A Proposal On The Effect Of Customer Service Strategies On Corporate Performance In Ghanaian Banks
1. INTRODUCTION
Globally, the world business is faced with stiff competition, due to the increased technology. In the world business arena, financial institutions have faced fierce competition from each other; hence the challenge remains to be customer service strategies that will enable them sustain the biggest market share. For example in most developing countries like Nigeria, retaining customers and attracting them has constituted one of the toughest and most challenging activities of financial institutions (Banabo & Koroye, 2011). In 2008 to 2009, the world economy suffered the deepest global financial crisis ever since World War II. Countries around the world witnessed huge declines in trade, output, and employment. Gross Domestic Product in the industrial countries fell by 4.5 percent in 2008, and average real Gross Domestic Product growth in emerging economies dropped to 0.4 at the start of 2009 from 8.8 percent in 2007. Unemployment rate across Organisation for Economic Co- operation and Development economies rose to 9 percent, and reached double digits in a mix of industrial and developing nations (Rose and Spiegel, 2009).
During the period 2008-2011, the Ghanaian banking system showed resilience, which was attributed in part to the low financial integration in the global financial market and the intensive supervision and sound regulatory, reforms (International Monetary Fund, 2010). The financial sector performance indicators improved substantially and the sector remained profitable with return on asset indicator rising from 2.6 percent in 2007 to 4.4 percent in 2011 while the ratio of gross non-performing loans to gross loans improving from 10.6 percent to
4.4 percent over the same period (Ghana National Bureau of Statistic, 2013). Banking industry is highly competitive with banks not only competing among each other; but also with non-banks and other financial institutions (Hull, 2002). According to Fiveson (2010), understanding customers doesn’t end with knowing who your customers are and what they have bought. Instead it is developing good relationship with them and knowing what they expect at any given point, is what matters for any profit making entity.
Even though the overall picture indicates that Ghana’s banking sector is well capitalized, competition has been increasing where major players have introduced various products in bid of attract customers. For example, the Equitel Banking Services, by Equity bank limited the Pesapoint by family bank limited, the M-shwari by the Safaricom and the Commercial Bank of Africa limited. With this increased competition, banks have to care about the quality of their services since this quality is considered the essence or core of strategic competition. However service providers such as banks have been faced with challenges on how to develop an offering that is both flexible and capable of being tailored to fit the specific requirements of customers (Edvardsson et al, 2007). This has led to the need for banks to continuously work on attracting, retaining and maintaining existing customers and to do so, implementing customer service strategies plays an important role. Since banking operations are becoming increasingly customer dictated (Heskett & Sasser, 2010). It is against this background that this study therefore, sought to find out effects of customer service strategies on bank performance on the selected commercial banks in Bantama town.
Customer Service Strategies
Customer service strategies refer to the processes and actions that make it easier for customers to do business with a company (Kotler, 2000). A good customer service strategy considers its customers’ needs and how best to meet them. It always puts the customer first, when creating procedures, conducting daily operations and training new employees (Hitt et al, 2008). A customer service strategy is essential if a business wants to gain a competitive edge in the marketplace by building a large and loyal customer base. If a company is to develop a successful customer strategy, the first step is to accurately identify customer needs. The objective is to enlarge the scope of the advantage, which can only happen at some other firms expense (Dobni, 2003). Good customer service strategies enhances employees performance, hence in the long run the organization’s goal is met.
Organizational Performance
Organizational Performance involves the ability of an organization to fulfil its mission through sound management, strong governance and a persistent rededication to achieving results (Doyle & Stern, 2006). In this study performance was viewed as attaining positive perceptions of customers by reaping off the effects of the adoption of strategies by financial institutions in attracting and maintaining customers while achieving customer service quality and maintaining customer loyalty. Organizational performance can be measured both using financial and non-financial indicators. The use of non-financial measures to manage organizations appears to be positively associated with organizational performance on average. Briggs, Claiboborne and Cole (2006) pointed out that financial measures are generally lagging measures of performance while non-financial measures such as sustainability, learning and growth, and internal processes improvements are leading measures that offer insight about future performance.
Balanced Score Card is defined as integrated set of performance measures derived from The company’s strategy that give top management a fast but comprehensive view of the organizational units (Drury, 2004). BSC framework identifies four categories of measures in order to achieve balance between financial and non-financial, between internal and external and between current performance and future performance (Kaplan & Norton, 1992). Out of the four BSC perspectives the customer is at the core of any business and it’s crucial to long
term improvement of company performance (Kaplan &Norton, 1992; and Pineno, 2002). This study will therefore use BSC to measure organizational performance of banks.
2. Statement of the Problem
Globally banks are under intense pressure to perform in today’s volatile market place. Ghanaian banks are facing fierce competition among themselves; this is due to the emergence of many financial institutions providing almost the same products and services. Since these financial institutions target the same clients, there’s need for the commercial banks to come up with unique strategies that will enable them stand out hence acquire the largest market share. In the last two decades researches have shown that strategic customer management and human resource management are among the most important determinants of organizational performance (Taylor & Francis, 2008). The banks survival solely depends on the customers, since they are the backbone of any service industry. For any bank to continue improving on its performance, it must differentiate itself by consistently providing exceptional customer service strategies. Progressive organizations are deeply examining client needs and plotting the customer journey to uncover inherent or potential risks, including compliance issues. They are then designing effective business controls with the impact to the customer at the forefront. By bringing compliance and customer objectives together “under one roof,” it is also possible to achieve greater efficiency, eliminate process redundancies and ultimately, lower costs (Adegoroye & Moruf, 2012).
Anyim and Munyoki (2010), in their study, clearly indicated that banks experience various challenges for example changing business environment and changing customer’s needs, when trying to adopt strategies to manage customer service strategies. Also, Wambui (2012), in her study on financial innovation and bank performance, indicated that most commercial banks in Ghana face greater challenges in trying to adopt new technologies as a strategic response to customer service delivery in the changing business environment. The study used census survey research design. Johnston & Kong (2011) and Helkulla (2010) identified the benefits for improved experience is not only for the customers but also benefits staff due to cost reduction and efficiency gains. Gapalani and Shuck (2011), in their study on the service enabled customer experience, the results revealed that companies need to adopt customer experience strategies and they should leverage on those strategies for them to achieve competitive advantage. William & Baumann (2008), in their study established relationship between customer service strategy and performance. The results indicated that customer satisfaction was positively related to earnings per share and price earnings ratios of an organization. However, few studies have used the variables that were discussed in this study. Hence it was paramount for the researcher to carry out the research on customer service strategies effect on bank performance in Bantama town.
3. Objectives of the Study
The general objective of the study was to establish customer service strategies effect on bank performance in Ghana, a survey of selected commercial banks in Bantama town.
i. Specific Objectives
- To determine the effects of human resource management strategies on performance of commercial
- To evaluate the effects of technological strategies on performance of commercial
- To examine the effects of service delivery environment strategies on performance of commercial
4. Research Hypotheses
The specific hypotheses that guided the research were:
HO1: There is no significant relationship between human resource management strategies and performance of commercial banks
HO2: There is no significant relationship between technological strategies and performance of commercial banks
HO3: There is no significant relationship between service delivery environment and performance of commercial
5. Significance of the Study
The findings of the study will be of great benefit to the management of commercial banks, to know important as a source of information on what strategies to apply in the market to ensure
customer satisfaction. They ought to be able to identify the loopholes in providing quality customer service and take necessary steps to rectify and offer solutions to the problems regarding customer experience. Managers ought to understand the strategies, effects and importance of customer service and further their use in the organization.
The findings of the study will add value to policy makers as they would obtain knowledge of the financial service industry dynamics and the responses that are appropriate and specific for the firms. They would therefore obtain guidance from this study in designing appropriate policies that would regulate the sector to ensure there is quality customer service.
The findings of the study adds value to scholars and academicians by providing information to potential and current scholars on customer care strategies on bank performance and would expand their knowledge on customer satisfaction in the banking industry. In addition; it would identify any knowledge and practice gaps that may exist and potential areas for further research.
The findings of the study will also benefits banks through board of directors, executive management, employees and policy makers by informing them on how to implement customer service strategies more effectively and ensure that they discharge their duties more effectively towards increasing Banks value. This would ensure provision of quality service to the customers and therefore providing a competitive edge for the Bank.
6. Scope of the Study
The study was limited to commercial banks in Bantama town. The study was restricted to the effects of customer service strategies on bank performance within Bantama town. The study used an exploratory research design, targeting all the 26 commercial banks in Bantama town.
The study sought to collect primary data from the respondents targeted which was done through the use of a questionnaires to; regional managers, branch managers and customer experience officers. Their opinions were used to draw the conclusions for the stud. The quality of service at the time of data collection was considered.
7. LITERATURE REVIEW
Theoretical Review
Resource-Based View Theory
Peter and Barney (2003), pioneers of this theory emphasize that resource of the firm as essential determinants of competitive advantage and its performance. The model assumes that firms resources are heterogeneous hence a chance for them to achieve competitive advantage. It also assumes that resource heterogeneity may persist over time since resources used to implement firm’s strategies are not perfectly mobile across firms. Resource Based View (RBV) assumes that firms can be conceptualized as bundles of resources and capabilities. The resources and capabilities with which firms compete cannot be bought or sold in markets hence they are: valuable, rare, inimitable and non-substitutable.
This approach emphasizes an inside-out business strategy, in which a firm using its internal unique resources and capabilities is better able to outperform its rivals (Barney, 2006). Capabilities must be developed rather than being taken as given resources must satisfy the user need. Business processes or activities could utilize for their execution: people characterized by their knowledge, experience, skills and talents; machines, devices and tools characterized by their technical characteristics and constraints; methodologies, tools and models installed in the organization, or various types of tangible assets buildings, real estate, and intangible assets like patents, brand names (Barney, 2006).
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