CHAPTER ONE

INTRODUCTION

BACKGROUND TO STUDY

Banking operation is becoming increasingly customer dictated. The demand for “banking supermarket” offering one-stop integrated financial services is well on the rise. The ability of banks to offer clients access to several markets for different classes of financial instruments has become a valuable core-edge. Convergence in the industry to cater for the changing demographic expectations is now more evident (Dash and Mahaptra, 2016). Banking business is the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the authority may prescribe (Wikipedia.org). Most bank product development are easy to duplicate and when banks provide nearly identical services, they can only distinguish themselves on the basis of price and quality (Cohen, Gan, Yong, and Chong, 2016:1). This thus makes it imperative for banks to market their product and services which are tending to innovative one. According to Kaynak and Kucukemiroglu (2012), the banking industry is highly competitive, with banks not only competing among each other; but also, with non-banks and other financial institutions. Therefore, marketing of bank products to attract new customers and retain old ones is potentially an effective tool that banks can use to gain strategic advantage and service in today’s ever-increasing banking competitive environment (Cohen, Gan, Yong, and Chong, 2006:3, Solomon, 2011:2).

The argument for marketing of bank products and services is relatively straightforward. It helps to attract new potential banking customers however it is also more economical to keep old customers than to acquire new ones. The costs of acquiring customers to “replace” those who have been lost are high. This is because the expense of acquiring customers is incurred only in the beginning stages of the commercial relationship (Reichheld and Kemny, 1990). In addition, longer-term customers buy more and, it satisfied, may generated positive word-of-mouth promotion for the company. Additionally, long-term customers also take less of the company’s time and are less sensitive to price changes (Healy, 2015).

According to Dash and Mahaptra, (2016), the significant increase in countries around the world’s population and the increased demand for banking services; speed, service quality and customer satisfaction going to be key differentiators for each bank’s future success. Satisfied customers are central to optimal performance and financial returns. Customers are viewed as a group whose satisfaction with the enterprise must be incorporated in strategic planning efforts. Forward-looking companies are finding value in directing, measuring and tracking customer satisfaction as an important strategic success indicator. Banks are placing a high priority on marketing various innovative products which is critical to improved performance in market place.

In Nigeria, over the years the regulatory authorities have embarked on reforms and restructuring programs aimed at making the banking sector more efficient and effective in its service delivery. In 1986, the banking sector was deregulated allowing marketing forces to determine their activities such as interest rate. The banks were made to recapitalize in 1986, 2001 and 2005 all at repositioning them into delivering customer satisfaction services (Solomon, 2011:3). According to Ezeaku (2015), the reforms in the Nigerian banking sector were aimed at enhancing the performance of banks by forcing them to be creative, reaching the underserved market segments; expand their operations beyond the Nigerian market and to improve customer satisfaction which is lacking due to past perception about the banks especially owing to incessant distress and insolvency.

Pandey (2013) observes that banks rely on customer deposits in order to make profit. This is because banking is and always has been the art of borrowing and lending. Banks borrow by accepting deposits from the public and subsequently use such deposits to create credit in the form of loans and advances, overdrafts and other investments. He stated further that, although other sources exist, the main source of investable funds remains bank deposits; loans and investment, the main outlets. Similarly, while other source exists, the main source of income and profitability of banking remains the spread or difference between the rate at which funds are borrowed and the rate they are invested or loan out. Thus, the amount of deposits mobilized by banks determines their profitability through loans and investment. Deposits form the essential working capital of banks and provide over 60 percent of their source hence the perception of increasing relationship with customers in order to attract more deposits (Solomon, 2011:3). According to Agusto and Co (2015) competition in the (Nigerian Banking) industry is based on market perception, service quality and pricing. Banking products in Nigeria are homogenous although some product differentiation is employed by creating brand names for some deposit products. Banks have focused on service quality, pricing and technology to enhance customer satisfaction, market share and profitability.

STATEMENT OF THE PROBLEM

Banks today are operating in a highly competitive and rapidly changing environment. In the changing economic scenario, a professional approach to business development is essential and the survival of a banking institution depends on its ability to take challenges coming up in the environment. Marketing of bank service was in the past not accorded relative priority because banks thought they were doing the public a favor in keeping their money and thus customers were expected to consider it a privilege to be offered such service. However, the reform programmes of the government through the Central Bank Nigeria resulted in the entrants of new banking institutions especially in1990 bringing with innovative services and products to be offered to customers   and Service equally is therefore seen as a significant approach in meeting customer’s needs and expectations (Louis and Mitchell, 1994). Indeed, customer satisfaction has been perceived as key in determining whether customers leave or stay with the bank.

The challenging business environment in the Nigerian financial service market has resulted in more pressure on banks to develop and utilize alternative delivery channels, with a view to attracting more customers, improving customers’ perceptions, and encouraging loyalty. Among the more recent delivery channels introduced is electronic banking. Recent consolidation policy of the government in 2005 was aimed at making the banking sector more responsive to the demand of the present era dynamic banking operations. It also targeted at making banks to be more customer oriented and bring competition that will increase their deposit base.

Despite all these, the problem of poor network service in various banking service delivery channels such as Automated Teller Machine, online banking etc has led to more dissatisfaction among the banks. Queues are still noticed at the hall of most banks while customer service desks are either ineffective in solving some challenges faced by the customers or simply non-existent. The issue of illegal deduction of certain commission from customer accounts, hacking of unsuspecting customers account by fraudster, low-skilled bank staffs, poor ethical standards in service delivery have all contributed to increasing dissatisfaction among banking customers. Furthermore, despite the recapitalization process in 2005, report shows that 11 of the existing 24 banks were in one form of distress or the other which consequently led to withdrawal of deposits by customers from these banks and from the remaining 13 as customers confidence on the banks diminished.

Furthermore, in August 2011 the Central bank of Nigeria withdrew the licenses of three banks namely- Bank PHB taken over by keystone bank, spring bank taken over by Enterprise bank limited and Afribank taken over by mainstream bank limited. They were found be incapable to meet their current obligations to their customers. Efforts are currently being made by all the banks to attract the confidence of these customers once again while the existing ones are offered various forms of service incentives to increase their satisfaction. From the above stated problems, it is of utmost importance for me to assess how are marketing their services and the impact of these services on banks operating in Nigeria.

OBJECTIVES OF THE STUDY

The project is aimed at achieving the followings:

i.  To investigate the conceptual issues of marketing of banking services.

ii.  To evaluate the extent to which marketing concept has been adopted in products and services delivery by banks in Nigeria.

iii.  To evaluate the extent to which marketing has impacted on the performance of banks in Nigeria.

iv.  To highlight recent development and innovative products offered by the banks and how they are marketed in Nigeria.

v.  To assess the challenges encountered by banks in marketing their services in Nigeria.

vi.  To assess the prospects of bank marketing in Nigeria.

RESEARCH QUESTIONS

The following relevant questions have been constructed to guide the study:

i.  What are the conceptual issues of marketing of bank services?

ii.  To what extent has marketing concept been adopted in products and service delivery by banks in Nigeria?

iii.  To what extent has marketing of bank service and products impacted on the performance of banks in Nigeria?

iv.  What are the new products and services offered by banks and how are they marketed in Nigeria?

v.  What are the challenges encountered by banks in the marketing of their products and services in Nigeria?

vi.  What are the prospects of bank marketing in Nigeria?

RESEARCH HYPOTHESES

The study will attempt to test the following hypothesis in order to come to a logical conclusion about the subject matter of the study.

Ho:   Marketing of bank services has not been significantly relevant in the increase of customer satisfaction in Nigeria.

Ho2:   Marketing of bank services does not significantly improve bank profitability

Ho3:   The adoption of marketing concept has not significantly led to the development of innovative product and services in the Nigerian banking industry.

SIGNIFICANCE OF STUDY

The present situation and business environment in the banking industry warrants an indepth investigation into the marketing strategy of banks for survival in Nigeria. The last ten years has witnessed series of reform in the banking industry aimed at repositioning the sector for better future prospect. Revelations made in this study will allow the authorities assess their performance and the result of their reform programmes. Since customers are the king in the market, the perception of banking customers on bank services will be revealed and highlighted. This will help banks take more strategic decisions to improve their marketing policies. Newly introduced product and other innovative ones in the banking industry in Nigeria will be unveil, this will help customer make decisions on the products and services that suite their purposes.

Ways of improving customer service was highlighted in this study; this will help bank management take better marketing strategy in future course of actions to meet the ever increasing demand by customers for better services and products. The challenges encountered by the banks in marketing of their services were reviewed to assist the bank regulatory authorities and government in making future policies that will help banks overcome such challenges. It will also help policy makers to decision making. A successful completion of this study will contribute to existing literatures, serve as reference material to scholars and other researchers and enlighten the public as well.

SCOPE AND LIMITATIONS OF THE STUDY

This study is an attempt to review the significance of marketing in the banking industry. Thus, the work was based on Nigerian banks with a focus on Zenith Bank. Issues on marketing concept, marketing of bank services, customer loyalty, perception and satisfaction was visited. The functions and importance of the banking industry in Nigeria was reviewed. The project made use of questionnaire to collect data. This study was faced with numerous limitations but the major ones include:

Financial Constraint: A study of this nature requires an indepth analysis of all banks and customers in Nigeria but due to limited resources, attention is paid on a particular bank. This will therefore affect the enriches of the work.

Time Constraint: The study of human behavior takes a long time to understand which the researcher does not enjoy. The time frame required to carry out the research study limited the ability of the researcher to critical investigate, observe and conclude on marketing by banks in Nigeria, the perception and character of banking customers to the issue of satisfaction or dissatisfaction. This will therefore affect facts made at the conclusion of the study.

DEFINITION OF TERMS

Marketing Concept: This is a business philosophy that challenges the above three business orientations.  Its central tenets crystallized in the 1950s.  It holds that the key to achieving its organizational goals (goals of the selling company) consists of the company being more effective than competitors in creating, delivering, and communicating customer value to its selected target customers. The marketing concept rests on four pillars:  target market, customer needs, integrated marketing and profitability.

Sales Concept: The Sales Concept focuses on the needs of the seller.  The Marketing Concept focuses on the needs of the buyer. The Sales Concept is preoccupied with the seller’s need to convert his/her product into cash.  The Marketing Concept is preoccupied with the idea of satisfying the needs of the customer by means of the product as a solution to the customer’s problem (needs).

Marketing Mix: This is a business tool used in marketing and by marketers. The marketing mix is often crucial when determining a product or brand’s offer, and is often associated with the four Ps: price, product, promotion, and place. In service marketing, however, the four Ps are expanded to the seven Ps or Seven Ps to address the different nature of services. In the 1990s, the concept of four C’s was introduced as a more customer-driven replacement of four P’s. There are two theories based on four Cs: Lauterborn’s four Cs (consumer, cost, communication, convenience), and Shimizu’s four Cs (commodity, cost, communication, channel). In 2012, a new four P’s theory was proposed with people, processes, programs, and performance.

Customer: A customer is an individual or business that purchases the goods or services produced by a business. The customer is the end goal of businesses, since it is the customer who pays for supply and creates demand. Businesses will often compete through advertisements or sales in order to attract a larger customer base.

Banking Services: The various ways in which a bank can help a customer, such as operating accounts, making transfers, paying standing orders.

Banking Product: Goods and services that banks provide for their customers, for example, statements, direct debits, and automatic debits.