The Impact of Relationship Marketing On Customer Retention in Banks in Kenya A Case Study of the Bank of Africa

A Project Report Submitted to the School of Business in Partial Fulfillment of the Requirement for the Degree of Global Executive Masters in Business Administration (GeMBA)The aim of this study was to determine the association between relationship marketing and retention of customers in banks in Kenya. To accomplish this, the research study aimed at answering the following research questions: - What are the different types or approaches of relationship marketing that banks use to attract and retain customers? What are the effects of relationship marketing to customer satisfaction? And, what are the aspects of relationship marketing that enhance profitability? The study used a descriptive research design which gave the desired information the researcher targeted. The targeted population included that of managers and staff of Bank of Africa (Kenya) together with a number of selected bank account holders with the bank. The sample size was 80 and it comprised 16 managers, 24 general staff members and 40 account holders (selected from the 8 branches of the bank within Nairobi). The purposive sampling method was used to identify the sample among the banking staff while accidental sampling was used to sample the account holders. A questionnaire was used for the data collection process. Out of a total 80 respondents, only 68% responded to the questionnaires adequately. The finding from these was that relationship marketing is a very important method of either defensive or offensive marketing strategy. Banks were found to be using a variety of approaches in executing relationship marketing, among them were better offers on products, convenience of access, customized services, and the use of E- Banking solutions (technological) among others. The study also established that there are certain effects of relationship marketing that impact the satisfaction of customers towards their banks. These were better customer care services, convenient location of the bank/ATM, continuous review of products on offer so as to coincide with customers’ changing lifestyles, better pricing rates, personalized banking, better services with diversified products, and use of mobile and internet banking services to bring services closer to customers. The research also found out that there were several factors that enhanced customer value and improved business performance; open, honest and frequent communications; enhanced ethics and trust between the customers and the direct sales representatives; appropriate client knowledge and progressive friendship to retain existing customers; enhanced quality services by keeping promises to customers; maximum and sustained customer satisfaction; and building and maintaining long-term customer relationships that affected the profitability of a bank. The study concluded that relationship marketing is a very important way of enhancing defensive and offensive marketing in banks. It was also observed that banks used several strategies of relationship marketing to enhance customer loyalty and attraction. Banks also valued relationship marketing approaches as strategies of sustaining their stake in their customer retention capacities. The research also concluded that the different tools of relationship marketing enhanced customer satisfaction in the services that banks offered and that high level of satisfaction influenced customer attraction as well as customer retention positively. The study also concluded that there are several factors of relationship marketing that when enhanced, increase profitability in banks through enhancing customer attraction and retention. It was however established that though these factors enhanced profitability on a general level, some of them had a higher chance than others of enhancing profitability. Due to the increased competition in the banking industry, this study therefore recommends that banks and other firms in the service sector should indulge deeply in devising better strategies/approaches relevant for the retention and attraction of customers to cushion firms from the high competition threats as well as make them remain profitable. Concerning effects of relationship marketing to customer satisfaction, the study recommended that due to the likeliness of imitation, banks should always be highly innovative so as to create unique tools that will enable them to provide exceptional quality and satisfactory services to their customers. To be able to enhance the effect of relationship marketing on profitability in a positive way, the study further recommends that banks and other companies at large should observe the necessary measures that keep their trust and commitment to customers hence establish better relationships with them so that, through the relationships, the banks can be able to remain profitable. The study finally recommends that further research needs to be done to assess whether the three levels of relationship marketing strategies can be fused into one major approach and whether the three levels should be used concurrently. Further research effort should also be expended in clearly establishing the relationship between the mentioned aspects of relationship marketing to quantity the profits a company is expected to achieve on implementation