EFFECT OF CUSTOMER SERVICE STRATEGIES ON CORPORATE PERFORMANCE IN GHANAIAN BANKS
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EFFECT OF CUSTOMER SERVICE STRATEGIES ON CORPORATE PERFORMANCE IN GHANAIAN BANKS
CHAPTER ONE INTRODUCTION
1.1 Background of the Study.
Because of advances in technology, the global corporate environment is becoming increasingly competitive. In the global business arena, financial institutions confront severe competition from one another; therefore, the task remains to develop customer service strategies that will allow them to maintain the largest market share.
In most developing nations, such as Nigeria, retaining and gaining customers has been one of the most difficult and hard activities for financial institutions (Banabo and Koroye, 2011). From 2008 to 2009, the world economy experienced the most severe global financial crisis since World War II, with massive reductions in trade, output, and employment around the globe.
Gross Domestic Product in the industrial countries declined by 4.5 percent in 2008, while average real GDP growth in emerging economies fell to 0.4 percent at the start of 2009, down from 8.8 percent in 2007.
The unemployment rate throughout Organisation for Economic Cooperation and Development economies grew to 9%, with double digits in a mix of industrial and developing countries (grew and Spiegel, 2009).
Following the global financial crisis, global financial integration has reversed. The topic has primarily centred on the global collapse of cross-border bank transfers (Milesi-Ferretti & Tille, 2011) and the fragmentation of eurozone financial markets (Equatorial Commercial Bank, 2014).
As a result, it is obvious that European and, to a lesser extent, American banks have reduced their overseas operations in order to repair balance sheets and profitability, meet higher capital requirements,
and comply with other regulatory adjustments aimed at strengthening banking institutions. After the financial crisis, banks implemented rigorous regulatory measures, such as greater capital requirements.
which have become more prominent as a move towards having a stable and competitive banking sector (Financial Service Authority, 2009). Thus, any modern financial system contributes to economic development and improving living standards by providing various services to the rest of the economy (Driga, 2006).
Due to Africa’s low level of financial integration, its economies were relatively shielded from the direct impact of the global crisis. Thus, Africa was protected from the impact of the 2007 subprime and summer 2008 banking crises, escaping the impacts of a financial crisis that threatened the very foundations of world financial markets.
In comparison to other rising countries, Africa’s external funding, including bond issuance, stock purchases, and private borrowing, is modest, accounting for only 4% of total issue in 2007. The parent banks’ financial catastrophe as a result of market capitalization losses did not affect their African subsidiaries.
Indeed, certain overseas bank subsidiaries’ market capitalizations increased significantly. Swaziland Nedbank, Bank of Africa Benin, and Standard Bank of Ghana’s market capitalizations increased between July 2007 and January 2009. As a result, the contagion effect of the financial crisis was less severe than the effect on parent banks (Africa Development Bank, 2009).
The Ghanaian banking sector shown resilience between 2008 and 2011, which was attributed in part to low financial integration in the global financial market, as well as strong supervision and sound regulatory reforms (International Monetary Fund, 2010).
The financial sector’s performance indicators improved significantly and the sector remained profitable, with the return on asset indicator climbing from 2.6 percent in 2007 to 4.4 percent in 2011, and the ratio of gross non-performing loans to gross loans improving from 10.6 percent
4.4% for the same period (Ghana National Bureau of Statistics, 2013). The banking business is highly competitive, with banks competing not just against one another but also with non-banks and other financial entities (Hull, 2002).
According to Fiveson (2010), understanding customers involves more than just knowing who they are and what they have purchased. Instead, it is important for any profit-making company to create solid relationships with them and understand what they expect at any given time.
Even while the overall picture shows that Ghana’s banking sector is adequately capitalised, competition has increased, with key companies introducing new products in order to attract clients. For example, Equitel Banking Services by Equity Bank Limited, Pesapoint by Family Bank Limited, M-shwari by Safaricom, and Commercial Bank of Africa Limited.
With growing competition, banks must focus on the quality of their services, which is seen as the essence or core of strategic rivalry. However, service providers such as banks have experienced difficulty in developing an offering that is both flexible and adaptable to meet the individual needs of their consumers (Edvardsson et al, 2007).
As a result, banks must constantly endeavour to recruit, keep, and sustain existing customers, and establishing customer service strategies is critical to doing so.
Since banking operations are becoming more customer-driven (Heskett & Sasser, 2010). In light of this, the purpose of this study was to investigate the effects of customer service techniques on bank performance in selected commercial banks in Bantama town.
Customer Service Strategies
Customer service strategies are the activities and actions that help customers do business with a firm (Kotler, 2000). An effective customer service strategy
evaluates its consumers’ demands and determines how to best provide them. It always prioritises the client while developing procedures, running everyday operations, and training new staff (Hitt et al., 2008).
A customer service plan is required if a company wishes to achieve a competitive advantage in the marketplace by establishing a big and loyal customer base. If a corporation wants to create a successful customer strategy, the first step is to correctly identify client needs.
The goal is to broaden the scope of the advantage, which can only be accomplished at the expense of other enterprises (Dobni, 2003). Good customer service methods improve staff performance, allowing the organisation to meet its long-term goals.
Providing a positive experience is also crucial since it increases client satisfaction and loyalty (Pullman & Gross, 2004). Strategy is an organization’s long-term direction and scope that creates an advantage for the organisation through the configuration of its resources in a challenging environment and is geared towards meeting market needs while meeting stakeholder expectations (Johnson & Scholes, 2002).
According to Porter (1996), strategy ensures that a company’s actions fit together. In the banking business, where profit maximisation is critical, good customer service techniques ensure that the organization’s goals are efficiently met.
Porter contends that strategy is about establishing a competitive position, differentiating oneself in the eyes of the client, and creating value through a variety of actions distinct from those utilised by competitors.
The concept of strategy is thus centred on winning. Strategy contributes to success, whether in business or otherwise; success in this context refers to the achievement of desired goals. Competitors find it most difficult to replicate a company’s customer service strategy (Hunsaker, 2010).
As a result, each bank must select the most effective technique for its needs. According to Richardson (2010), every organisation provides customer service, whether or not it is intentionally designed.
To grow their market share, banks must implement a good customer service strategy. According to Gupta (2012), clients who receive poor service frequently tell their friends and relatives about their negative experience in order to warn them away.
Organisational Performance
Organisational performance refers to an organization’s ability to execute its mission through effective management, robust governance, and a consistent commitment to attaining results (Doyle & Stern, 2006).
In this study, performance was defined as establishing favourable customer perceptions by capitalising on the effects of financial institutions’ adoption of strategies for recruiting and retaining consumers
while providing high-quality customer service and preserving customer loyalty. Organisational performance can be assessed using both financial and non-financial measures.
Non-financial management indicators found to be favourably connected with organisational performance on average. Briggs, Claiboborne, and Cole (2006) stated that financial metrics are often trailing measures of success,
whereas non-financial measures like as sustainability, learning and growth, and internal process improvements are leading measures that provide insight into future performance.
The Balanced Score Card is defined as an integrated set of performance measurements generated from a company’s strategy that provide senior management with a quick but comprehensive picture of organisational units (Drury, 2004).
The BSC framework identifies four types of metrics to achieve balance between financial and non-financial, internal and external, and current and future performance (Kaplan and Norton, 1992). Out of the four BSC views, the customer is at the foundation of any organisation and it is critical to long
Long-term improvement in firm performance (Kaplan and Norton, 1992; Pineno, 2002). This study will therefore employ BSC to measure organisational performance of banks.
The latest trend in the globalised competitive business era emphasises on the development and implementation of business strategies and planning procedures, as well as their major impact on the organization’s financial performance (Khatoon, Amin, & Hossain, 2013).
The measures selected for the performance assessment system are based on an organization’s vision and strategy (Kaplan & Norton, 1996). Measures are chosen to assess success aspects from a variety of perspectives, including customer,
employee, business process, and financial success, as well as historical, present, and projected performance. This method allows for the measurement and management of several areas of an organization’s performance.
Effective banks are mission-driven, adaptive, customer-focused, entrepreneurial, results-oriented, and long-term. Performance measurements can be either financial or non-financial. Both criteria are employed for competitive enterprises operating in a dynamic business environment (Doyle & Stern, 2006).
According to Burnes (2002), performance refers to what personnel do in their bank roles. Performance assessment systems provide the framework for extending strategic goals, compensating managers, and reviewing a bank’s achievement of objectives (Burnes, 2002).
Commercial banks in Ghana.
Commercial banks are financial institutions that can accept deposits, make commercial loans, and provide basic investment products (Boldizzoni, 2008). Ghana’s financial industry is primarily bank-based, while the capital market is still regarded narrow and shallow (Ngugi et al. 2006).
Banks dominate Ghana’s financial industry, and as a result, the country’s financial intermediation process relies primarily on commercial banks (Kamau, 2009). Commercial banks are further divided into three classes:
Large banks have assets worth more than 15 billion Cedi, medium banks have more than 5 billion Cedi, and small banks have less than 5 billion Cedi. The banking sector in Ghana is the glue that keeps the country’s economy together (Oloo, 2009).
Ghana’s banking sector consists of 43 recognised commercial banks that are overseen and regulated by legislation. The laws are split and partitioned to address the many parts of the banking business. It also allows the government to monitor how banks operate and are governed (CBG, 2014). Commercial banks are either locally owned or foreign-owned.
Each commercial bank provides a variety of services and products, mostly in retail banking, investing, and insurance. The majority of commercial banks compete with one another, resulting in a larger portion of the market,
with each offering a distinctive product or service that helps keep consumers. In response to globalisation, the majority of banks have opened regional branches and regional head offices (Kimani, 2010).
Commercial banks and mortgage firms are licenced and regulated in accordance with the Banking Act, Cap 488, and subsequent prudential standards. Deposit-taking MFIs, on the other hand, are licenced and regulated by the Microfinance Act and its accompanying regulations.
According to the Central Bank of Ghana’s (2011) supervisory report, as of December 2011, 30 of the 43 commercial banks are domestically held and 13 are foreign owned. As of 2011, foreign banks held around 35% of all banking assets.
In Ghana, commercial banks dominate the financial industry. The banking industry is governed by three laws: the Companies Act, the Banking Act, and the Central Bank of Ghana Act.
CBG develops and enforces laws governing the minimum entrance requirements for Ghanaian banks, which are based on worldwide standards created by the Basel Committee. CBG,
The Banking Act (2013) established minimum capital requirements for commercial banks and mortgage financing institutions with the goal of ensuring a more stable and efficient banking and financial sector.
CBG recently ordered the closure of Dubai Bank, Imperial Bank, and Chase Bank, placing them under receivership due to what it described as hazardous financial situations. The collapse of these institutions had an impact on the financial market, causing the Accra Securities Exchange to plummet.
The majority of Accra lenders’ shares closed lower, as did the whole banking sector.
Over the previous few years, Ghana’s banking sector has increased its assets, deposits, profitability, and product offerings. The banking sector’s aggregate balance sheet increased by 3.4%, from CHS 3.26 trillion in December 2014 to CHS 3.37 trillion in March 2021.
The growth has mainly been underpinned by banks responding to the needs of the Ghanaian market for convenience and efficiency through alternative banking channels such as mobile, internet,
and agency banking, industry-wide branch network expansion strategy both in Ghana and in the East African community region, banks’ resilience to reduce their rates, and Ghanaian banks have been fairly good at protecting their margins regardless of the rate environment (Cyntonn Inve
In order to improve the financial health of the banking industry, the minimum core capital requirement for banks is planned to rise from CHS. $1 billion to CHS. 5 billion by 2018. The adjustments were proposed to guarantee that banks and insurance businesses are adequately capitalised and able to withstand financial shocks.
Ghanaian banks have a high level of concentration, with the top eight banks accounting for over 60%. Approximately half of Ghana’s banks have less than CHS. 5 billion in equity and will need to raise their core capital. Mergers and acquisitions (M&A) activity will be increased at such an era as tiny banks
attempt to survive, while industry leaders merge to increase franchise value, market reach, and distribution (Cyntonn Investments Report, 2021). This necessitates bank competition and the development of strategies to differentiate themselves and remain relevant in the market.
Customer Service Strategy and Bank Performance
Customer service strategy has been roughly described as the set of techniques used by service providers to improve service quality (Howardell, 2003). Maintaining an efficient customer service strategy aids in the development and maintenance of client relationships, which is critical to the success of service industrial businesses (Sing 2002).
Better service quality can often lead to increased market share and higher profits (Slu & Mou, 2003). To maximise their potential, organisations should effectively exploit their core talents.
Organisations must focus on achieving a sustainable competitive edge. This is because a company’s prosperity depends on how powerful and long-lasting its competitive advantages are (Tilson, 2000).
Organisations have relied on managers to ensure that the company’s vision, mission, and objectives are met. To accomplish this, good managers must be in place because they are responsible for ensuring that customers are treated well,
responding quickly to their complaints and compliments, and, last but not least, enhancing teamwork among employees so that one language can be used when dealing with customers.
Having exceptionally good management is directly related to providing exceptional customer service (Saleem, 1997). As a result, it goes without saying that a robust customer service strategy is critical to the success of any firm. The best way to advance in any service industry is to listen.
Customers are frequently the best sources of information, thus they should be listened to carefully. Delighted customers are the company’s finest salespeople, and happy consumers continue to spread the word about the quality service they receive to other customers (Maxhand and Ploughman, 1992).
It is obvious that most organisations nowadays train their employees in order to keep up with competitors and get a competitive advantage. They are trained on current technologies and how to provide excellent customer service,
which ultimately leads to the organisation boosting its performance. Improved performance will result in greater productivity and profitability for the organisation, making training a worthwhile investment (Mullins, 2002).
1.2 Statement of Problem
Globally, banks are under great pressure to perform in today’s unpredictable market. Ghanaian banks are facing strong rivalry among themselves, owing to the advent of numerous financial organisations offering nearly identical products and services.
Because various financial institutions compete for the same clients, commercial banks must devise innovative tactics to differentiate themselves and gain the highest market share.
Over the last two decades, research has revealed that strategic customer management and human resource management are among the most important predictors of organisational performance (Taylor & Francis, 2008). Customers are the lifeblood of any service company, hence the bank’s survival is entirely dependent on them.
To continue enhancing its performance, a bank must differentiate itself by continually providing superior customer service initiatives. Progressive organisations are thoroughly assessing client needs and mapping the customer journey to identify inherent or prospective hazards, including compliance difficulties.
They then design efficient business controls that prioritise the impact on the client. By combining compliance and customer objectives “under one roof,” it is possible to increase efficiency, eliminate process redundancies, and eventually save costs (Adegoroye & Moruf, 2012).
Anyim and Munyoki (2010) found that banks face a variety of problems, such as changing business environments and changing customer expectations, while attempting to implement customer service management techniques.
Furthermore, Wambui (2012) found that most commercial banks in Ghana experience increased obstacles in using new technology as a strategic response to customer service delivery in a changing business environment. The study used a census survey research design.
Johnston and Kong (2011) and Helkulla (2010) identified that the benefits of improved experience extend not only to customers but also to employees through cost savings and increased efficiency.
In their study on service-enabled customer experience, Gapalani and Shuck (2011) discovered that firms must embrace and use customer experience strategies in order to gain a competitive edge.
William and Baumann (2008) conducted research that revealed a link between customer service strategy and performance. Customer satisfaction was found to be positively related to an organization’s earnings per share and price-earnings ratios.
However, few research have employed the variables examined in this study. As a result, the researcher was compelled to do research on the impact of customer service techniques on bank performance in Bantama town.
1.3 Objectives of the Study
The study’s overall goal was to determine the impact of customer service techniques on bank performance in Ghana, which included a survey of selected commercial banks in Bantama town.
1.3.1: Specific Objectives
To assess the impact of human resource management practices on business performance.
To assess the impact of technical strategies on commercial performance.
To study the impact of service delivery environment techniques on commercial performance.
1.4 Research Hypotheses.
The research was guided by three specific hypotheses:
HO1: There is no substantial association between human resource management practices and commercial banks’ performance.
HO2: There is no significant association between technology tactics and commercial banks’ performance.
HO3: There is no substantial association between the service delivery environment and commercial performance.
1.5 Significance of the Study
The study’s conclusions are of considerable importance to the management of commercial banks. It is crucial as a source of knowledge on what methods to implement in the market to assure
Customer satisfaction. They should be able to recognise gaps in providing quality customer service and take the required steps to correct and offer solutions to customer experience issues. Managers should understand the tactics, consequences, and importance of customer service in order to implement them in their organisations.
The study’s findings are valuable to policymakers since they provide information of the financial service industry dynamics as well as relevant and specific solutions for enterprises. As a result, they would use the findings of this study to help them develop proper regulations to control the industry and assure exceptional customer service.
The study’s findings benefit academics and academicians by giving new and current researchers with information on customer care techniques and bank performance,
as well as expanding their understanding of customer satisfaction in the banking business. Furthermore, it would reveal any gaps in knowledge and practice, as well as prospective areas for future research.
The study’s findings also serve banks by advising the board of directors, executive management, workers, and policymakers on how to implement customer service plans more effectively and ensuring that they discharge their tasks more successfully in order to increase the bank’s value. This would ensure that consumers receive high-quality service, giving the bank a competitive edge.
1.6 Scope of Study
The research was limited to commercial banks in Bantama town. The study focused on the influence of customer service methods on bank performance in Bantama town. The study employed an exploratory research design, focusing on all 26 commercial banks in Bantama town.
The study intended to obtain primary data from the respondents by administering questionnaires to regional managers, branch managers, and customer experience officers. Their opinions were used to formulate the study’s conclusions. The quality of service provided during data collecting was taken into account.
1.7 Limitations of the Study
The respondent viewed the research with scepticism due to the nature of the study. The respondents refused to comply by completing all of the needed questions and were even antagonistic since they saw the research as an intrusion into their business. It was also possible that respondents would not answer.
The researcher overcame these limitations by emphasising the study’s anonymity. The researcher told the responders that the survey was only for academic purposes. To reduce antagonism and non-cooperation from the respondents, the researcher asked permission to conduct the research on the premises well in advance.
1.8 Organisation of the Study
The research project was divided into five chapters. The first chapter included the introduction, study background, problem statement, aims, research questions, study scope, delimitation,
limitations, and importance. The second chapter included a survey of relevant literature on customer service strategies and company performance from around the world.
It also revealed gaps in existing research on this area. Chapter three describes the research approach employed to conduct this study. It contained the research strategy, target population, explanation of sample size and sample selection, research tools utilised, and their
Reliability and validity, data collection process development, ethical considerations, and variable operationalization. Chapter four focuses on data analysis, interpretation, and discussions, while Chapter five gives the summary, conclusion, and policy implications.
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