Quality of Service Delivery in the Marketing of Banking Services in Nigeria - Essay Example

Introduction The Nigerian banking industry has been through a series of changes over the past few years. This is in terms of its ownership structure,number of institutions, depth and width of its operations. Most of the changes that have occurred within the banking sector are as a direct result of the issue of globalization in relation to their operations. These changes have also been encouraged through technological innovations. On top of the latter, the Nigerian banking industry has undergone considerable deregulation. This has come as a result of greater emphasis on ethical issues within this sector. The research proposal will focus on these characteristics and how quality of service delivery in marketing of banking services applies to Nigeria. Specific emphasis will be given to Bank PHB which is one of the most influential and successful banks in this country. (Obafunmilayo, 2007) Background All banks in any part of the world are expected to provide efficient payment systems, conduct financial mediation and serve as platforms for implementation of monetary policies. Consequently, countries whose banks are able to perform these functions efficiently can boost their respective economies by sufficiently channeling and saving funds that can prove to be very useful for those who are planning on setting up their own businesses or carrying out a specific project. In any country with banking institutions, there are always certain conflicting needs between banks and governments. Banks usually want to operate under liberal market forces yet the Government needs to ensure that the former reflect the fundamentals of the economy. This is actually the reason why the banking sector is one of the most regulated sectors in most world economies and the same applies to Nigeria. This matter is further compounded by the fact that certain actions taken banks are done secretly or in private. Consequently, most of them tend to hide their agenda from the public. (Elumelu, 2005) The Nigerian banking industry is quite large compared to other banking industries in the continent. As of 2004, the country had over ninety insured or licensed banks; it had three hundred community banks, eighty four mortgage institutions and ten development finance institutions. All the latter banks obtain their funds from the public except the development financial institutions. It should be noted that in Nigeria, universal banks take up the largest share; others such as community banks usually restrict their consumer base to certain communities. On the other hand, universal banks operate in the entire nation and may sometimes extend their services to other parts of the world. The Nigerian banking industry has been recording considerable growth over the past few years. This is indicated by the following; Total deposits Total assets Total advances Total loans Over the past five years, these numbers have been increasing. Consequently, one can assert that there will be potential growth in the sector. Competition within the Nigerian banking industry can be classified as oligopolistic. This industry is very saturated but only a small number of banks dominate it. In this case, ten of them are responsible for driving the industry. The dominance of these ten banks is reflected by their market share, loans and advances and their total deposits. As of 2003, it had been established that fifty one percent of the Nigerian banking industry was driven by these companies. (Obafunmilayo, 2007) There are a number of reasons why the latter industry is oligopolistic. First of all, these banks have established consumer loyalty due to the fact that they are old generation banks. Additionally, some historical facts in the previous decades contributed to this outcome. In the nineteen eighties, there was an emergence of commercial banks that saw the dilution of these old generation banks. However, in the next decade, there were a series of distressed banks that had to be liquidated thus causing the earlier concentration that had characterized the nineteen eighties to be eliminated. The Nigerian banking industry does not operate in isolation; it is highly susceptible to global forces and one of them is information technology. Most banks were forced to accept this mode of conducting business because of the need to boost their competitive advantages. Also, it was something that caused a large number of them to be including local and wide area connections as part of their business strategies. However, this area still faces some challenges because of little focus on compatibility of network systems. (Peralta-Alva, 2005) There are still relatively high levels of unsound banking activities that go on in the Nigerian banking sector. This is depicted by the fact that twenty percent of all loans offered by this country's banks were non performing. Additionally, insider credit has risen substantially over the past five years. This is further heightened by the fact that liquidity in these unsound banks has gone up and much is yet to be done to improve that situation. The Central Bank of Nigeria (CBN) is largely responsible for regulation of this sector. Over the past few years, they have been in charge of a series of responsibilities that may include either offsite or on site activities. The former term refers to investigations that have been done on banks in their direct areas. This is designed to determine the kind of problems that banks are going through. Offsite regulation is usually done in order to ascertain the prudential returns exist in a certain bank. Usually, in site regulation is conducted by looking into the banking books and financial conditions prevalent in certain banks. Regulation in Nigerian banks is normally coordinated by the Central bank in collaboration with insurance bank regulator NDIC. Together, these two bodies ensure that banks operate under the twenty five principles of bank supervision. (Elumelu, 2005) The latter issues regard structural features of the Nigerian banking industries. However, there are certain operational issues that still challenge bankers and banks in this country. The first is with regard to Nigeria's operating environment. As financial institutions, banks cannot operate in isolation. Their social, political and most importantly, economic surroundings affect their productivity. First of all, Nigeria's economy is driven by the uncertain oil industry. Consequently, banks find that their monetary policies are driven by an unpredictable environment. This has forced some of them to operate under harsh regulations. To add insult to injury, there are some political and social problems that go on in this environment and some of them may be reflected directly in the banking industry through the lack of manpower to contribute towards banking business. Another issue that is ailing the Nigerian banking industry is its poor corporate governance. It has been established by ethics watchers that some banks opt to use unethical means in order to comply with external regulations. Additionally, their credit portfolio is not doing very well due to creation of fake portfolios or forgeries. This implies that the industry lacks sound internal controls. (Elumelu, 2005) The other major challenge facing this industry is fraud (not from outside) but from within this sector. As of 2004, close to thirty six banks were liquated as a result of engagement in fraud. Because of these practices, many shareholders' capital bases were depleted. Additionally, fraud diminishes the confidence that people have in the banking sector and thus spoils business for them. The last important challenge plaguing the Nigerian industry is with regard to industry regulators. The government and other partisan interests usually interfere in the running of such institution thus affecting the regulator's ability to carry out their mandate. This severely hampers their ability to control this sector. Research aim/ objective The major research objective is "To determine whether Bank PHB stands to benefit through improved quality of service provision" Although it is imperative to offer high quality services in the banking industry, it is essential to understand how this can be related to a case study which in this case is Bank PHB. The Bank has been relatively successful in the industry. However, there is still room for improvement in that sector. There is a need to check on its current service offering and determine whether that service can be regarded as high quality or low quality service. Additionally, it is essential to examine how this can then be translated into either positive or negative effects for the business. It should be noted that many studies have shown that when banks have high quality provision, then they are likely to depict better customer loyalty. Eventually, such banks are also likely to record greater levels of growth and thus improved productivity from their employees. In instances where bank offer low quality services, then those banks are likely to record less levels of commitment from consumers. Consequently, this can cause low growth levels. Additionally, inferior services eventually lead to poor brands and thus a deteriorating brand name. If banks fail to adhere to sound banking principles, then they are likely to become victims of the latter mentioned consequences. (Obafunmilayo, 2007) Hypotheses Bank PHB high quality service provision has led to growth of the Bank Superior service had promoted consumer loyalty Increased productivity at PHB is due to high quality service (Norman, 2002) Literature review Numerous banks find themselves in competition with others. This is especially the case for Bank PHB which is operating in a saturated market. Consequently, the bank along with any other in the world should look for ways in which they can stand out from the crowd. This is possible only when a bank has established a way of capturing both the minds and the hearts of their consumers. Many banks have tried a series of routes that could help them in the process of achieving this. Some have tried offering convenience in service provision. However, the latter factor alone cannot be sufficient to create such positive outcomes. Consequently, there is a need for them to look at other mechanisms for dealing with this issue. For instance, banks can add value and quality into their services. Through such an approach, it can then be possible for them to reap the following benefits Mitigate attrition Maintain consumer loyalty Gain top line growth (Tihanyi, 2006) The latter benefits are likely to emanate from a bank if it offers convenient services. Researches conducted in other parts of the world especially in the United States found that approximately half of the clients who chose their banks did so as a result of the nature of their respective locations. Most of them continued to use the services of their banks because those banks were close to them. This was due to the fact that many people interact with their banks through direct means. Only a few of them may choose to offer online banking while others may depend solely on their ATM machines for these contacts. This result reveals that when a certain bank has many branches, then they are likely to attract huge client bases and subsequently get all the benefits that come with such an approach. In order for banks to be ranked as superior service providers, then they need to offer value. Some surveys conducted in Europe indicated that the first thing consumers are looking for in bank is affordable fees. Others claimed that the thing that the valued the most in a bank was its level of security. Consumers wanted to be sure that the information they gave to their banks was secure and protected. It was also found that most of the respondents felt that their banks were not responding to this need adequately. Many consumers also valued product offerings that met their needs specifically. Consequently, when a bank had a product bundle for a certain consumer segment, then they were likely to add value to their service provision or to keep their consumers coming back. It is also essential for banks to have products that are easy to understand. Most banks make the mistake of offering too many products that tend to confuse the client instead of making them interested in it. It should be noted that numerous writings acknowledge the fact that most bankers are looking for institutions that offer superior customer service. This is because it creates deeper relations with clients and the reverse is also true. Whenever banks offer low quality services, then chances are that they will have destroyed any trust and loyalty that they would have established between themselves and the clients. (Tihanyi, 2006) One of the major pathways that banks normally use to offer superior services and hence good relationships with their clients is through call centers. Many companies acknowledge the fact that having live call centers is a suitable channel for effectively reaching these clients. This is something that has been verified by most other institutions in the world. Additionally, when banks have offered certain guarantees to their clients, then chances are that those consumers will be prompted to come back. One such example is the promise of shorter waiting lines, fast responses to clients with inquiries among others. Through such offers, most banks are likely to record better responses from their respective clients. In the case of Bank PHB, most of the latter mentioned issues have been adhered to. However, there are still a number of changes and opportunities for growth for this particular company. First of all, the company could increase its pursuance of undeserved markets. The latter markets are likely to report greater customer loyalty than all others. Besides that, such clients usually prefer taking all their financial services to one particular bank and this implies success for Bank PHB in terms of customer loyalty. (Donli, 2006) It should also be noted that Bank PHB is yet to employ robust consumer strategies for their clients. This means that the bank needs to focus on various consumer segments that are willing to pay certain prices for customization of their services. By doing this, the Bank will be offering an exchange of custom made services for greater consumer investment in their business. It should also be noted that most banks including PHB are yet to look at how they can change their internal structure in order to accommodate newer programs into their systems. The company can embrace change through consumer rotation and consumer development and this is only possible after restructuring process. It should also be noted that the latter strategy is a long term one and may not be achieved overnight. Research methodology The primary research plan will entail a questionnaire. The reason behind this approach is largely logistical. Questionnaires offer an opportunity to access numerous participants without spending too much time in the data collection process. Additionally, questions are clearly laid out and this will go a long way in offering uniform responses to the questions. The data analysis process will also be done easily through this approach. (Bradburn, 2004) The research will be a descriptive one. This is because it has already been hypothesized that efficient consumer service can lead to better growth, productivity and consumer loyalty. The purpose of this research will be to determine whether this is true for the particular company. (Presser, 2004) The research will be guided by the research objectives which have been stated above. The population size will be all people who have either banked with PHB or are currently doing so. The sampling criteria will be based on non probability sampling. In other words, respondents will be randomly selected from the bank's list. In order to achieve this, it will be necessary to generate random numbers from a computer and then choose consumers who will respond to those random numbers. Questionnaire design There are five specific steps that will guide the questionnaire design process and these include; Definition of research objectives, determination of the sampling group, questionnaire writing, administration of the questionnaire and lastly interpretation of the results. As stated earlier, the major objective of the research is to determine whether the case study Bank PHB will benefit from improvement of service quality. This will be done with specific reference to the consequences which in this case refer to customer loyalty, higher productivity and the provision of better services or service growth. After defining the research objectives, it is then necessary to look into the actual process of writing the questionnaire. This is the process of creating questions to be used within the questionnaire. Since the research wants to determine preset issues, then it is likely that the closed format method for setting questions will be more useful. It is likely for the research to yield uniform answers if the respondents can select their answers from a preset list rather than giving their own answers. Questionnaire analysis will also be made much easier. Additionally, this method has been chosen because it is a relatively easy thing to predict some of the responses that the potential participants will give to the questions. (Groves, 2004) The questionnaire may begin with some relatively easy questions such as; how many times have you banked with bank PHB Were you satisfied with the quality of service provision In order to affirm that the questions solicit proper responses, then it is likely that the alternatives will contain some neutral responses and some extreme cases e.g. when consumers have been asked about how often they are satisfied with the services offered by PHB, they can respond by choosing; never, rarely, sometimes, often and very often. Quantified responses will also be given for questions that necessitate the use of this. When customers are asked about how often they bank with PHB, they can respond by either choosing daily, once a week, annually, monthly, yearly. (Bradburn, 2004) After writing the questions in the questionnaire, it will be imperative to quality test the questions. This will be done by conducting a pilot research. This will entail the use of five people who will then give their thoughts and opinions about the questionnaire. There will be a number of issues that they will be assessed by the test takers, the first will be the clarity and conciseness of the questions in the questionnaire. Additionally, the pilot study will be designed so as to ensure that the questions are free from bias and that the choices from which respondents are supposed to select are clearly laid out in order to include all the possible answers that participants may think of. After including all the corrections made by the pilot study, it may then be necessary to create another questionnaire that is more accurate and precise this time. (Bradburn, 2004) Research plan The paper will entail collection of secondary data about Bank PHB. This part of the research will act as a guide to subsequent parts of the study and will be conducted in the first few weeks of the study. (Groves, 2004)Thereafter, compilation of research questions to be placed in the structured questionnaire will be done and this will also coincide with selection of participants. Permission will be sought from the PHB headquarters in Lagos. Afterwards, the questionnaires will be administered to bankers and thereafter a data analysis conducted. Conclusion Bank PHB is one of the most successful banking institutions in Nigeria. In order to determine Whether quality of service provision has brought positive repercussions to the company, it will be necessary to conduct a study among the PHB customers. They will be asked about how they have gone about tackling their respective challenges and how this can be improved. Reference Elumelu, T. (2005): Investment, Finance and banking in Nigeria; new opportunities and evolution; a report presented to the US-Africa Summit of the Corporate Council on Africa, June 2005 Bradburn, N. (2004): The Definitive Guide to Questionnaire Design, Mc Grawhill Publishers Donli, G. (2006): The State and future of the banking industry in Nigeria, retrieved from http://www.ndic-ng.com/pdf/tsafobin.pdf accessed on 19th Nov Presser, S. (2004): Methods for Testing and Evaluating Questionnaire Questionnaires, John Wiley & Sons Tihanyi, K. (2006): Customer loyalty Key to retail banking growth, available at http://www.delloitte.com/ accessed on 19th Nov Groves, R. (2004): Questionnaire Methodology, John Wiley & Sons Obafunmilayo, A. (2007): Challenges and opportunities in the Consolidating Nigerian banking sector, Alliance Consulting Report, no. U 46 Norman, D. (2002); The Design of Everyday Things, Basic Books Peralta-Alva, A. (2005): The Information Technology Revolution; Macroeconomics Journal, 12, 3, 56 Read More