Academic journal article Journal of Global Business and Technology

Relationship Intention and Customer Satisfaction as Predictors of South African Smes' Loyalty towards a Risk Financier

Academic journal article Journal of Global Business and Technology

Relationship Intention and Customer Satisfaction as Predictors of South African Smes' Loyalty towards a Risk Financier

Article excerpt

INTRODUCTION

Policy makers, economists, and business professionals agree that small and medium enterprises (SMEs) are the driving force of economic development and growth, especially in developing countries (Entrepreneur, 2013; Fatoki & Odeyemi, 2010; UCS, 2011). The importance of SMEs in developing economies such as South Africa becomes apparent when it is estimated that 91 per cent of recognised businesses in the country are SMEs (UCS, 2011), contributing approximately 54 per cent towards the GDP and providing nearly 61 per cent of private sector employment (Fatoki & Odeyemi, 2010).

Despite an estimated six million SMEs operating in the country (Entrepreneur, 2013; UCS, 2011), it is increasingly difficult for South African financiers who service SMEs to become the service provider of choice and to retain their customers in an industry marked by fierce competition (Coetzee, Van Zyl & Tait, 2013). Additionally, with as many as 71 per cent of SMEs predicted to fail within the first two years (Davies in Kgosana, 2013), it is not surprising that commercial banks and equity and risk financiers try to retain their profitable SME customers despite finding it difficult to differentiate their products and services from competitors (Jesri, Ahmadi & Fatehipoor, 2013). The high failure rate of SMEs is, however, not unique to South Africa, with many other developing countries, such as Uganda, experiencing similar trends (Tushabomwe-Kazooba, 2006). Retaining of successful SMEs thus seems essential to financiers operating in developing countries.

Arguably the best way for financial service providers like risk financiers to retain SME customers is by creating customer loyalty through building long-term relationships (Mende, Bolton & Bitner, 2013). However, despite the rationale for organisations wishing to build long-term relationships with their customers, not all customers want to enter into relationships with organisations (Gilaninia, Almani, Pournaserani & Javad, 2011; Jones, Reynolds, Arnold, Gabler, Gillison & Landers, 2015; Kumar, Bohling & Ladda, 2003; Parish & Holloway, 2010). Gounaris, Tzempelikos and Chatzipanagiotou (2007) underline the importance of studying customers' relationship intentions, as this serves as an indication of customer commitment to the business relationship -and thus of customer loyalty. It is essential that financiers targeting SMEs identify those customers who display relationship intentions, as such customers will be more inclined to building organisational relationships (Conze, Bieger, Laesser & Riklin, 2010; Kumar et al., 2003; Leahy, 2011; Raciti, Ward & Dagger, 2013).

In addition to considering SME customers' relationship intentions, it may also be important to consider their satisfaction, as it has been suggested that customer satisfaction is fundamental to achieving success and survival in a competitive market-place (Ndubisi & Wah, 2005). The importance of ensuring customer satisfaction lies in the belief that it can pave the way to loyalty and ultimately to customer retention (Aksoy, Keiningham & Bejou, 2008; Gounaris et al., 2007; Kakeeto-Aelen, van Dalen, van den Herik & van de Walle, 2014).

Despite the apparent link between customer satisfaction and loyalty, Pan, Sheng and Xie (2012) argue that a broader conceptual framework is needed to understand customer loyalty in a business-to-business (B2B) context. Also, the effectiveness of relationship marketing and building long-term relationships with SME customers, and in particular within a developing country perspective, has not sufficiently been researched (Kakeeto-Aelen et al., 2014). In responding to the call of Kakeeto-Aelen et al. (2014) and Pan et al. (2012), the primary objective of this study was to determine the extent to which SMEs' relationship intentions and customer satisfaction predict their loyalty within a developing country, specifically the South African B2B financing environment. …

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