A STUDY ON CUSTOMER

BEHAVIOR TOWARDS
COMMERCIAL BANKS IN
ETHIOPIA
Sinidu Tefera ; Yeabtsega Kiflu ; Eneye Tiruneh ; Tigist Nigatu ; Tigist
Yeshambel ; Bizuget Ababa; Yewoinshet Abebe ; Samson Haileyesus
(MaM Section B2)
Statement of the problem

 Banks play a key role in improving economic efficiency by channeling funds from
resource surplus unit to those with better productive investment opportunities- facilitate
exchanges of goods and services.
 With the intense competition and decreasing variability of banking services, banks are
looking towards developing customer-oriented strategies in order to compete
successfully in the competitive banking environment. The longer a bank can retains a
customer, the greater revenue and cost savings from that customer
 However, customers are also more prone to changing their banking behavior when they
can purchase nearly identical financial products provided by the banks. In order to stay
competitive, banks need to understand the factors that influence and determine
consumer’s bank switching behavior. Therefore, customer satisfaction, loyalty and
retention are all very important for a bank to be successful.
Our purpose

The main purpose of this study was to analyze customer behavior of commercial banks in
Ethiopia. this study seeks to identify the gaps by providing about the internal and
external factors that affects customer behavior.

 The general objective of the study is to examine if personal, social and

psychological characteristics have affect on consumer buying behavior towards
commercial banks in Ethiopia.
 Specific Objectives to identify the factors that influence customers’ behavior in the
Commercial banking industry and To determine the factors that influence bank
selection decision process by individual consumers.
Consumer behavior defined:

 Consumer behavior is the study of how individuals, groups, and organizations select,
buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs
and wants (Kotler, 2012).
 According to Peter B. Bennett, ed. consumer behavior refer to processes of decision
made by people who purchase goods and service for personal consumption or for
business.
Influence of consumer Behavior

Influence of
consumer
Behavior

Personal
Factors Psychological
• Age and • Factors Social Factors Cultural Factors
gender • Motivation • Social status Religion
• Occupation • Perception • Reference group Social Class-Caste
• learning • Attitude • Family and Sub Caste
• Income level • Belief  
• Life style • Values
• Personality  
Factors that impact consumer
behavior

 Hayden Noel (2009) states, that there are several factors that can impact on consumer
behavior. These factors can be grouped into three conceptual domains: external
influences; internal processes (including consumer and decision making); and post-
decision processes.

 External influences focus on the various factors that impact upon consumers as they
identify which needs to satisfy and which products and services to use to satisfy those
needs. These forces fall into two major categories: the efforts of the firm; and the
various factors that make up the consumer’s culture. The marketing efforts of the firm
according to Noel, include the product being offered for sale, its price, the places it’s
offered for sale, and how they choose to promote it. These forces are fairly uniform,
regardless of the individual needs and background of the consumer  
 Internal processes are the psychological factors inherent in each individual which include
Psychological motivation (which include Perception, Attitudes, and Knowledge) and
Decision making (which include problem recognition, information search, judgment,
decision making).

 Post-decision processes can be defined as the process of evaluating the outcome – is the
consumer satisfied with the product or service? Based on the response to this question
the consumer could react in different ways.
For instance, satisfied customers from purchases can positively recommend a particular
product to friends and family. If they are dissatisfied, they could react negatively and
end their ties with the company.
 
 Service quality and Customer
Satisfaction
Service quality
 Kotler defines Service quality as the totality of features and characteristics of service
[of a firm] that bear on its ability to satisfy stated or implied needs.
Service quality in our case could mean the range and quality of services
provided by bank such as speed of transactions, the degree of friendliness
of staff will also have affect on the result of customer choosing a bank.

Customer satisfaction
 Kotler defines customer satisfaction as the extent to which a product’s perceived performance matches a buyer’s
expectations.
 Yaden states that ‘Ideally, consumer products and services are marketed with consumer satisfaction as an objective.
Directing marketing activity towards consumer satisfaction is one way of encouraging brand loyalty; whether targeted at
consumer needs or wants. Long-term loyalty is a basic aim of all marketing effort’.
 
 Customer satisfaction is perceived as being a key drive of long-term relationships between supplies and buyers.
 
Customer Loyalty
 Customer loyalty is one of the most important indicators used to evaluate the quality of services offered by an
organization. The vital issue for the continued success of an organization is its potential to retain its current
customers and make them loyal to its brands. Therefore, gaining customer loyalty becomes a key objective for banking
organizations which decide to adopt a relationship marketing perspective.

 For brand loyalty to exist, Solomon et al state that a pattern of repeat purchase must be accompanied by an underlying
positive attitude towards the brand. Brand loyalty may be initiated by customer preference based on objective reasons,
but after the brand has existed for a long time and is heavily advertised it can also create an emotional attachment,
either by being incorporated into the consumer’s self-image or because it is associated with prior experiences.

 Yaden, prescribes for the need that firms put in place Loyalty schemes to continue the mutually beneficial relationship
between the firm and the customer.
 
How we enquired and responses we
got

 We used questionnaire where both descriptive and inferential statistics have been
employed.
Response Rate
 From the data collected, out of the 40 questionnaires administered, 32 were filled and
returned. This represented a 80% response rate, which is considered satisfactory to
make conclusions for the study.
WHAT WE ASKED?

• Age, sector they are working in, gender

• Frequency of bank visits
• Type of services they used (savings, ATM, mobile banking, internet banking)food
consumed
• What are reasons that attract you to be a customer of the bank?
• Which of these services of the banking industry do they know about?
• Which of banking services are they using?
• Which services of your bank would you rate the best?
• What is their perception regarding the service of their banks?
Our findings

 The study sought to determine the gender disparity between the male and female
respondents among the selected bank customers.
 From the findings, the majority (53.12%) were male respondents (17 out of the 32
responders) with (46.87%) being female (15 out of the 32 responders) respondents.
This implies there were more male than female among the respondent taken onto
account.
   > 1 year 1 to 5 years 6 to 9 >=10 years  
years

Years of   18 10 4  
experience

• The majority of the responders 18 (56 %) have between 1-5 years of experience followed
by 10 (32% ) of them have between 6-9 years of experience.

• The figure above shows that 50%of the respondents work within the Non for profit sector
and 31.2 % work n the business sector while 18.7 % worked as a civil servant

• The respondents all have bank accounts and can be considered as valuable inputs to the
study.
Channels used frequently
CHANNEL FREQUENCY OF USE
 
  Most Partially Least Never
Frequently Frequently Frequently frequently used
used Used used used
 
 

ATM 30 ppl (93 %)        

 
BRANCH 32 ppl (100 %)        
 
MOBILE BANKING 12 ppl (37.5 %)        
 
INTERNET BANKING 6 ppl (18.75%)        
 
 
AGENT BANKING 0        
 
OTHER 0        
 

Most of the respondents noted that they use more than one banking service with all
claiming to have used branch services followed by ATMS (93 percent) followed by mobile
banking 37.5 pc. Internet banking with 18.75 percent
Services used frequently

Frequency responders

once a month 2

once a week 10

twice a week 12

three times a week 8

daily 0

The responders noted that a majority of them use banking between 1 to three times a
week.
Familiarity with Channel

  Significant Little bit Not at all

a. Savings account 32   0
b. Fixed account 18 10 4
c. Current account 12 10 10
Rating was
d. Interest free banking 20 10 2
based on:
• Significant
• Little bit e. debit card 32 0 0

• Not at all f. Joint account 15 15 2

g. Local Transfers 32 0 0
h. Loans 32 0 0
g. Internet banking 32 0 0
h. Mobile baking 32 0 0

Those that were noted by the responders to have the most knowledge were saving, debit
cards, local transfers, internet banking, mobile banking. Those services that were not as not
having the least familiarity included current accounts and fixed account.
 Consideration for channel used
  1 2 3 4 5
* The results
convenient         32
are ranked
affordable          
between 1-5
a.   where 1
my friends also       10 22
means ‘I
uses strongly
reliable         32
disagree’ and
easy to use         32
5 means ‘I
available         32
strongly
good for urgent       7 25
agree’
transactions

The finding indicate that convenience, reliability, easy of use and availability rank high
among the expections. Interestingly enough recommendations by friends factored
 Satisfaction level towards banks

  Very Somewhat Neither Very Somewha   Excellent good average poor

unlikely unlikely likely nor likel t likely How will you   10 22  
unlikely y rate the your
Bank in
maintaining
good customer
  relationship?
How     7 2 23
likely   Very Somewha Neither Very Somewha  
are you dissatisfie t satisfied satisfied t
to d dissatisfi nor satisfied
recomm ed dissatisfie
end d
your
bank What is   10 15 7    
services your
to a overall
friend satisfac
or tion
colleag rating
ue with our
bank?
 
Conclusions

 The purpose of the study was to establish the influence of customer behavior in adopting banking
services. There were more male than female among the respondents, however, both genders were well
represented to effectively carry out the study. All respondents have a bank account and were therefore
able to provide their impressions of the services they received fro the banks.
 It is noted from the study that the respondents rely heavily on branch services and ATMs rather than
mobile or internet banking despite frequenting banking services one to three times a week. This can point
to the low level of perceived security when it comes to mobile banking or internet banking of the fear of
constant service interruption brought by failed internet networks.
 Although respondents are familiarity with the channels like Bank Agents this familiarity doesn’t translate
to usage. Other consumer behavior concerns of security, costs avoidance override
 familiarity. Alternative banking channels are positioned as convenient outlets for banking services when
the bank is selling them to the consumers. However this research indicates that respondent concerns for
cost and security of their transaction overrides their desire for convenience and therefore the low usage
of alternative channels proposed by the bank as convenient.
Conclusions continued…

 
 The respondents pointed at unreliability as the reason to why they least frequently used the
alternative channels. Reliability of services is the most frequent determining factor of choice
of a particular channel. Respondents select channels that are good for emergency payment.
The consumer behavior of waiting to make transaction at the last minute determines the
channel they will select for late payments. The more reliable a channel is for late payments
the higher the chances of usage.

 The researchers concludes that consumer behavior factors have a high contribution to
selection and adoption of banking channels. Those channels that are consistent with the
consumer behavior needs for convenience, reliability, easy of use and availability and are
adopted more frequently than those inconsistent with the respondent’s behavior.
Questions, comments …
Thank you