Project Proposal

An evaluation of innovative strategy on improved customer service delivery. A Case

1.0 Introduction

This research seeks to evaluate the innovative strategy (Project Pulse) on customer service
delivered by commercial banks focusing mainly on CABS. Innovative strategy is the base for
business expansion because of the stiff competition prevalent in the banking industry. With the
advent of new private banks, the concept of “innovative strategy” has become an important and
pivotal issue in banks, whether it is in the public sector, private sector, co-operative sector and so
on. Hence innovative strategy or project pulse depends on customer service delivery. In the
modern and open economy situation the customer preference and to create the awareness has
increased during the years. In these awareness due to the technology changes and effect of the
media as well as the competition among the banks and the resources are play an important role in
this part. In the new modern market to create the high competition among the customers with
what they want it also considered. Continuous improvement, gaining the information through the
existing customers to maintain the loyalty to the business leads to the increase the market share
and huge profit for these reasons are possible in the business. Therefore, the issue of proper
customer service is central to all business operations. That is why management experts have for
long, considered customer service delivery as an integral part of the growth strategy of their
businesses. The leader of an organisation should live and breathe customers’ needs and should
communicate this across the organisation. Hence, the major component of customer service is
related to the innovative strategy and commitment of the staff rendering such service.

1.1 Background of Study

The banking industry is facing a rapidly changing market, new technologies, economic
uncertainties, fierce competition and more demanding customers and the changing climate which
lead to an unprecedented set of challenges. Hence, innovative strategy on new ICT, staff, new
markets among others should be enhanced. There has been a radical shift in the market power
from banks to their customers. The effectiveness and efficiency of innovative strategy became
the catchphrase of the success of banking operation and proper functioning particularly in respect
of providing services to the customers. The Factor analysis technique which involves innovative
variables such as price (interest rates and charges), execution time, online services, accessibility
etc. has been employed to determine the satisfaction level of customers (Peyton, 2003). The
study found that the strategy of banks in regard to services rendered is quiet dismal and they are
unable to improve the quality standards. Hence, the way customers develop the feeling of
satisfaction is commonly explained by the confirmation/disconfirmation paradigm (Cadotte, et
al., 1987; Eggert, Ulaga, 2002). At a specific moment in time the customers makes the choice to
buy a product or a service. The perception of the product’s performance leads to a comparison
process, perceived performance is compared with one or more variables, such as prices. There
are three outcome possibilities: confirmation, positive disconfirmation and negative
disconfirmation. If the perceived performance meets the standard the results is a neutral feeling
of satisfaction. The customer is also satisfied if the performance exceeds his or her standard, the
case of positive disconfirmation. Performance worse than the standard creates negative
disconfirmation and thus dissatisfaction.

In contrast to products, customers are not really able to evaluate service delivery before the
service process takes place. The link between innovative strategy and customer service delivery,
the so called service encounter, is the key in the evaluation of service performance (Gil, 2008).
During these encounters, the customer is able to get an impression of the way the company
provides its services. His or her service experience is defined by the interaction with the
organization’s innovative strategy which include the processes and the employees. Accordingly,
improved service delivery is built upon the basis of CABS innovative processes. In banking
services, satisfaction is usually conceptualized as a multidimensional construct, (Manrai, L.A.,
and Manrai, A.K., 2007). The list of bank service attributes used for the measurement of
satisfaction comprises elements like: appearance of the facility, attitude and behavior of staff,
decor and atmosphere, business hours, interest rate, waiting time. Bank customers may regard
some of these elements as being not equally important as the others. The link between bank
services innovative attributes and customer service satisfaction leads to profitability.

Customer satisfaction is an important theoretical as well as practical issue for marketers and
consumer researchers. A brief the review of these related studies have been made in the
following paragraphs to identify the necessity of the study. It has been clearly seen that delivery
channels are lacking in meeting the demands of the customer by not making them aware of e-
banking and using obsolete or not too up-to-date technology. It was experiential that there is a
relationship between age group, occupation type and some aspects of e-banking. Jham and Khan
(2008) studied the customer’s satisfaction in the Indian banking sector and inferred that the
satisfaction of customers with the services of Indian banks is linked with the performance of
banks. Customers in urban India no longer want to wait in long queues and spend hours in
banking transactions. This change in customer attitude has gone hand in hand with the
development of ATMs, phone and net banking along with availability of service right at the
customer's doorstep (Nukpezah and Nyumuyo, 2009). Lenka, Suar, and Mohapatra (2009) in a
case study of Orissa state analysed service quality of Indian commercial banks and concluded
that the competitive pricing as well as company image contribute to customer satisfaction and
that service quality along a number of pathways drives customer loyalty and profitability thus:
service quality, customer satisfaction, customer loyalty, market share and profitability. Khattak
and Rehman (2010) analyzed the customer's satisfaction and awareness level towards the Islamic
Banking Industry of Pakistan. It has investigated the relationship between different demographic
variables and the satisfaction and awareness of customers. The customers indicated that they are
aware of different products but do not adopt these products. Chagwiza (2014) added that, it may
be observed that the existing bank branches are inadequate to serve the population in the districts
under study. Therefore, major areas are still remaining un-served by the banks and the rural
masses are yet to access the banking services. In order to improve the economic condition of the
people of this area, attention for the development and services of banks and financial institutions
with appropriate strategy may have to be taken.

CABS was formed in September 1954 and is a wholly owned subsidiary of Old Mutual
Zimbabwe Limited (OMZIL) a company owned by Old Mutual PLC. OMZIL is a financial
conglomerate with interests in banking, insurance, real estate, asset management and custodial
services. CABS was born out of Old Mutual Zimbabwe which is an international long-term
savings, protection and investment group, based in London, operating in 33 countries, and
serving more than 15 million customers. It has at its core the drive to create, manage and
preserve wealth for its millions of clients. The name Old Mutual was born in 1883 when another
mutual society calling itself Colonial Mutual Life Assurance society came on board in South
Africa. In order to differentiate the company from the new player a rebranding was done and the
name OLD MUTUAL was born. OLD MUTUAL opened its doors for business in Salisbury
(now Harare) in 1927. Central African Building Society (CABS) is a registered Building Society
in terms of the Building Societies Act (Chapter 24:02) in Zimbabwe. The Society is a wholly
owned subsidiary of Old Mutual Zimbabwe Limited with interests in insurance, asset
management, unit trusts and property management. Its main vision is to become the first choice
provider of financial services in Zimbabwe as we help our customers build wealth and achieve
their lifetime financial goals, while enriching the lives of our employees and the people we serve
as well as enhancing stakeholder value ([Link] retrieved 12 August 2021).
CABS faces competition from other financial institutions such as FBC, CBZ, POSB, NMB,
Stewart Bank and First Capital Bank among others.

In order to serve all market niches CABS is strategically structured as a financial powerhouse. It
has concerns in every sector of the financial services industry. Old Mutual’s principal business
comprises of life insurance, asset management, banking and general insurance. The
diagrammatic representation of the organisational structure is shown in Figure 1.1 overleaf.

Fig. 1.1 Old Mutual Group Organisational Structure

Source: [Link]

The Group financial results have been prepared on an inflation adjusted accounting basis in line
with the requirements of IAS 29 “Financial Reporting in Hyperinflation Economies” as the
conditions for hyperinflation accounting reporting persisted into 2020. The Group achieved
profit after tax for the year using both the inflation adjusted and historical cost accounting basis.
On an inflation adjusted basis, the Group had a profit before tax of ZWL5.9 billion for the year
ended 31 December 2020 compared to a loss before tax of ZWL11.9 billion for the same period
last year. On a historical cost basis, profit before tax was up 906% from ZWL1.1 billion to
ZWL11.5 billion driven by growth across all revenue lines, (Old Mutual Annual Report, 2020).
In line with the Monetary Policy Statement issued on 20 February 2019, the Group, through the
banking subsidiary, Central Africa Building Society (“CABS”) in 2019 registered with the RBZ
a foreign currency liability of US$26.4 million, being the legacy debt contracted prior to 20
February 2019 and other Group entities, in 2020, registered a foreign currency liability of
US$83.8 million. CABS and Old Mutual Zimbabwe Limited, the Company, paid over ZWL26.4
million and ZWL83.8 million respectively in 2019 and 2020 to the RBZ at a rate of 1:1. The
directors believed that the RBZ will assist CABS and the Company with sourcing foreign
currency and settling the liabilities at a rate of 1:1 between the US$ and ZWL and accordingly
recognised a foreign currency denominated asset. During 2020, CABS purchased foreign
currency which was paid over to foreign creditors registered as part of the legacy debt. CABS
subsequently claimed the local currency equivalent amount from the RBZ and the RBZ
reimbursed in local currency an amount equivalent to US$7.5 million during 2020. Operating
and Administration expenses increased by 537% to ZWL2.3billion from ZWL364.8million in
2019 (CABS annual report, 2020).

Net interest income grew by 718% to ZWL0.90bn in 2020 (2019: ZWL0.11bn), while net fee
and commission income grew by 1 109% to ZWL1.33bn in 2020 (2019: ZWL0.11bn). Operating
expenses increased from ZWL0.19bn in 2019 to ZWL1.31bn in 2020, an increase of 589%, with
unbudgeted expenditure incurred towards measures to curb the spread of Covid-19 and to
support new ways of work. The Society was compliant with the Reserve Bank of Zimbabwe’s
minimum Tier 1 capital requirement of US$30m, ahead of the 31 December 2021 deadline. Tier
1 capital increased from ZWL0.30bn (US$18m) at 31 December 2019 to ZWL2.63bn (US$32m)
at 31 December 2020. Measures have been put in place to maintain adequate capital throughout
2021. Figure 1.2 below shows the rise in customer fees.
 fee and commission 2019 2020
expense
Amount (ZWLm) 98.98 623.21
Fig 1.2: fee and commission expenses Source: CABS annual report, 2020.

The main strategic risks for the Group during the year 2020 were of failing to introduce new
products and services on time and of failing to change/adapt the business model in an
environment where customer preferences were rapidly changing, and there was cutthroat
competition. The Group also faced the risk that the strategy for recruiting, developing,
deploying, and retaining key employees and teams was inefficient or inadequate. The Group
remained on top of these risks as all key metrics monitored under each of these risks remained
within the approved risk appetite limits. The COVID-19 pandemic impacted continuity of
business operations, staff health and welfare status. Some branches were forced to close as some
staff tested positive or came into contact with positive cases and, therefore, there was a need to
observe the mandatory requirements on disinfection of exposed branches and the self-isolation or
quarantine of the concerned staff members. Significant risk continues to derive from the
industry-wide issues relating to legacy issues (2008/9) and issues emanating from the 2019
currency reforms. There is also continued inflation induced loss of value on local currency
savings products. For the year under review, most of the customer complaints received were on
the loss of value issues. In addition, some policy pronouncements especially around tax impacted
the risk profiles of the products and services offered to customers, and cases of failing to
promptly communicate such changes exposed the Group to conduct risk issues. Hyperinflation
also meant that the vested portion of the bonuses declared by the Guaranteed Fund reduced in
proportion.

1.2 Statement of the problem

The banks, now-a-days have come to understand that the business can come from satisfied
customers. Despite so many strategies initiated at various levels to improve the standard of
customer service, the level of satisfaction perceived by various segments of customers has been
low. Demand for improvement in customer service continues to be louder-and so is the level of
customer complaints regarding poor service.

1.3 Objectives
The overall objective of this study is to evaluate innovative strategy on improving customer
service delivered by CABS. The specific objectives of the study are:

1) To find out the response of customers towards customer services provided by CABS.
2) To examine the link between innovative strategy and customer service delivery at CABS
bank.
3) To determine whether CABS bank has appropriate innovative strategy in place to foster
customer satisfaction.
4) To establish how CABS bank can use innovative strategy to improve customer service
delivery.

1.4 Research questions

1) To what extent, the response of customers towards customer services provided by