Drivers of Customer Loyalty and Firm Profitability Research

Drivers of Customer Loyalty and Firm Profitability Researchfiscal institutions perform a rattling role in facilitating the aggregation and assignation of capital with the helper of litigate of conveying individual savings in to loans to vocationes, authorities and individuals. The role of trusting division in the concentration and distribution of capital in gold coast can not be disputed. The recent credit mash has left a deep impact over the consummation of respective(a) banks all told over the world. Thus, in graze to survive in the eagle-eyed run, the institutions affect to adopt competitive st set upgies. One and the most important of much(prenominal)(prenominal) strategies in the banking sector constitute guest loyalty to business which reads the banking businesses competent. In this radical, we allow dismember the determinants of client loyalty and their impact on the allocate mart and firm rewardousness with the help of proveing the guest kindred concern (CRM) and strive perplexity of Barclays imprecate in gold coast.In the late(a) seventies and early eighties, the state owned banks in gold coast predominate the formal banking system of the country as they had monopoly with respect to their spread and trading works (Hinson and Hammond, 2006). However, the banking environment has now been evolved. According to Hinson and Hammond (2006 p.45), universal banking law has permitted all categories of banking to be performed downstairs a single body for corporate banking which has greatly restructured the scopes of qualification in various banking products in Ghana. Thus, the banking sector in Ghana has been brought in to the competitive bena which is found on the guests and products due to the reforms and deregulations. This infers that the management of the banks in Ghana should employ the strategies that provide customer bliss, customer loyalty, customer store and thereby, increase firm profitableness and market regions.1.1 operate role opinionThe European school of thought, vastly expressed by the work of Gronroos (1984), explains that the customers fuck off it on assistant lumber from devil aspects which are (1) the technical aspect of assist and (2) the functional aspect of the renovation. Technical eccentric is determined by penetrative if the customers first moments from the procession are fulfilled or not. The functional timber is recognize done the customers cognizance around the operate production and its delivery. According to Richard and Allaway (1993), some(prenominal) of these distinctions are correct and needed to define customers serve up fiber abridgment and loyalty behaviour. However, this concept does not consider the physical environment of the service. Thus, the American school of thought led by the work of Parasuraman et al., (1985, 1988) has been pick out in various studies which states that service case is basically the passing amidst li ght and outlook of the delivery of service. According to this standard, service quality has volt dimensions on which customers judgement about sensed service quality is based. These dimensions are thinkability Performance assurance, accuracy and dependability of the service.Responsiveness Will to help and provide prompt service to the customers.Assurance Knowledge, courtesy and ability of the employees that ensures trust and confidence.Empathy premeditation and special attention given to the customers.Tangibles Outlook of the personnel, equipments and other physical facilities.These five dimensions forget be measured through a scale called SERVQUAL comprising of 22 items. usefulness quality is operationalized according to the perturbation between recognition and expectation (P-E). Thus, the SERVQUAL determines the gaps in the service delivery of a firm. SERVPERF is another service quality measure that has been nonpl utilize by Cronin and Taylor (1992) considering that SER VQUAL was inadequate. According to them, performance and not cognition minus expectation determines service quality by proving that expectations deliver just about no impact on the customers evaluation about service quality. two of the SERVQUAL and SERVPERF conceptualizations consent been incorporated in our research cast for this have. Although, our research model includes P E, we measure service quality on the basis of perception only since expectation is insignificant (Cronin and Taylor 1992 Brady et al., 2002). However, the basics of Parasuraman et als., (1988) dimensions of service quality take hold been retained in our model. Moreover, the 22 items of these dimensions in our study are around modified according to relevancy. 7 point likert scale bequeath be used to measure P.1.2 Customer Loyalty ConceptIn our study, we have incorporated both attitudinal and behavioural concepts of customer loyalty. The following cues leave alone be used to measure customer loyalty i n the banking sector of Ghana. discussion of talk Recommendations do by the customers to their friends and family for using the operate of the bank.Repeat grease ones palms Repetition or consistency in devising purchases by the customers for the banks products and services. mirth The level of pleasure or happiness of the customers with their banks services and products.2. SERVICE tint copyThe Disconfirmation Paradigm (Parasuraman et al., 1985) allows service quality model to measure difference between consumers perceptions and their expectations for the quality of service. Figure 1 given below represents the service quality model for the banking sector. This model illustrates that there are five gaps in delivering the quality service to the customers. These gaps are described below. gap 1 This gap can be referred as Understanding as it depicts the difference between expectations of the customer and the management perceptions of the customers expectations. disturbance2 This ga p can be referred as serve up Standards since it depicts the dissimilarity between management perceptions of customer expectations and specifications of service quality.Gap 3 This gap can be referred as servicing Performance as it illustrates the disparity between the service quality specifications and the veri elude service delivered to the customer.Gap 4 This gap can be referred as Communications since it shows the disparity between service delivery and external communication with the customer about the service.Gap 5 This gap can be referred as Service Quality as it depicts the disparity between customer expectation for the quality of the service and the customers perception about the performance of the firm.Gaps 1 till 4 impact the service delivery leading to Gap 5. Thus, these four gaps have a very strong make for over the gap 5.This study leave point on the potential drop discrepancies lay down in all the gaps. The managerial implications associated with these gaps mu st be assessed in purchase secernate to formulate straightlaced business strategies. These resultant strategies pull up stakes then be properly apply for closing the identified gaps found in the banking sector in Ghana and thereby, to improve service quality and profitability of concerned bevel.Word of MouthCommunicationPersonal NeedsPast ExperienceExpected ServicePerceived ServiceGap 5Service Delivery orthogonal Communications with CustomersGap 4Translation of Perceptionsin to Service Quality Specifications vigilance Perceptions of Costumer ExpectationsGap 2Gap 3Gap 13. PROBLEM STATEMENTThe gaps 1 to 4 impact the service delivery and are concerned with the management and service providers of the bank. Thus, the question arises, what variables or agents are responsible for creating these gaps or what is the lacking of the management that refrain them from delivering the quality service to the customers?As for Gap 5, the question arises which business strategies should be adop tive to reduce the gaps and thereby, improve service quality and performance of the bank.4. HYPOTHETICAL MODELThis paper is calculateed towards finding loyalty drivers according to the viewpoint of the customers of the Ghanaian sell banking. This chapter of the paper entrust present a alleged(a) model that testament be used to determine the relationship among loyalty, loyalty drivers, banks profitability and market share. Figure 2 provided below represents the framework of our hypothetical model.The model presented in figure 2 below explains the service quality as perceived by the customer. This model has been premised on seminal model (SERVQUAL), Cronin and Taylor (1992 SERVPERF), Parasuraman et al., (1988) and Brady and Cronin (2001). The quality of service conceptualized by 2 pathways that are (1) P-E representing the gap in between perception, P and expectation, E and (2) P that represents only perception as the conceptualization of expectation (E) is not important (Cronin and Taylor, 1992). Thus, perception is what is actually measured. Hence, the questionnaire in the survey go out consist of a single set to elicit answers concerning customers perception (Brady and Cronin, 2001) or else of two sets of questionnaires for measuring perception and expectation distinctively and for determining the difference between the two as was done by Parasuraman et al., (1988). The framework provided in this paper demonstrates the fact that fake loyalty may be found abundantly and incomplete gladness will result in customer switching.The model below illustrates a gap which represents the disparity between the customers perception and expectation. Since the expectation of a customer does not influence the actual service delivered to him/her by the bank, thus, it holds an insignificant value. This infers that the actual service delivered will depend on the perceived service quality which in turn is also influenced by various service quality dimensions namely tangi ble, reliability, responsiveness, assurance and empathy. Moreover, it is known that these dimensions influence both the customers service quality perceptions and the management excogitationed service quality. Thus, the hypotheses and the hypothetical model are the same for all the gaps mentioned preceding(prenominal). This research paper will investigate the disparity between the perceived service quality and the actual quality of service delivered to the customer by measuring the above mentioned service quality dimensions.Service quality dimensionsCompetitive PriceExpectations (Expected Service)Perception(Perceived Service Quality)SatisfactionLoyaltyActual service ExperiencedTangible dependablenessResponsiv-enessAssuranceEmpathy confides Profitability marge (image reputation)Market shareDissatisfied customers transposition customers5. PURPOSE AND OBJECTIVES5.1 Purpose of the ResearchThe finding of this study is to empirically analyze the hypothetical model and the related hypot heses. The analysis of the hypothetical model will lead to the formulation of appropriate business strategies that will overcome the potential disparity between perceived service quality and the actual quality of service delivered to the customer upon instruction execution.5.2 Research Objectives5.2.1 Primary ObjectiveThe objective of this paper is to investigate the drivers of customer loyalty and firm profitability with the help of assemblage empirical evidence through interviewing the customers of various banks in Ghana and also, through assessing a case study of Barclays imprecate Ghana. Due to the distinct ethnic values of the Ghanaian Society, our study will focus on the extant literature.5.2.2 Secondary ObjectivesBusinesses conventionally implement aggressive marketing strategies in order to draw the attention of the sassy customers and thus, increase market share at the cost of competitors. According to the latest trends in competition, those businesses benefit the most that focus on retaining their customers while providing them the goods and services (Roberts, 2005). Customer retention with the help of enforcing quality in products, services, prices and accessing facilities of the bank among others play a critical role in customer satisfaction. Studies have shown that satisfied customers always return to their service providers and also, make their recommendations to friends and families which in turn increase both market share and profitability of the firm.In the banking sector of Ghana, it is for the most part hypothesized that heights performance of the bank is associated with high customer retention. Thus, camberers appraise customer loyalty as the key factor towards maintaining market share and increasing profitability of the bank. Due to the high customer chum, it is important to know that what drives customer loyalty. Ghauri and Grnhaug (2005 p. 14) state that assumptions and speculations should not be certain or rejected unless these assumptions are critically studied to give pellucid and reliable reasoning for their acceptation or rejection. This study seeks to attain this aim that requires investigation of the drivers of customer loyalty serving as the core of design strategies that result in the increase of customer retention and bank performance by taking in to account the case study of Barclays shore in Ghana.6 RESEARCH QUESTIONS AND HYPOTHESES6.1 Research questionsIn order to study the optimization of the enterprise contact management through a CRM enabled contact centre program by taking in to consideration the case study of Barclays aver in Ghana, the following question are existence posed in this paper.What are the factors driving customer loyalty in Ghanas banking sector, in particular Barclays banking concern Ghana?What are the factors that set acantha customer loyalty and retention in the banking sector in Ghana, especially Barclays Bank Ghana?Does customer loyalty is achieved through custome r satisfaction?Do reluctant customers approach other banks in order to get better and improved customer relations and services?6.2 HypothesesOur study will test the following hypotheses in this paper.H1- Service quality influences loyalty and satisfaction of the customer.H2- Tangibility, responsiveness, reliability, assurance and empathy are the five dimensions of service quality that vary to the completion to which they instigate customer loyalty and satisfaction.H3- Customer loyalty and satisfaction depend upon competitive pricing.H4- Perceived reputation and image of the bank stimulate customer loyalty.H5- Banks or enterprises profitability can be increased by customer loyalty and market share.H6- Reluctant customers approach other banks in order to get improved service quality from other banks.7. BACKGROUND- BANKING IN gold coastGhana has a well structured pecuniary system that is make around the capital market, the Bank and the non Bank Financial Institutions. Banks are pas s on divided in to the following classes on the basis of a license system universal joint Banking low Class I banking license. planetary and off-shore Banking under Class II banking license. usual, off-shore Banking and ARB (Association of Rural and Community Banks) APEX Banking under the general banking license.(Bank of Ghana, Annual report, 2007).At present, the minimum amount of GHC 60 gazillion is required to be possessed by the banks that are operating in Ghana as their stated capital (Bank of Ghana, Annual report, 2007). Ghana has 26 major banks operating under the ecumenical banking license and 126 rural and participation banks that have been licensed for ARB Apex banking system. And also, 41 non Banking Financial Institutions which bear of Discount Houses, Finance Companies, Mortgage Finance Companies, Savings Companies, Loans Companies and Leasing Companies. All of these NBFIs are supervised by the Bank of Ghana that is the central bank of Ghana. The action based div ision of Commercial, merchandiser and education banking operating previously in Ghana have been replaced by this categorization. This was done in the wake of the first for the pecuniary reforms that enabled universal banking in Ghana and thus, dissolved the operating limits hypothesized on the sign activeness of incorporation. The goal was to transform the conventional way of banking operation in order to welcome competitive trading in to the banking sector.Dr. Acquah, the governor of the Bank of Ghana stated in his speech at the fifth Banking Award Ceremony that universal banking was introduced in order to promote mod banks, liberalize the options for the banking services, extend the forking network and increase competition for desex at the level of retail (Acquah, 2009).Since the banks constitute 70 per cent of the financial sector, thus, they are the most common source for contributing to the economy (Bawumia, 2008). The gaffer offices of all the banks in Ghana are si tuated in the matter capital of the country while their several branches are located in major cities and town of Ghana that are owned by the government activity, Ghanaians, foreigners or the combination. Currently all the banks in Ghana possess Universal Banking License. tho 12 banks in Ghana are owned by its citizens. The table below shows the banks operating in Ghana with their branch networks, area of activity and proprietorship.Name of BankNumber of BranchesOwnershipCurrent Banking LicenceBarclays Bank of Ghana Ltd120Non- GhanaianUniversalMerchant Bank (Ghana) Ltd16GhanaianUniversalEcobank Ghana particular(a)32Non- GhanaianUniversalGhana Commercial Bank Ltd143GhanaianUniversalNational investment Bank Ltd24GhanaianUniversalStandard Chartered Bank Ghana Ltd19Non- GhanaianUniversalSG-SSB Bank Limited36Non- GhanaianUniversalThe Trust Bank Limited17GhanaianUniversalAgricultural Development Bank Ltd50GhanaianUniversalAmalgamated Bank Limited10Non- GhanaianUniversal prudent Bank L imited10GhanaianUniversalFidelity Bank Limited6GhanaianUniversalZenith Bank Limited9Non- GhanaianUniversalStanbic Bank (Ghana) Limited10Non- GhanaianUniversalUnibank Ghana Limited11GhanaianUniversalIntercontinental Bank Limited12Non- GhanaianUniversalHFC Bank Ghana Limited11GhanaianUniversalFirst Atlantic Merchant Bank Ltd4GhanaianUniversalInternational Commercial Bank Ltd12GhanaianUniversalGuaranty Trust Bank Limited5Non- GhanaianUniversalCAL Bank Limited10GhanaianUniversalUnited Bank for Africa (Gh) Ltd16Non- GhanaianUniversalBank of Baroda Ghana Ltd1Non- GhanaianUniversalBSIC1Non- GhanaianUniversalBPI Bank Limited9Non- GhanaianUniversal dining table 1 Banks in Ghana (Source Price Waterhouse Banking Industry Survey, 2008).7.1 The era of slur Banking Reform in GhanaDevelopments in the era of post Banking Reforms in Ghana can be concisely expressed as the regeneration of the distressed and dysfunctional banking system with illiquidity and insolvency, credit rationing and interest rate controls in to a market based regime along with upward(a) the bank supervision in order to ascertain that efficiency and profitability is increased (Acquah, 2006).The Economic Recovery Programmed (ERP) introduced the Financial Sector Adjustment Program, generally referred as FINSAP so that the banking sector can play a vital role in promoting the sparing discipline. This course of instruction was executed in two in two phases. In the first phase, FINSAP 1, provisions were made for liberalizing the banking patience and restructuring the distressed banks in Ghana (Brownbridge et al., 1998). The restructuring part was very crucial since these banks were each extremely important for the economy or deeply associated with other economic activities such that their demolition may result in disastrous ramifications.The blink of an eye phase, FINSAP 2 brought new dimensions in the financial industry reform program through privatizing state owned banks, technological improvements, human capital development and careful supervision and regulation by the central bank of Ghana. In addition to this, the second phase of FINSAP characterized cautious banking through revising the Banking constabulary of 1970 and through introducing the Banking Laws of 1989 and 2004 which enforced the requirement of minimum capital keeping in view the increased number of banks and branches.Due to FINSAP 2, the banking and the financial industry in Ghana experienced strong regulation and supervision along with the advancement in latest payments and settlement system. Above all was the Payment Systems Development Strategy by the central bank of Ghana that focused at the delivery of financial services that enhanced the financial intermediation with the help of the progress of electronic payment products that include ATM (Automated Teller Machine) services, e-money, enthrall of funds at the point of sale, SMS (Short Message Service), internet and telephone banking. Recently, e-zwich wa s brought in to the market in order to build a common platform that assisted in connecting the different banking institutions through a biometric smart identity card (Acquah, 2009). All the banks responded positively to the introduction of information and communication applied science (ICT) in delivery of financial services which in turn improved the financial performance.This outlook over shadowed the competition and distinguished market share and profitability among the banks in Ghana. The new foreign and private banks launched latest technologies whereas the government banks have to cope up with the redundant man power and non-performing assets.The new banks encounter the challenges of market share, spread and size from the conventional banks. In order to overcome this challenge, the new banks employed the strategic option of swift implementation of the prescribed new products and the development of financial services administered by the Bank of Ghana so that the un-banked, ban ked and under banked customer classes of the population could be captured.7.2 The courting Study of Barclays Bank, GhanaAs shown in the table 2 provided above that Barclays Banks holds a leading position in the Ghanaian financial services market place in addition to an aggressive nationwide branch network. Thus, Barclays being the premier banking institution of Ghana is leveraging its distinct characteristics in order to compete effectively in the highly competitive and stiff progressing banking and financial services industry of Ghana.In order to further tag it self from the rest in the competition, Barclays Bank is headed towards promoting its strategy of holding its market leading position through developing its customer management functionality with the help of implementing a robust solution for customer relation management (CRM) with potently emphasise over its customer service operations. Barclays commenced this initiative for CRM in order to urge the customer facing th e banks operations with the technology platform enhancing the banks operations and change the bank to compete effectively in addition to becoming a truly customer focused organization.Thus, Barclays is looking forward to working with a reputable organization in order to develop and upgrade its lively customer contact centre along with integrating it with CRM Dynamic base by Microsoft.Completely equipped, contact centre of Barclays Bank will finally enable the customers to interact and deal with the bank via multiple channels such as voice, e-mail, fax, IVR, web, etc.) that fulfils various functionalities of sales, marketing and service at the time of their gubbins either with a customer representative or through self service.It is highly vital for Barclays to enhance its processes facing customers in order to develop the business relationship in between its customers and employees for attaining its business goals. The implementation of such an advance and complex customer manag ement project is to be based upon detailed and comprehensive planning, apt consulting and allocation of technical resources to ascertain that the desire goals are achieved with in a certain time period, being as cost effective as possible. Electronic services department of Barclays strongly believes that the goals of this initiative required being in line with the overall business strategies of Barclays Bank.It has been observed from similar engagements that spanning numerous industries is not adequate to ensure craved result. Barclays must recognize the important role that it has to play in the initial heads of the project. Complete commitment and dedication from Barclays is required through out the union time frame of the project in order to ascertain and fancy the significance of enhancing its customer management functionality which will ultimately result in the growth in revenue and profitability.7.2.1 Requirements for the Barclays Bank GhanaBarclays Bank Ghana is looking fo rward to improving its overall customer management operations through commencing a CRM strategy that is most likely to enhance the banks customer focus strategy. The first stage of this CRM initiative will emphasize over improving the customer service function of the bank through making new advancements in its true platform for the centre. This is achieved by employing latest tools that will improve the interaction of the customers with the bank either through the customer service representation or by means of self service.The first stage of CRM initiatives is most likely to improve the sales and marketing processes of the operation of the bank and set the stage for linking these processes with the customer service operations and allowing them to access the tools that will support in improving their performance, enhance their functions and recognize understand the customer as the Banks primary asset.The bank has recognized the following basic functions undeniable for improving its existing contact centre platform.Outbound Calls and Multimedia conveyAutomatic Distribution of CallsCaller Line IdentificationComplaint ManagementInteractive Voice Response consolidation of CRMComputer Telephony IntegrationCall Recording insures or DashboardSystem BackupBarclays Bank has also recognized the following modules of Microsoft Dynamics CRM platform as the plummy milestones for the project.Marketing moduleService ModuleSales Module workflow ModuleAnalytical Module7.2.2 Recommended SolutionThe recommended solution is divided in to the following three different components.CRM-Workshop for Business move Mapping carrying into action of Microsoft Dynamic CRMUp gradation of the platform of Contact Centre applied science7.2.3 Business Process MappingThe aim of this do work is to recognize the current business processes, early business processes and the gap between the two scenarios. It is conjecture to overcome barriers between the business values and its technology. The outcome is strict answerableness and a higher probability of customer satisfaction through its deployment.The exercise will determine the metric that need to be tracked down, managers and customers that will be held accountable for these measurements of the performance, required new processes, impact of processes and sub processes on data importing, solution configuration and integration with other technologies and systems used at the back end.The results of this exercise are given belowDetailed Process Map that consists of report on current state as lite by the stockholders.Detailed Process Map consisting of report on future state as validated by the stockholders.Gap Analytical ReportBusiness Requirements ReportAfter the above documents have been produced, the business users will eventually examine and validate the provided information. After approval, these documents will be used to support project execution.7.2.4 Deployment of CRM SystemThe desired outcome of the successful de ployment of a CRM system is determined through the end users usage and willingness to use it effortless in order to improve their personal productivity. In this regard, the adapted methodology gives a frame work for dealing with customer relationship management as a business strategy and also as a project for developing technical systems. The concept behind this process is that technology alone with out strategy does not produce business results. Thus, a proper strategy for CRM is required to be adopted side by side with the deployment of the technical system. The success of CRM lies in the implementation of the technology with the clear picture of the improvements in measurable business performance.7.2.5 StrategyThe strategic model used by the Barclays Bank Ghana constitutes of four components that must be understood in order to achieve real business advantage from whatever CRM based project.Figure 2 (Source e.Services Africa Ltd. 2010).Performance ManagementThe purpose of any C RM project in an organization is to improve or hone its performance. However, it is complicated to precisely define the areas and object to be improved, the extent of this improvement and the enhancement of this improvement measure through the CRM system. This objective is fulfilled by embedding key point indicators, business metrics in the form of perceiveible charts and graphs in to the user interface of the CRM system. This enables the user to use the system as a routine activity. User can easily find the changes made by them to the system in clear metrics on their dashboard. Users and the management must seriously operate the business in accordance to the enter metrics on the dashboards.Management CommitmentCommitment of the management serves as the basis for success of any CRM project. Senior managers must completely comprehend and be involved in adopting CRM as a strategy and they must also, actively take part in the implementation of CRM project. Existing processes need t o be changed for improving performance of any business or system, thus, any CRM project could be referred to an effort for changing management and modifying behavior. Managers are supposed to support such changes. Irrespective of the technological functions, the managers must back the process changes along with communicating the fact that new procedures need to be adopted in order to achieve the desired goals of the business.