IMPACT OF SERVICE QUALITY ON CUSTOMER RETENTION IN THE NIGERIAN BANKING SECTOR
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IMPACT OF SERVICE QUALITY ON CUSTOMER RETENTION IN THE NIGERIAN BANKING SECTOR
CHAPITER 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Unquestionably, a company’s ability to build brand loyalty and customer satisfaction is a key factor in determining its success rate (Iddrisu, Nooni, Fiankoc & Mensah, 2015). This is especially true in the service sector, where strong client relationships are essential for an organisation to thrive in providing services and outperform its competitors.
The core of marketing, among many other services, is the development of long-term, value-added relationships with clients (Agbemabiese 2015). In order to ensure long-term profitability and generate high financial returns, businesses must understand the crucial role that excellent client retention plays through service excellence.
Quality of service and client retention are seen as essential to a company’s success and survival in the current competitive market (Ibojo, 2015). For a service to be excellent, it must consistently anticipate what clients will need from it.
According to Kemp and Rotmans (2005), reliability and quality in business organisations have evolved into a standardised indicator for how effectively the service given matches the consumers’ expectations. Businesses have realised that they need to focus on providing their customers with high-quality services if they want to increase profitability.
Knowing the wants of the consumer is crucial for providing service of a satisfactory calibre. Customers and front-line employees engage customers to produce the service in a service-oriented firm (Rita, 2008). Effective interaction, in turn, depends on both the processes being used and the skills of the front-line service staff,
according to Kotler and Armstrong (2012), cited in Ivanauskiene (2014). In contrast to manufacturers, customer-staff interactions will always affect the quality of services provided. Customers are crucial to the entire spectrum of operations and revenue production in the banking sector.
Customers are demanding, thus keeping and gaining their business has taken precedence. Siew-Peng and Sedigheh (2015) assert that in order to keep customers, protect, and advance their long-term interests, banks must establish positive relationships with them.
Service quality is a success factor, the most effective and competitive tool, and the strength of top service businesses, according to Berry, Parasuraman, and Zeithaml (1988), referenced in Siew-Peng et al. (2015).
Banks must evaluate the quality of their services in order to retain consumers in light of the rising competition in the financial sector. As a result, this study will look at how customer retention affects service quality in Nigeria’s banking industry.
1.2 STATEMENT OF THE PROBLEM
One of the key trends in Nigeria’s banking system today is the gradual and incremental shift from conventional orientation to aggressive push. In order to share the large market and satisfy the variety of client demands, management is forced to emerge from their shells or enclaves.
It is important to understand the close relationship between customer happiness and service quality. According to Jayaraman, Shankar, and Hor (2010), an organization’s level of customer satisfaction increases in direct proportion to the quality of the services it offers.
Due to the aforementioned and growing industry competition, banks operating in Nigeria are under a lot of pressure (Evangelos, 2014).
As a result, a number of customer retention tactics are developed with the intention of raising service standards. In the banking industry, service quality is crucial since it promotes high client satisfaction, which is essential for gaining a competitive edge.
When customer service is subpar, client satisfaction and readiness to suggest the service to a friend decline. Each consumer prioritises each of the several aspects of service quality in a distinct way, according to Ahmad and Kyriaki (2009).
Additionally, there may be a big difference between how customers and service providers view service quality. If banks want to compete in providing quality service to consumers, it is essential to understand the customer’s perspective and expectation of quality service (Siew-Peng & Sedigheh, 2015).
Therefore, in order to ensure that their requirements and expectations are met, service quality metrics should be developed from the perspective of the customer, as this will boost customer retention.
1.3 OBJECTIVES OF THE STUDY
In general, the goal of this study is to investigate how customer retention affects service quality in the banking industry. In order to do this, the study specifically;
Identify the degree to which Nigerian banks provide consumers with high-quality services.
Identify the significance of high-quality services in the banking sector.
Check to see if client retention and service quality are significantly correlated.
Determine the elements affecting the level of service provided by Nigerian banks.
1.4 RESEARCH QUESTIONS
The following query will serve as the study’s compass;
How much do customers receive high-quality services from Nigerian banks?
What role does providing high-quality services have in the banking sector?
Is there a connection between client retention and service quality?
What elements affect the level of service provided by Nigerian banks?
1.5 SIGNIFICANCE OF THE STUDY
The emergence of digital currencies and fintech firms over the past few decades has led to changes in the Nigerian financial industry. The financial industry has seen a significant transformation as a result of this recent development due to increased competition.
As was already noted, providing high-quality service has the ability to keep consumers, therefore this study will reaffirm the necessity for service improvement and the ongoing provision of high-quality service to customers in the banking sector. These issues cannot be ignored if customers are to be kept.
Additionally, this work will serve as a literature review for next scholars. This implies that other students who might desire to pursue research in this field will have the chance to use this work as available literature that can be critically analysed.
The study’s findings almost always make a significant contribution to the corpus of academic information regarding the effect of service quality on client retention in the banking industry.
1.6 SCOPE OF THE STUDY
In particular for the banking industry, this study will assess the effect of service quality on customer retention. The study will also explore the extent to which Nigerian banks provide customers with quality services,
the significance of quality services in the banking sector, the relationship between service quality and customer retention, and the factors influencing service quality in Nigerian banks.
In this regard, the study would be conducted at a few First Bank Plc. locations along the Aba-Owerri Road in Aba, Abia State.
1.7 LIMITATIONS OF THE STUDY
While doing the study, the researcher ran into some minor obstacles, just as in every human undertaking. Due to a lack of resources, the researcher was only able to choose from a small number of sample sizes while looking for pertinent materials, literature, or information, as well as when collecting data.
Even more so, the researcher worked on this study and other scholarly projects at the same time. The time needed for study will be cut down as a result.
1.8 DEFINITION OF TERMS
Quality Service: This is a comparison of perceived performance versus perceived expectations for a service.
Customer satisfaction is a metric that assesses how content customers are with a business’s goods, services, and abilities.
Customer Retention: This refers to a company’s or a product’s capacity to keep customers over a predetermined time frame.
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