CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

It might be well accepted nowadays that intensive competitiveness in terms of both quantity and quality makes it extremely difficult for a firm to differentiate itself from its competitors. Moreover, dynamic business environments and increasing customer power have pushed firms towards a customer-focused strategy, especially using new technology to build relationships with the customer (Ryding, 2010). Service quality and customer retention have long been recognised as playing a crucial role for success and survival in today’s competitive market (Ibojo, 2015). Service quality entails constant anticipation of what customers expect from the service provider. Organisations are seeking ways to forge and maintain an on-going relationship with their customers in order to protect their long-term interest (Ibojo, 2015).

According to Kemp and Rotmans (2005) assert that customers retention of existing customer is cheaper than attracting new ones. This implies that building long-term customer relationships while keeping customer loyalty and trust is necessary. Quality in a service business has become a measure of the extent to which the service provided meets the customer’s expectations. Companies have found that in order to increase profits and market share, they should pay much attention to the quality of services they provide to their customers (Kemp &Rotmans, 2005).

Service quality plays a fundamental role in every organisation of a nation; it decides growth and survival of the organisation in this hugely competitive market in the modern era. Service quality has been revealed as a key factor in search for sustainable competitive advantage, differentiation and excellence in the service sector (Iniesta& Sánchez 2002). According to Heskett (2002) the service quality is considered essential for the success and survival in a competitive environment and this influence the consumer behavior in a decision-making process, and also the level of relationship between customer and company and can impact customer’s loyalty.

In the context of the world, service quality is one way to accomplish this. Retailers need an efficient way to assess the service quality of their store (Simmers & Keith, Measuring retail store service quality: the disparity between the retail service quality Scale and Comment Cards, 2015). However, the focus on customer retention in this area of business is one of the right strategies to generate profits (Sirohi, McLaughlin, &Wittink, 1998). Loyalty is an important step in ensuring that consumers perform something that is beneficial to the firm, whether through purchase or simple word of mouth. It is believed that satisfaction is a consequence of the quality of the service, and guaranteeing it, increases the likelihood of involving the customer and loyalty, in retailing sector in North of Portugal. Additionally, intend to present a conceptual model is used as a framework to identify the dimensions of service quality and examining the interrelationships among customer retention, value perceived and behavioural intentions and service quality in the modern retail industry.

In Saudi Arabia the retail industry is settled on actions, such as interaction, negotiation, and supplying that make a combination between services and products during the service meeting process (Mahfooz, 2014). The retail service combined a mix between services and goods wherefore it is crucial to look at service quality from the angle of services and from the angle of products, and develop a set of items that correctly measure this construct (Mehta, et al., 2000). This creates the service quality in retailing diverse from any other pure product or pure service setting (Finn, 2004; Mehta, et al., 2000; Vazquez, et al., 2001). Service quality in retail industry has a hierarchical structure with five dimensions: physical aspects, reliability, personal interaction, problem solving, and policy.

In the context of Africa according to Andargie (2013) foreign customer satisfaction in Ethiopian five-star hotels Sheraton Addis and Hilton intercontinental hotels reported that foreign customers are not satisfied by the services of the hotels, more over all services quality dimensions created a gap in their expectation and perception of guests. Besides Zeleke (2012) has examined a study about the impact of service quality on customer satisfaction at the public owned National Alcohol and Liquor Factory stated that the five service quality dimensions brought an impact on customer satisfaction was significant in all factors of service quality and Ethiopia also showed that there was a negative gap between actual service and expected service in all dimensions of lodging quality index and significant and positive relationships of five service quality dimensions and customers satisfactions (Shimekitet al., 2016).

1.2 Statement of the Problem

In a hyper-competitive market all micro financial institutions are confronted with challenges of keeping the prevailing customers from switching to other banks and selling them more services and attracting new customers from the non-banking community and competitors.  Maintaining one financial institution existing customer base is even more essential than the power to capture new customers. One of the justifications is that the cost of appealing a new customer is far over the cost of keeping existing one. In study by Bazan (1998) the cost of attracting a new customer from non-banking community and competitors is five times higher than maintaining an existing customer. With the exception of this monitory facet, the impact of negative word-of-mouth will a lot times be harsh. Service quality and customer retention may be a major contribution to sustainable profit growth.

One of the most significant challenges facing services organisations today is to provide consistently high-quality services. The delivery of consistent service quality is arguably the most vital factors that contribute to the establishment of credibility and reputation of the organisations in the eyes of the public. It is well recognised that providing high quality services has a beneficial effect on the bottom-line performance for the organisation. Indeed, there is a growing body of empirical evidence indicating that providing top quality services enhances profitability, improves productivity, spreading positive word-of-mouth, increases market share and return on investment, and reduces costs.

However, due to the decline in brand loyalty proposed by recent research, there is a clear gap in the connection of perceived value of service quality between different generations and whether or not the evaluation of service quality is connected to the decline in brand loyalty. This topic is an interesting field of study because service quality and maintaining retention among consumers is a substantial cost for companies. If the importance of the relationship between service quality and customers retention is decreasing among younger generations, then companies should be aware of this situation and reassess how they allocate their resources, to become more efficient in terms of internal costs. Therefore, the main aimed to establish the effect of quality services on customers’ retention in AZICCUL Bamenda.

1.3 Research Questions

The research problem raises two fundamental questions to be answered: the main research question and the specific research questions.

1.3.1 Main Research Question

What are the effects of service quality on customer retention in AZICCUL Bamenda?

1.3.2 Specific Research Questions

The specific research questions are simply stated as;

1. What is the effect of service product on customer retention in AZICCUL Bamenda?
2. What is the effect of service delivery on customer retention in AZICCUL Bamenda?
3. What is the effect of service environment on customer retention in AZICCUL Bamenda?

1.4 Objectives of the study

The objectives are segmented into two; the main objectives and the specific objectives of the study.

1.4.1 Main objective

The main objective is to examine the effects of service quality on customer retention in AZICCUL Bamenda.

1.4.2 Specific Research Objectives

            The specific research objectives are states thus;

1. To assess the effect of service product on customer retention in AZICCUL Bamenda.
2. To evaluate the effect of service delivery on customer retention in AZICCUL Bamenda
3. To determine the effect of service environment on customer retention in AZICCUL Bamenda