SIGNIFICANCE OF QUALITY CUSTOMER SERVICE ON CUSTOMER
SATISFACTION IN THE MICROFINANCE SECTOR: A CASE STUDY OF NAWIRI SACCO SOCIETY
BY:
Mohamed Dayax
REG NO. K16/1179/2011
A RESEARCH PROPOSAL SUBMITTED IN THE PARTIAL
FULFILMENT OF THE REQUIREMENT OF THE DEGREE OF BACHELOR OF ECONOMICS AND
FINANCE, KENYATTA UNIVERSITY
NOVEMBER 2013
DECLARATION
This proposal is
my original work and has not been submitted or presented in part or as a whole
to any other university or institute of higher learning for exam or academic
purposes
Student: Mohamed Dayax Reg no: K16/1179/2011
Signature………………………...…
Date: …………………………….
This proposal
has been submitted for examination with my approval as university supervisor
Signature……………………………………date…………………………………….
Supervisor Mr.:
Forah Obebo
Lecturer,
Department of
Applied economics
DEDICATION
This research
proposal is dedicated to my mum for dedicating her moral and financial support during my proposal writing period and throughout my
course.
ACKOWLEDGEMENT
First and
foremost I would like to acknowledge God for giving me strength and good health
throughout my course period.
I would also
like to pass my sincere gratitude to my supervisor, Mr. F. Obebo for his
dedication and timeless effort which has enabled me to complete this proposal. A
lot of appreciation to my parents and family members for the moral and
financial support they gave me throughout my proposal period.
ABSTRACT
Microfinance is
of global concern as it has played a major role in poverty alleviation and
economic integration in the poor and developing economies. In fact its impact
cannot be underestimated in our country Kenya which has experienced many
revolutions in the financial sector (AMFI).
Due to the small
nature of microfinance institutions, there is a great threat due to high
competition from the larger macro financial institutions like the commercial
banks which are competing very closely for customers with the microcredit
institutions. For this reason it is very important that the management of these
micro financial institutions evaluate different areas that need to be
strengthened in order to remain relevant amidst the competitors. In this
research the researcher tries to evaluate the significance of quality customer
service on customer satisfaction in the microfinance sector.
The research was
conducted on the customers of Nawiri Sacco Society, Embu branch. Thirty
questionnaires were used and the sample size was selected using systematic
sampling technique. The first 300 customers were considered. A random start was
established and the sampling interval was determined mathematically.
Questionnaires were administered on the selected sample of 30 customers. The
questionnaires were pretested before administration.
ACRONYMS AND ABBREVIATIONS
AMFI Association
of Microfinance Institutions
SACCOs Savings and
Credit Cooperative Societies
MFIs Microfinance
Institutions
USD US
Dollar
KWFT Kenya Women
Finance Trust
IMC Integrated
marketing communication
Ksh Kenyan
shilling
GE General
Electricals
Operational definitions
Microfinance: the provision of financial services such as
loans, savings, insurance, and training to people living in poverty. It is one
of the great success stories in the developing world in the last 30 years and
is widely recognized as a just and sustainable solution in alleviating global
poverty.
Integrated marketing strategy:
is an approach to achieving the objectives of a marketing campaign through a
well-coordinated use of different promotional methods that are intended to
reinforce each other.
TABLE OF CONTENT
Declaration..........................................................................................................
Dedication............................................................................................................
Acknowledgments................................................................................................
Table of content....................................................................................................
List of acronyms...................................................................................................
Abstract..................................................................................................................
CHAPTER ONE...................................................................................................1
1.0 INTRODUCTION………………………………………………….….….......1
1.1 Background
of the study……………………………………………..…………1
1.2 Statement
of the problem…………..……………………………………………3
1.3 Research
questions ……...………………………………………………………3
1.4 Objectives
of the study..…………………………………………………………3
1.4.1
General objectives……………………………………………………………3
1.4.2
Specific objectives……………………………………………………………4
1.5 Rationale
of the study………………………….…………………………………4
1.5.1
Industry………………………………………………….……………………4
1.5.2
Customers……………………………………………….……………………4
1.5.3
Future researchers………………………………………………..……………4
1.6 Scope
of the study…………………………………………………………...…….5
1.7 Limitation
of the study…………………………………………………………….5
CHAPTER TWO.........................................................................................................6
2.0
LITERATURE
REVIEW………………………………………………...............6
2.1 Introduction…………………………………………………………........................6
2.2 Conceptual framework…………………………………......................……………6
2.3 Review of past studies…………………………………………………...................7
2.3.1 The
extended marketing mix……………………………...................……………7
2.3.2 The
extended marketing services …………………………………………............8
2.3.3 Characteristics
of services …………………………………………………...........8
2.3.4 Measuring
customer care service…………………………………………….........9
2.3.5 Communication……………………………………………………………...........…10
2.3.5.1 Elements
of effective communication………………………………………..........11
2.3.5.2 Factors
that influence communication………………………………………….....11
2.3.5.3 Steps of
effective communication…………………………………………………12
2.3.5.4 Promotional
mix strategies…………………………………………………………13
2.3.5.5 Methods
used to set up a promotional budget……………………………………...14
2.3.6 Customer
delivered value……………………………………………………………..15
2.3.6.1 Customer
delivered value model…………………………………………………....15
2.3.6.2 Generic
value chain model………………………………………………………….16
2.3.7 Handling
customer complaints……………………………………………………......17
2.3.7.1 Procedures
that help to recover good will…………………………………………...17
2.3.7.2 Benefits
from handling customer complaints effectively…………………………...18
2.3.7.4
Types of
complainers………………………………………………………………...18
2.3.7.4 Ways of
handling customer complaints ……………………………………………..18
2.3 Summary
……………………………………………………………………………….19
CHAPTER
THREE
3.0
RESEARCH
DESIGN………………………………………………………………….21
3.1 Introduction………………………………………………………………………………21
3.2 Research
design………………………………………………………………………..…21
3.3 Target
population………………………………………………………………………...22
3.4 Sampling
frame……………………………………………………………………….22
3.5 Sample
and sampling technique………………………………………………….......22
3.6 Data
collection instruments ………………………………………………………......22
3.7 Data
collection procedure……………………………………………………………..23
3.8 Pilot
test………………………………………………………………………………..23
3.9
Data analysis…………………………………………………………………………….23
REFERENCES.....................................................................................................................24
APPENDIX...........................................................................................................................25
CHAPTER
ONE
1.0 INTRODUCTION
1.1 Background of the study.
The microfinance
sector is growing rapidly as a strategy for poverty alleviation in many
countries, leading to multiple financial services firms serving the needs of
micro entrepreneurs and poor households. Formal credit and savings institutions
for the poor have also been around for decades, providing customers who were
traditionally neglected by commercial banks a way to obtain financial services
through cooperatives and development finance institutions. One of the earlier
and longer-lived micro credit organizations providing small loans to rural poor
with no collateral were the Irish Loan Fund system which was initiated in the
early 1700s by Jonathan Swift.
Customer
satisfaction is defined as a measure of how products and services supplied by a
company meet or surpass customer expectation. Within organizations, customer
satisfaction ratings can have powerful effects. They focus employees on the
importance of fulfilling customers’ expectations which helps in building
customer loyalty. When a brand has loyal customers, it gains positive
word-of-mouth marketing, which is both free and highly effective.
Therefore, it is
essential for businesses to effectively manage customer satisfaction. To be
able do this, firms need reliable and representative measures of satisfaction.
A business ideally is continually seeking feedback to improve customer
satisfaction. Customer satisfaction provides a leading indicator of consumer purchase
intentions and loyalty. Customer satisfaction data are among the most
frequently collected indicators of market perceptions. "Within
organizations, the collection, analysis and dissemination of this data send a
message about the importance of tending to customers and ensuring that they
have a positive experience with the company’s goods and services. Organizations
also need to retain existing customers while targeting non-customers. According to Kotler and Keller (2006),
quality is the totality of features and characteristics of a product or service
that bear on its ability to satisfy stated and limited needs. Customer care
service on the other hand, is the organization’s way to meet its customers’
needs and wants.
The East African community reported that just
as the microfinance Act has granted particular Kenyan microfinance institutions
legal status as deposit taking institution, they are feeling squeezed from
commercial banks which have begun to attract a larger share of what has
traditionally been the microfinance market. This trend is occurring as
commercial banks are offering more attractive financial products to the best
performing microfinance clients, with better terms and more easily met
conditions. Particularly at stake are the savings deposits from hundreds of
thousands of small businessmen, artisans and women groups, worth an estimated
USD 126.2 million. According to Benjamin Nkugi, the chief executive of the
association of microfinance institution (AMFI),’’ banks are able to identify
the very best clients of the MFIs, whom they then proceed to pouch’’
According to the
Association of Microfinance Institutions (AMFI), in competition with commercial
banks, MFIs are in many respects at a distinct disadvantage. First, they often
rely on loans from the very same banks they are in competition with, and have
to mark-up the interest rates to cover their costs. Not only do MFIs offer
smaller loan sizes, which have a lower return, they generally have higher
overhead costs because they go to the clients, rather than have the clients
come to them as do commercial banks. Furthermore, clients may be dissuaded by
the relatively involving terms and conditions of MFI loan products, including
attending weekly meetings and adhering to strict repayment schedules. More so, MFIs do not have huge capital and
resources to develop their marketing team and programs like the banks do. Banks
also may offer easier terms and more flexible repayment schedules of up to 48
months.
1.2 Statement of the Problem
The encroachment of commercial banks into the
microfinance market began when Equity Bank began allowing clients to open up
accounts with zero balance. Since then, banks have also begun offering
no-collateral loans of USD 630 or more, to further attract low-income clients.
(The MiFi Report on February 11th, 2009).
It has become increasingly important to understand this threat of
competition that is currently being faced by the microfinance institutions.
Many factors may be critical in trying to counter this challenge including
improving on the customer service so as to retain the customers, offering
quality to competitive standards and improving on the communications channels.
This study therefore attempts to explore the relative importance of quality
customer service in the microfinance sector and how it impacts on customer
satisfaction.
1.3 Research questions
1. How does communication affect customer
satisfaction?
2. Does customer
delivered value affect customer satisfaction?
3. To what extent does handling customer
complains affect customer satisfaction?
1.4 Objectives of the study
1.4.1 General Objectives
This study attempts to investigate the
significance of quality customer care service in promoting customer
satisfaction in the microfinance sector.
1.4.2 Specific Objectives
1. To
determine the effects of communication on customer satisfaction. 2. To
establish whether customer delivered value affects customer satisfaction 3. To
investigate how the extent of handling customer complains affect customer
satisfaction.
1.5 Rationale of the study
1.5.1
Industry
The industry will be able to improve on its
service delivery since the study will assist to understand the significance of
quality customer care service in promoting its customers satisfaction.
1.5.2 Customers
According to Kotler and Keller (2006),
whenever there is poor customer care service the customer ends up being
frustrated and unsatisfied. When firms understand the positive impacts of
quality customer care service there is improved services and the customers are
more likely to enjoy the experience with the company.
1.5.3 Future researchers
This study may
not be conclusive. It may leave a lot of gaps in the process of trying to find
out solutions to the problems associated with customer satisfaction in the microfinance
sector and other sectors in the economy. Therefore this study will open up a
subject of investigation for other researchers. In deed many customers are
moving away from the sector and joining other commercial service providers like
banks which are competing closely with the microfinance institutions (KWFT
profile, 2010). This trend has not yet been countered and a lot has to be done
to investigate the causes of this and find the best solutions for the problem
at hand.
1.6 Scope of the study
The study was
carried out in Nawiri Sacco, Embu branch located in Embu town which is a major
trading centre in Eastern Kenya. The Sacco has six branches which are; Embu,
Runyenjes, Kairuri, Kianjokoma, Kathangariri and Kiritiri (Nawiri Sacco’s
profile). growing maize, millet, sorghum, beans, cassava, and yams among other
crops as subsistence food. They also rear domestic livestock in addition to
growing cash crops such as Macadamia nuts, coffee and tea. Due to the concentration of all the above
agricultural activities, there was need for a financial institution that
targeted the needs of these farmers and its then that Aembu Farmers Sacco
Society was introduced which has changed
its name from Aembu Farmers Sacco to
Embu Farmers Sacco and then to the current Nawiri Sacco Society.
1.7 Limitation of the study
Some of the members were uncooperative due to
the fact that some information was sensitive. They were reluctant in filling in
the questionnaires and some hesitated to give genuine responses of sensitive
issues like customer complains. The researcher tried to overcome this
limitation by assuring them that research is for educational purposes. The fact
that this study is about the microfinance industry also restricted
the researcher not to include other service industries.
CHAPTER TWO
2.0
LITERATURE REVIEW
2.1
Introduction
Literature
review is a procedure that involves identification, location and evaluation of
information in a variety of publication which support the research ideas to
enrich the current study (Smith, 2009). In this chapter the researcher shows
her in depth understanding of the cited topic. Thus, she has extensively
acknowledged the work on various authors to develop a conceptual insight of the
topic. By the end of the literature review
more insight on issues regarding significance of quality customer care service
in promoting customer satisfaction in the microfinance sector will be created
and the ideal solutions to the research questions identified.
2.2 Conceptual framework
Independent variable
Dependent variable
Fig 2.1
Conceptual framework model: Source (Author, 2012)
2.3 Review of Past Studies
The American society for Quality Control
defines quality as the totality of features and characteristics of a product or
service that bear on its ability to satisfy stated or implied needs. Kotler and Keller (2006) states that service
quality can only be defined by the customer. Customers form service
expectations from many sources such as past experience, word of mouth and
advertising. If the perceived service falls below the expectations, customers
are dissatisfied or rather disappointed.
2.3.1 The extended marketing mix
According to Owaga (2002), the standard 4ps
(product, price, place and promotion) of marketing can be extended when it
comes to service marketing. There is an addition of 3ps which are people,
process, and physical evidence. Since services are provided by people, the
selection and training of employees can make a huge difference in customer
satisfaction. Employees should exhibit competence and a caring attitude,
responsiveness, initiative, problem solving ability and goodwill. Front line
employees should be trained and empowered to handle customer complaints. Physical evidence and presentation is another
marketing extended mix. According to Owaga (2002), physical look matters a lot
in not only motivation of the employees and the customers, but also in
promoting customer satisfaction. Further, Felix emphasizes that service
companies have a choice to make among different processes to deliver their
service. The choice of the process and its execution will make the difference
between products.
2.3.2 Extended marketing services
In
service companies external marketing is required but also internal marketing
activities and interactive marketing are also important. External marketing
describes the normal work done by the company, internal marketing deals with
the work done by the company to train and motivate its staff on how to serve
customers whereas interactive marketing entails the employee’s skills in serving
the clients.
Internal External
Marketing Marketing
Process
Interactive
marketing
Source:
Owaga (2002)
Fig
2.2 Extended marketing services
2.3.3 Characteristics of services
Services have
four major characteristics that greatly affect design of marketing programs.
These are: intangibility, inseparability, variability, and perishability.
Intangibility
Services cannot
be seen, tested, felt, heard, or smelt when they are bought. To reduce
uncertainty, buyers will look for evidence of the service quality. They will
draw inferences about quality from the place, people equipment, communication
material, symbols, and the price that they see. Therefore, the service
provider’s task is to “to tangibilize the intangible.” Inseparability
Services are
typically produced and consumed simultaneously. This is not the case multiple
resellers, and consumed later. If a person renders the service, then the
provider is part of the as with physical goods, which are manufactured, put
into inventory, distributed through service.
Variability
Services depend
on who provides them, when and where they are provided, services are highly
variable. Service buyers are aware of this variability and often talk to others
before selecting a service provider.
Perishability.
Services cannot
be inventoried or stored to be used at a future date. This poses a great
challenge in times of high demand because a service provider cannot produce
over capacity. Service firms can take
three steps toward quality control. The first step is investing in good
recruitment and training procedures. Recruiting the right employees and
providing them with excellent training is crucial, regardless of whether
employees are highly skilled professionals or low- skilled workers. The second
step is standardizing the service –performance process in the organization. The
third step is monitoring customer satisfaction through plaint systems, customer
surveys, and comparison shopping.
2.3.4 Measuring customer care service
According to
Kotler (1999) measurement of customer care service is done to investigate if
the customer’s satisfaction is been met. Regular customer survey is done by
consulting customers to express their opinion about the levels of satisfaction
provided in the form of questionnaires which customers are requested to fill
after being offered specific services.
Customer panels provide continuous source of information on customers’
expectations. Customers who are frequent users are brought together by a
company on a regular basis to source their opinion on the quality of service
provided. The use of continuous panels gives an easy warning for emerging issues
of importance. Transaction analysis
involves tracking the satisfaction of individuals with particular transactions
that they have recently been involved in. This type of research enables
management to judge overall performance as well as overall satisfaction with
staff. Mystery customers are a method of
auditing the service provision particularly involved in such provision. A major
difficult in establishing service quality is overcoming the conformance of
staff with performance guidelines. Performances gap is a result of employees
being unwilling/unable to perform the service at the desired level. This method
involves the use of assessors who visit organizations and report back their
observations. Analysis of complains by
customers referring to instances of what they consider poor quality service may
be treated constructively to provide a rich source of data on which to base
policies for improving quality. Employee research on the other hand involves
undertaking research among the employees to enable their views about the way
services are provided and their perceptions.
2.3.5 Communication
Communication is
a process by which information, ideas and understanding is shared among people.
Customer care service should be fast without having delays. Involved service
providers must develop their communication skills so that they are proficient
in all methods of communication.
According to Bateson (1995) communication can have a profound effect
upon the service experience. Modern marketing calls for more than developing a
good product, pricing it attractively, and making it accessible. Companies must
also communicate with present and potential stakeholders and the general public
(Kotler and Keller, 2009). Communication
is very vital in every industry since nothing goes on without communication.
Currently, there is a new view of communications as an interactive dialogue
between the company and its customers that takes place during the pre-selling,
selling, consuming and post consuming stages. According to Kotler (1999),
technological advancement have helped people to communicate through media at
decreasing costs which have encouraged move from mass-communication to more
targeted communication and one-to one dialogue.
2.3.5.1 Elements of effective communication
In effective
communication, there are the nine elements; sender, receiver, message, media,
encoding, decoding, response and feedback. In communicating with the customer,
the company needs to establish what to say, to whom and how often, with what
effect and what media.
2.3.5.2 Factors that influence communication
There are
several general factors that influence communication. To start with, it affects
greatest where the message is in line with the receivers existing option,
beliefs and dispositions. Secondly, the greater the monopoly of the
communication sources over the recipient the greater the change. Communication
can also produce the most effective shifts on unfamiliar, lightly felt,
peripheral issues which do not lie at the centre of the recipients’ value
system. Finally, communication is likely to be effective where the source is
believed to have expertise, high status, and objectivity and so on. Moreover,
the social context, group or reference group will mediate the communication and
influence others.
2.3.5.3 Steps to effective communication
Kotler (2004)
details the steps of effective communication as follows; First, identify the
target audience whereby the microfinance sector in this case is represented by
Nawiri Sacco society, The target audience influences the communicator’s a
decisions on what to say ,how to say it, when to say it ,where to say it and to
whom. The marketing manager of Nawiri Sacco, in analyzing the target needs to
establish the audience’s current image of the company, its services and its
competitors. Then, determine the
communication objectives which are done after identifying the target audience
and its characteristics, the marketing communicator must decide audience
response. The responses could be high satisfaction and favorable word of
mouth. Designing the message is the next
step whereby the marketing manager of Nawiri Sacco should have a good and
effective message. The message should conform to the model of creating
attention, interest, desire and action. Formulating the message would require
solving the following four problems; what to say (message content), how to say
it logically (message structure), how to say it symbolically (message format),
who should say it (message source). Then
select the communication channels by choosing efficient channels of
communication to carry the message. There are two broad types of communication
channels which are; personal communication which involves two or more persons
communicating directly with each other. The communication might be face to
face, person to audience, over telephone calls or through mails. On the other
hand, non-personal communication channels carry message without personal
contact or interaction. The channels include media, atmosphere and events.
However, personal communication channels derive their effectiveness through individualizing
the presentation and feedback.
Awareness
Knowledge
Liking
Preference
Convincing
Purchase
Fig 2.3
Communication Hierarchy Model Source (Owaga,
2002)
Another step is
establishing the total promotion budget which is the most difficult marketing
decisions facing companies. This is because they are unable to decide on how
much to spend on promotion.
2.3.5.4 Promotional mix strategies
According to
Owaga, (2002), deciding the promotion mix which is also known as a promotion
tool is very essential to a company. Promotional mix strategies include;
advertising, sales promotion, public relations and publicity, personal selling,
and direct marketing. The Company in the service industry has to decide on the
promotion mix and how much of the total promotion budget will be spent on each
of the promotion tool. As far as the sector is concerned, personal selling is
the most convenient. When an
implementation of promotional plan is done, the marketing communicator must
measure its impact on the target audience. This involves asking the target
audience whether they recognize or recall the message and their previous and
current attitudes towards the service and the company after promotion. Currently a number of industries are adopting
the concept of integrated marketing communication (I.M.C). This recognizes the
added value of a comprehensive plan that evaluates the strategic roles of a
variety of communication disciplines. Advertising is one of the most common
tools companies use to direct persuasive communications to target buyers and
members of the public. The I.M.C. model
consists of eight major modes of communication and these include;
advertising-any paid form of non-personal presentation and promotion of ideas,
goods, or services by an identified sponsor, sales promotion-a variety of
short-term incentives to encourage trial or purchase of a product or service,
events and experiences-company sponsored activities and programs designed to
create daily or special brand-related interactions, public relations and
publicity-a variety of programs designed to promote or protect a company’s
image or its individual products, direct marketing-use of mail, telephone, fax,
e-mail, or internet to communicate directly with or solicit response or
dialogue from specific customers and prospects, interactive marketing-online
activities and programs designed to engage customers or prospects and directly
or indirectly raise awareness, improve image or elicit sales of a product or
service, word of mouth marketing-people to people oral, written or electronic
communication that relate to the merit or experiences of purchasing or using
products or services, personal selling-face to face interactions with one or
more prospective purchasers for the purpose of making presentations, answering
questions, and procuring orders.
2.3.5.5 Methods used to set up a promotional budget
Kotler, (1999)
states four methods used to set up a promotion budget. These are affordable
method, percentage of sales method, competitive parity method and
objective-and-task method. Affordable method completely ignores the role of
promotion as an investment and the immediate impact of promotion on sales
volume. However, in percentage of sales method, industries set specific
percentage of sale whereas in competitive –parity method, a promotion budget is
set by defining the specific objectives and determining tasks that must be
perceived to achieve these objectives. Then an estimation of costs of
performing these tasks is done which is the proposed promotion budget.
2.3.6 Customer Delivered Value
According to
Owaga, (2002), customer delivered value is the difference between total
customer value and total customer cost. The total customer value is the bundle
of benefits customers expect from a given service. On the other hand, total
customer cost is the bundle of cost customer expects to incur in evaluating,
obtaining and using the service. When
buying a service, for example, a customer who is considering opening a bank
account, he/she will evaluate the bank to open account with on the basis of
appearance, attendance by the staff and so on. A customer also places
differences in the accompanied services and also gauges the personnel of the
hotel on the basis of knowledge and responsiveness. Finally, he/she places high
value on an industry’s image. He also examines the total cost of transacting
with the company on the basis of monetary, cost, time, energy, and so on.
2.3.6.1 Customer Delivered Value Model
Michael porter
of Harvard University proposed the value chain as the tool of identifying ways
to create more customer value. Every firm is a collection of activities that
are performed to design, produce and market, deliver and support services. The
value chain identifies nine strategically relevant activities that create value
and cost in a specific business.
Source (Michael Porter, 1985)
2.3.6.2
Generic value chain model
The primary
activities represent the sequence of bringing materials into business (inbound
logistics) converting them into final services/products (operations), shipping
out final products (out bound logistics), marketing and sales, and servicing
them (service). Support services (procurement), technological development, and
human resource management and so on, are handled in the industry’s specialized
departments. The firms’ task is to examine its cost and performance to each
value creating activities so as to look for ways to improve it.
Fig 2.4 Generic
Value Chain
Source: (Michael Porter, 1985)
According to Keller (2006) companies are
developing superior capabilities in managing their core processes to be able to
fit in the ever changing business environment. First, is the market sensing process which
is all activities involved in gathering market intelligence, disseminating it
within the organization, and acting on the information? Second, is the new
high-quality offerings which should be quick and within budget. Customer
acquisition process comes next and these are activities involved in defining
target markets and prospecting for new customers. Fourth is the customer
relationship management processes which include all activities involved in
building deeper understanding, relationships and offerings to the individual
customers. Finally, fulfillment management which involves receiving and
approving orders, shopping the goods on time, and collecting
2.3.7 Handling Customer Complaints
Industries that
are truly committed to delivering customer satisfaction work hard at providing
their customers opportunities to complain. A company must be in a position to
accept that a problem exists when a customer complains so as to resolve
it. According to Porter (1985) the best
thing that a company can do is to make it easy for the customer to complain.
Suggestion forms, toll-free numbers and e-mail addresses can give the customer
the opportunity to render their complaints. Customer complaints must be
experienced in all organizations because, however how perfectly designed and
implemented a marketing program may be, mistakes will happen because they are
implemented by human beings who are subject to errors. The negative experience
should be dealt with efficiently and effectively so as to clear wrong
perceptions by customers and also promote customer retention. It is also
important to realize that industries that are customer focused, do not just
respond to customers’ complaints but want to do much more so that the customer
feels an immediate sense that the industry truly cares.
2.3.7.1 Procedure of recovering good will
According to
Kotler (1999) the following procedures help to recover good will in a company.
The industry should Set up a 7-day, 24 hour call free hotline (by phone or
email) to receive or act on customer complaints. After, contact the complaining
customer as quickly as possible, the slower the response the more dissatisfaction
may grow to negative word of mouth. It should accept responsibility for
customers’ disappointment, do not blame the customer. Then use the customer
service people who are emphatic. Finally, resolve the complaints swiftly and
the customers will gain satisfaction. Many complaining customers are not
looking for compensation so much, just show a sign that the company cares.
2.3.7.2 Benefits from handling customer complaints
efficiently
There are many
benefits accrued by the organization from handling customer complains
efficiently. They include; improved service delivery, customer satisfaction,
better understanding of customers’ needs, improved business reputation and
reduce the time spent retaining and attracting
new customers.
2.3.7.3 Types of complainers
Boda (1992)
defines various types of complainers. They include the following; meek
complainers who generally do not complain and therefore one must work hard at
getting comments and complains and act appropriately to solve the complaints.
Aggressive complainers complain oftenly and at length. They should be listened
to and agreed to that a problem exists and given an indication of what will be
done. Rip off complainers’ goal is not
usually to get complains settled but rather to win and get something that they
are not entitled to get. The high roller complainers expect the absolute best
and are usually willing to pay for it and are likely to complain in a
reasonable manner. Chronic complainers are never satisfied and there is always something
wrong and so extra-ordinary patience is required when dealing with them.
2.3.7.4 Ways of handling customer complaints
Oakland (2003)
outlines different ways on how customer complaints can be handled; first, it’s
good to be customer centric by listening carefully to the customers complaints.
Second, one must understand the situation from the customer’s point of view
attentively. Third one should display sensitivity to the customer and show them
respect. Again, apologize to the customers since this can make an angry
customer to be pleased acknowledge the customer’s feelings because customer
lifetime value is more important than the issues under dispute. The
organization should also be able to calm the customer and accommodate them
rather than get them furious. After listening to the customer’s complaints and
being able to calm and accommodate them, an organization should explain what
action they will take to collect the problem and then follow it up to prevent
similar occurrence. Keeping in touch and listening to customers is important
for an organization since customers need change over time. Finally, one should
thank the customer for bringing the problem at your attention. 2.3.8.5 Significance of handling customer
complaints
There is great
significance of handling customer complains. By complaining, customers often
compare the service they have received with those they have been offered by
other providers. This gives a company a great deal of information about ways in
which other companies are gaining a competitive edge. Customers also show what
services provided need to be improved when they complain. Therefore, the
organization becomes more competitive than the other organizations. In listening carefully and handling complains
the staff is ready to improve their services in order to create peaceful
working conditions and see their customers in a positive way. The organizations
are enabled to retain their customers by the way in which they deal with those
customers when something goes wrong. Also the organizations are able to take
into consideration the needs of customers and ensure that it does not fail or
incur losses.
2.4 Summary
The study’s
primary aims are to enhance understanding of customer satisfaction and factors
affecting it. Currently a number of industries are adopting the concept of
integrated marketing communication (I.M.C). This concept recognizes the added
value of a comprehensive plan that evaluates the strategic roles of a variety
of communication disciplines. The task
of the microfinance institutions is to examine the cost and performance of each
value creating activity and to look for ways to improve them so that customers
can be satisfied. Customers show what
services provided need to be improved when they complain. Therefore, the
organization becomes more competitive than the other organizations if they are
able to deal with the customers complaints in a more effective and efficient
way. The organizations are able to retain their customers by way in which they
deal with those customers when something goes wrong.
CHAPTER THREE
3.0 RESEARCH DESIGN AND METHODOLOGY
3.1
Introduction
According to the
oxford dictionary, methodology is a set of methods and principles used to
perform a particular activity. It is a system of explicit rules and procedures
in which research is based and against which claims of knowledge are
evaluated. This chapter outlines the
following: research design, target population, sampling frame, methodology,
data collection instruments, pilot test and data analysis.
3.2 Research design
Descriptive
research design will be used by the researcher and specifically, structured
questionnaires comprising of both open headed and close headed questions will
be used on customers. According to
Mugenda (1999) descriptive design helps the researcher to gain understanding of
the content of research, develop skills of evaluating data and synthesize ideal
answer questions concerning the current subject of study. A survey will be conducted
on Nawiri Sacco’s customers from the Embu Branch. Cohen and Marion (1994), describes
descriptive research as a method that enables the researcher to gather data
from a relatively large population in a particular period of time. Thus, this
method was considered to be the best for the purpose of countering the
shortcomings of the researcher including limited time and yet it proves to be
more accurate when relevant samples are used. Systematic probability sampling
technique was used to derive the sample. This was calculated by finding the
sampling interval; dividing the total population by the required sample size
and establishing the random start. In this study the required sample was 30 and
the target population was 300.
3.3 Target population
According to
Kothari (2004) a population is defined as a complete set of individuals with
some common observable characteristics of particular nature distinct from other
populations. The target population was the customers, both male and female of
Nawiri Sacco society, Embu branch. These customers helped the researcher to
have a small representative sample of the larger microfinance sector.
3.4 Sampling frame
The research was
confined to the customers of Nawiri Sacco Society.
3.5 Sample and sampling technique
A sample is a
small part of a population (Orotho, 2004). The researcher used systematic
random sampling method. This method was more appropriate to the population
under study since it was simple and realistic and as the customers could not be
divided into strata very easily. The researcher used 30 copies of
questionnaires.
3.6 Data collection instruments
Both primary and
secondary data was used in this study. Primary data was collected by use of
structured questionnaires and interviews. This method was considered more
accurate since the investigator had no influence on the respondents.
Unstructured interview were also used and this involved the respondent’s
personally collecting information from the respondents through their response
to the questions. The success of an interview largely depends on the
interviewer (Kahn and cannel, 1994). The best thing about an interview though
is that the interviewer and the respondents have a chance to seek clarification
and the worst side of it is that many people are not willing to be interviewed
especially on sensitive issues.
3.7 Data collection procedure
The researcher
used descriptive statistics with the help of the bar graphs and pie charts
which were appropriate to analyze the data collected for easy interpretation.
Prior to summarizing of data, questionnaires were checked to ensure that they
had been dully completed to ensure accuracy. The uncompleted questionnaires
were discarded. This process involved data sorting which was done to eliminate errors
that might have been committed during the filling of questionnaires.
3.8 Pilot test
Pretesting of
the questionnaire was done in Nawiri Sacco, Runyenjes branch so as to test its
reliability when administered in Embu branch.
3.9 Data analysis
The study used
both qualitative and quantitative data for analysis. Qualitative data
constitutes of numeric data whereas qualitative data involve the data which is
not in numeric form. The data was analysed using simple statistical methods,
i.e. by use of tables, graphs and percentages.
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APPENDIX
WORK PLAN
DATE
ACTIVITIES
September
– November 2013 Proposal
development and writing
13th
November 2013
Proposal presentation
Jan
-April 2014 Data collection
May
2014 Data analysis
May-
August 2014 Report writing
August
2014 Research report presentation
BUDGET
ITEMS
COST (KSH)
Typing
600
Printing
and photocopy 800
A
flash disk 1000
Internet
700
Questionnaires
materials
300
Transport
cost and other expenses 4200
Totals
7600
