The effect of value Co-creation on customer loyalty of banks in Buea.

CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background of the Study

            In today’s economy, it has become imperative for businesses to continuously re-invent themselves in order to adapt to the increasingly complex and dynamic market realities brought about by globalization, deregulation, technology, outsourcing and the convergence of industries. In recent times, globalization which is at its peak has continued to drive the rapid growth of international trade, global corporation and advances in internet and E-commerce and the emergence of the internet has changed how businesses and customers do things (Ifeanyichukwu, 2016). Current economic conditions make it critical forthe companies to satisfy customers, as satisfied customers are crucial for organizational survival and stability (Pantouvakis & Bouranta, 2013). Companies are trying hard to survive in severe competitive and cost-cutting forces which makes attempt of increasing market share linked with customer loyalty (Duygun, 2015).

            Companies have to look for resources of new ideas outside the boundaries of their firms (Ramaswamy and Gouillart, 2010). Therefore, involving target customers in a value generation process have been recently gaining its importance as a new marketing strategy (Rossi, 2011)Such new marketing strategy, which can lead to innovation, consumer’s loyalty and profitability, refers to cocreation. Consumers are seen as a key resource in the process of value creation and innovation of a company (Mariyudi and Faisal, 2017). The newly coined field of service logic is playing an influential role towards redefining the significant components of marketing. The significant notion inside this characterized field lies in value co-creation, the thought being that value isn’t exclusively made for the customer by the provider of the service, however it is made for and by both the parties all through the service delivery process(Reema and Zaki, 2019).The value co-creation process isfacilitated by access, which allows actors to have the information and/or skills to assist them to build their own experiences (Albinsson, 2016). Providing actors with information at all stages of the co-creation process, from design to experience, will pave the path for effective co-creation (Albinsson, 2016).

            New wave marketing era is an era where producers can collaborate with consumers in developing dynamic, interactive, and multi-source-based co-creation products that involve value creation processes that are not only done by coordinating everything that deals with quality, cost, and delivery but also done through collaboration. The success of the new products is influenced by not only product quality but also market condition, customer
targeting, and the time of product launching. The product development process in the new wave marketing era requires companies to co-create with experts who are able to identify and create quality products. Prahalad and Ramaswanmy (2004) asserted that the value of a product will be better than the produced product if the company has run the co-creation
process well.

            Risk assessment, which expresses more information about costs andbenefits to actors in the co-creation process, enablesinformed decisions about risks in the value co-creation process (Albinsson, 2016). The fact that actors have detailed information about risks will lead them to take more responsibility in the management of these risks by increasing their perception of being a cocreator of value (Albinsson, 2016). Transparency minimizes knowledge asymmetry between the actors, which is crucial given that these three basic concepts (dialogue, access, and risk assessment) play an active role in value co-creation. The tendency of businesses to be more upfront and transparent in their interactions increases the willingness of customers to accept service quality.

Markets are more fragmented than they used to be and consumers now have unprecedented access to information and networks. At the same time, technologies have created new modes of production and innovation that enable and encourage greater degrees of participation and collaboration. While consumers are demanding a greater level of personalization in their consumption experience and placing businesses under increasing pressure to co-create value with them, companies are searching for new and better ways to create value and differentiate their market offerings in order to profitably attract and retain customers (Bendapudi& Leone, 2003). Many consumers appear to gain satisfaction from taking an active part in the creation of value. There are several factors that have also contributed to the progress of e-commerce in recent time asides the internet and these factors include the increasing number of experienced users, individual’s exposure, ease of navigating through websites, convenience, time savings amongst others (Ifeanyichukwu, 2016).

            For drawing a closer, longer and profitable relationship with the customers, managers are undertaking various creative approaches for energetic customer contribution in the service creation and the process of its delivery. The approach, as it is turning into the next frontier in competitive effectiveness, helps in achieving higher customer satisfaction & customer loyalty, which is a competitive advantage for the organizations (Auh et al, 2007). Service-dominant (SD) logic model envisions customer as a value cocreator and a proactive creator rather than a passive receiver of value. It regards organizations as enablers rather than producer of value (Chen & Wang, 2016).

Brand loyalty has been widely recognized as an important factor in the relationship marketing era. However, the predictors of brand loyalty may vary from time to time as a result of the changes in consumer behavior. Around a decade ago, researchers have found that value creation process as a part of relationship marketing is considered as an important construct in enhancing loyalty (Hapsari et al., 2017). Nowadays, in the enhancement of information technology, value creation process is gaining more traction in literature as the process of creating value can be done offline and offline through social media or online communities. One of the objectives of value creation process is to establish relationship between customers and brand. Walter and Ritter (2003) noted that, in order to establish a strong and sustained relationships, there is a need to put trust in the relationship. When a customer has been interacting with the brand for quite a while, trust will appear in the relationship. Furthermore, once trust has been established in the relationship, emotional connection called brand love will emerge

            Value co-creation not only motivates customer towards problem sharing and solving but
also builds an experiential milieu in which consumers build, exchange dynamic relationship
and co-construct customized familiarities. Products may be alike but customers can develop distinctiveexperiences. The present era related to service driven economy makes experience based and customercentric approach elementary requirements for the growth of the service providers. Customers’ experiences and perceptions are at the forefront to determine value on the basis of Service-Dominant (S-D) logic which defines customers not as passive buyers ofvalue (Vargoand Lusch, 2007), but as actors playing an active role in value creation (Chan et al., 2010 andPayne et al., 2008). The influencing of the service produced by each individual who actively participates in the joint creation of value (Woratschek et al., 2020). helps businesses gain new competencies and move to a more competitive structure. The DART model, which deals with the context of Dialogue,Access, Risk Assessment, and Transparency between the actors in the value co-creation process, is an important strategy for improving customer loyalty and facilitating the formulation of perceivedinnovation (Süleyman, 2021). As businesses establish a deep relationship with customers through interaction, the customer is expected to be the co-creator of value and contribute to the formulation of innovation strategy by businesses. The innovation strategy comprised by co-creating value will increase the scope of customer loyalty and will ensure that both parties gain in short and long-term interactions in today’s competitive world.

The value created by interactive actions that take into account specificneeds and wishes for both businesses and customers transform the customer beyond purchasing into a relationalpartner and a co-creator (Pedeliento et al., 2020). Co-creation consists of the contributions of the actors inside and outside the business in manyaspects such as ideas and designenable businesses to focus on processes that maximize customer participation in customizing their services (Jayashankar, 2019). Value, which is defined subjectively by the customer and thesupplier, is also considered a concept that cannot be measured in monetary terms (Echeverri, 2011).The value produced through collective actionsand interactions isexperienced subjectively (Holbrook, 2006).

            Value co-creation because co-creation encourages creativity and generates reciprocal value for both the company and the customers themselves (Alafia et al., 2021). The banking sector continues to experience changes in consumer behavior with customer characteristics that demand to be adjusted to their wishes. Banks in the world invest in greater product variety but are less able to differentiate themselves from competitors as products and services are facing competition as never before (Prahalad & Ramaswamy, 2004). Markets are more fragmented than they used to be and consumers now have unprecedented access to information and networks. At the same time, technologies have created new modes of production and innovation that enable and encourage greater degrees of participation and collaboration. While consumers are demanding a greater level of personalisation in their consumption experience and placing businesses under increasing pressure to co-create value with them, companies are searching for new and better ways to create value and differentiate their market offerings in order to profitably attract and retain customers (Bendapudi & Leone, 2003). Many consumers appear to gain satisfaction from taking an active part in the creation of value. There are several factors that have also contributed to the progress of e-banking in recent times asides the internet and these factors include the increasing number of experienced users, individual’s exposure, ease of navigating through websites, convenience, time savings amongst others (Ifeanyichukwu, 2016).

            However, the core role of customers in value co-creation has been changing, which is due to the transformation of bank customers from value receivers to value creators. In order to accomplish successful value co-creation, customers generate necessary participation behaviors (in-role) and nonessential citizenship behaviors (extra-role) that create extraordinary value for destinations (Chan et al., 2010). Existing research has focused on the multi-dimensional characteristics of customer value co-creation behavior and divided it into customer participation behavior and customer citizenship behavior. However, most studies consider it as a single dimension when discussing the subsequent causality of value co-creation behavior (Woratschek et al., 2020), or focusing only on the role of customers with various analyses and discussions of participation behavior, ignoring the role switching that took place(Süleyman, 2021).

            The banking service Industry is an important industry or sector in Cameroon. The industry promotes economic development and contributes greatly to the success of the economy system in Cameroon. The industry for instance employs workers and helps in reducing the level of employment in the country. When an industry like Ecobank, NFC, CCA, SGBC, Bank Atlantic and BICEC have in mind to satisfy its customers always, such industry can withstand turbulent business challenges and will gain competitive advantage over others (Vilare et al., 2001). According to Kotler and Keller (2009), when customers are satisfied, they develop brand loyalty, refer other customers to patronize the brand and services. With respect to the banking industry, the satisfied customer will encourage others to do banking with this bank which they derived satisfaction from consuming their services.

As this referring process continues, the customers will develop customer loyalty and emotive commitment. The vital area which this bank has not identified as the basic mechanism for satisfying customers lies in adopting value co-creation concept (Nirmali, Tajid & Azam, 2001; Ramaswamy & Ozcam, 2014). In fact, many scholars or authors have also not extensively study value co-creation concept as a determinant for customer satisfaction. When the study of value co-creation is approached as a major means of satisfying customers, this banks and other business organizations in the banking sector will see the need to invite customers in creation of values for goods and services.

            Still on value co-creation, personal interaction is developed as customers become friendly with the organization. They also develop trust and respect for each other; they share their views and experiences. What comes out due to personal interaction between both parties will pave way for the success of value co-creation since the firms (the banks) will engage such a customer in value co-creation initiative (Lee et al., 2012). Another important dimension is engagement platform which serves as a market or channel where customers and a firm meet to decide on how the nature and quality of products and services should be produced to meet customers’ needs (Srinivasan, & Hanssens, 2009).

It is quite obvious that many authors and researchers have conducted studies on value co-creation over the years (Spreng, Harrell & Mackoy, 1995; Payne, Storbacka & Frow, 2008; Ramaswamy & Goüllart; 2010) but most of the researchers focused on manufacturing firms with no regards to the banking sector which is a critical sector that needs value co-creation on services provided. Additionally, those researchers and their studies were carried out in foreign environment of which their culture may be different from banks in the domestic environment like Cameroon.

1.2 Statementof the Problem

            Dicipio (2017), asserts that organizations that deliver poor customer service and render poor value co-creation, damage their reputation, kill the conversion of their leads, see their customer lifetime value drop and also increase the risk of them losing their best employees.

This can be further justified by a Forego report which found that poor customer service is costing financial institutions 10 million dollars in revenue per year (Forego, 2019). These figures are red flags that necessitate the need for sustainable customer loyalty programs in banks. According to (Canel, Rosen, & Adnerson, 2000), society is now in the service economy.

            Business organizations who understand the concept of effective customer service and value co-creation will excel in today’s business environment. Getting people at the door-steps of businesses is a key to success but an even bigger challenge is to keep customers coming back (Joseph, 2019). He goes further to state that good customer service generates repeat business and improves organizational reputation. According to (Osbornebooks, 2018), 68% of businesses lose customers because they are unhappy with the service that they were given and therefore decide to go elsewhere.

According to (Fomunyuy, 2017) Cameroon has had a lot of disgruntled customers in the domain of commercial bank services. These are as a result of the studies he carried out showing that customers want to be heard, pampered and nurtured.

That is, the customer has needs, expects the needs to be well communicated and receives positive feedback in the shortest possible amount of time. Unfortunately, all of these expectations have been neglected leaving customers wanting and abandoned, leading to high levels of dissatisfaction.

            The creation of many commercial banks in Cameroon, has abandoned customers who face difficulties in understanding the roles of the banking systems such as; absence of an effective Customer Service Department, an absence of expected customer feedback, poor expression of issues to customers especially in the value of using bank products and services, communicating and updating problems encountered in any affairs of the banks and congestion in banks.

            It is for this reason that the researcher is passionately seeking to find out if the commercial banks such as Ecobank, NFC, CCA, SGBC, Bank Atlantic and BICEC collect these data on customer’s real needs and challenges, integrates them and boost the loyalty of their bank customers in Cameroon.

1.3 Research Questions

1.3.1 Main Research Question

The main research question is what is the effect of value Co-creation on  customer loyalty of banks in Buea.

1.3.2 Specific Research Questions

1. Whatis the effect of personal interaction on customer loyalty of banks in Buea?

2. To what extent does platform engagement affect customer loyalty of banks in Buea?

3. What is the effect of customer trust on the customer loyalty of banks in Buea?

 1.4 Research Objectives

1.4. 1 Main Objectives

The objective of this study is to assess the effect of value Co-creation on customer loyalty of banks in Buea.

1.4.2 Specific Objectives

1. To assess the effect of personal interaction on customer loyalty of banks in Buea.
2. To analyse the effect of platform engagement on customer loyalty of banks in Buea.
3. To identify the effect customer trust on customer loyalty of banks in Buea.

1.5 Research Hypotheses

The following research hypotheses were formed to guide the study:

H_o: Personal interaction has no significant effect on customer loyalty of  banks in Cameroon.

H₁: Personal interaction has a significant effect on customer loyalty of banks in Cameroon.

H_o: Engagement platform  has no significant effect on customer loyalty of bank in Cameroon.

H₁: Engagement platforms have a significant effect on customer loyalty of banks in Cameroon.

H_o:  customers Trust no significant effect on customer loyalty of banks in Cameroon.

H₁:  customer Trust has a significant effect on customer loyalty of banksin Cameroon.