An Empirical Study of Relationship Marketing Orientation and Bank Performance Ayopo O. Olotu Department of Marketing, Rufus Giwa Polytechnic, Owo, Ondo State, Nigeria E-mail:
[email protected] Darego W. Maclayton Department of Marketing, Rivers State University of Science and Technology Port Harcourt, Nigeria Bright C. Opara Department of Marketing, Rivers State University of Science and Technology Port Harcourt, Nigeria. Abstract In this research we examined the practice of Relationship Marketing Orientation (RMO) in Nigerian banks, to replicate the study of Sin, et al (2005) with a conceptual model and measurement scales of RMO in the Nigerian business environment. The six multi-item scales of RMO were tested for reliability and validity using the Confirmatory Factor Analysis through the SPSS statistical tool. The results showed a strong evidence of validity, unidimensionality and reliability using samples from 123 bank branches in Port Harcourt, Nigeria. The result further revealed the practice of RMO in the Nigerian Banks and that the RMO dimensions positively correlate with the Business Performance measures used in the study. The results were discussed and recommendations advanced for further research in the area of RMO as a new marketing paradigm.
Introduction The traditional marketing mix theory generally focuses on the sellers approach toward achieving set goals. Moller (2006:24) assert that Marketing mix is internally oriented and does not consider customer behaviour, is passive and does not allow interaction, or capture relationships; devoid of theoretical content, while focusing only on management. The traditional marketing mix is therefore viewed as obsolete toward achieving high business performance in a dynamic and more sophisticated environment. Hence, there is a need for paradigm shift in the marketing practice i.e. customer retention through enhance Relationship Marketing Orientation. The emphasis placed on Relationship Marketing as opposed to transaction based exchanges, is today redefining the domain of marketing (Sheith et al, 1988:54). The growing interest of marketing scholars in the relational paradigm is creating the emergence of Relationship Marketing as a discipline. It is important to note here that, the paradigmshift from ‘transactions’ to ‘relationships’ is associated with the return of direct marketing, both in Business to Business (B2B) and Business to Customer (B2C) markets. The growing interest of marketing scholars in the relational paradigm is creating the emergence of Relationship Marketing as a discipline. In other to develop a valid measure for the new construct Sin et al (2005) did a cross-cultural validation study in Hong Kong and China. This exploratory study led to the development and validation of a measure of RMO, which was found to be reliable, valid and one-dimensional. © Research Journal of Internatıonal Studıes - Issue 16 (September, 2010)
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The study has since been replicated in most developed economies and developing economies without recourse to Africa, But Africa and most especially Nigeria is fast growing in economy, as such requires the application of RMO concepts for businesses to be relevant in the global marketing warfare. Hence, this paper examined the Sin et al RMO scale in a developing economy like Nigeria, with emphasis on the banking sector. We provided a brief review of the RMO and Business Performance constructs, while qualitative data and analysis were used to validate the research findings.
Review of Relevant Literature Historical Perspective of Relationship Marketing The emphasis placed on Relationship Marketing as opposed to transaction based exchanges, is today redefining the domain of marketing (Sheith et al, 1988:54). The conception and growth of RMO over time go back to: (1) Pre-industrial era or medieval period when Direct Marketing was the order of the day, (2) The Industrial Era which refers to the period of industrial revolution that gave rise to mass production and mass consumption of goods and services, and (3) The Post-Industrial Era which witnessed a change in marketing practices from transaction orientation to relational orientation. Shapiro and Posner (1979:125) posit that this period brought about system integration. Figure 1: The Pre-industrial, Industrial and Post-industrial eras of Marketing. Period
:
Orientation
Pre-Industrial era
Direct Marketing
Industrial era
-Transactional – Marketing
Post-Industrial era
Relationship Marketing
Source: Sheith, J .N and Parvatiyar (2005)
Figure 1, revealed the transition of the marketing theory from the pre-industrial era to the postindustrial era, and this paradigm shift has altered the basic foundations of marketing which was buried in exchange theory.
Banking Sector and Relationship Marketing The Nigerian financial service sector, just like that other of countries provides a full range of banking services. They accept deposits, engaged in lending, effect domestic and foreign payments and provide property management and trustee services and a wide range of other financial services for companies (Firpo, 2006:5). These services are rendered efficiently and with utmost trust and commitment in most developed Nations due to the relational and interactive approach adopted. Law et al, (2003:56) opined that, unique strategies are adopted by banks to maintain relationships with customers. Some of these strategies include; Introduction of negative interest rates for customers with minimum deposit rate. The essence is to identify profitable customers, access to easy loans among others. Palmers (1994:573) concluded that, the application of Relationship Marketing Orientation is for attracting high value customers. They are the starting points in a customer-managed relationship in the marketing environment. The environment is a dynamic place that has the power of influence on the operators to improve business performance. Business performance refers to the effectiveness of organizations in fulfilling its purpose. While some firms trade to return financial benefits to their shareholders, others have non-financial benefits as their returns. It is apparent to note that, in a competitive and dynamic environment, some © Research Journal of Internatıonal Studıes - Issue 16 (September, 2010)
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organisations may compare their performance against competitors, while some others measure success with usage and productivity (Epstein, 2004:10). Most often, subjective measures of performance are commonly used, however many of these studies used only a few measures to operationalise this construct. Slater and Naver (1994:22) used only return on investment ROI, sales growth and market share to proxy market performance. Yau et al (2000:118) argued that the current business performance was operationalised by 12 items of Business Performance (BP). In our study, we have considered Market Share, Cost Reduction and Customer Retention as indicators of Business Performance in the new Relationship Marketing Orientation (RMO) paradigm in the Nigeria financial sector, because organisational performance refers to its ability to attract and retain the ‘best’ mix, quantity and quality of stakeholders. Interestingly, it is pertinent to measure the performance of the firm using available indicators in order to be sure of the effectiveness and efficiency of the tools employed.
Dimensions of Relationship Marketing Orientation The marketing literature theorised key virtues that underpin Relationship Marketing Orientation. This new concept of marketing is a multidimensional construct, with strong correlations that are positively associated with organizational performance (Sin et al, 2002 and Yau, et al 2000). It is necessary here to understand the dimensions of RMO in order to appreciate the analysis. Figure 1: The six components of RMO sharing of meaningful and timely information between buyers and sellers.
Trust Bond RMO Reciprocity
Communication
Shared value Empathy Source: Sin et al (2006)
Sin et al (2002:658) stated that there are six dimensions of Relationship Marketing Orientation according to Morgan and Hunt, (1994); Veloutsou et al, (2002); Ndubuisi and Chan, (2005); Crosby et al, (1990), Morgan and Hunt, (1994); Evans and Laskin, (1994); Callaghan et al, (1995); Hinde, (1997); and Egan, (2001). They are: Trust, Marketing communication, Shared value, Empathy, reciprocity, and Bonding. These identified variables are directly linked to and are capable of predicting customer loyalty. Trust: Callaghan et al, (1995:238) describe trust as the belief of confidence in, or reliance on, the truth, goodness, character, power and ability of someone or something. Morgan and Hunt, (1994:24) argued that trust is the willingness to rely on an exchange partner in whom one has confidence. Trust is therefore considered an experience of mutual honesty and confidence that includes few negative surprises and is established on the basis of similar values. © Research Journal of Internatıonal Studıes - Issue 16 (September, 2010)
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Due to the implications of trust to profitability, growth, market share, and customer retention; trust is a potentially weapon that banks can employ in their desire to gain a strategic advantage and survive in today’s ever increasing competitive environment. Bonding: In a relationship most especially the one between customer and business provider, requires some tie otherwise called bond that unite them together. Callanghan et al, (1995:235) refer to it as the dimension of a relationship that result in two parties (customer and supplier or buyer and seller) acting in a unified manner towards a desired goal. A bond has a number of dimensions which Chiao (1982: 348) noted is based on some cardinal relations including social interaction, closeness and friendship. Ahmad and Buttle (2001:556) noted that in service marketing there are three forms of bonding that exists between parties, thus creating different levels like financial, social and structural bonds. But, Vierra and Ennew (2004); Sin, et al (2006) and Yau, et al (2000) agreed that, the two most widely discussed bond are social and structural bonds. It is important to note that when different forms of bonds are brought to play in a relationship such as in service marketing, the customers are not only seen as clients, but also as partners. Turnbull and Wilson (1989:239) corroborated this assertion when they posit that, as partners, customized services are rendered through mutual understanding. Marketing Communication: Schiffman and Kanuk, (1995:283) saw communication as a tool to persuade consumers; while Canon (1997:382) regard it as the process of establishing a commonness or oneness of thought between a sender and a receiver. Marketing communication can be described as means by which firms attempt to inform, persuade, and remind consumers, directly or indirectly about the products and brands they sell (Kotler, 2005:536). Ahmad and Buttle (2002:10), Kotler, (2005) and Hawkins et al, (2001) concluded that, if Relationship Marketing is to be successful, an integration of all marketing communications messages is needed to support the establishment, maintenance, and enhancement of relationships with customers. Shared Value: Marketing offering is said to be successful only when it delivers value and satisfaction to the target customer. Value according to Kotler and Keller (2005:25) reflects the perceived tangible and intangible benefits and costs to customers. It is seen mainly as the combination of quality, service, and price which Wilson (1995:338) called “customer value triad”. In both marketing concept and Relationship Marketing concept, value is central. But, in Relationship Marketing Orientation, the values associated with the product offerings are shared between the supplier and the customer. Similarly, Hesket et al (1994:168) posits that shared value is the ability of a company to provide superior value to its customers. The banking sector must therefore, create additional value other than the product or utility value through Relationship Marketing Orientation. A loyal and valued customer can become the bank advocate and ultimately contribute toward improved organizational performance. Empathy: Relationship Marketing Orientation can be viewed as the ability to share, understand and feel another person’s feelings in a relational situation. Thus, Sin et al (2002:660) described empathy as dealing with a business relationship that enables two parties to see the situation from the other’s perspective i.e. seeking to understand somebody else’s desires and goals. In the banking sector for instance, the front desk bankers must see themselves in the customer’s shoe and serve them as such in other to keep them satisfied. Earlier studies have shown the relevance of empathy as a dimension of Relationship Marketing Orientation as shown in the work of Berry, et al (1990:32) in designing SERVQUAL; Hwang (1987:948) in Chinese business relationships where empathy is seen as a sub-component of the Chinese dimension of guanxi in business and social relationships. Reciprocity: This is another dimension of business relationships where it is believed that people owe one another duties because of their prior actions. This is premised on the fact that, if you want help, then you must help others first. In a study Callaghan in Sin, et al (2006:412) described reciprocity as the dimension of a business relationship that causes either party to provide favours or © Research Journal of Internatıonal Studıes - Issue 16 (September, 2010)
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make allowances for the other in return for similar favours or allowances to be received at a later date. The act of reciprocity stipulates that returns should be fitting and proportional (Becker, 1986:82). A reciprocal relationship does purchases, shows advocacy and retention which ultimately affect the bank’s performance positively. The conceptual framework below shows an illustrative relationship between components of RMO and BP. Figure 2: Conceptual Framework Showing RMO and BP BUSINESS PERFORMANCE
RELATIONSHIP MARKETING ORIENTATION
TRUST MARKET SHARE BONDING COMMUNICATI
CUSTOMER RETENTION
EMPATHY SHARED COST REDUCTION
RECIPROCIT YY
Study Scope The Cross-sectional survey approach was adopted in a non-contrived environment, while the study unit is the bank employees of 24 consolidated banks operating in Nigeria and located in Port Harcourt cosmopolitan. Using the Krejcie and Morgan sampling size determination method, we have a sample size of 565 staff respondents (214 Managers and 351 Marketers/Tellers); selected from the 123 branches used in this study. Table 1:
Questionnaire Distribution Analysis.
S/N
Banks
1) 2) 3) 4) 5) 6) 7)
UBA Union bank First bank Finbank Intercontinental Bank Eco bank Spring bank Total
No of branches selected 7 bank branches each
49
No of Marketers/Teller per bank Marketer 3 Tellers/ bank branch
147
© Research Journal of Internatıonal Studıes - Issue 16 (September, 2010)
Managers
2 managers/bank branch
Remarks
Banks with more than ten (10) branches
98
51
8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20)
Oceanic Unity Diamond Zenith Afribank Fidelity GTB Access Skye Stanbic/IBTC Wema Bank PHB FCMB Total 21) ETB 22) Sterling 23) Citibank 24) Standard Chartered Total Source: Survey Data
5 banks branches each
65 3 4 1 1 9
Marketer 3 Tellers/bank branch
2 managers/bank branch
171 33 Market teller
98 18 Managers
351
● Banks with less than Nine but more than 5 branch ● 5 banks with > 7 branches = 50 managers. ● 8 banks with
