CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Understanding of innovation is vital to organizations competing in an environment characterized by high uncertainty and a high rate of change. For most firms, successful new product innovations are engines of growth (Cohen, Elashberg and Ho, 1997). Innovation leads to a process of change in organizations and its market offerings, and is a key weapon that marketing strategists use to win customers and markets, through the development of sustainable competitive advantage. In the words of Peter F Drucker (1954) ‘there is only one valid definition of business purpose: to create a customer’ and ‘the business enterprise has two and only two basic functions: marketing and innovation’. Innovations use assets and competencies (skill and knowledge in both technical systems and management systems) of the organization along with innovation processes to bring about new or different market offerings, which when successful in the market bring in immense value to the firm. Innovations also lead to the creation of assets called intellectual property; intellectual property rights (IPRs) include copyrights, patents, trademarks, trade secrets and industrial designs. An ongoing innovation advantage is possible if the organization focus is to build organizational capabilities along with the co-creation of value with the customer, with adequate adaptations to mindsets, skills, behaviors and decision structures in an environment of global resources, flexible, efficient, resilient business processes and focused analytics (Prahalad and Krishnan, 2009).  Innovation is driven by customer and market requirements as well as competition among suppliers to a need requirement and shaped by the evolution of technology (Adner and Levinthal, 2001).

Product innovation is the result of bringing to life a new way to solve customer’s problem. It can be defined as the general and or acceptance of ideas, process, products or services that the relevant adopting unit perceives as new (Garcia and Catantone, 2002). Product innovation according to Gunday, Kandah, and Ranch, (2011) is broadly seen as an essential component of competitiveness, embedded in the organizational structure, processes, products, operations, and services within a firm. Product innovation is one of the fundamental instruments of growth strategies to enter new markets, to increase the existing market share and to provide the company with a competitive edge. However, developed and developing economies around the world have come to realize the value of manufacturing firm, they are seen to be characterized by dynamism, innovations, efficiency, competition, technological development (Ibidunni, Iyiola and Ibidunni, 2014).

Rainey, (2005) submitted that product innovation involves the conceptualization, commercialization, development, design, and validation of new product, which provides higher value or utility to all the stakeholders of that product.

 Wang and Ahmed, (2004) stated that innovation in products and process is regarded as an essential prerequisite for organizational survival and success. However, product and process innovations are related to the concept of technological development.

Regionally, the effects of product innovation are felt by the manufacturing companies in Africa, they are introducing new models along with novel approaches to business process, all aimed at increasing firms’ services penetration and production, expanding market share, driving profits and cutting costs.

Marketing Performance encompasses three specific areas of firm outcomes: (a) financial performance (profits, return on assets, return on investment, etc); (b) product market performance (sales, market share, etc); and (c) shareholder return (total shareholder return, economic value added, etc).Organizations have an important role in our daily lives and therefore, successful organizations represent a key ingredient for developing nations. Sales outcomes have always been seen by performance oriented sales people as evidence to their behavioral performance and consequently a positive relationship has been found to exist between job involvement component of commitment and sales performance. In other words, committed sales people are expected to extend greater efforts on the job there by having a direct effect on job performance (Silva, 2006). Richard (2009) defines performance measures as the vital signs of the organization, which “quantify how well the activities within a process or the outputs of a process achieve a specified goal” Some commercial banks have been going through a period of growth as result of product innovations. As opposed to importation of new technologies from the western world in the past, Africa now has tried to be more innovative by motivating employees to be more innovative as well as provide an enabling environment for product innovation. As a result of these, some companies in Africa have grown to global level. However, those companies in Africa which continue to depend on imports continue to face challenges in the market and eventually shrink (Moodley, 2012). From the foregoing therefore, the study is determined to examine the relationship between product innovation and marketing performance of commercial bank in Port Harcourt.

1.2 Statement of the Problem

One aspect of emphasis on product innovation is the assumption that innovation can lead to tangible business outcomes that can lead to higher margins through sustainability of customer satisfaction and organisation competitiveness (Collerton, 2012).

The lack of product innovation is caused by among others lack of sufficient funds and lack of expertise which are important ingredients to successful product innovation. Another challenge to this is the changing customer needs and the existing regulations which hinder development of certain products. Some commercial banks also lack research and development departments in their management team.

The banking industry in Nigeria has in the recent past, been faced with increasing competition and tremendous challenges due to industry globalization, adversely changing economic and political patterns and narrowing profit margins.

Most commercial banks enter the market with high expectation; the result is not always what they expect. Some products do not survive to see the growth stage, while others do not really grow as per their expectations. Most commercial banks have been struggling to survive in the financial sector and they have been reported to be downsizing in an effort to remain afloat (Noonan, 2012). These commercial banks in most cases end up scaling down their employees, being unable to sustain themselves and therefore closedown.

For this reason, this study aims at examining the relationship between product innovation and marketing performance of commercial banks in Port Harcourt with an aim of establishing the best product innovation strategies that commercial banks should employ in order to grow and lastly establish the ability of good product

innovation strategies to facilitate growth of these firms to their potentials.

1.3 Objectives of the Study

          The main objective of the study is to examine the relationship between product innovation and marketing performance. The specific objectives are as follows;

1.       To examine the extent to which incremental innovation influences marketing performance.

2.       To examine the extent to which radical innovation influences marketing performance.

3.       To examine the extent to which modular innovation influences marketing performance.

4.       To examine the extent to which product innovation influences marketing performance.

1.4 Research Questions

1.       What is the relationship between incremental innovation and marketing performance?

2.       What is the relationship between radical innovation and marketing performance?

3.       What is the relationship between modular innovation and marketing performance?

4.       Does product innovation influences marketing performance.

1.5  Research Hypotheses

H01: There is no significant relationship between Incremental innovation and marketing performance.

H02: There is no significant relationship between radical innovation and marketing performance?

H03: There is no significant relationship between modular innovation and marketing performance?

1.6 Significance of the Study

The relevance of this study, this time, is as crucial as the study will help to highlight benefits the companies in this industry will derive. The information collected will expose the management of the companies in product innovation, and know the quantity to produce in order to avoid losses.

This study will afford a successful and thorough examination of current practices of product innovation in the banking sector, as well as expose influential and critical factors and processes that determine the success of product innovation.

Furthermore, it will highlight the socio-economic impact to product innovation in commercial banks in Nigeria and as well provide recommendations for enhancing the proficiency of the process with the view to increasing the growth and success of the banking sector in Nigeria.

Finally, it will provide a guide to operations of commercial banks and government policy makers on the proper frame to adopt towards product innovation of commercial banks with the view of enhancing growth and marketing performance.

1.7 Scope of the Study

The study is delimited under the following heading: content scope, geographical scope and unit of analysis.

Content Scope: The content scope of this study involves an investigation to ascertain the relationship between product innovation and marketing performance of commercial banks in Port Harcourt. The dependent variable is marketing performance measured by sales volume, market share and profitability. While independent variable is product innovation strategy measured by Incremental innovation, radical innovation and modular innovation.

Geographical Scope: This study is delimited to Port Harcourt with references to selected commercial banks which include First Bank, Polaris Bank and Fidelity Bank all at Garrison Junction, Port Harcourt. The commercial banks were visited by the researcher.

Unit of Analysis: The unit of analysis in this research involves both senior and junior staffs of the selected commercial banks in Port Harcourt at the time of the study.

1.8 Limitation of the Study

The study was limited by the following:

Finance: Accessing fund for the research work was difficult and this to a great extent limited the quality of research activity.

Time: The time allocated to the research work was not sufficient to give room for further intensive work on the field of study, however, the researchers was able to cover the areas motion in the study.

Organization Policy: Policies of the organization limited the level of information received. The personnel of the firms were not willing to give information, stating that it was against the organization’s policy.

1.9 Definitions of Terms

In this study, it will be very important to define key terms that will be featuring. They include the following:

Innovation: It’s the process of translation an idea or invention into goods or service that create value or for which customers will pay. To be called an innovation, an idea must be replication at an economical cost must satisfy a specific need.

Product innovation: this is the creation and subsequent introduction if goods and services that is either new or improved version of previous goods and service. In other words it helps to create new product that customers will love and want to follow. They also track how customer responds to their product.

Incremental innovation: It refines and improves an existing design, through improvements in the components.

Radical innovation: It is about much more than improvements to existing designs.

Modular innovation: It uses the architecture and configuration associated with the existing system of an established product, but employs new components with different design concepts.

Marketing performance: It measures as the vital signs of the organization, which “quantify how well the activities within a process or the outputs of a process achieve a specified goal”.