This study investigates the impact of relationship marketing on customer loyalty in the banking sector, focusing on NIB International Bank in Addis Ababa, Ethiopia. It identifies key dimensions of relationship marketing—trust, communication, competence, conflict handling, and commitment—and their significant positive correlations with customer loyalty. The findings underscore the need for banks to enhance their marketing strategies and improve customer relations to remain competitive in a growing and challenging market.

1. SCHOOL OF MANAGEMENT, DEPARTMENT OF MANAGEMENT
THE EFFECT OF RELATIONSHIP MARKETING ON CUSTOMER LOYALTY IN
BANK INDUSTRY: IN CASE OF NIB INTERNATIONAL BANK AT ADDIS ABABA
BY: MEKDES TADESSE WUBIE
SUPERVISOR: WORETAW CHANIE (PhD)
JULY, 2024
Bahir Dar, Ethiopia

2. Background of the Study
The primary source of the companies’ present profit and future growth and also
creating loyal customers is at the spirit of every business. Customers are central to
all marketing actions all over the world. Success and in turn profit are unthinkable
without customers. Moreover, companies incur millions of dollars to be a focus
for customers and make them loyal. With the strong competition and increasing
globalization of the financial markets, building customer loyalty has become a
critical strategy for most financial institutions. In Ethiopia as well the banking
sector has been flourishing with the sector entertaining more participants from
both private and public sector.

3. Cont---
The increase in the number of banks in the industry to some degree has increased the sense of
competition among banks, which leads to the competition spirit will obviously call for banks
to adjust their strategies towards attracting customers. The sector has been known for
providing minimal financial products over the past two decades, expensive branch extensions,
low rates of technology utilization, large dependence on manual labor and concentration on
urban areas. Private Banks cannot continue to do business in this very competitive industry,
using traditional business models. Thus, it’s imperative to investigate the effect of relationship
marketing on customer loyalty, in case of NIB, one of the private banks of Ethiopia. Therefore,
the present study will intend to find out that, to what extent the Relationship Marketing (RM)
has an impact on Customer loyalty in case of Nib.

4. Statement of the Problem
Nowadays, banking sector had operated like a monopoly within few numbers of banks in
Ethiopia. Before the current epoch of the industry, banks saw their existence and service as
privilege to their customers. Still, it is also observed that most Ethiopian banks traditionally laid
more emphasis on attracting and prospecting for new customers than determined to retain old
ones.
As a result of, competitive pressure and globalization, the banking sector in Ethiopia has shifted
to the emphasis towards customer loyalty and retention to get high profit and continuous
growth in every time. The industry is, therefore, in urgent need to put something in a new place
itself towards the customer-oriented principle in order to achieve growth. Consequently, the
industries are now re-strategizing to meet current customers expectations through robust
‟
relationship marketing policies and programs to remain in business and make profit.

5. Cont----
As per the knowledge and observation of the researcher, relationship marketing of banking
industries in general and Nib international bank in particular are often directed only at the most
profitable (key) costumers. However, relationship marketing should be directed towards all
customers of the bank. Moreover, many researches which have been conducted on the effect of
relationship marketing on customer loyalty used descriptive statistics method of analysis and
construct relationship marketing on Trust, Commitment, Communication, competence and
Conflict Handling. Because, different scholars suggested that trust, communication, competence,
conflict handling and commitment are marketing relationship dimension which affect customer
loyalty. Therefore, this research would try to fill the above gaps by applying a statistical model
called multiple linear regression model to assess the effect of relationship marketing on customer
loyalty in bank industry: In case of nib international bank in Addis Ababa.

6. Research Questions
This research would be tried to answer the following research questions in Nib international
Bank, in case of Addis Ababa, Ethiopia;
To what extent relationship marketing practices in nib international bank?
What is the effect of communication on customers loyalty?
What is the effect of conflict handling on customers loyalty?
What is the effect of trust on customers loyalty?
What is the effect of commitment on customers loyalty?
What is the effect of competence on customers loyalty?

7. Objective of the Study
General Objective
To assess the effect of relationship marketing on customer loyalty in bank industry: In the case
of Nib international bank in Addis Ababa
Specific Objectives
This research would be tried to answer the following specific objectives in Nib international
Bank, in case of Addis Ababa, Ethiopia;
To describe the extent of relationship marketing practices in nib international bank
To analyze the effect of communication on customer loyalty.
To examine the consequence of conflict handling on customer loyalty.
To explore the impact of trust on customer loyalty.
To inspect the impact of competence on customer loyalty.
To explore the impact of commitment on customer loyalty

8. Significance of the Study
This study would be aimed to explore the effect of relationship marketing on customer
loyalty in Bank industry in Nib International Bank at Addis Ababa. It was played a
significant role in raising the awareness of the bank managerial bodies about their
customers’ loyalty and identifying and take positive actions on the factors those help
customers’ consistency. In addition, the results of this study would help the researchers as
secondary source.
Conceptual Farmwork of the Study

9. METHODS OF THE STUDY
Study Design Mixed quantitative and qualitative approach with descriptive case study.
Population  5750
Sample Size  374 (M 266 and F 99) & respondents & 3 interviewees
Sampling Technique  Purposive and Simple random sampling accordingly
Data Gathering
Instrument
 Interview, and questionnaire.
Procedures of Data
Collection
 Develop questions in English, translated in to Amharic, received
comment, reorganize with modification and print.
 Address the letter to NIB Head Offices.
 Select all relevant samples.
Data Analysis Technique  Multiple linear regression with different diagnostic tests via SPSS
version 26.
Ethical Considerations
 Address the letter to NIB Head office.
 Select samples without harming, suffering and violating their right and
privacy

10. DATA PRESENTATION AND ANALYSIS
•Questionnaire Response Rate
•374 questionnaires were distributed
•365 were completed and returned
•9 (nine) respondents not returned
•The response rate representing 97.59% response rate.

11. Reliability Test for the Study
•Cronbach's alpha was used in this study to test or measure the
reliability or internal consistency of data set for statistical
analysis.
•Cronbach Alpha for this study is found to be 0.882 as pilot
study for 36 customers.
•The Cronbach Alpha 0.882 of this study points out, the internal
consistency or reliability of data set for variables in the study
was acceptable or respectable. Table 4.1.docx

12. Descriptive Result
Gender or sex was also used in this study as a demographic variable to
explain the demographic characteristic of the respondents of in NIB in
case of Addis Ababa. 72.9% of the respondents were Males and 27.1%
of them were Females. This shows that the study area characterized the
experience to participate or involve female loyal customers as lower
compared with male. Ages for the respondents ranges from the
minimum 18-27 years old and maximum value which range greater than
47 years old at an average Mean =2.06 and Variance =0.686.

13. Cont---
The Mean value for the age groups approximate 2, which indicates that
most loyal customers in NIB were aged in between 28-37 years old
with minimum or less than 1 deviation and variation from the Mean.
Table 4.2.docx
Trust indicators revealed that the respondents' responses were
reasonably close to one another, as indicated by the Std. of 1.304. The
mean of the first indicator, 3.94, showed that most customers agreed
that bank employees identify customers' needs by looking at their
profile each time they interact with them.

14. Cont---
The majority of customers were found to be highly in agreement, as
evidenced by the mean values of roughly four. But one measure of
trustworthiness that was the majority of clients responded neutrally
when staff members called them on a frequent basis regarding account
information, as the mean value was getting close to three.
The most of respondents were in agreement about the NIB conflict
management system, as well as its competence and communication,
and significant results were reached for each parameter.

15. Inferential Statistics
Correlation Result
There is significant positive correlation between customer loyalty of the Nib and customers
trust with r=0.412. Additionally, customer loyalty of NIB is positively related to number of
boards communication between the bank and their customers and with r=0.338, which is
less than 0.01. Therefore, there is strong and statistically significant relationship at 1%
significant level. As well, competence of the bank is positively related to customers loyalty
with r=0. 484. Therefore, there is strong and statistically significant relationship at 1%
significant level.
In addition, there is significant positive correlation between customers loyalty of the bank
and commitment with r=0.306 and also significant positive correlation between conflict
handling of the bank and customer loyalty with r=0.380. Table 4.3.docx

16. Multiple Linear Regression Model Analysis
This study conducted all relevant diagnostic tests and the result showed
that there were not a problem of normality, multicollinearity, linearity
and autocorrelation.
The result showed that, a unit change in trust of customers on Nib related with
services of the bank leads a positive effect by 0.216 at 1% level of significance
with the corresponding t-statistics 4.625 which indicates the coefficient is
statistically significance at 99% level of significance with p=0.000, keeping other
things remain constant. The result is in line with different studies performed
previously.

17. Cont---
Similarly, a unite increase in number of communication indicators of
marketing relationship between Nib and their customers which leads to
an increase of customer loyalty by 0.836 units.
Moreover, through another marketing competence and conflict
handling of the financial institution’s customers loyalty like Nib in the
study area significantly and positively affected the bank performance at
1% level of significance. Additionally, commitment also positively
affected the customers loyalty at 1 % level of significance. this result is
consistent with different studies. Table 4.4.docx

18. CONCLUSIONS
This study is crucial for improving knowledge of client loyalty and
retention in Ethiopia's banking sector, particularly NIB.
The correlation coefficients were strongly and significantly associated
with customer loyalty, and communication, commitment, trust, conflict
handling and competence pillars had the highest correlation coefficient
value. Hence, communication, commitment, trust, conflict handling and
competence pillars associated linearly and strongly with customer loyalty
indictors in NIB in Ethiopia, in case of Addis Ababa.

19. Cont---
The overall characteristics of the data were presented and explored and significant
information was extracted from the data using inferential statistics techniques like
correlation analysis and multiple linear regression model, as well as descriptive
statistics instruments for analysis such as standard deviation, mean, and
percentages. The results of the multiple linear regression model and bivariate
correlation demonstrated that all of the pillars had a strong and significant positive
correlation with customer loyalty, and that the factors like trust, communication,
commitment, competence and conflict resolution were statistically significant.

20. RECOMMENDATIONS
As a result, private banks should pay special attention to enabling free ATM access
for their clients as much as possible. This will make it easier for clients to obtain
ATM cards, which will increase the number of clients in the banks
The study's findings also confirmed this, so private banks in the study area need to
evaluate and improve their employees' communication skills in order to close the
communication gap and maximize marketing relationships.
As a result, private banks should pay special attention to enabling free ATM access
for their clients as much as possible. This will make it easier for clients to obtain
ATM cards, which will increase the number of clients in the banks

21. Cont---
private banks in general and Nib international Bank in particular to continue
enhancing their trust, commitment, conflict handing, competence and
communication processes and to put a lot of effort into developing
competence-related facilities in order to compete with other capable private
and public banks in the industry.
stakeholders and other relevant entities should pay particular attention to
enhancing employees' communication skills and their ability to handle conflict.
This will also benefit managers and employees in the human resource
department