The Effect Of Relationship Marketing On Organizational Performance (A Study Of AIICO Insurance Plc)

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The Effect Of Relationship Marketing On Organizational Performance (A Study Of AIICO Insurance Plc)


Abstract


This study examined the effect of relationship marketing on organizational performance using the AIICO Insurance Plc as a study. The survival, success and continuity of service organizations depend on effective relationship marketing. The effectiveness of relationship marketing in service organizations determine to a great extent the performance of the organization as well as the satisfaction customers can derived from services rendered by the organization. For the purpose of this study, the survey research design was used to study a representative size of the population total of 371 sample size was studied from a target population of 1,452. Similarly a sample of 6 was purposely selected from a total number of 30 AIICO insurance staff of Lagos city branch. Questions designed in the Likert Scale Format was used as major instrument for the collection of data while mean score was used for the analysis of the research data. Findings revealed that AIICO insurance Lagos city branch regularly carried out various relationship efforts in line with the socio- cultural norms of the people of Lagos and this has translated to positive influence on patronage by its customers. The study revealed also that the business men accepted the relationship marketing of the AIICO insurance. Deriving from this therefore, the study recommends that AIICO insurance plc should increase the community social responsibility efforts for a steady long term relationship marketing and patronage in line with the focus of relationship marketing.


Chapter One


Introduction

1.1 Background to the Study

The survival, success and continuity of service organizations depend on effective relationship marketing. The effectiveness of relationship marketing in service organizations determine to a great extent the performance of the organization as well as the satisfaction customers can derived from services rendered by the organization (Kotler, 2006).

Relationship marketing (RM) is meriting an increasing amount of attention in marketing research, and has already become a key enterprise marketing activity in recent decades. The term ‘relationship marketing’ was coined more than twenty years ago and since then it has been receiving considerable attention from both researchers and practitioners (Yang and Wu, 2007; Sharker, 2009). Mulki and Stock (2003) discuss several environmental factors that have facilitate the rise for this concept such as the trends for firms to be service and information-oriented, be niche-oriented, global in nature and of course, to adopt information technologies.

The concept of “relationship marketing” is at the very heart of the study of marketing management and work organization. The issue of relationship marketing is a current topical issue in marketing management that is presently attracting the concern and attention of marketing organization and company’s services (Achumba, 2002).

For any organization to survive the on slough of competition, it must define clearly its relationship marketing which is a strategy adopted to create a cordial relationship between the marketing company and its customers. This will ensure the achievement of the company objectives and set goals that will invariable yield positive results (Weitz and Sandy, 1995).

In spite of its importance, not everyone appreciates its in-depth meaning, perhaps, the reason for this is because it is difficult to define and apply in organizations. Relationship marketing therefore, is concerned with the creating and maintaining mutually beneficial exchanges and relationship between the marketing organization and the target markets to achieve organizational objectives (Berry, 1995)). This can only be possible by providing quality services, ensuring the availability and provision of after sales services.

The role of Relationship Marketing in Competitive Marketing Strategy includes: guide moments of truth, improve profitability, build partnering, address ‘Customer Better’, buy in of customer attention, protect emotional well-being, understand consumer psyche, build trust with customer (Morgan and Shelby, 1994). Relationship marketing serves as a moderator for the sustenance of positional advantages and influences the impact of competitive and market conditions on the formulation of the marketing mix. In service industries, there is always some form of direct (social) contact between the customer and the service firm. This direct (social) contact or ‘service encounter’ is so important a part of service delivery that it is frequently called ‘the moment of truth’ (Johns, 1999).

One of the major objectives of competitive marketing strategy is to improve the long-term financial performance. Relationship marketing by working towards improving profitability based on exploiting its relationships serves this financial performance objective of marketing strategy.

In fact, relationship marketing pays off handsomely when products or services have high switching costs e.g. office automation system. Relationship Marketing is profitable when customers are willing to stay with suppliers for a long period of time. Transaction marketing on other hand pays when there are low switching costs. According to Egan (2001), relationship marketing fosters external partnerships that cater to the mega-marketing needs of a business. It fosters external partnerships through networks (individual relations); collaborations (organizational relations) including alliances. These sets of external relations bring together market elements synergistically. Importantly, for relationship marketing to be effective it must take customer behaviour into consideration.

Moreover in the present business world, marketing is no longer just about developing, selling and delivery of products and services (Gilbert and Choi, 2003) rather it concerns attracting, developing, maintaining, and enhancing customer relationship. By implication, organizations need to treat their customer base as individual assets in themselves bearing in mind that the costs of acquiring customers are generally higher than the costs of retaining them and this difference is particularly in evidence in the service sector (Ennew and Bink, 1996).

In order to serve customers better, the company must give consumer real satisfaction. Consumer should be able to derive utility, which is the satisfaction derived from the consumption of a given service (Berthon, Leyland, Michael and Gunnar, 2003). This research study would throw more light on the effect of relationship marketing on organizational performance in service organizations.


1.2 Statement of the Problem

The study unveiled the numerous problems an organization could face if relationship marketing is not effectively carried out and its impacts on customers’ loyalty. What is the implication of this effect on the organizational products/ services and profitability? The problems of lack of patronage, unfavorable attitude, no repeat purchase, absence of customer royalty, lack of quality service and low profitability level is’ as a result of not putting in place effective relationship marketing. For firm to implement this strategy, the challenges include complex array of technologies, shortages of skills and resources, couple with huge amount of time and effort, rapidly changing markets as well as more demanding customers’ present service organization. With these unprecedented set of problems, many marketing scholars and practitioners recognized that building relationships is essential to compete effectively especially in this turbulent and challenging business environment.

Thus, the management of service organization should put in place an effective relationship marketing to promote cordial relationship between the organization and its customers.

It is against this background that this study seeks to examine the effect of relationship marketing on organizational performance at AIICO Nig Plc.


1.3 Objectives of the Study

This study primarily aims at:

  1. To find out how regular AIICO insurance Lagos engage in relationship marketing?
  2. To evaluate various relationship marketing techniques adopted by AIICO insurance in Lagos town.
  3. To assess the relevance of such relationship marketing approaches within the context of socio- economic realities of Lagos people.
  4. To examine people’s perception of such relationship marketing approaches.
  5. To determine the overall influence of such relationship marketing approaches on organizational performance of AIICO insurance products and services.

1.4 Research Questions

The following research questions guided the research for the purpose of this study:-

  1. How regular does AIICO insurance Lagos engage in relationship marketing?
  2. What are the various relationship marketing techniques adopted by AIICO insurance Lagos?
  3. To what extent are relationships marketing techniques of AIICO insurance relevant within the context of the socio-economic realities of Lagos people?
  4. How do the public perceive AIICO insurance relationships marketing approaches?
  5. To what level has a relationship marketing effort of AIICO insurance in Lagos town influence organizational performance?

1.5 Significance of the Study

This study will be important to the following:

Academically, this study will examine relevant issues related to relationship marketing. This would bring to the fore the inter linkages between various academic disciplines like Mass Communication, Marketing and other related disciplines.

Theoretically related to the above is the fact that the study would explore relevant theories which provide insight and understanding of the subject matter just as it would provide theoretical basis for further research efforts.

Professionally, the study would also help organization professionals to assess their relationship marketing techniques and efforts in a bid to ascertain if it yields desired benefit. Such would enable them tune remedial or corrective actions for better efficiency and productivity.


1.6 Delimitation / Scope of Study

The scope of this study is limited to AIICO Insurance Plc located 36/38, Industrial Avenue Ilupeju, Lagos Nigeria. In this project, an attempt was made to consider topical issues relating to Relationship marketing and the effect on organizational performance, precisely AIICO Insurance Plc. in Nigeria. Hence opinion of members of this AIICO Insurance Plc in Illupeju, Lagos Nigeria was sampled to obtain the effectiveness or otherwise, Relationship marketing operating in the organization. The staff strength of this company is not less than 100 employees ranging from management to non-management staff. However, for the purpose of this study, only the management/ senior staff will be considered based on the know legibility in the area under study. The research findings and recommendations was limited to AIICO.


1.7 Definition of Terms

This section of the study has to do with the definition of concepts and terms in the study. The followings are the key variables used in the study:

Marketing:

Marketing is the totality of both social and societal efforts of business activities designed to satisfy both the present and potential customers.

Relationship Marketing:

Relationship marketing is a strategic orientation that focuses on keeping and improving on current customers, rather than acquiring new customers i.e. maintaining mutual relationship.

Organizational Performance:

Organisational performance is the level of success business organizations have achieved resulting from proper utilization of resources in the organization. Those parameters used in evaluating performance.

Planning:

Planning has to do with anticipating trend and determining the best strategies to achieve organizational goals.

Strategies:

Strategies are methods or plans which manager hopes to deploy in order to achieve its objectives.

Promotion:

Promotionare all activities aimed at informing, educating, persuading and creating awareness for the company’s offerings.


1.8 Organization of Study

The study is divided into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapter five which deals on the summary, conclusion and recommendation.


Chapter Five


Summary, Conclusion and Recommendation

5.1 Summary

The nature of business competitiveness in a capitalist economy like Nigeria and Lagos in particular, has obviously necessitated the application of certain techniques by organizations in a bid to sustain organizational performance, remain in business and outwit competitors. As studies showed, customer-firm relationship is a vital factor in this dynamics. Thus, relationship marketing has become a household factor in the literature and several researches aimed at proffering solution to the challenge of sustaining organizational performance by business organizations. As a result, this study undertook the examination of the influence of relationship marketing in organizational performance of organizations with focus on AIICO insurance, Lagos city branch. Respectively, a sample of 6 was purposely selected from a total number of 30 AIICO insurance staff of Lagos city branch. Questions were designed in the Likert scale format were used as major instrument for the collection of data while mean score was used for the analysis of research data.

In view of the analyzed data in the previous chapter, in summary, it is confirmed in the study that AIICO insurance regularly carry out relationship marketing activities which among others, included face-to- face interaction with the target market on issues relating to not just the organization but the insurance well being of the customers as it relates to the organizations’ activities. This constitutes interaction which integrates the benefit of advertisement, publicity, public relations, personal selling derives from the fact that it is better and cost effective to retain a customer than to get new ones. As such, relationship marketing efforts of AIICO insurance primarily aims at retaining the patronage of customers while using it as a basis to gain new customers for the organization. In view of this therefore the interaction holds sway in the popular comprehensive language in quasi formal or informal setting that do not insult the socio – cultural realities of the Lagos people. It therefore is no surprise that the message content of such relationship marketing is understood by both parties which make room for believability and trust and thus accounts for the perception of the organization as a friend that keeps its promises thereby influence the customers towards patronage.


5.2 Conclusion

This study concludes that the relationship marketing activities of AIICO insurance pays off, and that the need for relationship marketing has continued to be relevance since majority of organizations no longer depend solely on the media for information in view of the characteristic power vintage. These are taken care of by such factors as relationship marketing activities. Related to this is the seeming aggressive rural insurance that characterizes the insurance sector. Presently in Nigeria, the AIICO insurance relationship marketing efforts also qualify as a right step in the right direction to retain old customers while gaining new ones. This accounts for why the organization extends its relationship marketing to staff of AIICO insurance plc. The business developing confidence and trust in the organization.

In conclusion therefore AIICO insurances’ regular engagement in relationship marketing efforts which aligns with the socio- cultural realities of Lagos people has meaningfully helped at improving the corporate image of the organization which translates to increased patronage of the organization by its customers.


5.2 Recommendations

  1. The researcher recommends that AIICO insurance should increase their community social responsibility efforts in Lagos by providing such facilities as soft loan for small and medium scale enterprises at accessible rate since Lagos is the commercial nerve centre in Lagos state. This, coupled with its relationship marketing would endear Lagos especially business men to the organization. In line with its relationship marketing efforts, the organization should intermittently hold /organize lunch with various stakeholders like market women or Christian mothers with a view to further gaining their patronage.
  2. For the purpose of further studies however, efforts should be focused on the relationship marketing efforts of other organizations as basis for a comparative analysis of different organizations relationship marketing efforts and their impact on organizational performance.
  3. Moreso, further studies should focus on other areas in Lagos state (not Lagos) so as to measure the influence of differing cultures on the influence of relationship marketing efforts on customers.

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