The Effect of Service Quality on Customers Retention in an Organization with Case Study Mutengene Savings and Loans Cooperative Society
Department: Management
No of Pages: 66
Project Code: MGT10
References: Yes
Cost: 5,000XAF Cameroonian
: $15 for International students
Abstract
This
work sought to assess the effect of service quality on Mutengene Savings and
Loans Cooperative Society customer retention. In order to satisfy the specific
objectives of the study, a structured questionnaire was developed, pre-tested
and administered to targeted subscribers using a simple random sampling method.
A
total of 105 respondents were contacted; 100 subscribers and 5 staff were
interviewed. Descriptive method of data analysis was used to analyze the data
collected from the field. The findings revealed that even though the five
service quality dimensions can lead to customer satisfaction, some of them were
regarded to be of higher priority.
Reliability,
responsiveness and assurance dimension was considered to be having the highest
impact on service quality. Moreover the study established that all service
quality dimensions should be improved and allocated more resources since they
positively affect customer retention.
The
study therefore recommends that the management of Mutengene Savings and Loans
Cooperative Society should put more effort on those Service quality dimensions
that were found to be higher importance on Customer retention.
They
include reliability factors, assurance factors and responsive factors. Moreover
service quality dimensions were found to have a positive relationship with
customer retention hence should be improved to achieve more customer retention.
CHAPTER
ONE
INTRODUCTION
1.1 Background of the
Study
The
retention of customers is one of the most vital element in the global
competitive markets. With the fast paste in technological and economic
conditions has made it cumbersome for organizations to deal with.
The
contemporary age has brought the advancement in global commerce and emerging
competitive markets which has led to fluctuations and intense competition.
Thus, consumers has series of alternatives to exceed expectations when making a
buying decision.
In
this light, customer retention is seen as a tool that all organizations must
put in place in order to diminish the risk of substitutes. In the Microfinance
sector there are lots of challenges, that is why customers are not that loyal
to one particular service provider, especially when there are not receiving
value for money kind of service.
Hence,
contemporary companies are forced to consider how to create a loyal customer
base that will not be eroded even in the face of fierce competition. This is in
bid to gain market share and to extend their profit margin.
Therefore,
microfinance institutions must realize the necessity of studying and
understanding various antecedents (viz service quality, switching cost, trust,
corporate image, and customer satisfaction and retention) which might help them
to develop a loyal customer base (Sharp & Sharp, 1997) as well as
strategizing ways to satisfy these customers.
Mixed
findings exist regarding the casual direction between service quality and
retention (Lee, et al., 2000) does customer retention lead to service quality
or vice versa. Yavas et al. (1997) explained that although some studies
interpreted service quality perceptions as an outcome of satisfaction, recent
studies have characterized service quality as an antecedent of customer
retention.
The
goal of every successful business is to maintain a high level of customer
satisfaction and retaining customers by providing their clientele with value
added transactions through positive customer service interactions.
In
turn the customer's expectation is to feel important and assisted during the
interactions that ultimately lead to their desired end result. Customers are
constantly aiming to get the highest satisfaction from products or services
that they buy from various organizations across the globe.
Research by Oliver (2009) suggests that both service quality and customer retention are two distinct but related variables. It is particularly true for the services firms where increased level of customer retention results in profit maximization.
Therefore experts say that customer retention should be the fundamental principle of all the service firms as it is the key indicator of firm’s performance. As said by Sakthivel et al., (2005) quality service and customer retention is proved to be the major determinant for long term survival and financial performance of the company (Jones and Sasser,1995).
Also, customers are considered as final judges
to judge the quality level of product and services offered. Parasuraman et al.
(1985) describes service quality as the evaluation of the general quality of
services being provided to customers.
Therefore,
it can be noted that service quality is the differentiation between the
customer’s expectation and the perceptions of services delivered by
organizations. Gronroos (1984) also defined service quality as the outcome of
an evaluation of process where the consumer compares their expectations with
the service they received.
He
postulated that customer perceived service quality is a function of expected
service, perceived service, and image quality. Service quality focuses on
meeting the customers’ needs and requirements and how well the service
delivered matches the customers’ expectation (Philip and Hazlett, 1997).
While
customer satisfaction as Lonial and Zaim, (2000) cited in Oladepo and Abimbola
(2014) put it, is customers’ positive or negative feeling about the value that
was received after the consumption of ideas, goods and services.
Service
quality and customer retention are global issues that affect all organizations
whether private or public businesses, small or large, global or local.
Organizations are interested in studying, evaluating, and implementing
marketing strategies that aim to improve customer satisfaction and retention
with an intention to maximize the financial performance of the firm.
Service
quality and customer retention have long been recognized as playing a vital
role towards the organizational success and survival in today’s global
competitive markets. ( Kaplan and Norton, 2001).
Service
quality is considered as an integral part of any facet of industry and it
defines the future of any organization. The rapid increase in technology based
systems related to internet are leading to fundamental ways in how different
organizations interact. This applies same for relation of an organization with
its customers.
In
different services, industries relationship between customer satisfaction and
service attributes have been difficult to identify because services nature is
intangible (Hong, Goo et al., 2004; Nguyen and Leblanc, 2002). Due to the
intangible nature of services it is difficult for the firms to analyze how the
customers perceive and evaluate the desired outcome of the service quality.
SERVQUAL
scale is the measures of service quality based on the gap between expectation
and performance. Within SERVQUAL model there are five specific dimensions of
service quality; tangibility, reliability, responsiveness, assurance and
empathy (Parasuraman, Zeithaml and Berry, 1988).
But
this study will make use of three dimensions which are reliability,
responsiveness and assurance. The SERVQUAL model is used in this study because
it takes a broader perspective of service, that is far beyond simple customer
service and it is the dominant approach to quantitatively assess service
quality.
The
understanding of customer’s needs within current competitive finance industry
and most especially in microfinances has become an important factor for service
providers successes Owing to that , companies have moved from product-centric
to a customer centric positions.
Retention
has become of great interest to practitioners because it is important for
customer retention (Patterson et al., 1997; Sedon, 1997). Good customer service
is an expectation held by the customer regarding the manner in which they are
treated by anyone representing the company and this service quality is not able
to affect the retention of customers of the microfinance institution.
Consumers
want and expect to be addressed in a respectful and professional manner when
dealing with any situation, problem, complaint, question or assistance that may
arise pertaining to any aspect of their business relationship without that
they.
A negative customer service experience often leads to a dissatisfied or disgruntled customer; and an unhappy customer can tarnish the name and reputation of a company by generating negative feedback. Customer service is a standard in customer satisfaction, so consumers expect to have their issue managed while being addressed in a polite and in a timely manner.
The Cameroon cooperation of credit union (2017) records that Mutengene savings and loans cooperative society the provider of both savings and loans services has achieved significant customer base but still many of their customers always complain of the quality of service render to them. Over the years, there has been a low significant customer base growth even after deployment of new technologies.
Customer retention has helped us understand and implement store loyalty programs (Agustin and Singh, 2005; Carter, 2008). In a nationwide customer retention survey, majority of the respondents reported that 75% of the sales were from existing customers (Carter, 2008).
98%
of the respondents surveyed agreed to the importance of customer loyalty but
only half of them were aware of any customer loyalty program being implemented
at their firm. 73% of the firms said that they did not measure customer loyalty
(Ray and Chiagouris, 2009).
Revenues
from the loyal customers continue to grow as the customers continue to be loyal
to the firm and Companies spend more in attracting new customers rather than
retaining the existing ones.
The
front end function of attracting a new customer like substantial budget,
management attention and effort of marketing professionals is taken care of
while the backend function of retaining customers is usually neglected. It
costs six times more to get a new customer then retaining an existing one.
Some
companies maintain incoming of new customers to cover up regular loss of
existing ones. Customer retention is now emerging as an important area of
analysis and planning. Designing an optimal customer portfolio, designing a
special marketing mix and modifying the organization can help build good
relationship with the existing customers (Rosenberg and Czepiel, 1992).
Companies
uninterested in retaining existing customers and looking for new ones is
similar to throwing a needle in the Haystack, finding it , again throwing it
and then looking for it. The time and money spent in attracting a new customer
is not worth if you cannot keep them.
It
is recommended that “there needs to be a different marketing mix for retaining
customers: product extras, reinforcing promotions, sales force connections,
specialized distribution, and post-purchase communication”.
However,
there have been many complaints from customers about the service delivery of
the Mutengene savings and loans cooperative society in Cameroon, profusely
lamented that in spite of the appreciable growth and expansion recorded in the
industry, “the quality of service is still poor”
Despite
the economic and social benefits of the Mutengene savings and loans cooperative
society and market, unlike the developed countries, there is no marketing or
management research attention to this sector. However, it is probable that the
mobile operators conduct satisfaction surveys and other marketing research but
contact with the mobile operators for any useful information yielded no
response.
With the current crisis plaguing the two English speaking regions of the country for three years has greatly affected service delivery especially in the remote areas of the regions. This is due to the reductions of savings of local individuals.
This
would in turn lead to an increase the number of customers shifts to
competitors. As such, this study evaluated service quality on Mutengene savings
and loans cooperative society customers’ retention in the Buea municipality.
1.3 Objectives of The
Study
Main objective
- The main objective of this study is to assess the effect of service quality on customer retention in the Mutengene savings and loans cooperative society.
Specific objectives
include:
- To analyze the reliability of Mutengene savings and loans cooperative society services that affect customer retention in the organization.
- To examine the degree of Mutengene savings and loans cooperative society responsiveness to customers complaints that influence customer retention in the organization.
- To assess the assurance that the services provided by Mutengene savings and loans cooperative society influence customer retention in the organization.
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