ASSESSMENT OF CUSTOMER SATISFACTION IN AGRICULTURAL DEVELOPMENT BANK

1.1 Background to the Study

The banking sector has undergone very important changes globally. More specifically, increased

competition, technological developments and the growth of the various financial institutions

have significantly altered the environment in which banks operate (Mylonakis 2007). Indeed,

customers will always remain the primary focus of every business because without customers

there will be no reason for a business to operate (Roberts-Lombard 2009). Today’s sophisticated

customer has changed the face of the operations of many banks. According to Mylonakis (2007),

the changes in customer behaviour have also imposed changes in decisions related to offered

services, as these services need to be of high quality in order to satisfy today’s demanding

customers. The identification and satisfaction of customers needs better and sooner than

competitors and the sustenance of customer’s satisfaction secures an advantage over competitors

(Oyeniyi & Abiodun 2008).

Customer’s satisfaction holds the potential for increasing an organization’s customer base,

increase the use of more volatile customer mix and increase the firm’s reputation (Fornell, 1992,

Levesque and McDaugall, 1996). One path to achieving customers’ satisfaction is through

critical assessment of the needs of the customer. Customer satisfaction is a measure of how

products and services supplied by a company meet or surpass customer expectation

(http://www.thetimes100.co.uk/theory/theory--customer-satisfaction--278.php). Indeed, customer

satisfaction can be seen as a key performance indicator within business. It is clearly the extent to

which customers are happy with the products and services provided by a business.

Making the customer the fulcrum of the business may vary from one industry to another.

However, in service delivery and sale of products it is not only key but crucial. This is because

service organizations such as banks cannot take back their service once it is consumed.

Nevertheless, it is demanded for corporation survival, profitability and growth that service

organizations hold their own in competition (Oyeniyi & Abiodun 2008). In such an environment

according to Roberts-Lombard (2009), losing a valuable customer to a competitor can have

significant impact on profitability and growth of the company. Gaining high levels of customer

satisfaction is very important to a business because satisfied customers are most likely to be loyal

and to make repeat orders and to use a wide range of services offered by a business

(http://www.thetimes100.co.uk/downloads/theory/customer_satisfaction.pdf).

The Ghanaian banking industry for one has witnessed significant rise in competition in recent

years due largely to the deregulation policy of government and the advent of many banks and

quasi financial institutions turning themselves into banks. Another complex dimension to the

competitive trend in the Ghanaian banking industry is the ease and rate at which products and

services are copied and duplicated in the industry. This trend fosters a scenario of continuous

fight for customers share (Mendzela 1999) and an increasing the need to build loyal customers

through customer satisfaction.

Loyal customers, from cost perspective tend to stay longer with the preferred providers, buy

more and generate favourable word-of-mouth effect that may further benefit the preferred

providers (Reicheld and Kenny 1990). Gan et al. (2006) indicates that retaining customer

becomes a priority for most enterprise and there are compelling arguments for manager to

carefully consider the factor that might increase customer’s retention rate. In any case, the cost of

creating a new customer has been estimated to be five times the cost of retaining an existing

customer (Reicheld 1996). And loyal customers will always show resistance to customer’s

enticement and be able to give both solicited and unsolicited referrals (Oyeniyi & Abiodun

2008).

1.1 Statement of the problem

The need to operate efficiently and gravitate towards the needs of the customer comes from the

intense competition stimulated by the liberalization of the banking industry. Indeed, customer

relationship management is well-established in the banking industry. However, Sievewright

(2006) found that in the implementation stage, banks tend to focus more on discrete products

rather than on the overall customer relationship. This has actually prevented banks from

addressing the needs of customers and thus satisfying the customer.

The changing environment and complexities of a bank’s day-to-day operations have taken their

toll on the core business processes that support and underpin these operations. As a bank adds

products, services, employees, channels and customers, customer rewards and incentives become

few and far scattered leading to customer disaffection and disloyalty. However, it has been

established that where the core business is centered on the customer with outstanding service

performance and delivery, satisfaction and loyalty is guaranteed.

Despite all efforts to mobilize deposits by the banking industry more people still remain in the

informal sector and outside the banking system. This comes against the backdrop of the set

standard within the banking industry which has become a hindrance. For instance, the “cut off

time” of the daily operations of Agricultural Development Bank to allow for running end of day

transactions has seen customers who come at late hours to transact business turn away. This

practice does not resonate with this large segment of customers.

The pressure of competition in the banking sector today is further increased by a market where

the customer acquisition rate is slowing and customer loyalty is decreasing. This is the result of

attention being focused on products and sales instead of specific needs of the customer.

Indeed, beyond balance and transactional data, banks do not have holistic view of each customer

and for that matter knowing their personal needs. Such balance and transactional data do not

contain demographic and psychographic details that make it possible to design pre-filled

application forms that could be used by customers and their associates as the basis for applying

for and processing new products.

The turn-around time of most banks has been pegged at five minutes however, long queues with

people wasting more than two hours whenever they come to transact business has become a daily

rituals at the end of every month. Yet many banks continue to trumpet the fact that they are

customer focused.

Previous studies have focused narrowly on customer’s loyalty and satisfaction without

attempting to link them. Therefore, given the competitive battle in the Ghanaian banking

industry and the fact that if intention criteria are not well managed customers may leave

irrespective of retention efforts. Hence, this study examines the potential construct of customer

satisfaction by investigating the chain of events that converge on satisfaction

1.2 Aims

The importance of activities that inure to the benefits of the customer and the subsequent

satisfaction and loyalty from the customer cannot be over-emphasized. This research aims to

assess customer satisfaction as a requirement for loyalty and retention in the ever competitive

banking environment in Ghana.

1.3 Objectives of the study

Specifically the study seeks to;

To find out what measures ADB has taken to improve on its customer’s satisfaction.

To determine how these measures reflect on retention of existing customers.

To assess whether the measures have led to improvement on their customer base.

1.4 Research questions

What measures has Agricultural Development Bank taken to improve on its customer’s

satisfaction?

How have these measures reflect on retention of existing customers?

What interplay exists between improvement in customer satisfaction and increase

customer base?

1.5 Significance of the study

Customers have expectations about any product or service they choose to exchange money for.

They are satisfied where the performance of the product or service quality is commensurate with

the price paid. If a firm consistently fails to deliver on its promises, it is penalised by the

customer. The difficult part of this is that customers do not just walk away quietly, but tell others

about the poor service delivery. A way to avert this situation is what the current study seeks to

do.

With the increasing competition within the banking industry in Ghana, it is not just enough to

meet the customer’s expectation but rather provide effective services to dazzle the customer.

This will ensure repeated transaction which will eventually affect the much needed philosophy of

business – profit. This could be achieved through effective customer service practices by the

banks.

The need to make banking services of Agricultural Development Bank excellent to enable it to

stay ahead of others in the competitive banking industry has given the needed oxygen to this

study to help critically examine this issue in the context of the banking industry.

The findings of the study it is hoped will help policy makers in the banking industry to design

appropriate programmes and formulate policy interventions to tackle the problem of effective

customer service and customer satisfaction through making the customer the fulcrum of the

operations of the bank.

1.7 Scope and organization of the study

This research covers Gulf House and Madina branches of Agricultural Development Bank. The

study will be structured into five main chapters. Chapter one will focus on the general

introduction, giving background to the study, the objectives, research questions, rationale of the

study and limitations.

Chapter two will represent a review of literature on the subject matter and explanations of the

various concepts and theories involved in the study as well as information about the study bank.

Chapter three mainly will feature methodology that will be used for the study and the various

statistical tools and techniques used.

Chapter four takes up analysis of field data in matrix and descriptive forms and the various

analytical tools that were used in the analysis.

Finally, chapter five gives a summary of the study, conclusion and recommendations

CHAPTER THREE

METHODOLOGY

3.1 Introduction

This chapter covers the study organization and different methods used in the study. These

methods include: the selection of the study bank and respondents, the case study approach,

validity and reliability, the sample population, the instrument for data collection and data

collection procedure and the analysis of the data.

3.2 Selection of the study organization

The research was conducted in three branches of Stanbic Bank. These are Airport City, Accra

Main and Makola. The choice of Stanbic Bank as the focus of the study is based on the leading

role it has played and continues to play in efficient banking services.

3.3 The case study approach

A case study method was selected to gauge the customer centricity for the following reasons.

This approach is more appropriate because of the contemporary nature of study opposed to a

historical phenomenon. It also allows for the use of multiple sources of evidence. Customer

centricity which the study seeks to address in the banking industry is a contemporary

phenomenon within real life context and an understanding of the issues requires careful and

critical inquiry or examination in order to make decisions that take into consideration the special

and peculiar circumstances surrounding the issue. Even though the use of a case study method is

often limited to an area, it could be used to make generalisation when the data collected has a

wide scope and is highly representative of the population.

3.4 Population

The population of the research was two-fold, namely the staff of the various branches of Stanbic

Bank in the Accra Metropolis as well as the customers of these branches. The Accra Metropolis

was chosen since it represented the largest number of branches of the bank as well as the largest

sales turnover for 2008. A list of the branches in the Accra Metropolis was obtained from the

head office which also included the annual sales figures, as well as the names and contact details

of the branch managers.

3.5 Sample

For this study both stratified and convenience sampling techniques were applied The sample

units were Airport City, Accra Main and Makola branches in Accra Metropolis. The three

branches constituted the strata from which a proportionate sample was chosen. Since the largest

concentration of customers is located in the Accra Main branch and the largest turnover for 2008

was also recorded here, the majority of sample elements were selected from here. The sampling

elements were obtained by means of executing a convenience sample at each branch. The target

population for this study included 81 sample elements, representing 31 staff and 50 customers.

3.6 Research instrument

The empirical research component of the study consisted of the completion of semi-structured

questionnaires through personal interviews. The questionnaire to both the customers and staff of

Stanbic Bank consisted of a structured format and incorporated two types of questions, namely

closed-ended questions to gather demographic data on the profile of respondents and five point

Likert-type statements to test respondent’s current and ideal application of identified customer

centricity management principles. The reason for applying a five point Likert scale to the study

compared to a seven point Likert scale is because the satisfaction levels of bank customers can

be measured more successfully through the use of five point Likert type statements .

Questionnaires were completed with the help of three research assistants within one week period

with the intention of gathering detailed information which would help contribute to the

successful outcome of the research study. The items on the questionnaire were compiled from

each section and sub-section of the literature.

The questionnaires were designed to gather data on customer satisfaction and retention against

variables such as service quality, product quality, personal attention, efficient staff, queuing time,

personalized service deliverance and timely handling of complaints among others.

3.7 Data gathering

Personal interviews were used to collect primary data for the research. These interviews were

conducted with both customers and the staff of the Stanbic Bank. Customers were selected at

random as when they enter the banking hall. The research assistants were available to the

respondents (both customers and staff) during the interview to clarify unclear questions on the

questionnaire. After completion of the interviews, follow up telephone interviews were

conducted amongst fifteen percent (15%) of the respondents. The purpose of these interviews

was to determine the accuracy of the information on the questionnaire. Through this process the

reliability of the information on the questionnaire was enhanced.

Secondary data was obtained through extensive review of written documents, which included but

was not limited to articles in newspapers, textbooks, articles on the internet and publications.

3.8 Data analysis

The collected data were analysed using statistical and analytical techniques. The statistical

software package SPSS Version 11.5 as well as Microsoft Excel were used to analyze the data to

obtain descriptive statistics mainly in the form of frequencies and percentages. For the statistical

analysis, cross tabulation was used.

Quantitative and qualitative data from semi-structured and in-depth interviews was analyzed

within the framework of the research questions. For discussion of results, tables and graphs will

be used to present the data. The study also used proportions generated from simple cross-

tabulations as part of the analysis. This technique was employed to examine variables considered

to be of relevance. This was made with 99% level of confidence i.e., p= 0.01. The discussion of

the major findings and the management implications was done according to the following four

headings, namely customer centricity as a strategy of managing relations, customer satisfaction

as a core component of customer retention, customer retention measured by customer loyalty and

customer retention as influenced by technology among others.

3.9 Validity and Reliability

The researcher maximized internal validity by exercising tight controls over extraneous variables

and conditions. Data on particular issues, collected from different sources are double checked

while ensuring that the data are related to the operational objectives of the study.

The two main issues of external validity are the representativeness of the sample and the reactive

arrangements in the research procedure (Frankfort-Nachmias et al 1996). In order to ensure that

this study can be reliable, care was taken to select the sample using a sampling method that

assures representation.

Indeed, the questionnaire was first pre-tested on respondents chosen from the Tema Metropolis

branch of Stanbic Bank by a convenient sampling method. This was done to evaluate the validity

and reliability of the instrument to be used. It was also to serve as a means of identifying and

solving unforeseen problems in the administration of the questionnaires. As a result of the pre-

test, few of the original items were reworded while some were completely deleted.

On the extent to which the research findings can be generalized to larger populations and applied

to different social or political settings, the representativeness of the sample was ensured through

the administration of two sets of questionnaire to both customers and staff of Stanbic taking over

15% percent of the sample frame.