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CUSTOMER RELATIONSHIP MANAGEMENT AND

PERFORMANCE OF COMMERCIAL BANKS IN


UGANDA. A CASE STUDY OF BARCLAYS
BANK WANDEGEYA BRANCH

BY
NYIRAGA NOERENA
2013/FEB/BBA/B11472/DAY

SUPERVISOR
NAMARA ASIIMWE (MRS)

A PROJECT PROPOSAL SUBMITTED TO THE SCHOOL OF


BUSINESS ADMINISTRATION IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE AWARD OF A
BACHELORS OF BUSINESS ADMINISTRATION
OF NKUMBA UNIVERSITY

MARCH, 2016
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CHAPTER ONE
1.1 Introduction
This chapter covers the introduction, background of the study, problem statement, purpose of the
study, objectives of the study, research questions, and scope of the study and significance of the
study.

1.2 Background of the Study


1.2.1 Historical Background
The concept of customer relation management traces its way back to the 1980s with the
emergency of direct marketing where there was great dependence on client databases (www.12
Manage, 2010)
Relationship marketing was then first described by Grnroos, et al (1985) of the Nordic School
together with Theodore Levitt. In their study of relationship marketing versus transaction
marketing, they defined the characteristics of relation-centric organizations and giving
corresponding marketing tools.
This later was compounded by Treacy et al. (1993) in the 1990s in their study and description of
value principles where customer intimacy sprouted as one of these core values. As a result,
Customer Relationship Management (CRM) transformed from a web based contact management
and information tool to a customer oriented strategy which was originally developed by United
States marketing strategy consultants, Don Peppers and Martha Rogers, and first published in the
Harvard Business Review almost sixteen years ago. The more customers teach the company,
they explained, the better it gets at providing exactly what the customer wants exactly how
they want it and the more difficult it will be for a competitor to entice them away. (Peppers &
Rogers Group, 2001)
Since the 1990s, the marketing of both services and tangible products has increasingly focused
on the concept of the development of relationships with consumers (Swartz et al, 2000).
Customer relationships ensure that consumers develop the perception of customization, empathy,
appreciation, friendliness, communality and feelings of trust (Swartz, 2000). This perception
leads to support and loyalty among consumers to firms.

In recent years, CRM has emerged as a top commercial priority. CRM is not simply a method
used by leading firms to gain a competitive advantage: it has become a necessity for their
survival (Buttle, 2004:1). The focus is increasingly on CRM, with the dominant business
environment evolving from a production orientation to a marketing orientation. While, in the
past, firms focused on increasing profits by reducing production costs, they have adopted a sales
orientation, in terms of which the main objective is increasing profits through increasing sales
volume. Previously, firms were expected to identify client needs and provide value to clients.
Presently, firms focus on satisfying client needs, at a profit. This requires that the focus of the
entire firm must be on identifying and meeting client needs. With CRM, the client helps the firm
to provide the benefit bundle that the client values. Value is thus created with clients, not for
them (Gordon, 1998). The overall provision of service delivery can thus be customized for the
individual client, according to his/her needs.

1.2.2 Theoretical Background


Customer relationship management (CRM) is a process business entities and corporations
recognise and implement as a strategy for managing the entities interactions with its customers,
clients and sales prospects. It is a methodology used to learn more about customers requirements
and behaviours in order to develop stronger relationships with them.
The coming up of new channels and superior technologies has considerably transformed the way
entities interface with their customers which has then created a greater scale of connections
between marketing, sales and customer service functions in organisations (Parvatiyar and Sheth,
2001).
It represents an entities move towards embryonic initiatives for acquiring and retaining fullknowledge about customer behaviour and dynamics to facilitate development of programs and
strategies that promote customers to constantly improve their business relationship with the
corporations (Parvatiyar and Sheth, 2001).
The notion herein assumed is that developing a good relationship with customers will lead to
customer satisfaction, trust, commitment, social bond and ultimately customer loyalty. In the
long run, maintaining business relationships with satisfied customers yield to profitable customer
behaviours through more purchases over a period of time, frequent and repeated purchases from
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the organisation and reference of other prospects to the organization (MsMurrian and Matulich,
2006). This in overall generates higher level of revenue to the organisation henceforth, building
up a financially sustainable business.

1.2.3 Conceptual Background


Customer relation management aligns marketing processes and drive customer demand using
functionality to enhance management of marketing resources, segments and lists, campaigns,
leads, trade promotions and marketing analytics.
The majority of marketing scholars who study the span of customer relation management come
up with concepts regarding the value and process of mutual affiliation between buyers and
sellers. Their interests primarily focus on the strategies and processes for customer categorization
and choices, account management, cross-selling and other forms of partnering with customers
(Parvatiyar and Sheth, 2000).
Further studies established relationship strength measurement by setting a center of attention on
definite key relationship attributes. This study will therefore explore in detail the regularly and
resolutely identified measures of relationship strength proposed by a number of scholars. These
measures of relationship strength include communications quality, trust, conflict, social bonds,
commitment, customer satisfaction and information flow (Lages et al., 2005; Lang and Colgate,
2003; Roberts et al., 2003, Wongand Soal, 2002; Parvatiyar and Sheth 2001; Hausman, 2001).
Trust, communication quality and commitment appear to be prevalent.
For this study, the research will investigate the impact of these established relationship measures
of trust, communications quality and relational performance evaluation and their impacts on the
Stanbic Bank financial sustainability.
performance is defined as the extent to which organizations, viewed as a social system fulfilled
their objectives (Georgopoulos et al, 1957). Yuchtman et al. (1967), performance is defined as
an organization's ability to exploit its environment for accessing and using the limited resources.
In this context, profit became one of the many indicators of performance.
Lebans et al. (2006) provides that organizational Performance is a set of financial and
nonfinancial indicators which offer information on the degree of achievement of objectives and
results (Lebans & Euske 2006 after Kaplan & Norton, 1992). This definition will be applicable
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to this study and The measures of performance in this study will explore are: profitability;
customer loyalty; customer retention and customer satisfaction.

1.2.4 Contextual Background


With a market share of over 19 percent, Barclays Bank Uganda, the fifth-largest commercial
bank in Uganda as of December 2014 with assets valued at about US$504 million (UGX:1.4
trillion) has maintained her position as one of the market leader in the industry by focusing itself
on providing solutions to its customers.
Opened in 1927, with two branches, the bank focused only on meeting the banking needs of
large corporations and high-net-worth individuals which was loosened to include small and
medium sized enterprises and regular customers.
Barclays Bank Uganda has a strong and active customer base. It deals in various bank accounts
like salary accounts (ultimate salary ultra, ultimate salary classic and single bouquet account &
single fee bank account), current accounts (daily interest account, bank flexi account, BPL flexi
account, foreign currency account personal, student flexi account), savings accounts (bonus
savings account, instant savings account, junior eagle account and fixed term deposit account)
with other services electronic banking and internet banking.
Barclays Bank Uganda continues to have the best services, however over the years it has lost its
leadership position in Uganda, with customers declining steadily every year over the last five
years due to defection to other service providers including those who are not locally present in
Uganda, for example Internet based bankers.
The bank currently has a relationship management team with a major responsibility of
maximizing risk-adjusted portfolio contribution, oversee and sustain a portfolio of commercial
banking customers, building long term relationships founded on efficient and reliable support for
their business achieved particularly through quick risk decisions and managing consistency and
quality of operational service. The team is responsible for business development both with new
customers and with existing customers where they are expected to increase wallet share. But it
team has registered little success since un attended to customer complaints from 5% in 2008 to
8.8% in 2009 thus the bank failed to retain its customers in the Ugandan market Odeke (2010).

Therefore, this study is aimed to establish whether failure on the part of Barclays Bank Uganda
to retain its customers is a result of poor customer relationship management.

1.3 Problem Statement


Managers always make mistakes by seeing customers satisfaction from their eye not from
customers eye (Peppers and Rogers, 2014). Banking sector is a customer-oriented service where
the customer is the key focus. Research is needed in such sector to understand customers need
and attitude so as to build a relationship with customers in order to retain them. Customer
Relationship Management includes all the marketing activities, which are designed to establish,
develop, maintain, and sustain a successful relationship with the target customers.
Although the bank uses a number of marketing strategies like advertising seminars and
workshops, event sponsorship and commissions designed to persuade potential customers to their
service over that of competitors, over the years it has registered an increase of un attended to
customer complaints from 5% in 2008 to 8.8% in 2009 thus failed to retain its customers in the
Ugandan market Odeke (2010) yet it is believed that customer retention impacts organizational
performance (Reichheld et.al, 1990). This can be attributed to the failure to embrace customer
relationship management. Without maintaining strong relationships to deliver customer
satisfaction, customers of Barclays bank will continue to defect to other service providers in the
industry.

1.4 Purpose of the Study


The main objective of this study is to assess The Contribution of customer relationship
management on Bank performance while taking Barclays

bank Wandegeya branch as case

study.

1.5 Objectives of the study


To establish the customer relationship management techniques employed by Barclays Bank
Wandegeya Brach.
To stablish the level of customer loyalty and satisfaction in Barclays Bank Wandegeya Brach.
To establish whether customer relationship management affects performance in Barclays Bank
Wandegeya Brach.
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1.6 Scope of the Study


The study will be limited to Barclays Bank Wandegeya Brach. Although customers are spread all
over Uganda; the study will focus on those located in Kampala. The conceptual scope of the
study will cover customer relationship management and how it performance in Barclays Bank
Wandegeya Brach.

1.7 Research Questions


What customer relationship management techniques are employed by Barclays Bank Wandegeya
Brach?
What is the level of customer loyalty and satisfaction Barclays Bank Wandegeya Brach?
What is the Contribution of Customer Relationship Management (CRM) on Bank performance at
Barclays Bank Wandegeya Brach?

1.8 Significance of the Study


The study will provide benchmark data to the existing body of knowledge by highlighting the
need for customer relationship management to business organizations. This study will also beef
up the available literature on marketing for reference and further research.
The study will be significant in that it will establish the effects of customer relationship
management on customer retention. Marketing managers will use the study findings to enhance
their marketing strategies.

CHAPTER TWO
STUDY LITERATURE
2.1 Introduction
This chapter presents a review of available literature, by scholars in the area of study thats
customer relationship management and organizational performance and it focuses on the
following; the literature survey and

the literature review

which includes the concept of

customer relationship management, critical elements of customer relationship management,


customer loyalty, effects of customer relationship management on the customer loyalty, customer
retention, effects of customer relationship management on customer retention, customer
satisfaction, relationship between customer relationship management and organizational
performance, other factors which impact bank performance and the conceptual model.

2.2 Literature Survey


Nanyombi and Musasizi (2011) conducted a study about Customer retention in an emerging
market context: the case of mobile telephone users in Uganda. Says that with the complete
liberalization of the telecommunications sector in Uganda, in August 2006, (ICT Ministerial
Policy statements) the telecommunications market has seen more operators being licensed. The
major licensed holders are MTN Uganda, Uganda Telecom, Airtel / Warid Telecom and Orange
Telecom now Africell. The market has become increasingly competitive with tariffs and
connection costs significantly dropping.
Nanyombi and Musasizi (2011) stressed the view that while telecom companies have invested
much, the subscriber base is still growing and currently stands at only 13.5 million Ugandans of
which six million Ugandans have more than one SIM-card. While MTN Uganda boasts of a
record 6,215,000 subscribers by the end of October 2011, the Uganda Communication
Commission (UCC) market survey October 2011 indicates that less than half the number has
used the network for the past five years. Airtel Uganda recorded 2,250,000 Customers by the end
of October 2011 while an internal record from their marketing department shows that the
retention and loyalty drive which closed in August 2011 registered 750,000 loyal customers.
(Those who have used Airtel lines for the past five years) UTL registered 2,150,000 customers of
which the UCC Market survey report of October 2011 indicated 650,000 loyal customers.
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He further noted that the individual companies continue to register increased sales volume in
terms of telephone lines, the usage period for telephone lines acquired is less than five months,
meaning that customers only respond because of the short time rewards that come from different
promotional offers. Once the offer ends, the customer will switch to another network with better
rewards and promotions. This leaves very small numbers of loyal customers on each individual
network.
It was found out that the challenge all marketers face today is in finding ways of increasing
customer loyalty and retention. Transforming indifferent customers into loyal ones and
establishing a long term relationship with customers is critical for organizational success.

2.3 Literature Review


2.3.1The Concept of Customer Relationship Management
Shani et al. (1992) defines relationship management as a business strategy which focuses on
firms resources, operations, and activities around consumer needs to retain and grow customer
base. Peppers et.al (1993) viewed customer relationship management as a philosophy that puts
customers in the heart of developing firm's products and allocating its resources toward
delivering zero-error services to increase customer satisfaction and loyalty. CRM can be
regarded as a core business strategy that integrates internal processes and functions, and external
networks, to create and deliver value to targeted clients, at a profit (Buttle, 2004).
According to Gordon (1998), it is an ongoing process of identifying and creating new value with
clients and then sharing the benefits from this over a lifetime of association.
It is a management approach that enables organizations to identify, attract, and increase retention
of profitable customers through improved relationship management (Hobby, 1999) CRM is the
utilization of customer related information or knowledge to deliver relevant products or services
to customers (Levine, 2000). Thus CRM is a set of business processes which focus on capture,
retain and provide service to customers. The customer is at the heart as the approach aims at
putting customer first by shifting the role of marketing from manipulating the customer to
genuine customer involvement communicating and sharing the knowledge (Parvatiyar et al,
2001). In other words, CRM is about managing the customer portfolio efficiently and effectively
by designing business policies which focus around the customer.
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CRM can be further described as a comprehensive set of activities that covers all functions of the
firm interacting with and supporting a consumer. These activities ultimately build customer
satisfaction by providing in their needs, wants, and desires over the long term (Wilmshurst &
Mackay, 2002:169). According to Gordon (1998:9), it is an ongoing process of identifying and
creating new value with clients and then sharing the benefits from this over a lifetime of
association.
According to Picton et al. (2005), CRM is a view that emphasizes the importance of the
relationships developed between an organization and its customers. It involves the strategic and
tactical management tasks to achieve positive communications and long term customer
relationships. Berkowitz (2006) also defines customer relationship management (CRM) as the
organizations attempt to develop a

long-term, cost-effective link with the customer for the

benefit of both the customer and the organization. Personal relationships with clients are
important, as loyalty to service firms has been associated with clients personal relationships with
a service provider (Swartz et al, 2000). Therefore, service providers, including financial
institutions like banks, should focus on building relationships with their clients to reap the long
term rewards of support and loyalty.
Benefits from customer relationship management to clients Successful relationships with clients
involve a mutual fulfillment, with benefits to both parties, namely the service firm and the client
(Swartz, 2000).
A client will desire a relationship with a specific service provider if he/she finds that the benefits
to be received will significantly exceed the associated costs of obtaining such benefits. Clients
want firms to manage all client interactions and focus on building a relationship over time
(Wilmshurst, 2002). Clients are willing to build long term relationships based on trust and
mutual respect with firms that provide differentiated and personalized services (Customer
Relationship Management in Financial Services, 2001).
According to Finch (1994), a strong relationship with clients is one in which the client is
completely satisfied; feels appreciated; has learned he/she can trust and depend on the service
provider; and is satisfied that the services offered are reliable. As CRM is a fairly recent
marketing concept, limited research has been undertaken on the dimensions of a relationship
between a service provider and its clients.
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There are about five dimensions of such a relationship have been repeatedly identified in
research, namely trust; bonding; concern; reciprocity; and loyalty (Swartz et al, 2000).
i.

Trust refers to the confidence in the dependability of one party to act in the long term
interests of the other party. A party to a relationship has trust, if the feeling that the other
party can be depended on exists (Beckwith, 2001). In the banking branch of the financial
services industry, for example, clients will trust the bank if they believe the bank will

ii.

always act in their best interests.


The mutual state where two parties act in such a way that a bond is developed is called
bonding. In the banking branch of the financial services industry, for example, clients will
have a strong bond with their bank if they would not switch to another bank and if they feel

iii.

part of the banks valued client base.


Concern exists if two parties have an appreciation of, and caring, emotional feeling for
each other. Based on such concern, each party will consider the view point of the other
party in negotiations and interactions. In the banking branch of the financial services
industry, for example, concern will be evident if clients and bank employees care about

iv.

each other and show respect during negotiations.


Reciprocity occurs when the cooperation between two parties leads to benefits for both
parties. In the banking branch of the financial services industry, for example, reciprocity
will occur when a banking relationship leads to benefits for both the banking institution

v.

(such as income in the form of bank charges) and the client (such as the security of funds).
Loyalty refers to the emotional and psychological commitment between parties. In the
banking branch of the financial services industry, for example, clients will be loyal to a
specific bank if they always return for existing and new banking products and services.
Banks will be loyal if they always listen to their clients enquiries and focus on assisting
them in all their banking needs.

Therefore, the degree of a relationship with a client will depend on the extent of these
dimensions in the interaction between the service provider and the client. However, it is
important to remember that many other possible dimensions exist in this complex aspect of a
relationship between a service provider and its clients.

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2.3.2Critical Elements of Customer Relationship Management


Four critical elements of Customer Relationship Management are to be examined in this study.
These elements are interaction management, relationship development, customer service and
employees behavior.
Interaction Management:

According to the Brown and Gulycz (2002), if an organization

willing to make a stable relationship with its customers, there are different ways to have an
interaction with them including interaction along touch points and distribution channels. The
main purpose is to find out how and when the customers would like to interact with the
organization Gulycz (2002). The interaction activities should be well customized and organized
through the available touch points. The touch points provide in relation to the customers profiles
developed by data gathered from the former records of the customers. Peppers and Rogers
(1997) stress that the touch points must be used for distribution of different products, services
and communication with the customers. According to the works of Lindgreen et al. (2006) and
Peppers et al. (1999), interaction management is implemented by a few methods such as getting
customers feedback and increase the interaction with customers by attractive ways such as using
social network.
Relationship Development: According to Ford (1980), the study of relationship development
primarily involves research into structures and processing of the relationship between customer
and supplier. Lindgreen et al. (2006) argue that the relationship development process concerns an
interaction where connections have been developed between two parties.
The most important activity to achieve relationship development is known as monitoring of the
relationship management process such as service or complaint management Lindgreen et al.
(2006). This relationship processes include procedures, mechanisms, schedules, and activities in
which the products and services have been delivered to customers (Beckwith, 2001). The key
performance indicators such as rate of retention, life time value of the customers, and customer
satisfaction should be set by the organization (Gulycz, 2002). According to the works of Hanley
(2008) and Lindgreen et al. (2006), relationship development can be made through commitment
to convince customers that their feedback is taken seriously.

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Quality of Services: According to Gulycz (2002) in an attempt to understand the factors that
induce customer satisfaction, the concept of service quality is increasingly common in the
literature. Studies show that service quality has a positive effect on consumer satisfaction and
also has a significant relationship with customer loyalty, and the profitability of the firms.
According to the works of (Gulycz, 2002), the quality of services could be implemented by a few
methods such as: Meeting customer expectation of good service level and having many varieties
of products; Provide good quality products with reasonable price and to handle the customer
complains about the products and services tactfully.
Behavior of the Employees: An employee that conforms with organization behavior and value
is likely to strengthen the connection between the consumer and the firm. A reverse pattern of
effects is to be expected when the employee act through his/her own behavior. In these cases, a
consumer may think that the organization actually does not deliver the symbolic benefits that
s/he had expected for and may evaluate the organization in a negative way. In other words, under
circumstances such as the ones described, an employee will probably exert a strong impact on
organization reputation and attitudes (Gulycz, 2002). According Lindgreen et al. (2006), the
effect of positive employees behavior could be expressed by increasing speed of response to
customer and ensure employees are friendly and respectful to customer.

2.3.2Customer loyalty
Customer loyalty is one of the most important factor or the issue facing by the business today.
Unless the companies can retain the loyalty of their customer, they will lose their customer for
repeat purchase and the long term future of that business will be uncertain Linton (1993).
According to Tikkanen et al. (2002), customer loyalty has been defined as the strength of the
relationship between the individuals relative attitude and repeat patronage. Therefore,
Rosenberg (1984) pointed out that considering the brand loyalty reflects the likely habitual
behaviour of the consumers when brand make changes in the price, product features, its
communication and distribution programmes etc. It is an important part of the marketing side for
the expansion of the customer loyalty which focuses on the marketing strategy due to the
benefits related with the existing retaining customer (Salami, 2005). Discovering an exact
measurement of loyalty is very important due to its profitability.

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To obtain loyalty and to outweigh other competitors, service providers must be able to obtain
high levels of customer satisfaction for the service supplied Reinartz et al. (2004). How much
should a company invest in building loyalty so that the costs do not exceed the gains?

2.3.2.1 Effects of Customer Relationship Management on the Customer Loyalty


Oliver (1997) defines loyalty as a deeply held commitment to re buy or re- patronize a preferred
product/service consistently in the future, thereby causing repetitive same brand or same-brand
set purchasing, despite situational influences and marketing efforts having the potential to cause
switching behaviors. Although frequent usage and satisfaction with a product or service are
frequently associated with loyalty, they by themselves insufficiently serve as precursors to
loyalty. A major goal of CRM is to capitalize on future opportunities presented by a core group
of long-term customers. Two approaches for retaining these customers have been loyalty
programs and cross selling. Loyalty programs play an important role in retaining customers and
linking the business to future opportunities. The objective of a loyalty program is to build a
positive attitude toward a brand and provide the customer with an incentive to patronize the
product, service or brand.
A successful program will decrease its members purchase of non-program brands, and increase
their allocation, repeat -purchase rates, usage frequency, propensity toward exclusivity and
switching to program brands (Sharp and Sharp, 2007) Prior studies have found that the
development of loyalty programs in CRM, frequently leads to increases in repeat-purchases and
profitability Reinartz et al. (2004), decreases to price sensitivity (Reichheld, 2006), and raises
barriers of entry to markets by making it difficult for new entrants to court customers away from
existing businesses (Sharp and Sharp, 2007). Furthermore, loyal customers tend not to consider
alternatives or shop for lower prices Gulycz. (2002). The market research studies of, Sharp and
Sharp, (2007) and Reichheld et al (2000) strongly suggest that loyalty programs can increase
business revenue and total customer market share.

2.3.3Customer Retention
Unfortunately, most marketing theory and practice centers on the art of attracting new customers
rather than on retaining and cultivating existing ones (Chen et al., 2002). The emphasis
traditionally has been on making sales rather than building relationships, on pre-selling and
selling rather than caring for customers afterwards. The key to customer retention is customer
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satisfaction and companies need to measure customer satisfaction regularly. A highly satisfied
customer stays longer, buys more and promotes the company for free to other consumers Kotler
(2008). The best thing a company can do is to make it possible for customers to complain as it is
feedback for the company to improve its products and services.
According to Kotler (2008), of the companies who register a complaint, between 54 and 70%
will do business again with the organization if their complaint is resolved and the figure can go
to a staggering 95% if the customer feels that the complaint was resolved quickly. Chen et al.,
(2002), proposed that companies should come up with several mottos which can include: - A
customer is the most important person ever in the office whether in person, telephone, or mail; A
customer is not dependent on us, we are dependent on him; A customer is not an interruption to
our work; he is the reason of it.

2.3.3.1 Effects of customer Relationship Management on Customer Retention


Customer retention is economically more advantageous than constantly seeking new customers
(Boldgett ' et al, 2011) This is because referrals and recommendations from satisfied customers
present the most effective and efficient way to search for new customers to replace those that
defect (Rudra, 2009) Customer retention is one of the most commonly mentioned outcomes of a
strong buyer seller relationship Levine (2000). Within long term business relationships, a
repeated purchase situation is usually at the same times a re-purchase situation. The retention of
customers by building relationships receives top priority in organizations that adopt the customer
relationship management. Customer relationship management places emphasis on key business
processes that help to retain customers. The organization and work members comprise key
processes such as new product generation and customer service. customer relationship
management should create an obsession for quality internally and in external relationships and
build a customer retention culture by centering reward and recognition systems on retention and
loyalty (Kotler, 2008). Relationships may endure for a long time, as continuation reflects the
strength of using learning effects and built-in skills for mutual benefit.
The strength of a relationship is related to necessary investments, which make it costly to switch
counterparts and is enhanced through commitment among interacting parties (Reinartz et al,
2004). Focusing on existing customers through satisfaction leads to lower costs, higher retention,
and higher revenue and enhances profitability. However, authors like Wilmshurst (2002) argue
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that the idea of preventing high value customers from defecting is an important one but not
enough for any business. They argue that defection is not the problem but the change in spending
behavior. They continue to argue that the change in spending behavior accounts for a larger
change in value than defection itself. This is as important for industries whose customers
generally deal with more than one company e.g. consumer goods retailing as it is for industries
like telecom or printing where customers seem to have a single provider. This may mean that
whatever the industry, it is important to retain customers as customer retention is regarded as key
for good business performance. A 5% increase in customer retention can increase profitability by
25 - 85% (Reichheld et.al, 1990).

2.3.4Customer Satisfaction
Customer satisfaction is a psychological concept that involves the feeling of wellbeing and
pleasure that results from obtaining what one hopes for and expects Zablah, A. R. (2014).
However, the emphasis in marketing is shifting from discrete transactions and short-term
economic exchange towards long-term relationships between organizations. In business-tobusiness marketing, customer satisfaction with a product / service can be seen as something that
helps cement the parties for the long term, or drives a wedge between them (Gulycz, 2002).
According to Moller et.al (1995) customer satisfaction in business-to-business marketing is seen
to relate to the inter-organizational exchange process. The satisfaction of business parties can be
seen as a critical turning point in the development of buyer-seller relationships.
Satisfaction is however not a universal phenomenon, this means that not everyone gets the same
satisfaction out of the same experience (Kaufman, 2004). This is because within the same
industry, different customers could have different needs, objectives and experiences that
influence their expectations. Expectations are a mutable internal standard, which is based on a
multitude of factors including needs, objectives, past personal experience etc.
Barclays Bank offers a wide range of services that are designed for ease of use like the different
account types to meet the needs of particular types of customers in a bid to ensure customer
satisfaction.

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2.3.4.1 Overall Customer Satisfaction


Overall customer satisfaction is an evaluation based on the total purchase and consumption
experience with a good or service over time (Andersonet.al, 1994) Rather than capturing the
transient and encounter specific evaluations and emotions, overall customer based on all
experiences with the firm. This overall satisfaction is a cumulative construct summing
satisfaction with specific products and services of the organization, and satisfaction the various
facets of the firm (Garbarino et.al, 1999).

2.3.4.1

Relationship

between

Customer

Relationship

Management

and

Organizational Performance
Different researches have been done about CRM frameworks but there has been limited
academic effort about the issue of the CRM process and firm performance. Some researches tried
to understand the consequences of CRM. There is some evidence focus on CRMs impact on
organizational performance. Different articles showed the positive impact of CRM on different
aspects of performance, for example aspects that are related to the company (Levine, 2000) or
aspect that are related to customers (Gustafsson et al, 2005).
Reinartz et al. (2004) attempts to relate CRM activities that lead satisfaction to a different
business performance measures. There are some other studies that show a relationship between
the activity of customer satisfaction and business performance (Kamakura, de Rosa, 2002). There
is also some study that expresses the association between activities that lead to customer loyalty
and commitment - profitability and retention (Kotler, P. 2008).
Reinartz et al. (2004) also tried to establish a link between CRM and organizational performance.
As mentioned before they found CRM has three distinct customer relationship-related stages:
initiation, maintenance, and termination. They found CRM has an impact on perceptual
performance across the three stages. In the initiation and maintenance stages, some support was
found for CRM's impact on Performance, but little support was found for CRM's impact on the
termination stage.
Some researchers stress that sales force efficiency and effectiveness will improve by applying the
CRM process (Chin, 2002). He expressed that one potential CRM benefit that did not make the
list includes improved employee motivation
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Yonas, B. (2013), Believed an organization can develop time of product modification for a
customer compared to competition and increase a number of newly introduced products
compared to the competition. She also expressed CRM cause increase sales volume of individual
customers and also sales revenue with individual customers. Customer satisfaction and loyalty is
as consequences of CRM process too.
Kim et al (2003) also suggested a model that emphasizes CRM process can improve customer
satisfaction, increase customer loyalty, reduce customer cost and increase customer revenue and
profit for organizations.
The length of interaction with customers will be increased and also the time of delivering
services to customers will be decreased for organizations that apply CRM.
Levine (2000) expressed that CRM can decrease the marketing and sale cost. It can also decrease
the customer loose rate and increase customer value. Customer relationship management helps to
improve customer perception about product and

service. So it can lead the increment of

revenue.
Picton et al., (2005) emphasis that customer relationship management can impact on different
measures of performance. He showed CRM can decrease the marketing and service cost. The
revenue of the company also increases by cross /up selling. CRM process stress on customer
segmentation based on customer needs and information. So the company can improve product
/service quality.
Yonas, B. (2013) expressed if companies notice on CRM process, it can help them to increase
their profit and also the shareholder revenue. Due to one of the important activities of CRM
process is gathering data about current and potential customers and creating a database, so the
employee has access to important information about customers and their needs and can improve
their service based on their requirements so it can lead employee satisfaction.

2.3.5Other Factors Which Impact Performance


2.3.5.1 Good Risk Management and Performance
The general financial theory believes that the higher the risk, the higher the returns
(Performance). Rudra et el, (2008) found out that Returns on the banks stocks appear to be
17

sensitive to risk management capability of banks. While Lindgreen (2011) found that highly
leveraged microfinance institutions perform better by reaching out to more clientele, enjoy scale
economies, and therefore are better able to deal with moral hazard and adverse selection,
enhancing their ability to deal with risk. However, higher risk threatens the long term survival of
the bank, Reinartz et al. (2004). Equilibrium between risk and return must be maintained through
Recognition of both the potential value of opportunity and the potential impact of adverse
effects, Swartz (2004), As an approach to risk management, the Capital Asset Pricing Model,
suggests elimination of unsystematic risk through diversification and investors rewards should be
based on systematic risk. Nellis et al., (2004) found out that non-banking activities are less risky
and thus can be used to diversify the risk inherent in the commercial banking firm. Such
diversification could engulf real estate, fund management, insurance, and broking activities,
(Panayiotis, 2008). The researcher is of the opinion that since operational risk cannot be
eliminated completely through diversification, it can be categorized as systematic risk and has to
managed effectively.

2.3.5.2 Service Quality


Service or product quality and customer satisfaction both have long been considered crucial for
success and survival in todays competitive market. But it is also important to understand what
contributes to customer satisfaction that could be a key to achieve competitive advantage
(Zeithaml et al., 1988).
Consumers are now demanding higher quality in products /services than ever before
Eichengreen, 2000). The important feature of service firms is to focus on quality, the way it is
produced and being offered to the final customer. It is seen that continuous improvements in the
quality of services perceived according to the consumer expectations positively affects the
satisfaction level and customers perceptions about the company.
However, it is worth noting that there are several distinct conceptualizations of quality. Just as
current quality is expected to have a positive influence on overall customer satisfaction
(Anderson et al., 1994). So we can say that, the effect of expectations of quality on customer
satisfaction is positive and significant Eichengreen, et al.,( 2000). Delivering quality service is
considered an essential strategy for success and survival in todays competitive environment
(Dawkins et al., 1990).
18

Service quality is a determinant of whether a customer ultimately remains with or defects from a
company (Zeithaml et al., 1996). In marketing management literature service quality takes a
prominent position. It is usually defined as customers impression of relative inferiority or superiority
of service provide and its service. Also it is often considered similar to overall attitude of customer
towards company.

2.3.5.3 Regulatory Environment


The performance of banks can be affected directly by principles of a legal framework because
regulations refer to a variety of government interventions into their operations and markets. It is
a tool for the government to correct shortcomings of entities in the economy. In this sense, the
legal framework is designed in such a way that it can both adjust any misconduct of banks to
ensure a fair business environment and enhance their performance (Kaufman, 2004).
One of the key aspects of the financial reform in developing countries is financial liberalization.
It refers to the process of lifting or releasing government barriers on operations of banks such as
regimes of foreign exchange rate, deposit rate ceilings, investing and new lending power, and
entries by financial intermediaries (Kaufman, 2004). Releasing these restrictions created
flexibility, independence and determination for banks in their business, which brought about
more efficient resource allocation and higher welfare benefits for society. However, removing
these barriers results in new challenges in controlling and managing loans and liquidity due to
the boom in lending (Eichengreen et al., 2000).
Monetary policy is an effective tool which is used for controlling and maintaining the price
stability, market interest rates and exchange rates. Central banks with monetary policy via main
instruments such as legally required reserves, open market operations, discount and rediscount
rates control the monetary supply in the economy in terms of easy monetary or tight monetary
policies (Nellis et.al, 2004). By implementing monetary policy, central banks affect market
interest rates in terms of lending and deposit rates and prices of products and services in the
economy, which impact the performance of commercial banks.

19

2.4 The Conceptual Model


INDEPENDENT VARIABLE
CUSTOMER RELATIONSHIP

DEPENDENT VARIABLE

MANAGEMENT

BANK PERFORMANCE

Trust

Profitability

Bonding

Customer loyalty

Concern
Reciprocity
Loyalty

Customer Retention
MODERATING VARIABLES

Customer satisfaction

Regulatory Environment
Quality of services

Good Risk Management


Source: Adopted from Salami (2005) and modified by the researcher.
The conceptual model above illustrates that customer relationship management through trust,
bonding, concern, reciprocity and loyalty which can lead to high levels of profitability, high
levels of customer loyalty, the desired customer retention and the invaluable customer
satisfaction, within an organization thus creating a customer oriented organization with customer
focus to compliance the regulatory environment, improvement to the quality of services and
good risk management which will lead to bank performance where by the client is willing to
transact again and to recommend someone else.

20

CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
This chapter focuses on the research design which will be employed in the study, Area and
population of study, sample and sampling design used, research instruments, data analysis and
the problems experienced during the study.

3.1 Research Design


The researcher will adopt cross sectional survey design on the aluminum and steel industry. The
study is to be both descriptive and analytical in nature, aimed at determining the effect of
relationship marketing on customer retention in the industry.

3.2 Study Area


The study area will be Wandegeya- Kampala since most Barclays Banks Wandegeya branch are
based there.

3.3 Study Population


The population of the study will comprise of both employees and customers of Barclays Banks
Wandegeya branch. For the findings of a study to be representative, it should use a sample that
accurately represents the population under study (Berdie et.al, 1974). The population of
employees and Barclays Banks Wandegeya branch is 27 and 33 respectively.

3.4 Sample Size and Selection Procedure


The researcher will employ purposive sampling when selecting respondents who have
experience or knowledge about the problem under study. The respondents which will be
interviewed are those known to be conversant, experienced and well informed on the subject.
The sample will constitute 52 respondents broken down as 40 customers and 12 members of
staff. The 40 customers are chosen on the basis of having been clients with Barclays Banks
Wandegeya branch over the last five years, while the 12 employees are chosen on the basis of
being in direct personal contact with customers on a daily basis.

21

The sample size will be determined using Krejcie and Morgan (1970) who assets that in
correlational research at least 30 subjects are required to establish a relationship.
The table below shows the sample selection adopted from Krejcie and Morgan (1970). Where N
= Population Size and n = Sample Size.

N-n

Nn

N-n

N-n

N-n

10 - 10

100 80

280 - 162

800 - 260

2800 - 338

15 - 14

110 86

290 - 165

850 - 265

3000 - 341

20 - 19

120 92

300 - 169

900 - 269

3500 - 346

25 - 24

130 97

320 - 175

950 - 274

4000 - 351

30 - 28

140 103

340 - 181

1000 - 278

4500 - 354

35 - 32

150 108

360 - 186

1100 - 285

5000 - 357

40 - 36

160 113

380 - 191

1200 - 291

6000 - 361

45 - 40

170 118

400 - 196

1300 - 297

7000 - 364

50 - 44

180 123

420 - 201

1400 - 302

8000 - 367

55 - 48

190 127

440 - 205

1500 - 306

9000 - 368

60 - 52

200 132

460 - 210

1600 - 310

10000 - 370

65 - 56

210 136

480 - 241

1700 - 313

15000 - 375

70 - 59

220 140

500 - 217

1800 - 317

20000 - 377

75 - 63

230 144

550 - 226

1900 - 320

30000 - 379

80 - 66

240 148

600 - 234

2000 - 322

40000 - 380

85 - 70

250 152

650 - 242

2200 - 327

50000 - 381

90 - 73

260 155

700 - 248

2400 - 331

75000 - 382

95 - 76

270 159

750 - 254

2600 - 335

100000 - 384

Adapted from (Krejcie & Morgan, 1970, p.608)

3.4

Data Collection Methods

Kothari (2004) defines data collection methods as techniques employed in gathering of


information for research operations. A number of instruments are to be employed to gather the
relevant data and the following are some of the methods that are to be used.

22

3.4.1

Questionnaire

This involves using a predetermined set of questions designed to collect information from a
respondent on the subject under study. The researcher believes that the use of this tool can be
useful in exploratory studies in which various dimensions and facts of a problem are examined,
but in which hypothesis are not posed and tested (Kothari, 2004). Both closed and open ended
questionnaires are used.

3.4.2 Interview
According to Grazianno (2010) an interview can be defined as a method of data collection where
the researcher/investigator follows a rigid procedure and seeks answers to pre-conceived
questions through personal interviews. This involves face to face conversation between the
researcher and the respondents for the purpose of obtaining information. This is useful as it
enables gathering of information on attitudes, values, beliefs and motives of the respondents
towards relationship marketing and customer retention.

3.4.3 Observation
This involves a purposive or intentional examination of something, particularly for the purpose
of gathering data. The University of Harvard defines observation as the unobtrusive method of
gathering data. This provides the researcher with a richer and more direct account of the
phenomena under study. Observation will be used because of its provision of firsthand
information and its supplements on other methods (Efuetngu 2005). Observation is made on
customer relationship management and performance.

3.4.4 Document Study


This involves the study of both primary and secondary documents such as strategic plans,
policies among others.

3.5 Data Analysis and Presentation


In analyzing and presenting data, qualitative analysis of data which involves the editing of data
during and after collection to remove/sort out possible mistakes, creating themes and systematic
description of the contents in a summarized form is used (Pramod et.al, 2011).

23

The researcher interprets and makes explanations of content gathered from the field basing on
the research objectives. Any explanations of meanings, discussions and interpretation of
emerging information and data is presented in form of tables

3.6 Limitations of the study


There could be lack of cooperation by respondents during interviewing due to the fact that sales
are considered private.
There might also be negative response from the respondents due to fear of the information given
out ending up in the hands of wrong individuals which may taint the image of the company.
The time frame given to me for completing he research may not be enough.

3.6.1 Delimitations of the Study


The lack of cooperation due to fear of information misuse is anticipated and faced in the course
of research, but I the researcher will ensure that the interviewee is informed of the confidentiality
and purpose of information obtained, in other wards the workers are assured that information got
is strictly for education purpose only.

3.7 Procedure
The researcher will receive an introductory letter signed by School dean of school of business
administration which will introduce the researcher to the respondents. The letter will contain the
topic of the study and the objective of the study. The researcher will address the respondents
briefing them on their role in the study which will be to fill the questionnaires. For the case of the
interview, an appointment will be sought from the respondents after which interviews are
conducted. Data will be recorded as the interview session goes on.

3.8 Ethical Considerations


The researcher will seek the respondents consent before involving them in the research. This
includes briefing the respondents about the research objectives and roles of the respondents and
how they are going to benefit from the research. The researcher will also assure the respondents
about the degree of confidentiality of the information that is gathered from them.

24

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