CUSTOMER SERVICE, CUSTOMER LOYALTY AND CUSTOMER RETENTION ATNWABIAGYA RURAL BANK LTDByMARY ANINWAH DANQUAH (PG 2638914)1
CHAPTER ONEINTRODUCTION1.1 Background of the StudyThe banking industry is a significant sector in the business world which has a huge effect on allother sectors of the economy due to the financial services provisions. Financial services in Ghanahave seen several transformations over the past decades with a growing focus on customer needs.The function in the growth of all economies by the financial sector cannot be overlooked. Banksas a matter of fact assume a significant role in advancing the performance of businesses in theeconomy. Banks are the main supplier of credit in Ghana (Petasis and Opoku-Mensah, 2009).Notwithstanding their role, banks could not have done all these without customers. During thepast decade, the financial service sector has seen turbulent transformations, leading to marketplace which is characterized by extreme competition, little growth in primary demand andincreased de-regulation with the banking sector. Banks are not left out as they are severelyaffected by the level of competition both locally and globally. There has been a rapid growth inthe banking industry with the proliferation of micro-finance institutions which further increasesthe competition and complexity among the banks. This makes it necessary for a bank to becustomer oriented in its daily activities and relations with its customers in order to be able toretain them (Petasis and Opoku-Mensah, 2009).The complexity in the banking industry has made bank managers to concentrate on how todevelop close affiliation with their customers. Hence, Ghanaian banks are required to createeffective strategies to improve the interaction between customers and the bank staff. It is notsurprising that Ghanaian banks currently establish a separate department in the bank called2
customer service department to address customer concerns and complaints so as to guarantee thatcustomers obtain value for their money thereby improving customer retention, building andmaintaining customer's cordial relationship (Ehigie, 2006; Gee, Coates and Nicholson, 2008).This will also assist banks to attain an advantage which will eventually lead to customerretention and increase profitability. Additionally, loyal customers can provide the basis forgrowth which results into competitiveness in the industry. Furthermore, the belief that customerservice investment builds firm, more trusting customer relationship and enhances financialperformance has resulted into massive spending on customer relationship programmes (Morganand Hunt, 1994). Good and superior customer service would lead to customers' retention whichhas to do with creating relationship, customers’ loyalty which has to do with developingrelationship, and customer interaction may result into customer retention (Gan et al., 2006).