IMPACT OF SERVICE QUALITY ON CUSTOMER RETENTION IN THE NIGERIAN BANKING SECTOR

CHAPTER ONE

INTRODUCTION

1.1 Background Of The Study

The success rate of business organizations is undoubtedly dependent on their ability to establish customer satisfaction and brand loyalty (Iddrisu, Nooni, Fiankoc & Mensah, 2015). This is particularly true in the service industries, where connection with customers is critical to ensure that the organization outperforms its rivals and excels in service delivering. The establishment of long-term, value-added relationships with customers is the heart of marketing, among many other services (Agbemabiese 2015). Organizations must recognize the vital role of customer retention via providing excellent services in order to secure long-term profitability and achieve good financial returns. In the contemporary competitive market, quality of service and customer retention are regarded as vital to a company's success and sustainability (Ibojo, 2015). Service excellence necessitates regular anticipation of what customers expect from the service provider.

Reliability and quality in business organization, according to Kemp and Rotmans (2005), has transformed into a standardized indicator for how well the service rendered meets the expectations of the customers. In light of this , businesses have understood that in order to improve profitability, they ought to concentrate on the quality of services they deliver to their patronizers. It is essential to know the customers' needs in order to give acceptable quality service. In a service oriented business, customers and front-line workers engage customers to generate the service (Rita, 2008). Effective interaction, in turn, is based on the abilities of front-line service personnel as well as the processes proceeds (Kotler and Armstrong (2012), cited in Ivanauskiene (2014). Unlike manufacturers, the quality of services rendered will always vary based on staff-customer engagements. Customers are essential to the banking industry's entire range of operations and revenue generation. Customers are demanding, thus acquiring and maintaining them has become a prime priority. According to Siew-Peng and Sedigheh (2015), banks must build a good relationship with their customers in order to retain them, safeguard and support their long-term interests. According to Berry, Parasuraman, and Zeithaml (1988), cited in Siew-Peng et al.(2015), service quality is a success factor, the most effective and competitive instrument, and the strength of top service businesses. Given the increased competition in the financial sector, banks must assess the quality of their services in order to retain customers. This study will therefore examine the impact of service quality on customer retention in Nigeria's banking sector.

1.2 Statement Of The Problem

The progressive and incremental transition from conventional orientation to aggressive push is one of the primary developments in Nigeria's banking sector today. As a result, management is obliged to leave their shells or enclaves in order to share the wide market and serve the diverse wants of customers. It's crucial to note that customer satisfaction and service quality are inextricably linked. According to Jayaraman, Shankar, and Hor (2010), the higher the service quality provided by an organization, the higher the level of customer satisfaction.

As a consequence of the above, banks operating in Nigeria are under a great deal of pressure as a result of increasing competition in the industry (Evangelos, 2014).

As a result, various strategies are devised to retain customers with the aim of improving service quality. Service quality is very important in the banking sector since it ensures high customer satisfaction, making it a key to competitive advantage. Customer satisfaction and willingness to recommend the service to a friend drop when customer service is poor. Service quality has several dimensions, and each customer prioritizes each dimension differently (Ahmad & Kyriaki, 2009). Furthermore, service providers' perceptions of service quality may differ significantly from customers' perceptions of service quality. It is critical to understand the customer's perception and expectation of quality service if banks are to compete in delivering quality service to customers (Siew-Peng & Sedigheh, 2015). Hence, service quality measures should be derived from the viewpoint of customers in order to guarantee that their needs and expectations are satisfied, as this will increase customer retention.

1.3 Objective Of The Study

Generally, this study is designed to examine the impact of service quality on customer retention in the banking sector. To achieve this, the study will specifically;

1.        Determine the extent to which Nigerian banks offer quality services to customers.

2.        Ascertain the importance of quality services in the banking industry.

3.        Determine if service quality has any significant relationship with customer retention.

4.        Identify the factors influencing Nigerian banks' service quality.

1.4 Research Question

The study will be guided by the following question;

1. To what extent do Nigerian banks offer quality services to customers?

2. What is the importance of quality services in the banking industry?

3. Is there any significant relationship between service quality and customer retention?

4. What are the factors influencing Nigerian banks' service quality?

1.5 Significance Of The Study

The Nigerian financial sector has evolved over the past decades as fintech companies have emerged as well as digital currencies. This new development has drastically changed the financial sector as competitiveness is on the increase. As mentioned above, quality service has the potential to retain customers, hence this study will revitalize the need for service improvement and the constant offering of quality service to customers in the banking industry, which must not be treated with laxity if customers must be retained.

Additionally, subsequent researchers will use this study as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to the impact of service quality on customer retention in the banking sector.

1.6 Scope Of The Study

This study is set to evaluate the impact of service quality on customer retention, particularly in the banking sector. The study will further delve into determining the extent to which Nigerian banks offer quality services to customers; ascertaining the importance of quality services in the banking industry; determining if service quality has any significant relationship with customer retention; and identifying the factors influencing Nigerian banks' service quality. In this regard, the study will be carried out across selected branches of First Bank Plc. in Aba-Owerri Road, Aba, Abia State.

1.7 Limitation Of The Study

Like in every human endeavour, the researcher encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size. More so, the researcher simultaneously engaged in this study with other academic work. As a result, the amount of time spent on research will be reduced.

1.8 Definition Of Terms

Quality Service: This is a comparison of perceived expectations of a service with perceived performance.

Customer Satisfaction: This is defined as a measurement that determines how happy customers are with a company's products, services, and capabilities

Customer Retention: This  refers to the ability of a company or product to retain its customers over some specified period.

Reference

Agbemabiese,& Nyanyofio,(2015). Service quality and customer satisfaction in the Ghanaian banking industry.

Ahmad, L., & Kyriaki, A. (2009). Effects of individual dimensions of service quality in creating and enhancing customer loyalty.

Evangelos,(2014). Cultural influences on service quality and customer satisfaction in Greek insurance.

Ibojo, B. O. (2015). Impact of Customer Satisfaction on Customer Retention: A Case Study of a Reputable Bank in Oyo, Oyo State.

Iddrisu, A. M., Nooni , I.K., Fiankoc, K.S., & Mensah, W. (2015). Assessing the impact of service quality on customer loyalty: A case study of the cellular industry of Ghana.

Ivanauskiene, (2014). Relations between service quality and customer loyalty.

Jayaraman, M., Shankar, C. & Hor W. M. (2010) Service Quality Delivery and Its Impact on Customer Satisfaction in the Banking Sector in Malaysia.

Kemp, R., & Rotmans, J. (2005). The management of the co-evolution of technical, environmental and social systems.

Melaku, M. (2015). Impact of service quality on customer satisfaction: The case of bank of Abyssinia.

Rita, K. (2008). Impact of satisfaction and image on loyalty in Alpine ski resorts.

Siew-Peng, & Sedigheh,2015). The dimension of service quality and its impact on customer satisfaction, trust, and loyalty.