ABSTRACT

This work focuses on the comparative study of the pricing of Commercial Bank products in the Enugu Urban Area. Two populations were used for the study. The first comprises all the eleven Commercial Banks operating in the city. Six branches of these banks were selected and studied. The second population is made up of all the passbook or cheque-book carrying customers of the selected banks. A total of 95,224 customers make up this population out of which 402 were sampled. From the analyses of the data that is using the following statistical toolsANOVA with F-Ratios: Differences between the means of two welldistributed population; and Two-factor, analysis, the following important findings were made from the study.

• There is no significant difference in the prices of bank products among Commercial Bank operating in Enugu
• There is also no significant difference between the degree of customers’ awareness of price variation among the banks before, during and after every bank transaction.
• The majority of bank products studied showed that “money price” alone does not have significant influence on consumer’s product and bank switch behaviours.
• Consumers are however often attracted by other attributes of price such as bank’s accessibility, courtesy, promptness of services, friendliness of staff, etc, in making their pricing decisions.

In view of the above findings, the recommends that:

• Since bank consumers’ buying decision processes are not often influenced by only monetary price, it is necessary that banks’ incorporate the concept of “total pricing” or “package pricing” when setting prices for their products.

• To realize the above objectives, banks should as a matter of urgency open up a separate pricing department or make marketing departments as is the case in some manufacturing concerns.

-The CBN as an apex monitoring authority should step up checks on the operations of the Commercial Banks to ensure strict compliance with the pricing guideline as are stipulated in the Banker’s Tariff.

CHAPTER ONE

INTRODUCTION

One thing that is permanent, in this world is change. Due to the fact that the world is dynamic, things must keep on changing. For this, the Nigerian Commercial Banking Industry has witnessed tremendous changes within a century of its existence. There has been a noticeable change in the number of banks and their branch networks. At independence in 1960, there were only eight commercial banks with 190 branches in the country. There are now 81 of such banks with about 1,711 branches nationwide. In like manner, the number of bank customers has continued to grow over the years. The introduction of the Structural Adjustment Programme (SAP) by Babangida’s administration has brought far more significant changes into the industry. With it came the deregulation of operations in the commercial banking industry.

One obvious effect of these developments is the emerging of aggressive competition for survival among the individual banks. Nwankwo (1990) has attributed this development to the multiplicity of banking services and the spate of technological innovation new persuading the industry.

It is an indispensable marketing fact that increasing competition creates awareness among suppliers of economic goods and services in the market place. Aware that consumers of bank products may discriminate more meaningfully under a competitive environment, the banks are currently evolving new and varied strategies to grapple with these new challenges. There have been in the form of the extension of banking operations to weekends (Saturday banking), and public holidays. In the same vein, new products and services are continually being conceived and developed within the industry. Such products as the Automated Teller Machine (ATM), Up Front Payment of Interest on Deposit, Zero Coupon Investment Certificate (ZCIC) etc, are all part of the banks reactions to these new challenges. Nwankwo (1990) sees this development as “The task of evolving new customers, new markets, and new segments”.

Ideally, this scenario is designed to attract more customers to the banks, provide these customers with better satisfaction and in the process afford the banks with more opportunities to compete favourable in the industry. But how well any particular bank performs under this new dispensation would depend greatly on the quality of its services, the promotional strategies it adopts, its distributive networks and more importantly on how well it prices its products.

Pricing is therefore, an important factor in a bank marketing activity. It is one major determinant of consumer choice on what, when and how to buy. An eddential theme in the price of banking services should however hinge on the need to balance bank profit with consumer satisfaction. A high profit at the expense of a customer’s satisfaction obviously will boomerang against future prospect of any bank. A low profit on the other hand will provide customer’s satisfaction quite alright, but only at the expense of insufficient use of resources and reduced future funding of new services. Either of these conditions will not be in the best interest of banks and their customers. There is therefore the need of understanding the dynamics of product pricing in banks as a means to setting optimum pricing for the benefit of all the concerned parties i.e banks and their consumers.

1.1 STATEMENT OF PROBLEM

Among the many functions of commercial banks is the mobilization of domestic savings, provisions of loans and advances, current account, overdraft, bank draft facilities etc through various sectors of the economy. Under the new de-regulated economic environment in Nigeria, achieving these objectives has been stalled by political interference, instability in the foreign exchange market, and the recent CBN deregulatory measures which occasioned the new Prudential Guidelines on banks.

At one time, banks haven been called upon to incorporate the marketing concept philosophy in various facets of their operation, as a way out of these constraints. At other times, they have been advised to de-emphasize their hitherto to armchair banking practice in order to compete effectively under the new economic dispensation. The banks have responded through the development of new bank products to complement existing ones, establishment of numerous rural branches and the tracing and re-training of bank personnel.

Whilst these practices have become common-place among the various Commercial Banks in Nigeria, the prices they charge for a large variety of their products and services appear to vary greatly. A cursory look at the banking practices within the industry tends to give an ample evidence of these price variations. For example, interest rate chargeable on loans of equal amount differs among banks. Disparity also exists in the amount chargeable on customer’s cheques and passbooks, as well as on interest rate earned on savings. An important research question therefore is why do these price variations persist among the Commercial Banks? Specifically, this research will attempt to find satisfactory answers to the following questions:

• Do prices actually vary (and to what degree) among the Commercial Banks in Enugu?

-To what extent are the consumers of bank products aware of the diversity of bank products and the variations in their prices across the banks?

-Does price exert a significant influence on a consumer’s patronage of any particular bank?

-What is the degree of customers susceptibility to price influence as to what to buy, where to buy and when to buy a given bank products?

-What is the influence of ownership and size in the pricing of bank products?

1.2 OBJECTIVE OF STUDY

With the above stated problem in mind, this study intends to compare the prices of selected Commercial Bank products in Enugu to determine the degree of price variation and the influence of this on consumer buying decision making processes. The specific objectives of the study however include the following:

(i) Identification of some Commercial Bank products.