THE IMPACT OF EFFECTIVE CUSTOMER RELATIONSHIP TO IMPROVE

CUSTOMER SATISFACTION AND RETENTION OF BANKING SECTOR

COR JESU COLLEGE, INC.

Master in Business Administration

Major in Business Management

In Partial Fulfillment

Of the Requirements for the Subject

Management Communication Arts

Submitted by:

FATIMA M. CHIN
 THE IMPACT OF EFFECTIVE CUSTOMER RELATIONSHIP TO IMPROVE

CUSTOMER SATISFACTION AND RETENTION OF BANKING SECTORS

OBJECTIVE OF THE STUDY

This study aims to determine if customer relationship management have significant

effect on customer satisfaction and retention.

STATEMENT OF THE PROBLEM

Significantly it seeks to answer the following questions:

1. What is the level of customer relationship management?

2. What is the level of customer satisfaction?

3. What is the level of customer retention?

4. Do customer relationship management significantly affect the customer

satisfaction and retention?

CONCEPTUAL FRAMEWORK

Independent Variable Dependent Variable

1. Customer Relationship 1. Customer Satisfaction

Management
2. Customer Retention
REVIEW OF RELATED LITERATURE

Customer Relationship Management

In recent years, Customer Relationship Management (CRM) has gained much

momentum to make performance of businesses more credible and trustworthy (Abbas,

A., Chachar, A. A., & Bilal, A. 2017). The utilization of CRM and its dimensions helps in

expanding value for the customers, long term relationships customer satisfaction and

retention along with enhancement of sales (Yim et al., 2004). Every business is trying to

embrace customer centric models in the manufacturing concerns and service sectors.

They are aware about the fact that CRM can put a benchmark in achieving the

competitive edge by attracting the customers positively (Abbas, A., Chachar, A. A., &

Bilal, A. 2017).

The way of serving clients efficiently and effectively in businesses eventually

expects to maximize profits while having a long term and meaningful relationship with the

client (Peppers & Rogers, 2004). Maintaining meaningful relationship with customers, it

makes lifetime worth and fulfilment towards businesses. It additionally portrays how

various components of CRM brings positive and beneficial results (Yim et al., 2004).

Businesses who consider CRM in this period will definitely make progress due to proper

planning and clear objectives yet inappropriate changes and poor integration in strategic

planning leads to failure (Foss et al., 2008).

Customer Satisfaction

In line with Tsoukatos and Rand (2006), the key to long-term business success is

customer satisfaction. It has been discussed using many different models and
taxonomies. Khirallah (2005) defined customer satisfaction as a customer’s perception

that his or her needs, wishes, expectations, or desires as to products and services have

been fulfilled. Razak et al. (2007) also reported that overall satisfaction is the outcome of

customer’s evaluation of a set of experiences that are linked with the specific service

provider. It is ascertained that greater satisfaction is resulted from organization’s

concentration on client’s expectations. If the customers of an organization are satisfied

by their services the result is that, they will be loyal to them and consequently be retained

by the organization, which is positive for the organization because it could also mean

higher profits, higher market share, and increasing customer base (Karatepe et al., 2005).

The research by (Rust & Subramanian, 1992) confirmed that customer satisfaction has a

direct positive effect on customer retention and companies.

Due to increased competition customer satisfaction has become important and it

is considered very important factor in determination of bank’s competitiveness (Berry et

al., 2002). Continuous measurement of satisfaction level is necessary in a systematic

manner (Chakravarty et al., 1996). Cronin et al., (2000) mentioned in their study that

satisfied customer repeat his/her experience to buy the products

additionally produce new customers by communication of positive message concerning it

to others. On the other hand, dissatisfied customer may switch to alternative

products/services and communicate negative message to others. Customer satisfaction

is a set of feeling or outcome attached with customer’s experience towards any product/

service (Solomon, 1998). Hence, organizations must ensure the customer satisfaction

regarding their goods/services.

Customer Retention
 Customer retention can be described as the marketing goal of keeping your

customers from going to the competitor (Ramakrishna, 2006). One of the important

outcome which results from CRM is retention or loyalty of the customers with that specific

organization. Dawkins & Reichheld, (1990) defined customer retention as the

number of customers doing business with a firm at the end of a financial year, expressed

as percentage of those who were active customers at the beginning of the year.

Customer retention is the key benefit of relationship marketing as termed by several

prominent authors (Sheth & Parvatiyar, 2002); (Žvireliene & Bučiuniene, 2008); (J. b.

Shao & X. X. Long, 2008); (Manoj & Sunil, 2011); (Jyh-Fu Jeng & Bailey, 2012).

Based on the underlying assumption that customer retention affects customer

satisfaction, customer perceived value, trust relationships and switching cost (Srivastava,

M., Naik, S., & Narula, A., 2018).

Effect of Customer Relationship Management on Customer Satisfaction and

Retention

Today, many businesses such as banks, insurance companies and other service

providers realizes the importance of customer relationship management and its potential

to help them acquire new customers, retain the existing ones and their life time value.

Customer service management is a key component of business today. The concept is

very crucial as it

incorporates customer, customer service, customer satisfaction, customer value,

customer loyalty, and customer retention (Singh, H. B., & Kumar, S. 2015). CRM is the

strategy which enables the banks to analyze the customer profiles, to direct their needs

to the potential profitability areas and establish the necessary actions to

achieve customer satisfaction, competitive advantage and thus the profitability (Ogbadu,

E. E., & Usman, A. (2012).

In the words of Joyner (2002) as quoted by Pokharel (2011) states that, the

banking industry is facing an ever increasing level of competition around the world as the

dynamics of the business change. Onut et al (2007) observes that the objectives of CRM

in the banking sector are to help businesses use technology and human resources gain

insight into the behavior of customer and value of those customers.

Implementing customer relationship management, Mihelis etal, (2001) as quoted by Onut

etal, (2007) considers the implementation of CRM in the banking sector to be

focused on the evaluation of the critical satisfaction dimensions and the determination

of customer groups with the distinctive preferences and expectations in the private bank

sector.

However, customers today are looking for better place to go that their businesses

can be assisted. Any CRM programs in the banking sector must focus on the mutual

benefits of both the company and the customers. And implementation process of CRM

should require and involve the top management if it must succeed.

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