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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 fo r 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 t he 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 T his 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 T his 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 I nterview, 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 w ithout 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 T rust 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 T here 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. T he 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