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Customer Satisfaction in the Banking Industry
Case Study – Barclays Bank of Kenya Ltd.
Customer satisfaction is a major issue in almost all sectors. This can basically determine the success and profitability of a company as a satisfied customer would most likely to ‘spread the good word’ or would have be happy to do business again with the firm. It is an important theoretical and practical issue for market researchers and consumer researchers (Meuter et al, 2000). With positive results in most research, the significance of customer satisfaction and customer retention in strategy development for a “market oriented’’ and “customer focused’’ firm cannot be underestimated (Kohli and Jaworski, 1990). Specifically, Levesque and McDougall (1996) stated that customer satisfaction and retention are critical for retail banks, because of their impact on the company’s profit. With this, there is the challenge for banks to deliver a satisfactory quality service. After all, customer satisfaction is inarguably one of the two core concepts that are at the root of the marketing theory and practice (Spreng and Mackoy, 1996). The other one is service quality but it can be said it is not purely intertwined with customer satisfaction as a customer can be satisfied even though the service is not of high quality. But then, customer satisfaction is considered a must for customer retention and loyalty, and undoubtedly helps in realizing economic goals like profitability, market share, return on investment and other corporate target (Reichheld, 1996; Hackl and Westlund, 2000).
This paper presents the proposal to investigate customer satisfaction in the banking industry and link it with the profit of the company. As mentioned, this theory is also plays an important role to banks. The study will focus specifically on the Barclays Bank of Kenya. Barclays is a UK based brand that has made a huge impact on Kenya. The study will look at how Barclays retain and satisfies its customers and what type of measurement they used and how it can be further improved. In this proposal, a background of Barclays Kenya will be presented along with some insights on the personal experience of the author on their service. Furthermore, a literature review will also be presented. This will include contents of literatures about customer satisfaction, examples of how satisfaction is measures, results of other studies, etc. Other important divisions such as the objectives of the study, the problem, limitation and the methodology will be presented.
Background of the Study
Barclays is the UK’s third biggest banking company. It is engaged mainly in retail banking, investment banking and investment management. In 2002, it generated revenues of £11.32 billion (Datamonitor, 2004). Through its subsidiary Barclays Bank, the company operates about 2,000 offices in the UK, particularly in both England and Wales. Its overseas business is managed by Barclay Bank International, which operates over 500 branches in around 60 countries. Other subsidiaries include the Woolwich, Barclaycard, Barclays Capital, and Barclays Global Investors. The company is headquartered in London, UK (Datamonitor, 2004).
One of its overseas business locations is in Kenya, where the company is considered as one of the key players in the country’s banking industry. Started in the 17th century in London, the company directly invested in Kenya in 1916 and has operated continuously until the present day (Barclays, 2005). Barclays in Kenya is considered the leading contributor of profit and size of operations in Africa (Barclays, 2005). As stated in the Website of the Barclays Kenya, “The bank is the market leader in the retail segment and is aggressively growing its corporate business with numerous world class financial services products. The bank pioneered the concept of unsecured retail lending in Kenya where it currently holds a market share of 30%” (Barclays, 2005). With a world renowned brand, Barclays is one of the most successful investors in Kenya, with 69 computer-linked outlets across the country and 82 ATMs.
Based on personal experience, the Barclays Bank of Kenya offers quality professional service to its customers. The employees are moderately friendly and they welcome customers thoroughly. However, the employees themselves are not quite persuasive as they should be, but nonetheless, services are satisfactory in terms of speed of service delivery and customer orientation. But perhaps, a more persuasive and friendly approach can be possible. Sometimes, employees are inconsistent with the service quality. Cross-selling is also poor which can be considered as one of the weak points of the bank.
SWOT Analysis of Barclays
Generally, Barclays have many strengths that they can boast as well as opportunities that they can grab. However, with strengths there also weaknesses that are needed to be fixed. Furthermore, there are also threats should also be addressed with strategy and care.
Strengths and Opportunities
Barclays is already an established brand in financial services. Thus, no matter where they are located overseas, they are known as one of the largest financial service groups in the UK. Their corporate identity and features is basically one of their strengths that they can show. They are also the leading provider of coordinated global services to multinational corporations and financial institutions worldwide, and have been involved in banking for over 300 years and with over 73,600 employees (Datamonitor, 2004).
Another strong point of the company is its global reputation and being globally diverse. Operating business in 60 countries, its diverse geographical spread allows the company to spread its risk of the adverse effects of operating in a single country such as economic downturn etc. (Datamonitor, 2004). For instance, despite the economic slump in Kenya, Barclays can still survive as it can ask support from its International office. In Kenya, poverty is widespread with 55 percent of the population below the poverty line. Specific weak points of Kenya’s economy include: lack of budget discipline, government corruption, slow progress on privatization of parastatal companies, a weak banking sector, poor infrastructure, an inconsistent judicial system (CountryWatch, 2005). But despite these weaknesses of Kenya, especially in the banking sector, Barclays has the strength to stand up in the competition with a strong international aid and support from subsidiaries (Datamonitor, 2004). In addition, one of its strategies for penetrating in foreign markets is its good acquisition. The company has been able to achieve solid growth, fend off external pressures and global expand through successful acquisitions.
In terms of opportunities, Barclays in Kenya can profit from the unique all in one bank account approach. Furthermore, Barclays is offering legal and general life, pensions and investment products to Barclays’ customers. This offers an opportunity to breathe life into the group’s bancassurance operations (Datamonitor, 2004). There is also the growth of customers in Kenya. The BBK Annual Report (2004) stated that the continued growth in customer deposits is attributed to the attractiveness of Barclay Kenya’s deposit products and the level of confidence their customers have in the Bank. The managing director stated that they continue to focus their efforts in lending to the personal and business sector in Kenya and are considering new products to facilitate this process (BBK Annual Report, 2004). Furthermore, the continuous investment in state-of-the-art technology and the effort to improve staff performance might give the company the edge in providing customer satisfaction in financial services.
Weaknesses and Threats
The biggest weakness of Barclays is its bad publicity. Comments of the CEO made to MPs described how he didn’t use credit cards as they were "too expensive" and that he’d advised his children to not get into too much credit card debt causing an embarrassing situation (Datamonitor, 2004). Furthermore, the OFT pulled the plug on a marketing campaign as it described as "misleading" and possibly illegal offering "0% interest forever" (Datamonitor, 2004). In 2002, its reductions in local and village branches had been criticized and accused of arrogance for its "Big Bank" advertising campaign (Datamonitor, 2004). As mentioned, majority of Kenya’s population is poor, and the grand image might not satisfy customers greatly.
In addition, the company has also been criticized for its half-hearted efforts at cross-selling products to existing customers, and the lack of brand clarity has led to the loss of customers who failed to realize that differentiated services were available to those with the requisite cash (Datamonitor, 2004).
The main threat of the company, on the other hand, is the poor economic condition of Kenya itself. Furthermore, Kenya's economy is hindered by the onslaught of AIDS in the region (CountryWatch, 2004). In addition, the continuous conflict in Central Africa might result in a slack of customers. Thus, this gives them the challenge to provide satisfactory service to retain as much customers as possible.
Objectives of the Study
The aim of the study is to conduct an investigation on the customer service of Kenya, which is categorized into three main objectives. They are as follows:
1. To find out what factors contribute to customer satisfaction in the banking industry.
2. To develop mechanisms for accurate measurement of customer satisfaction.
3. Review existing literatures on models of customer satisfaction and correlate this with the existing study.
4. Extend current understanding of customer satisfaction.
5. Provide feedback on level of satisfaction
Statement of the Problem
The problem in the study is that the Barclays Bank of Kenya or the general Barclays brand is used to European policies and has been most recognized in terms of success in Europe than in Africa. Management in Europe is different from the management in Kenya, although they are trained by the principles of the company. Yet, it may be harder for a corporate company to deliver customer satisfaction in developing countries because mainly of social and cultural differences. Satisfaction perceived by British customers is different from how Kenyan’s perceive satisfaction. Thus, an investigation on the factors that influence customer satisfaction in the Barclays Bank of Kenya might open new doors to new information such as what customer service should the bank focus on quality to retain customers in Kenya branch. Along with this, it will be given effort that an effective mechanism for measuring satisfaction be discovered, based on the method to be used and the result of the study.
To attain the objectives of the study, key questions will be answered. The answers to these questions will provide light to the problem and will open new perspectives or support to existing perspectives in customer satisfaction. The research questions are:
1. What are the strategies of Barclays Kenya in giving customer satisfaction or retaining customers?
2. In what area of their service do they receive the most satisfactory remarks from customers?
3. What area of Barclay Kenya’s services that customers are mostly not satisfied with the service?
4. What are the methods that the Barclays Kenya used to measure the satisfaction of the customers?
5. How do customers’ view the service performance of Barclays Kenya?
6. Why is it important to assess customer satisfaction?
7. What are the consequences of ignoring customer satisfaction?
The study will be limited only to the survey and literature and review. Furthermore, 100 of existing customers of each 5 branches in Kenya will be interviewed because of limited time and budget. Also, the study will be limited only with the extent of which the Barclays Kenya will allow such study to take place. There might be changes in respondents, schedules of survey etc. depending on the how much the company will allow them. The confidentiality of information about their customers can be one of the biggest limitations of the study as it is the choice of the company which information is to disclose.
Significance of the Study
The results of the study could play a great role in improving customer satisfaction in banks. By unearthing the factors that affect customer satisfaction, banks in Kenya would not have a blind eye on what to do anymore, rather the will easily know what and where they should improve their customer service to give customer satisfaction. Also, by proving it to be related with profit, banks in Kenya would be motivated to improve customer service. Furthermore, the study might encounter new issues that deserve to be investigated in future studies. Finally, the findings of the study can be reviewed and used for comparison in future studies about customer satisfaction. Thus, this study will be beneficial to both banking companies and market and consumer researchers.
Brief Review of Literature
According to Zineldin (2000), customer satisfaction brings many benefits as satisfied customers are not very price sensitive, buy additional products, are less influenced by competitors and stay loyal longer. Rust and Subramanian (1992) stated that customer satisfaction has been deemed directly to affect customer retention and companies’ market share (Rust and Subramanian, 1992). In banks, service quality, service features, and customer-complaint handling determine customer satisfaction (Hansemark and Albinsson, 2004). Some factors that affect satisfaction are extended hours of operation and competitive interest rates as confirmed by the study of Levesque and McDougall (1996). In addition, there are researchers who discuss the links between satisfaction, loyalty, and profitability (Heskett et al, 1994; Anderson and Fornell, 1994; and Rust et al, 1995). They are proponents of the theory called service management, which argues that “customer satisfaction is the result of a customer’s perception of the value received in a transaction or relationship relative to the value expected from transactions or relationships with competing vendors. Pertaining to this theory, Hansemark and Albinsson (2004) stated: “Loyalty behaviours, including relationship continuance, increased scale or scope of relationship, and recommendation (word of mouth advertising) result from customers’ beliefs that the quantity of value received from one supplier is greater than that available from other suppliers” (p.28). They continued: “Loyalty, in one or more of the forms noted above, creates increased profit through enhanced revenues, reduced costs to acquire customers, lower customer-price sensitivity, and decreased costs to serve customers familiar with a firm’s service delivery system” (Hansemark and Albinsson, 2004, p.28).
In the survey of Coulson-Thomas and Brown (1990), it has been noted that quality, customer satisfaction, and identification of customer value were identified by their respondent companies as either important or very important. Those companies that have high quality of services as well as goods had higher market share, higher return on investment and asset turnover than companies with perceived low quality (Ghobadian et al, 1994). It basically affects the competitiveness of the company, long-term profitability and “repurchase intentions” of both existing and potential customers (Ghobadian et al, 1994). Because it affects those factors, then it certainly affects customer satisfaction (Anderson and Fornell, 1994). Gronroos (1984), Parasuraman et al (1985) and Johnston (1987) have emphasized the link of service quality with customer satisfaction, which is, the degree of fit between customer’s expectations and perceptions of service.
According to Groth and Dye (1999), customer criteria determine the definition of quality and the variables that affect perceptions of quality. They explained that variables may change with circumstance, experience, and time. In addition, service providers may influence the variables that drive customer perception to service quality. The perception of the customers may also vary by circumstances, time, and experiences (Groth and Dye, 1999). Groth and Dye (1999) explained that the total perceived value of a service comes from two sources. First, customers perceive value that originates from the service act itself; second, customers perceive value that originates from the quality of the service act. However, as mentioned in the introduction, it is difficult to measure the perception of the customers because of its intangible nature – and this complexity triggers the complexity of controlling or managing service quality. For instance, the intangibility of services and the simultaneity of service production and consumption make it complicated for customers to evaluate the quality of the desired service before it is provided or rendered (Berry et al, 1988).
Armstrong and Seng (2000) attempted to conceptualize a comprehensive model of satisfaction at the business-to-business level incorporating guanxi (Chinese business relationships), relationship marketing and the disconfirmation paradigm. Using the path analysis, their study found that fairness exerts a negligible impact on corporate customer satisfaction. Its other term is equity, and is included in the expectations of customers for competent professional services and fair deals in terms of pricing or credit facility advance basis. On the other hand, the study found that the association of relationship marketing, disconfirmation and performance on satisfaction was significant at the 95 per cent confidence interval (Armstrong and Seng, 2000). Relationship marketing is simply to secure continued business relationships through customer retention strategies (Armstrong and Seng, 2000). The principle of the disconfirmation paradigm, on the other hand, is that “if performance exceeds expectations, customers will be positively disconfirmed (satisfied). On the other hand, if performance fails to meet expectations, customers will be negatively disconfirmed (dissatisfied)” (Armstrong and Seng, 2000, p.98). Finally, performance is based on the perception of the consumers or costumers on the service quality of the bank.
Quality can also be used to measure satisfaction as quality basically means to satisfy costumers. One of the known models to measure quality is SERVQUAL. It is an instrument being used to measure perceived service in terms of the gaps between customer expectations and actual judgment of performance along five dimensions of service quality namely: tangibility, reliability, responsiveness, assurance and empathy (Parasuraman et al, 1998). Mersha and Adlakha (1992) conducted a study that aims to seek service quality attributes from consumers based on the SERVQUAL model. However, the list of quality attributes was first obtained from MBA students used as Delphi experts and were asked to provide or list attribute that they consider important to poor or quality service. In the result, it was seen that top six attributes that are important for good quality were: knowledge of the service; thoroughness and accuracy; consistency/reliability; reasonable cost; willingness to correct errors; and time/prompt service (Mersha and Adlakha, 1992). On the other hand, the most important attributes for poor service quality were: lack of knowledge about service; employee indifference or “I don’t care” attitude; reluctance to correct errors; service inconsistency; sloppy service; and high cost (Mersha and Adlakha, 1992). The study then found out that there was no significant relationship between cost of service and quality. It was also found out – because most of the service covered were expensive – most of the respondents would be willing to trade some conveniences for a price –off.
The respondents of the study will consist of customers of Barclays Kenya and managers. The criteria for the customers are that they should at least do business with the company for two months up. The reason for this is to make sure that they have enough time to evaluate the service of Barclays Kenya and if it satisfies them. The managers to be surveyed, on the other hand, should have knowledge about customer complains and customer satisfaction in the company. They should be aware of what is usually being complained and being praised. The survey will be conducted on five branches of Barclays. The sampling technique to be used is convenience sampling to make the process faster and easier. 100 customers from each branch will be surveyed. However, 20 questionnaires will be piloted first to test the validity of the questionnaire. Five managers on the other hand, will be surveyed from each brand for basic information about their customer satisfaction approach and how they measure it.
The survey method, also known as the questionnaire method, will be used in gathering the data. Surveys are the most common form of research method for collection of primary data (Commonwealth of Learning, 2000). One of its purpose is to describe, e.g., to count the frequency of some event or to assess the distribution of some variables such as proportion of the population of different age groups, sex, religion, castes and languages, knowledge, attitude and adoption of practices about particular issues, and other information of similar nature about the population (Commonwealth of Learning, 2000).
A self-administered questionnaire, or the type of questionnaire that is usually completed by respondents (Saunders et al, 2003), will be constructed to gather the needed data. This questionnaire will have two sections: the first part intended to acquire the demographic profile of the respondents, and the other section comprised of a set of attitude statements that intends to determine the level of agreement or disagreement using a five-point Likert scale. In the Likert technique, the degree of agreement or disagreement) is given a numerical value ranging from one to five, thus a total numerical value can be calculated from all the responses. (Underwood, 2004) The equivalent weights for the answers were:
4.50 – 5.00 Strongly Agree
3.50 – 4.00 Agree
2.50 – 3.49 Uncertain
1.50 – 2.49 Disagree
0.00 – 1.49 Strongly Disagree
The framework to be used in measuring customer satisfaction in the study will be the group of paradigms used by Armstrong and Seng (2000). They are: transactional paradigm; repurchase intention; fairness; and relationship marketing. The Guanxi or Chinese business relationship paradigm will be omitted because it is not applicable in Kenya. Instead, the social trait of Kenya regarding bank transactions will be used.
The frequency distribution analysis, and the comparison of mean, median and mode will be used in the study.
To interpret the data to be gathered, the researcher will use the following statistical formulae:
1. Percentage – to determine the magnitude of the responses to the questionnaire.
% = -------- x 100 ; n – number of responses
N N – total number of respondents
2. Weighted Mean
f1x1 + f2x2 + f3x3 + f4x4 + f5x5
x = --------------------------------------------- ;
where: f – weight given to each response
x – number of responses
xt – total number of responses
Customer satisfaction is a crucial factor that can determine the success of a business. However, people have different perception of satisfaction because of the diversity of culture. Barclays has its roots in the UK and obviously practices UK policies in banks. However, with its direct investment in developing countries like Kenya, satisfaction might be looked on a different perspective. The study of Armstrong and Seng (2000) found in Singapore that customer satisfaction of Singaporean people in bank transaction has little relevant with fairness of treatment. However, they found customer satisfaction highly significant with disconfirmation, relationship marketing and performance on the service. But do these results can also be seen in the African setting? There are many possibilities and the results might reveal important characteristics on how Kenyans perceive customer satisfaction.
Quantitative research method is the only method that will be used in this study. The main purpose of avoiding qualitative research is to be able to categorize the responses easily with a considerable amount of sample size. The statistical results based on the framework of Armstrong and Seng (2000) will help determine the level of satisfaction among Kenyan bank customers. Furthermore, the survey with the managers of Barclays will help determine the type of measurement they use on determining customer satisfaction. By reviewing the weak and strong points of the different measurements used, it is hoped that the researcher can conclude measurement model that will be effective.
The following are the assumptions of the study:
1. That the 500 customers will represent the total number of customers
2. That respondents will answer the questionnaires truthfully.
3. That results will reveal the factors that affect customer satisfaction and will confirm customer satisfaction’s link to profit.
Primary research will begin during Easter. Then, analysis and literature review will progress through June up to September.
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