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STRATEGIC ROLE OF MARKETING AS A COMPETITIVE TOOL FOR GROWTH ANDSURVIVAL IN NIGERIA BANKING INDUSTRY
Shittu Oladipupo Ibrahim [email protected], [email protected]
08032495760, 08077223399
And
Dr. Samaila Idi Ningi [email protected]
08024138052, 08031125430
Accounting and Finance Technology Department, Faculty ofManagement Technology
Abubakar Tafawa Balewa University, Bauchi
ABSTRACTPrior to bank consolidation in Nigeria, some banks are referred to as bestperforming banks, with the hope that they are highly liquid and efficient. Butafter the consolidation exercise in 2005, it is paramount to understand thatbanking industry became more intensely competitive which calls for asignificant tool to survive in the competitive market. This research thenexamines the role of marketing as a competitive tool for growth and survivalin Nigerian banking industry. 5 banks were selected from which 50 staff of theselected banks (ten from each) and total of 446 customers were used as thesample with the use of questionnaire. Tables and percentages were used to makeanalyses. The hypothesis was tested using chi-square statistical method. Itwas concluded that marketing plays a vital role for growth and survival in TheNigerian banking industry, the problem of distinctive characteristics ofservice marketing have effects on banks and that customers’ service functionshould be considered in rendering efficient banking services. It wasrecommended that Nigerian banks should be more customer-focused in order toidentify customers’ needs and satisfy them; Nigerian banks should adopteffective marketing strategies to differentiate their product from that of thecompetitors; use brand names among others.
Keywords: customers’ service, marketing mix, marketing strategy,service marketing.
Introduction 1
Banking is of strategic importance to the economy, this is
because the performance of other industry depends on the
soundness of the banking sector. In Nigeria, the industry has
witness many phases as described by Bamidele and Kama (2003), and
most especially the 2005 consolidation exercise. Prior to the
consolidation, some banks are referred to as best performing
banks, with the hope that they are highly liquid and efficient.
But after the consolidation exercise in 2005, it is paramount to
understand that the Nigerian banking industry became more
intensely competitive, which calls for a significant tool to
survive in the competitive market.
There are basically four principal areas of operations within all
firms, namely: Accounting, Finance, Management and Marketing.
Adebisi and Abdulazeez(2000) defined Accounting as the process of
collecting, classifying, recording, summarizing and interpreting
the financial events of a business for the purpose of making
decision on the financial state and progress of the business. Van
Horne (2002) described the main functions of finance to include
investment in assets and new products, determining the best mix
of financing and dividends in relation to company’s overall
valuation. Management is defined by Oyekunle and Adeniyi (2001)
2
as a mental activity, which is concerned with the work of
planning, organizing, staffing, directing or leading and
controlling for the accomplishment of the stated objectives of an
organization. While marketing is described in ATS Distance
Learning Pack: Management (2001) as the process of determining
consumer wants for a product or service, motivating its sale and
distributing it to ultimate consumption at a profit. So,
marketing is majorly responsible for generation of revenue,
through the exchange process and customer’s satisfaction, which
makes the unit to be indispensable in every organization. Dwivedi
(2007) explained that finance functions are important, but not as
important as the marketing functions. Thus, every firm that
produces products either tangible or intangible, to existing or
potential customers need marketing personnel and strategy for its
growth, survival and profit maximization. Some people thought
that marketing is just about advertising or sales, but it goes
beyond that, it also involve everything a company does to
acquire customers and maintain good relationship with them,
creation of demand for company’s products, its distribution and
other services for customers who purchase the product and/or
service.
3
Kotler (2003) described industrial marketing as the marketing
activities across borders. Bolaji (2006) defined service as an
act or performance, offered by one party to another, but which is
essentially intangible and does not result in ownership of
anything. He as well described it (service) as an economic
activity that create value and provide benefits for customers’
want as a result of bringing about a desired change on behalf of
the recipient of service.
Ikpefan (2013) explains that the need for marketing of services
and products in the banking system to satisfy customers and to
improve profit levels cannot be over emphasized since the
sustainability of any economic system is predicated on the
viability of the financial system of that country.
Banking institution as a major sector in the service industry
occupies a central position in the financial system in any
economy as described by Bamidele and Kama (2003). Marketing scope
in banking sector is considered under the service marketing
framework. Bank marketing does not only include service selling
but also the function which gets personality and image for bank
on its customers’ mind in order to solve the problem of
intangibility among others. As described by Nokandeh, Poorhabib,
4
Seyedi and Niknafs (2013) banks marketing involve creating a
comprehensive marketing plan for assessment and finding hidden
and visible need of customer and finding most useful markets. In
today's competitive environment, the survival of bank depends on
their ability to deal with environmental challenges which also
lies on marketing. Marketing of banking service is so important
because of banks’ aim to increase its profit. Banks need to
increase their profit in order to create new markets, to protect
and develop their market shares and to survive on basis of
intense competition through customers’ retention and strategic
marketing. Many Banks in recent time failed and went out of
business probably, because the insignificant tool (marketing) for
organization’s success was not properly utilized. So, marketing
consideration should be an integral part of every organization
because the success of every firm is the result of satisfying the
wants, needs and demands of its customers.
The need of maintaining customers in terms of waiting hours, bank
lending, unpleasant attitude of some bank staff and lack of
awareness of certain products and services offered by banks call
for the research work. It also arises from the problem of
competition which has become intense since the bank consolidation
5
(re-capitalisation) exercise in 2005 as most banks that survive
the exercise were believed to be strong in terms of capital base
and management which as well increased competition which
moreover, calls for a tool that could aid banks for growth and
survival in the industry.
The objectives of the study is to access the role of marketing as
a competitive tool for growth and survival in banking industry as
well as to access an efficient customer service as an essential
tool in rendering efficient service to customers.
LITERATURE REVIEW
Frank and Bernanke (2007) defined commercial banks as privately
owned firms that accept deposits from individual and businesses
and use those deposits to make loans. It explained further that,
the determination of money supply in a modern economy depends in
part, on the behavior of commercial banks and their depositors,
which makes the industry, and their customers deposit to be very
essential. So, to improve those deposits, marketing is very
essential.
As described by Perreault & McCarthy (2002), people think that
marketing is about selling and advertisement only but, it also
extended to identifying customer’s needs, as well as making those
6
needs so well that the product almost sells itself. This is
applicable to whether the product is a physical good or services
or even an idea. So, if the whole marketing has been done well,
the customers might not need much persuasion but customers will
always be ready to buy. Kotler and Keller (2006) pronounce that
marketing is everywhere, formally or informally.
Every organizations/ business firm intends to remain in business
profitably as Dwivedi (2002) revealed and that the major
objectives of all business firm is not only profit maximization
but as well include the following: maximizing sales revenue/
deposit, maximizing firms growth rate, maximizing utility
function, making satisfactory rate of profit, long run survival
of the firm, entry prevention and risk avoidance among others, so
it was to be noted that all these could be possibly achieved
through marketing strategies.
Zikmund and Michael (2006) explained that financial success often
depends on marketing ability, finance, operations, accounting and
other business functions but the success will not be actually
realized if there is no sufficient demand for product and service
offering of the firm which makes marketing function to be so
important.
7
Bamidele and Kama (2003) described the increase in the use of
marketing in banking industry as a result of four accruing
factors, which are:
Increase competition to customers
Increase sophistication of those customers
Increase technology, and
Increase cost of meeting customers need profitably
Therefore, marketing is important tool to be considered in
banking industry.
Marketing of Banking Services
There are several services offered by commercial banks, which
needs to be marketed with the deployment of various marketing
strategies and mixes. Banking industry falls under the service
industry, so its’ meaning and nature to be understood.
Meaning and nature of service
There are varieties of organizations that are referred to as
‘service industry’ which include health care sector, legal firm,
Education, Real estate, Hotel and Tourism, Communication sector,
Insurance, Baking among others.
Kotler (1999) defined service as any act or performance that one
party can offer to another that is essentially intangible and
8
does not result in the ownership of anything. It also defined
service as the production of an essentially intangible benefit
either in its own right or as a significant element of a tangible
product, which through some form of exchange, satisfying and
identifying need. Service Providers/ Service firms offer
varieties of service to their customers and tend to satisfy them
profitably which requires distinctive marketing strategies of
service marketing.
Services are intangible unlike a tangible product. It cannot be
touched, felt or held to determine its quality, which pose threat
to service marketers but with better understanding and use of
service marketing mixes and strategies the problems could be
overcome.
Some Marketing Strategies Employed by Banks
Traditionally, there are four P’s of marketing but, there are
three additional P’s which makes service marketing to be seven (7
P’s), as described by Mas’ud and Yamzid (2009), which are
Product, Price, Place, Promotion, People, Process and Physical
Evidence. The appropriate mix of these are good ingredient for
bank sound performance. Marketing Strategy is a major tool used
9
by marketers to penetrate the market with programs that will
convince potential customers and retain the existing ones
THE ROLE OF MARKETING AS A COMPETITIVE TOOL IN BANKING INDUSTRY
Marketing has been a good competitive tool for growth and
survival in banking industry through series of role it performed
in the industry. Some of these roles are:
1. Marketing Research
2. Product and Business Development
3. Market Plan Formulation and Strategy
4. Marketing of Banking Services
5. Strengthening Customer Relationship
Marketing Research
Alvin and Ronald (2001) defined marketing research as the
systematic and objective search for an analysis of information to
guide managers in marketing planning and problem solving.
Marketing research assists marketers to identify customers’ need
and want and how to satisfy them. It helps marketers to get
customers information in terms of income level, socio-cultural
factors that could affect sales volume and any barrier that could
affect demand.
10
Product and Business Development
It is the role of the marketing unit of the bank to develop new
products and look for ways of developing businesses for the bank
within the society. They make sure that they produce an evenly
challenging and competitive product to withstand the competitive
market in to retain and gain more customers as well as surviving
in the industry.
Market Plan Formulation and Strategy
This is a function of the marketer, which play a significant role
as a tool for survival and growth in the competitive market. It
helps banks to plan about how to carry out their activities and
programs and as well formulate differentiated strategies that
could be used to offer products that are better than that of the
competitors. As concluded by Uppal (2010) only those banks who face
the competition with the effective ways of marketing will survive.
Marketing of Banking Services
This is the most common role of marketers understood by the
majority. They (bank marketers) ensure that the products and
services offered by the banks are demanded for by the customers,
they try as much as possible to create personal awareness to
customers and convince them of the benefit they could derive.
11
Many constraints are faced by bank marketers as a result of the
distinctive characteristics of bank service, which requires
special skills.
Strengthening Customer Relationship
It is the role of the marketer to ensure smooth bank-customer
relationship. They make sure that customers always get what they
want at the right time as they are the closest staff to the
customers. To achieve this, every bank customers is attached to
every staff called ‘Account Officer’, whom must know everything
(mostly financial) about his customer.
Methodology
The descriptive survey is adopted in carrying out this research
and its success was based on the administration of questionnaire.
The population covers all commercial banks in Bauchi State out of
which five (5) banks (GTBank, Skye bank, Keystone bank, Zenith
Bank and Sterling Bank) were selected as the sample size. A total
number of fifty (50) questionnaires were distributed to the
marketing and customer care unit of the five banks, ten (10)
questionnaires to each of the banks from the total marketing and
customer care staff population of 12 (GTBank), 11 (Skye Bank),
10(keystone), 13(Zenith Bank), and 10 (Sterling Bank). And total
12
of 446 (four hundred and fourty six) questionnaires were also
administered to some of the selected banks customers with GTBank
(126), Skye Bank (88), Keystone Bank (76), Zenith Bank (102) and
Sterling Bank (54). As a result of non-disclosure of the total
customers number by banks, the sample size were determined by
visiting and administering questionnaires to customers available
at the time of visit to each of the banks at three different
times. Respondents’ responses were analysed using frequency
distribution and percentages while chi-square was used to test
the hypotheses.
DATA PRESENTATION, ANALYSIS AND HYPOTHESES TESTING
Two sets of questionnaires were administered, one to the
marketing/customer care unit staff of the five selected banks and
the other one to the customers of the same five selected banks.
Table 1: Analysis of Questionnaires Administered to Customers Banks Q.
AdministeredReturned Not
ReturnedGTbankSkye BankKeystoneBankZenith BankSterlingBank
126768810254
126768810254
-----
Total 446 446 -Source: Surveyed Data, October, 2013.
13
Table 1 displayed the numbers of questionnaires that were
administered to each of the five banks customers in which all the
distributed questionnaires were returned.
Table 2: Analysis of Questionnaires Administered to Customercare/Marketing Unit Staff Banks Q.
AdministeredReturned Not
ReturnedGTbankSkye BankKeystoneBankZenith BankSterlingBank
1010101010
1010101010
-----
Total 50 50 -Source: Surveyed Data, October, 2013.Table 2 showed the numbers of questionnaires that were
administered to each of the five banks customers in which 100% of
the distributed questionnaire were returned.
Table 3 (Question 1): Marketing is a good competitive tool forgrowth and survival in banking industryOpinion Staff CustomersYesNo
44 (88%)06 (12%)
440 (98.7%)006 (1.3%)
Total 50 446The above table shows that 44 (88%) of the staff and 440 (98.7%)
of the customers agreed that marketing is a good competitive tool
for growth and survival in banking industry and other respondents
disagree.
14
Table 4 (Question 2): Effective pricing strategy as adeterminant of customers’ baseOpinion Staff CustomersYesNo
41 (82%)09 (18%)
439 (98.4%)007 (1.6%)
Total 50 446The above table shows that 41 (82%) of the staff and 439 (98.4%)
of the customers agreed that effective pricing strategy is a
determinant of customers’ base while other respondents disagree.
Table 5 (Question 3): Do you consider staff attitude towardscustomers as an inevitable tool to satisfy andretain customers?
Opinion Staff CustomersYesNo
41 (82%)09 (18%)
444 (99.6%)002 (0.4%)
Total 50 446The above table shows that 41 (82%) of the staff and 444 (99.6%)
of the customers agreed that staff attitude towards customers is
an inevitable tool to satisfy and retain customers while others
disagree.
Table 6 (Question 4): Do you consider Customers RelationshipManagement as a good tool to deliver an efficientcustomers service.
Opinion Staff CustomersYesNo
44 (88%)06 (12%)
439 (98.4%)007 (1.6%)
Total 50 446The above table shows that 44 (88%) of the staff and 439 (98.4%)
of the customers are of the opinion that Customer Relationship
15
Management (CRM) is a good tool to deliver an efficient customer
service while other respondents disagree.
Hypothesis I
Ho: Marketing plays no vital role for growth and survival in
banking industry
Using the information gathered from the questionnaire
Table 3: Marketing as a competitive tool for growth and survivalin banking industryOpinion Staff: Q.1
Q.2Customers: Q.1Q.2
Total
YesNo
44 41 06 09
440 439 006 007
964028
Total 50 50
446 446
992
Computation of expected frequency (e)
Table 4: Calculation of Chi-Square for Hypothesis I
o E o-e (o-e) 2 (o-e)2/e44440664143997
48.59433.41 1.41 12.59 48.59433.41 1.41 12.59
-4.59 6.59 4.59-6.59-7.59 5.59 7.59-5.59
21.0743.4321.0743.4357.6131.2557.6131.25
0.43 0.1014.94 3.45 1.19 0.0740.86 2.48
Total 63.52Degree of freedom (v) = (r-1)(c-1) = (2-1)(4-1) =1x3
=1
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Using the chi-square distribution table by checking the level of
significance of 5% (0.05) against the degree of freedom (3)
X2t = 7.815; X2
c = 63.52
Decision Rule:
Reject Ho : if X2c>X2
t ; Accept H1 : if X2
c>X2 t
Therefore accept H1, that is, marketing plays a vital role for
growth and survival in banking industry.
Hypothesis II
Ho: Customer service is not an essential tool in rendering
efficient service to customers.
Using the responses gotten from the questionnaires distributed
Table 7: Customer service is an essential tool in renderingefficient service to customers Opinion Staff: Q.4
Q.7Customers: Q.4Q.7
Total
YesNo
41 44 09 06
444 439 002 007
968024
Total 50 50
446 446
992
Computation of expected frequency (e)
Table 4: Calculation of Chi-Square for Hypothesis II
o E o-e (o-e) 2 (o-e)2/e41944
48.79 1.21 48.79
-7.79 7.79-4.79
60.6860.6822.94
1.24 50.15 0.47
17
644424397
1.21435.21 10.79435.21 10.79
4.79 8.79-8.79 3.79-3.79
22.9477.2677.2614.3614.36
18.96 0.18 7.16 0.03 1.33
Total 79.52Degree of freedom (v) = (r-1)(c-1) = (2-1)(4-1) =1x3 =1
Using the chi-square distribution table by checking the level of
significance of 5% (0.05) against the degree of freedom (3)
X2t = 7.815; X2
c = 79.52
Decision Rule:
Reject Ho : if X2c>X2
t ; Accept H1 : if X2
c>X2 t
Therefore accept H1, that is, efficient customer service is an
essential tool for rendering efficient service to customers.
Summary of findings
Based on the research analysis and interpretation of result, it
was observed that:
1. Marketing plays a vital role for growth and survival in
banking industry and
2. Efficient customer service is a good tool for rendering
efficient service to customers.
Banks use marketing through several roles they perform such as
product and business development marketing of banking services,
18
strengthening customer relationship, marketing planning strategy
formulation, marketing research among others. Since service is
different from product with some features referred to as
distinctive characteristics of service which are intangibility,
variability, perishability, inseparability of ownership these
then posed threat to marketing of banking service as customers
wish to see what they intend to purchase, verify its reliability
before consumption, to get service without visiting the bank and
even want best service of same degree every time.
Efficient customer service was discovered to be a significant
tool for rendering efficient service to customers as they want
staff to treat them with care, pay special attention to them and
talk to them in an appropriate manner.
Summary
Marketing is an indispensable tool for the realization of
organization’s objective as they (organization) need it
(marketing) for growth, survival and profit maximization. Many
people earlier believed that marketing is just about advertising
or sales but others believed that marketing is just about
advertising or sales but others believed that it goes beyond
that, as it involves everything a company does to acquire
19
customers and maintain good relationship with them, creation of a
demand for a company’s products/services, distribution and other
service for customer who purchase the product. This research then
study the situation especially the banking industry to determine
whether marketing truly plays a significant role for growth and
survival in banking industry among other objectives with the aid
of survey design and questionnaire which is being validated by
the use of chi-square statistical method of testing.
Authors’ views related to marketing were reviewed with emphasis
on marketing in banks, various marketing definitions, major banks
division marketing concepts, banking services and its marketing,
marketing planning and strategies and importantly the role of
marketing in banking industry.
The study as well focuses on all the 21 banks in Bauchi state
while 5 selected banks in Bauchi were used as sample size in
which both staff of marketing/customer care unit as well as
customers were used as respondents with the use of table and
percentages, and also interpreted to give a clear understanding
before the hypotheses were tested for acceptance or rejection
using chi-square statistical method.
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It was concluded that marketing plays a vital role for growth and
survival in banking industry,. Marketers should always focus on
benefits to be derived from their differentiated product and
service to minimize the problems of intangibility, Banks should
be more customer-focused and more innovative in order to identify
customer’s needs and satisfy them timely and Marketers should
always follow the know your customer (KYC) and Customers Address
Verification (CAV) procedures and conduct proper credit
assessment before giving out loan to customers.
Conclusion
After several study, assessment analyses and proper
interpretation of the data obtained from the respondents it was
concluded that marketing is an important tool used by banks for
growth and survival in the industry. It was as well realized that
marketing also play a vital role, in terms of customer service
function, to render efficient service to customers while there by
increase customers loyalty and retention.
Banks use advertisement, promotion, branding and corporate social
responsibility as a service marketing strategy to create
awareness of their products/services in order for customers to
know much about the products/services offered by the banks. They
21
also adopt management of credit facilities extension, pricing
strategy, customer relationship management and electronic banking
products/services as an aid for customers’ retention and
acquisition.
It was observed that male are the majority of banks customers
as they cover 80% of the respondents, while female covers only
20%, which was concluded that they (female) don’t really deposit
and transact with banks.
Recommendations
The following recommendations were suggested which if properly
implemented will further enhance marketing of banking service and
solve the problem posed by the distinctive characteristics of
service.
1. Banks should be more customer-focused and more innovative in
order to identify customer’s needs and satisfy them timely.
2. Marketers should always follow the Know Your Customer (KYC)
and Customers Address Verification (CAV) procedures and
conduct proper credit assessment before giving out loan to
customers.
3. Benchmarking should be deployed by banks in order to compare
organization’s performance with that of their competitors.
22
4. The banks should continue to improve their corporate social,
responsibility function and branding so as to create more
awareness of the banks to both existing and potential
customers.
5. Banks should adopt effective marketing planning and
strategy to differentiate their product/service from that of
the competitors.
6. Banks should encourage adequate training and re-training to
their marketing and customer care staff in order to boost
their efficiency and equip them with adequate practical
marketing knowledge, idea and tactics.
7. Banks should focus more on the additional 3p’s of marketing
mix (people, process and physical evidence), so that
customers will be best satisfied.
8. Ensure that standards are always monitored to overcome the
problems of variability.
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