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INFORMATION TECHNOLOGY AND CUSTOMER'S LOYALTY IN THE SERVICE INDUSTRY

 

CHAPTER ONE

INTRODUCTION

BACKGROUND TO THE STUDY

Information and Communication Technology has no doubt brought with it dramatic changes in the way businesses are conducted worldwide. In early 70’s, Smith had first noted that technological changes in form of new machines are invariably one of the three important causes of increasing incomes. Neither has this notion changed, especially in the face of the recent infusion of technological advances nor electronic commerce into commercial activities (Abor, 2005).

The Banking industry of the 21st century operates in a complex and competitive environment characterized by these changing conditions and highly unpredictable economic climate. Information and Communication Technology is at the center of this global change for example, banks customers can pay for airline tickets and subscribe to initial public offerings by transferring the money directly from their account, or pay for various goods and services by electronic transfers of credit to the sellers account. As most people now own phones, banks have also introduced mobile banking to cater for customers who are always on the move. Mobile banking allows individuals to check their account balances and make fund transfers using their mobile phones (Alu, 2000).

In a competitive, complex and dynamic environment of the banking industry, the very slight differences which exist in financial services and products together with an increasingly demanding customer have led to a great transformation in the industry. The traditional product-oriented bank is becoming increasingly customer-oriented in accordance with the basic principles of relationship marketing, which focuses on customer loyalty as its main goal. Bitner (1990) considers that constant customer-oriented behaviour is a prerequisite for improving the implementation of quality in services industry. Indeed, factors such as financial products and distribution have attained similar levels of development and technology and have thus been relegated to a secondary role as reference points for distinguishing between one bank and another (Dowling and Uncle, 1997). Also, Easterby-smith, Thorper and Love (2002) argued that, given that many financial offer equivalent services. It can be stated that a customer is unlikely to be over impressed by core product attributes when all companies are providing similar offerings (Dabholker 1996).

Accordingly, the consensus among scholars is that internet has fundamentally changed the rules of the game, with its impact felt across industries (Acquah, 2006; Awad, 2000; Babaku and Boller, 1992). This raging wave is such that banks are now being forced to introduce and quickly upgrade their front-end internet applications in order to be competitively relevant.

Bahia and Nantel (2000), observed that even with the growing interest in the introduction and development of internet banking, not much research seems to have been done on the implementation of internet banking in the transition economies like Nigeria. For instance, the banking industry in Nigeria has continued to undergo thorough complex changes in recent times, such that banks now adopt several survival strategies in the face of keen competition. This advent of Electronic Banking and its attendant myriads of product development have been predicted to bring about dramatic changes in both the distribution channel structure of retail banks and the general bank performance (Dulman, 2000).

Companies in most industries assess and implement loyalty strategies and programs to make strong relationships with their customer. Certainly, the proliferation and fragmentation of media make more difficult to attract and access new customers. This will encourage more companies to try to keep current customers (Bolton 1991; Dick and Base 1994; DeRuyter 1999).

Since customers are not often satisfied, the cost of attracting a new customer is five times the cost of retaining an existing customer. Banks have to provide customer satisfaction, because it has advantages which are: it keeps away customers from competitors; can provide benefits of sustainability; reduce costs of defects and attracting new customers; increase positive word of mouth advertising and encourage continued loyalty and support to achieve this goal that is only possible through proper marketing (Oliver, 1993; and Moore, 2001). Customer loyalty to organization is subject that is influenced terms and conditions of variety and diversity inside and outside of the organization which the extent of their impacts vary according to type of organization and from organization to organization (Zeithaml and Parasuraman, 2003).

Loyalty can be defined as a customer continuing to believe that your organization’s product/service offer is their best option. It best fulfills their value proposition whatever that may be. They take that offer whenever faced with that purchasing decision. Customer loyalty can be said to have occurred if people choose to use a particular shop or buy one particular product, rather than use other shops or buy products made by other companies (Yi, 1990; Yoo and Donthy, 2001).

Based on the above discussion, it can be said that bank’s customers service online and maintaining customer loyalty through Information Technology can be considered a quite new phenomenon that has not yet received much focus.

STATEMENT OF THE PROBLEM

Information Technology has altered traditional marketing and sales activities by introducing and fostering directions between demand and supply eliminating the need of intermediaries’ intervention. Information technology has made it possible for organization to establish a customer relationship management (CRM). It is a strategy where customers can interact and maintain mutually relationships with the purpose of introducing information technology into the banking industry to enhance customer’s loyalty. It equally improved customer satisfaction and ensure customer retention by aligning business processes with technology integration. Information technology brings together lots of information about customer, customer characteristics, sales transactions, marketing effectiveness and marketing trends.

For all these benefits associated with Information and Communication Technology in the Banking sector, this study will understudy Ecobank of Nigeria Plc. and make recommendations according to the findings.

OBJECTIVES OF THE STUDY

The objectives of the study are as follows:

To find out if there is any significant relationship between Information Technology and service delivery. To ascertain the influence of Automated Teller Machine on customer loyalty in Ecobank of Nigeria Plc. To examine how Electronic fund transfer affects customer loyalty in the banking sector. To find out how mobile Banking affects customers loyalty of Ecobank of Nigeria Plc branches in uyo. Identify problems militating against quickteller implementation in Ecobank. To suggest measures on Information Technology implementation. RESEARCH QUESTIONS

To achieve the above objectives, the following research questions were necessary:

Is there any significant relationship between Information Technology and service delivery? Does Automated Teller Machine have any influence on customer loyalty in Ecobank of Nigeria Plc? Does Electronic fund transfer have any significant relationship with customer’s loyalty in Ecobank Nigeria Plc.? Is there any significant relationship between mobile Banking and customer’s loyalty of Ecobank of Nigeria Plc. Does mobile banking have any impact on customer’s loyalty? Does Quickteller enhanced service delivery? RESEARCH HYPOTHESES

For the purpose of the study, the following hypotheses were formulated.

Ho: There is no significant relationship between Information Technology and service delivery.

        H1:   There is a significant relationship between Information                           Technology and service delivery.

Ho: Automated Teller Machine has no influence on customer loyalty       in Ecobank of Nigeria Plc.

        H1:   Automated Teller Machine has influence on customer loyalty                   in Ecobank of Nigeria Plc.

Ho: Electronic fund transfer has no significant relationship with         customer’s loyalty in the banking sector.

        H1:   Electronic fund transfer has a significant relationship with                               customer’s loyalty in the banking sector.

Ho: There is no significant relationship between mobile Banking and         customer’s loyalty of Ecobank of Nigeria Plc.

        H1:   There is a significant relationship between mobile Banking and                        customer’s loyalty of Ecobank of Nigeria Plc.

1.6   SIGNIFICANCE OF THE STUDY

This study will be significant in many ways:

i) The outcome of the study will assist the management of Ecobank Nigeria Plc branches in uyo, as it will help them in the formulation and implementation of Information and Communication Technology policies. ii) The study will be of a great assistance to Information Technology users in banks. iii) Lastly, the study would be useful for marketing professionals as it would be a reference material for further researchers. SCOPE AND LIMITATION OF THE STUDY

The study was Information Technology and customers loyalty in the service industry understudying Ecobank Nigeria Plc, branches in Uyo. The study would have been more extensive but for the following limitations:

Finance: the researcher did not have sufficient funds to cover a wider area. Information source: searching for secondary data in libraries, business journals, textbooks and magazines was properly equipped. Time: The time given to the researcher to complete the study was too short. HISTORICAL BACKGROUND OF ECOBANK OF NIGERIA PLC.

Ecobank Transnational Incorporated, a public limited liability company, was established as a bank holding company in 1985 under a private sector initiative spearheaded by the Federation of West African Chambers of Commerce and Industry with the support of ECOWAS. In the early1980’s the banking industry in West Africa was dominated by foreign and state-owned banks. There were hardly any commercial banks in West Africa owned and managed by the African private sector. ETI was founded with the objective of filling this vacuum. The dual objective of Ecobank Transnational Incorporated (ETI) is to build a world-class pan-African bank and to contribute to the economic and financial integration and development of the African continent.

The Federation of West African Chambers of Commerce promoted and initiated a project for the creation of a private regional banking institution in West Africa. In 1984, Eco-promotions S.A. was incorporated. Its founding shareholders raised the seed capital for the feasibility studies and the promotional activities leading to the creation of ETI.

In October 1985, ETI was incorporated with an authorized capital of US$100 million. The initial paid up capital of US$32 million was raised from over 1,500 individuals and institutions from West African countries. The largest shareholder was the ECOWAS Fund for Cooperation, Compensation and Development (ECOWAS Fund), the development finance arm of ECOWAS.

A Headquarters’ Agreement was signed with the government of Togo in 1985 which granted ETI the status of an international organization with the rights and privileges necessary for it to operate as a regional institution, including the status of a non-resident financial institution. ETI commenced operations with its first subsidiary in Togo in March 1988.

Today, Ecobank is the leading pan-African bank with operations in 36 countries across the continent, more than any other bank in the world. It currently operates in countries in West, Central, East and Southern Africa, namely Angola, Benin, Burkina Faso, Burundi, Cape Verde, Cameroon, Central African Republic, Chad, Congo Brazzaville, Democratic Republic of Congo, Côte d’Ivoire, Equatorial Guinea, Ethiopia, Gabon, Ghana, The Gambia, Guinea, Guinea Bissau, Kenya, Liberia, Malawi, Mali, Mozambique, Niger, Nigeria, Rwanda, Sao Tome & Principe, Senegal, Sierra Leone, South Africa, South Sudan, Tanzania, Togo, Uganda, Zambia and Zimbabwe. The Group also has a licenced operation in Paris and representative offices in Beijing, Dubai, Johannesburg, London and Luanda.

The Ecobank Group is a full-service bank focused on Middle Africa. It provides wholesale, retail, investment and transactional banking services to governments, financial institutions, multinationals, local companies, SMEs and individuals. Ecobank’s services are delivered by three customer-focused business segments, Corporate Bank, Domestic Bank and Ecobank Capital all of which are supported by an Integrated IT platform operated by e-Process, the group’s technology subsidiary. Corporate Bank provides financial solutions to global and regional corporates, public corporates, financial institutions and international organizations. Products focus on pan-African lending, trade services, cash management, internet banking and value chain finance.

Domestic Bank provides convenient, accessible and reliable financial products and services to retail, local corporate, public sector and microfinance customers, leverages an extensive branch and ATM network as well as mobile, internet and remittances banking platforms. Ecobank Capital provides treasury, corporate finance and investment banking, securities and asset management solutions to corporate and governmental customers. Ecobank also operates within Ecobank Capital a Research team based on the ground in key markets, provides unique information support capabilities.

Ecobank operates as “One Bank” with common branding, standards, policies, processes to provide a consistent and reliable service across its unique network of 1,305 branches, 2,426 ATMs, and 13,800 POS machines servicing over 10 million customers. We have an integrated information technology platform, with all of our operations successfully migrated onto a single core banking application: Oracle FLEXCUBE. With 19,565 employees as at end of March 2014, the Group is the largest employer of labor in the financial sector industry in Middle Africa.

Sustainability is at the core of our mission and vision of building a world-class pan-African bank that contributes to the integration and socio-economic development of the continent. We take the view that the long-term success of Ecobank is intertwined with the sustainable development of the economies, societies and environment that we operate in. In 2012, the Group adopted an integrated and comprehensive approach to sustainability and created a common framework. The framework depicts sustainability such that our business operational model ensures effective, efficient and sustainable utilization of economic, social, human and natural capital. This framework reflects our commitment to drive economic transformation in Africa while protecting our environment by being a socially responsible financial institution with a world class professional. Each strand forms the building block for our integrated sustainability (http//:www.ecobank.com.history,2015)

DEFINITION OF TERMS

The following words are defined as they are used in this study:

Marketing: marketing is the activity, sets of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large (Kotler and Keller, 2013).

Market: market is an arena for potential exchanges (Anyanwu, 2000)

Computer:  is defined as a programmable electronic device that accepts data, process data into a meaningful form called information and store the resulting information for future use (Essinger and Fisher, 2007).

Customer Loyalty: Customer loyalty is the result of successful marketing strategy that creates competitive value for consumers as well as marketplace experiences have shown mixed or unique results as to what determine successful customer loyalty strategies. (Egan, 2004)

Products: A product is anything capable of satisfying a consumer’s want or need (Gould and Leow 1999).

Services: is the production of an essentially intangible benefits, either in its own right or as a significant element of a tangible product, which through some form of exchange, satisfies an identified need (kotler 2005)

Information: information is that which informs, i.e. an answer to a question, as well as that from which knowledge and data can be derived as data represents values attributed to parameters, and knowledge signifies understanding of real things or abstract concepts (Sannders and Gummerus, 1995).

Satisfaction: it is a good feelings that customer has when his/her needs or desires have been met (Schneider and Bowen 1993).

Technology: technology is the manipulation of nature for human purpose (Gefan and Lin, 2003)

Information Technology: is a technology which uses computers to gather, process, store, protect, and transfer information. Today, it is common to use the term Information and communications technology because it is unimaginable to work on a computer which is not connected to the network (Gefan and Lin, 2003).

1.10         ORGANIZATION OF THE STUDY.

This study was arranged into five chapters. Chapter one has the background of the study, statement of the problem, objectives of the study, research questions, research hypotheses, significance of the study, scope and limitations of the study, historical background of Ecobank Nigeria Plc, Uyo  branches, definitions of terms and organization of the study.

Chapter two contains the review of related literature, Meaning of information technology, Role of information technology, History of information technology, Components of Information Technology, Gains of Information Technology, The concept of internet, Customer loyalty, Service satisfaction, Information Technology and customer loyalty in the Banking industry. Chapter three deals with the Research Methodology, Research design, the study area, Population of the study, Sample size and sample techniques, Research instrument, Method for data collection and Decision rule.

In Chapter four data presentation, analysis and interpretation were done. Finally, chapter five deals with the summary of findings, conclusion and recommendations for the study.

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