Why is relationship marketing so important in rural banking?

Banking business involves relationship building. The relationship between a bank and a customer is usually referred to as a banker-customer relationship.

It is worth mentioning that the moment a person opens an account, he/she becomes a customer of the bank. The account opening becomes a starting point of a relationship. The relationship between the banker and customer depends on the nature of service being provided by the banker.

The relationship can take the following forms: debtor and creditor relationship, agent and principal relationship, pledger and pledgee relationship, licensor and licensee relationship, trustee and beneficiary relationship, advisor and client relationship among others.

The relationship between banks and their customers need to be strong and lasting. This is vitally important because banking institutions depend on customers for survival. Customer deposits serve as the main source of funding for banks.

Deposits from customers enable banks to give out loans as well as making investment in order to earn income and profit. Although, there is the need for RCBs to develop stronger bonds with customers, this is not the case with some of them. I have observed that, the relationship between some banks and their customers are casual and can be likened to transaction marketing.

I normally describe the relationship between some Ghanaian banks and their customers as robotism relationship (robotism banking). This is where customers are treated as simply inputs into a system that must be processed.

Another problem facing some RCBs is the fact that they focus on customer acquisition without putting in much effort with regard to customer retention.

However, the importance of retaining bank customers cannot be overemphasize because research has revealed that lack of long-term and stronger relationship between some banks and their customers has led to dormant accounts, low average account balance, closing of accounts, switching to other financial institutions which offer unrealistic interest on savings among others.

This article will examine how rural banks can adopt relationship marketing. Specifically, the article will examine the following: meaning of relationship marketing, benefits and strategies.

Meaning of Relationship Marketing

Relationship marketing is a process of creating; maintaining and enhancing strong value-laden relationship with customers (Philip Kotler). Relationship Marketing involves building a strong and lasting relationship with existing customers (Abratt and Russel 1999).

According to Theodore Levitt, relationship marketing is an approach which emphasizes the continued relationship that should exist between an organization and its customers. Relationship marketing can also be defined as establishing long-term mutually beneficial relationship with customers.

Looking at the definitions quoted above, there is one thing that runs through and it is long-term or lasting. This implies that the focus of Relationship Marketing is to build a stronger and lasting relationship with customers, that is customer retention. According to most marketing experts, relationship marketing is focused on customer retention rather than putting much emphasis on customer acquisition.

This means that organizations, such as rural banks should work hard to attract and retain customers. It will not be advisable for rural banks to invest much resources in terms of money and time to acquire new customers without putting in place any mechanism to retain them. According to research by some marketing experts, it cost three to five times lower to keep an existing customer than to get a new one.

Management of RCBs should therefore appreciate relationship marketing because it can improve cost to income ratio. As already mentioned, the opening of an account by a potential customer (prospect) is the beginning of a banker-customer relationship. For the relationship to be strong and lasting, management and staff of RCBs should develop and enhance relationships with customers.

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The situation could be compared to newly married couples. For newly married couples to have happy and lasting marriage there is the need to strengthen the marriage relationship as each day passes.

According to Christopher Payne who developed the relationship marketing ladder of customer loyalty, customers should be moved up to the ladder, that is turning new customers into regularly purchasing clients and then progressively move them to being strong supporters of the organization and its products and finally to being active and vocal advocates.

This implies that RCBs should work hard to deepen relationships with their customers so that progressively most of them will get to the top of the loyalty ladder to be advocates. Advocates will spread positive word of mouth communication about a rural bank to friends, relatives and other acquaintances. They will also defend a rural bank publicly when under attack. Therefore, as a manager or staff of a rural bank reading this article ask yourself the following questions?

How many of our customers are advocates?

How can our bank turn new and existing customers into advocates?

Do I treat customers well?

Do we connect emotionally with our customers?

Relationship marketing strategies

There are a number of relationship marketing strategies that can be adopted by rural banks. However, 6 of such strategies are recommended below.

  1. Build strong customer trust

Relationships are built on trust. When two people trust each other, they feel safe and secure. In view of this, rural banks should use trust as an ingredient to build and maintain strong and lasting relationship with customers.

According to Moorman Deshpende, trust is the willingness to rely on an exchange partner in whom one has confidence. In line with this definition, rural banks should deliver their brand promise so as to boost customers trust and confidence. RCBs should therefore avoid the tendency to over promise in their marketing communications.

They should promise what they can deliver in order to avoid communication gap which might undermine customers trust and confidence. According to the Five Service Dimensions developed by Parasuraman, reliability is a top factor in choosing a financial institution. This underscores the importance of building strong customer trust and long term relationship.

Rural banks should also improve on their liquidity so that they can meet the everyday demand of depositors. This will go a long a way to eliminate suspicion and bank run.


  1. Effective Communication

Communication is said to be a life blood of a relationship. Hence, rural banks should use effective and regular communication to maintain relationship with their key customers such as top depositors, large borrowing customers who are trustworthy, (large exposures) customers who are opinion leaders among others.

Rural banks may call such customers through the telephone every month or quarterly to find out whether they are faring better or not. It is worth mentioning that customers look for a bank that is more than a banker. They appreciate a bank which is also interested in their general well-being than purely in their deposits.


  1. Holding special event

RCBs should hold special events for their key customers with a view to enhancing relationship. Examples of such events include: annual dinner, pleasant excursion and the like. Such social events will no doubt encourage interaction and also create a warm bond between the bank and key customers. Some of my readers will argue that such social events will be expensive. Though they are expensive, RCBs are likely to benefit so much.


  1. Offer customer reward

To maintain and enhance relationships with customers, RCBs should reward their key (best) customers as a way of showing appreciation for their loyalty. Some rural banks tend to offer gifts to their customers at the end of the year, that is Christmas season. However, customers could be rewarded any time other than Christmas festivity. Offering gifts to people at the end of the year has become ritual and hence the impact is minimal. Let me reiterate the point that RCBs should reward their loyal customers by introducing loyalty programme that are of interest to customers.

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It is worth noting that rewarding loyal customers by offering them incentives is the best way to capture their minds.


  1. Enhance quality of customer service

Rural banks should provide excellent customer service in order to enhance customer experience. This will go a long way to retain customers and if possible make them loyal.

To improve the quality of customer service, RCBs should adopt and implement the 5 Dimensions of Service Quality. This consists of Reliability, Responsibility, Assurance, Empathy and Tangibles.

Reliability dimension implies that, RCBs should ensure consistent delivery of quality services to customers and should also deliver on their promises.

Employees of RCBs should be responsive to customers How? They should be willing and ready to offer the necessary help to customers as well as offering prompt services.

The empathy dimension means that staff of RCBs especially the customer contact personnel should be caring when dealing with customers. They should also give customers personal attention and also have their best interest at heart. There is no doubt that when RCBs apply the 5 Dimensions of service quality, they will be able enhance strong and long-term relationship with customers.


  1. Personal visit

To maintain and enhance relationship with valued customers, there is the need for personal visit. The personal visit could be done by the General Manager, branch managers or any member of the management team. Customers will view it as a privilege to be visited by the G.M. The aim of this visit is to show appreciation for the customer’s business dealings with the bank and also encourage him/her.

The visit should be an opportunity to advice the client as to how best he/she can grow his/her business. Many a time, banks visit borrowing customers as part of loan monitoring process so as to overcome loan default thereby reducing their non-performing loans. However, it is also important to visit loyal customers, top depositors among others who are creditors and not debtors so as to strengthen relationship.

Please bear in mind that the aim of this visit is not to collect deposits but to enhance relationship. RCBs should not create the impression that, they visit existing customers only when they need deposit. When cordial relationship is established with existing customers, their share of wallet for the bank will be higher in relation to competitors.


So far, the article has helped us to appreciate the meaning of relationship marketing and relationship marketing strategies that can be adopted by rural banks.

I want to emphasize the point that relationship marketing, that is establishing and maintaining trusting and lasting relationship with customers should not be taken for granted because of the following benefits: It reduces cost of operation, it promotes positive word of mouth communication, it leads to customer loyalty, improves corporate image and enhances bank profit among others.

The Author is the head of Proven Trusted Solutions, an employee training and development and marketing research firm.

Contact: 0207725859 / 0244517833

Email:jakossey@yahoo.com / proventrustedsolutions@yahoo.com

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