COLLAGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

Study on the problem of customer relationship management

and its effect on customer loyalty
( in the case of Megela branch)

A RESEARCH PROPOSAL ON PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR BA DEGREE IN MANAGEMENT

BY: Hassen Ahmed

ADVISOR: Teklay B. (MBA)

May … 2008 E.C

DIREDAWA ETHIOPIA
II
 Acknowledgment
First of all thanks to almighty Allah the source of every knowledge and
wisdom: next, I would like to express my deep gratitude to my advisor Mr.
Teklat B. for his genuine advice, critical comment and closer supervision.

My heartfelt gratitude also goes to the top managers, the employees, and the
customers of commercial bank of Ethiopia, megalla branch who have
provided me with the necessary data.

Finally yet importantly, I am highly grateful to all persons who have co

operated me in the development and successful completion of this paper.

I
ABSTRACT
The study was conducted on the problem of customer relationship
management and its effect on customer loyalty in case of commercial bank
of Ethiopia, Megalla branch. The major objective of this study is to assess
the problem of customer relationship management and its effect on customer
loyalty and to identify the importance of customer relationship management
in Commercial Bank of Ethiopia, Megalla branch to keep (retain) its
customers loyal. The respondents to the study were both employees and
customers of commercial bank of Ethiopia, Megalla branch. All the
necessary data for the accomplishment of the study were collected through
primary source of data, from published documents and from the internet.
The primary data were collected through distributing questionnaire. The
sampling method that had been used in this study was simple random for
employees and convenience sampling technique for the customers. The
results of data were organized and analyzed by using descriptive method
through cross tabulation; finally the better, supposed conclusion and
recommendation had been given on each problem identified.
From the enquiry the researcher has found that, even though majority of the
clients of the Bank are satisfied by the service rendered by the Bank, they
are not loyal customers of the bank.

II
Acronym

CRM: Customer Relationship Management

DDU: Dire dawa University

CBE: Commercial Bank of Ethiopia.

III
Table of Contents
Acknowledgment.............................................................................................I
ABSTRACT...................................................................................................II
Acronym........................................................................................................III
Table of Contents..........................................................................................IV
List of Tables................................................................................................VI
CHAPTER ONE.............................................................................................1
1. Introduction.................................................................................................1
1.1. Background of the Study......................................................................1
1.2 Statement of the Problem.......................................................................3
1.3. Objective of the Study..........................................................................4
1.3.1 General Objective............................................................................4
1.3.2 Specific objectives...........................................................................4
1.5 Scope of the Study.................................................................................4
1.6 Significance of the Study.......................................................................4
CHAPTER TWO............................................................................................5
2. Literature Review........................................................................................5
2.1. Definition of Customer Relationship Management..............................5
2.2. Why do Organizations need and Undertake Customer Relationship
Management?........................................................................................5
2.1.1 Benefit of Customer Relationship Management.............................6
2.3. Achieving Good CRM..........................................................................6
2.4. Customer Loyalty.................................................................................7
2.4.1 Behavioral Loyalty..........................................................................7
2.4.2 Attitudinal Loyalty..........................................................................7

IV
 2.4.3 Benefit of Customer Loyalty...........................................................8
2.5. Antecedent factors of customer Loyalty...............................................8
2.5.1 Customer Satisfaction.....................................................................8
2.5.2 Customer Relationship Management (CRM)..................................9
2.6 Customer Relationship Management in Banking Industry..................10
2.7 Challenges of CRM in the Bank..........................................................10
CHAPTER THREE.......................................................................................12
3. Research Methodology and Design..........................................................12
3.1 Study Design........................................................................................12
3.2.3 Target Population..........................................................................12
3.3 Sample Size Determination.................................................................12
3.4 Sampling Technique............................................................................13
3.5 Source of Data.....................................................................................14
3.6 Method of Data Collection..................................................................14
3.7 Data Collection Procedure...................................................................14
3.8 Method of Data Analysis.....................................................................15
CHAPTER FOUR.........................................................................................16
CHAPTER FIVE...........................................................................................28
5. Summary, conclusion and Recommendation............................................28
5.1 Summary of Major Finding.................................................................28
5.2 Conclusion...........................................................................................30
5.3 Recommendation.................................................................................31
Reference.......................................................................................................33
Appendix.......................................................................................................35

V
List of Tables

Table 4.1 Sex and age distribution of the respondents .....................16

Table 4.2 Education and Occupation of Respondents ......................17
Table 4.3 Shows Whether the Customer are usual or not .................18
Table 4.4 How often do you use the bank service.............................18
Table 4.5 Customer use to provide complain (comment) to the Bank 19
Table 4.6 Method of clients use to provide comment or suggestion
to the bank. ..................................................................................19
Table 4.7 Customer satisfaction.........................................................20
Table 4.8 Customer loyalty ...............................................................21
Table 4.9 Handling customer complaints .........................................22
Table 4.10 Work Experience of employees in the bank ...................23
Table 4.11 Satisfaction of employees on their duties ......................24
Table 4.12 Customer complain in the bank ......................................24
Table 4.13 Customer retention ..........................................................25
Table 4.14 Weakness in the bank in providing service..................... 26
Table 4.15 Customer handling ..........................................................26

VI
CHAPTER ONE

1. Introduction

1.1. Background of the Study

Previously marketing efforts had been directed majorly at gaining new customers (Sivadas and
Baker-prewitt, 2000). However, with increased competition and low customer switching costs,
building customer loyalty is now a critical goal for organizations (Johnson et al, 2004).

The key to build lasting customer relationships is to create superior customer value and
satisfaction. In their view, Kotler and Armstrong (2008:13) satisfied customers are more likely
to be loyal customer and to give the company a larger share of their business. Targeting
acquiring, and retaining the right customer is at core of many successful business firms once a
firm has won customer it sees as desirable, the challenge shift to building relationship and
turning them in to loyal customers who will generate growing revenue for the firm in the
future. Customer relationship management concerned with customer data management, which
is managing detail information about individual customers and carefully managing customer
touch points in order to maximize customer loyalty by delivering superior customer value and
satisfaction (Antony lawerna2010).
Customer relation management is one of several antecedent of loyalty. Because customer
relationship management is the “seed” out of which loyalty develops, enhancing customer
relationship management is an important means for achieving loyalty. Failure to meet customer
needs and expectation and failure in maintaining effective customer relationship management
technique is assumed to result in dissatisfaction (Zeithaml and Bitner, 2003), which is
considered as the major causes of customers exit from organizations (Buttle and Burton, 2001).

1.2 Statement of the Problem

Customer relationship management approach that enables organization to identify, attracts, and
increase retention of profitability customer through improved relationship management
(Hobby, 1999 cited in Ramkelawon, 2010). However, successful customer relationship
management focuses on understanding the needs and desires of the customer and is achieved
by placing these needs at the heart of the business by integrating them with the organization’s
strategy, people, technology and business processes (Pritesh et al., 2011).

1
Many researchers have been conducted on customer relationship management before.
KAWAKURA ET AL (2003) studied on choice models and customer relationship
management, Rajeb Nurwin Fozia, simon Mashiamwame and Kennedy Natabo Otiso in
common studied the impact of customer relationship management as a strategy for competitive
advantage in Kenya public university, Antul parvatiyer and Jagdish N.sheth studied under the
title customer relationship management as Emerging practice, process and disciple, and
Solomon amare (2004) has conduct a research on the assessment of customer relationship
management practices.
All the above studies were conducted on the area of customer relationship management. But all
in common doesn’t give focus on the problem of customer relationship management and its
effect on customer loyalty. So the researcher will try to fill this gap.

This study answers the following basic question

1. What are the weakness of the bank regarding customer relationship management?
2. What measure does the bank use to make customer loyal?
3. How the banks handle its customer complaints?

1.3. Objective of the Study

1.3.1 General Objective

The general objective of the study is to assess the problem of customer relationship
management on commercial bank of Ethiopia, megala branch and its effect on customer
loyalty.

1.3.2 Specific objectives

1. To identify the different measure that the bank use to make customer loyal.
2. To find out how the company (bank) handle its customer complaints to measure the
satisfaction of its customer.

2
3. To identify strength and weakness of the bank regarding its customer relationship
management practice.
4. To understand customer relationship management as antecedent of customer loyalty.

1.5 Scope of the Study

Even though, commercial bank of Ethiopia have many branches, due to some constraints like
time and budget these study should be limited itself on commercial bank of Ethiopia, Megala
branch on customer relationship management and its effect on customer loyalty.

1.6 Significance of the Study

The outcome that drawn from this study was help the bank in order to identify
the main customer oriented areas or touch point that should be carefully
addressed to improve with customer needs and also to identify the strength
and weakness of the bank in dealing with its customers. Then to take
corrective action on the system that the study will find as a barrier. It used
arrange their customer relationship in order to achieve their profit motives. The study

also used as a reference for other researcher who is interested in this subject
matter and it also help the student in partial fulfillment of the requirement of
bachelor art degree (BA degree).

CHAPTER TWO

3
2. Literature Review

2.1. Definition of Customer Relationship Management

Different authors define customer relationship management indifferent time some of these are
listed as follows. Customer relationship management is the process of building and maintaining
profitable customer relationship management by delivery superior customer value and
satisfaction and involves carefully managing customer touch point to maximize customer
loyalty or its strategy, process and enabling technologies that allow organization to acquire and
retain its best customer (Philip customer kottlre 12th edition, 2006).

Customer relationship management concerns the relationship between the organization and its
customer. Customers are the life blood of any organization be it global corporation with
thousands of employee and multibillion turn over or sole trade with a hand full of regular
customer (Ellen Gifford, 2002).

Customer relationship is a corporate wide approach to understanding customer behavior

influencing it through continuous relevant communication and developing long term
relationships to enhance customer loyalty acquisition, retention and profitability (Sharp, 2003).

2.2. Why do Organizations need and Undertake Customer Relationship Management?

As Ellen Gifford stated the ultimate purpose of customer relationship management, like any
organization initiative, is to increase profit. In the case of customer relationship management
this is achieved mainly by providing a better service to your customer than your competitor.
Customer through a good customer relationship management capability will also reduce cost
wastage and complaints effective customer relationship management also reduce staff stress
because, a major cause for stress reduces as service and relationship improve.

2.1.1 Benefit of Customer Relationship Management

Gifford, (2002), states that there are significant business benefit derivable forms an integrated
customer relationship management approach. These include:
 Reduced costs, because the right things are being done

4
  Increase customer satisfaction because they are getting exactly what they want (i.e.
exceeding expectations).
 Growth in number of customers
 Maximization of opportunities (i.e. increased service, referral etc).
 Long term profitability and sustainability
 Highlighting poor operational process
 Offering a big advantage of competition to the enterprises
 Reduction in procedure cost
 Improvement of customer loyalty increase to race of scaft loyalty.

Benefits to customers, Ansoff (1990:26) as quoted by Onu (2008) includes:

 Risk and stress reduction
 High quality service since the service provider becomes knowledgeable about
customer requirement.
 Social and status benefit from continuity relationship with a supplier since repeated
contract may develop relationship resembling personnel friendship which can feed
ones status.
 Avoiding switching cost because maintaining a relationship with suppliers avoids
the cost associated with switching to a new provider.

2.3. Achieving Good customer relationship management

Achieving good customer relationship management required many organizations to adopt new
perspective (Ellen Gifford) clarity as follows. Consider the following
 Traditional customer is something you ‘do to’ the customer.
 Modern customer relationship management is ‘done with’ the customers.
The second statement is emphasized the big difference between conventional traditional
service, and the modern progressive customer relationship management approach, your
relationship with customer should be on going cooperative and built for long term
organizations who have many transitory relation with customer the cost of keeping existing
customer is a tiny fraction of cost of acquiring new customers (Ellen Gifford, 2002).

5
2.4. Customer Loyalty
There is still no universal agreement on the definition of loyalty. However, researchers have
agreed that customer loyalty les two dimensions; behavioral and attitudinal dimensions
(Skogland and Siguaw, 2004).

2.4.1 Behavioral Loyalty

Behavioral loyalty is a customer’s overt behavior toward a specific product/ service in terms of
repeat purchasing pattern a repeat purchasing pattern. It can be determined as actual purchase
frequency, the portion of occasions in which a specific brand is purchased as compared to the
total number of purchased brand. According to Kumer and Shah (2004), behavioral loyalty is
observed form purchase behavior if a business can successfully achieve repurchase behavior,
then it is on the way to generating customer loyalty (Gee et al, 2008).

2.4.2 Attitudinal Loyalty

Researcher widely agrees that the mere measurement of repeat purchase does not capture the
whole meaning of loyalty. Some scholars argue that behavioral loyalty (repeat purchase) alone
is too simplistic and odes not capture the multidimensionality of loyalty (Kumer and
Shah2004). Attitudinal loyalty represent a high order, or long term, commitment of customer to
the organization that can not be inferred by merely observing customer repeat purchase
behavior. This as often results as an outcome of a long fruitful relationship between the
organization and the customer over the time (Kumer and Shah, 2004).

Van Looy et al. (2003 P. 59) putting in to consideration both behavioral and attitudinal aspects
pf loyalty, defined customer loyalty as “customer behavior characterized by a positive buying
pattern during an extended period (measured by means of repeat purchases, frequency of
purchase) and driven by positive attitude towards the company and its products or services”.
The consideration of attitude in addition to behavioral representation makes loyalty not just
richer conceptually (loyalty is a process, not just an act) but also more useful for practical
purpose. (Dick and Basu, 1994)

2.4.3 Benefit of Customer Loyalty

Customer loyalty generates numerous benefits. According to Rowley (2005), a stable customer
base is a core business asset that enables improved organizational profitability. Chaudhuri and

6
Holbrook (2001) suggest that a high customer loyalty implies a higher market share and an
ability to demand relatively a higher price compared to those competitors. Loyal customers are
cheaper to serve; less price sensitive, foster positive word of mouth promotion.

Customer loyalty creates a stable pool of customers for firms products or services Loyal
customers demand less time and attention from the organizations they patronize and behave
favorably towards the company in a variety ways (e.g. forgiving product (service) because they
are emotionally committed (Crosby, 2002)., As result, they are a major source of sustained
growth (Anderson and Mittal, 2000).

2.5. Antecedent factors of customer Loyalty

Maintaining customer is increasingly difficult in many industries consequently; companies
need to consider the antecedents of customer loyalty and their relative importance (Lewis and
Soureli, 2006). It is important to gain insight to the two antecedent factors of customer loyalty
customer satisfaction and customer relationship management (CRM).

2.5.1 Customer Satisfaction

Satisfaction is one of the several antecedents of loyalty (Buttle & Burton, 2001). Customer
satisfaction is the ability to bridge the gap between customer expectations and product/ service
delivery”. (Dafty, 2011 P. 44), It is achieved when the customer expectations about the
performance of service or product being consumed are met or exceed (Anton et al.. 2007). The
strong focus on customer satisfaction is based on the implicit assumption that there is strong
positive relationship between customer satisfaction and loyalty (Homburg and Giering, 2001).

Failure to meet customer needs and expectations is considered as a major cause of customers
exit from organization because it is assumed to result in dissatisfaction (Zeithaml and Bither,
2003). Therefore organizations must be customer focused/driven to gain intrinsic knowledge of
the customer’s needs and expectations. Moreover, an organization’s capacity to satisfy
customers need prevent both customer withdrawal and the arrival of new competitors (Gomez
et al, 2004).

7
2.5.2 Customer Relationship Management (CRM)
“All business is based on relationships. The firm only has to make them visible and meaningful
for its customer provided that the customer wants them” (Grunroos, 2007 p.23).

Customer relationship management is the overall process of building and maintaining

profitable customer relations by delivering superior or value and satisfaction (Kotler and
Armstrong, 2006. p. 13). Customer relationship management is an attempt to modify customer
behavior over time and strengthen the bond between the customer and the company, with the
purpose of maximizing the value of the relationship to the customer for the customers benefit
and the company’s benefit. Customer relationship management could enhance a company’s
ability to achieve the ultimate goal of retaining customers and so gain strategic advantage over
it competitors (Nguyen et al… 2007). Customer relationship management allows organizations
to distinguish between customers that are profitable, nearly profitable, and unprofitable and
have the potential to be profitable (Bull, 2003).

The customer awareness of organization customer relationships could raise their loyalty
toward the corporation, which would in turn increase company income, enhance market share,
and achieve other corporate objectives (Hsieh & Li, 208).

2.6 Customer Relationship Management in Banking Industry

Today, many businesses such as banks, insurance companies and other service provider
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. Onut et al (2007)
argues that customer relationship management is a business strategy of identifying the banks
most profitable customer & prospects, and devotes time and attention to expanding account
relationships with those customer through individualized marketing and customized service all
delivered through the various sales channels that the bank uses.

The banking industry is facing an ever increasing level of completion around the world as the
dynamics of the business change bank have understood the need to capitalize on the new
technologies to gain advantage in the competition by exploiting their customer base, brand
value and costly infrastructure investment in order to increase profits as there is a direct link

8
between the customer satisfaction and profitability. However the banks faced challenges in
implementing Customer relationship management it include
 lack skilled people
 quality of customer data
 using customer data more intelligently
 using right technologies

2.7 Challenges of customer relationship management in the Bank

As (Antony Lawrence, 2010) stated that customer relationship management is not easy to
understand but when it come up to implementation it becomes very difficult for the bank.
Generally it is observed that the bank do not fail to select right tools but they fail to implement
it improper way. Banks are finding it difficult track and pitch profitable customers across the
various contact channel such as ATM, el mail, voice recognition and wireless. Bank should
train customer to serve themselves and connect customer focused marketing campaign across
the various service and products.

The challenge for the bank is to retain and depend on the profitability of existing customer
relationship. In attempt to be more profitable the banks have been come competitive and more
customers oriented. The customer relationship management is one of such tools which help in
meeting the customer expectation according to their changing needs. Banks have started
acknowledging the importance of the customer in developing their business. They have
recognized that is essential to protect and grow its customer base and ultimately its
profitability.
The banks can do this by building relationship with its customer. To meet the customer need to
beat the computation they must deliver superior quality service. The customer relationship
management approach adopts by the bank focused on maximizing the value of customers and
the bank. There are key derivers to customer loyalty such as: positive staff attitude, honesty,
integrity, productive advice and delivery promised service and so on (Antony Lawrence, 2010,
2nd edition, page 146-147).

9
CHAPTER THREE

3. Research Methodology and Design

3.1 Study Design

The research was undertaken on the tile “The problem of customer relationship management
and its effect on customer loyalty in case of commercial bank of Ethiopia, Megala branch.”
This was carried out by using descriptive method.

3.2 Source of Data

To conduct this study the researcher used both primary and secondary source of data. The
primary data should be questioners for the employees and customers and interview with
manager of bank.
The secondary data was different documents and related literature, regarding customer
relationship management and customer loyalty.

3.3 Method of Data Collection

Data in the research were gathered from two main sources i.e. primary source of data and
secondary source of data.
Primary source of data
1. Questionnaires: that contain relevant variables which contain both open and close
ended questions should be developed by the researcher.
2. Interviewing: which enables the researcher to gather information relevant to service
provision in the office, employee’s motivation in customer relationship management.
Secondary Sources
Related literature, regarding customer relationship management and customer loyalty should be
used as a source of information. The researcher has been used different written materials. It
includes:
- books
- documents
- different research work regarding the topic of the study
- internet

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 3.3 Techniques of data collection

To conduct this study both primary and secondary data was used. The primary data collected by
using open ended and close ended questions from tax payers, employees of revenues office. Most
of questions were open ended and some of them were close ended questions that was included to
allow respondents to disclose all the information they have concerning the particular issue. The
secondary data collected from the previous year reports of the office, from different books, and
related published materials. The reason that the researcher use only previous year report is because
of time limitation to refer all years report and to conduct the research based on recent data.

3.4 Target Population

Target populations for the research are employees and customers of Commercial Bank of
Ethiopia, Megala branch.

3.5 Sample Size Determination

n= sample size
Z 2 p (q ) N
n= 2 Z = Confidence level
e ( N  1)  ( Z ) 2 ( p )(q )
p = probability of success (90%)
q= probability of failure
N= population
e= error term (10%)

By using the above formula the researcher has identified 19 samples among the employees of
commercial bank of Ethiopia, Megala branch.

(1.28) 2 (0.5)(0.5)(33)
n= = 18.5  19
(0.1) 2 (33  1)  (1.28) 2 .0.5 x 0.5

In addition to this from the customers of the bank 41 customers are believed to be
representative for the study by the researcher after calculating by using the following formula:

11
 Where,
Z = Confidence level (90%)
Z 2 p (q )
n= (Kothari, 2004) p = probability of success
e2
n= sample size
2
1.28 (0.5 * 0.5)
n= q= probability of failure
0.12
e= error term (10%)
=41

3.6 Sampling Technique

The researcher has used both probability and no probability sampling technique. From the
various categories of probability sampling technique the researcher specifically employed
simple random sampling technique for employees of the organization. This is because first, all
the employees are considered equally important for the study. Second the researcher has an
access to get the list of all employees and the last but not the least reason is in order to avoid
bias simple random sampling technique was the first choice of the researcher.
On the other hand, among the different types of non-probability sampling technique,
convenience sampling technique had been selected to select samples from the customers of the
bank. This is for the reason that it is difficult to get all the customers of the bank. Due to time
and budget constraint the researcher is forced to use convenience sampling technique.
Therefore, the convenient respondents among the entire customers of the bank were used.

3.7 Method of Data presentation and Analysis

After gathering all required quantitative and qualitative information, data analysis performed
and present through tables percentages and frequencies. Then the data was analyzed through
descriptive method. .

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 CHAPTER FOUR

4. Data Analysis, Interpretation and Presentation

This part deals with the major finding of the study. All necessary data and
information are analyzed, discussed and hence the basic issues are given
appropriate treatments. In this chapter from the questioners that were distributed
to 19 selected employees of the organization, 18 were collected and analyzed.
And also from the 41 distributed questionnaires all are returned and analyzed.

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Part I- This section describes the data which is gathered form customers
Table 4.1 Sex and age distribution of the respondents
Respondents
(No of respondents) frequency Percentage (%)
Items
1. Sex
A. Male 26 63.41
B. Female 15 36.59
Total 41 100%
2. Age
A. Between 18 – 25 12 29.27
B. Between 26-35 19 46.34
C. Between 36-45 7 17.7
D. Above 45 3 7.32
Total 41 100%

As shown in table 4.1., out of the total respondents 26(63.41%) of them are male
where as 15(36.59%) are female. This result show that majority of the
respondents are males.
Age also other demographic variables that indicate the proportion of people by
dividing in to different section as youth, adult, old. As it is indicated on the above
table out of the total respondents 12(29.27%) of respondents lies between the age
of 18-25, 19(46.34%) of them lies between 25 -35, 7(17.07%) of the respondents
were between 35-45, where as the remaining 3(7.32%) were above 45 years of
age. This indicates that majority of the respondents lie between 25 – 35 years of
age who are adult.

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Table 4.2 Education and Occupation of Respondents
Respondents
(No of respondents) Percentage
Items
frequency
1. Educational level
A. Below grade 12 8 19.51
B. Certificate 6 14.63
C. Diploma 8 19.51
D. First degree 16 39.02
E. Above first 3 7.32
degree
Total 41 100%
2. Occupation
A. Merchant 15 36.6
B. Student 12 29.3

15
 C. teacher 14 34.1
D. farmer - -
Total 41 100%

As shown in table 4.2 out of the total respondents 8(19.51%) are below grade 12
and 6(14.63%) of the respondents holds certificate 8(19.51%) of respondents
holds diploma and the remaining 16(39.02%), 3 (7.32%) of respondents were
holds first degree and above first degree respectively. Based on this fact it is
undoubtedly to conclude that majority of the percentage of the respondents were
degree holders.
The researcher also identified the respondent’s occupation as merchant, student,
teacher and farmer. As it can be clearly depicted in the above table one can
understand that out of the total respondents 15(36.6%) of the respondents were
merchants 12(29.3%) of the respondents were students 14(34.1) were teachers.
This result show that majority of the respondents were merchants.

4.3 Shows Whether the Customers are usual or not.

Respondents
(No of respondents) Percentage
Items
frequency
Are you usual customer of
the bank?
A. Yes 27 65.85
B. No 14 34.15
Total 41 100%

Table 4.3 indicates that out of the total respondent 27(65.85%) responded yes and
are usual; customer of the bank. The rest 14(34.15%) replied no. This result

16
shows that majority of the respondent responded yes. So, this means majority of
the respondents are usual customer of the bank.

Table 4.4 How often do you use the bank service

Respondents
(No of respondents) Percentage
Items
frequency
1. How often do you use the
bank service?
A. Always 20 48.78
B. Sometimes 13 31.7
C. Irregularly 5 12.2
D. Often 3 7.32
Total 41 100%

As indicated in the above table 20(48.78%) use the bank service always
(regularly), 13(31.7%) of the respondent use the bank service sometimes and the
rest 5(12.2%), 3(7.32%) use the service given by the bank irregularly and often,
respectively. So this manifests that most of the respondents i.e. customers of the
bank use the service provided by the bank regularly.
Table 4.5 Customer use to provide complain (comment) to the Bank
Respondents
(No of respondents) Percentage
Items
frequency

17
Does the bank provide you a
means to complain?
A. Yes 34 82.9
B. No 7 17.1
Total 41 100%

As table 4.5 shows 34(82.9%) of the total respondents agreed that the bank
provides a means of complain while 7(17.1%) of respondents doesn’t have any
information regarding, the bank whether provide a means to complain or not. So
we can say that the bank done well in providing a means of complain but it
should announce these to all customer of the bank because 7(17.1%) of the bank
user have no any information in this regard.
Table 4.6 Method of clients use to provide comment or suggestion to the
bank.
Respondents
(No of Percentage
Items
respondents)
frequency
Which method do you use to provide
comment complain to the bank?
A. Suggestion box 25 61
B. Telephone 5 12.2
C. Email - -
D. Direct contract with the 11 26.8
representative
Total 41 100%

According to table 4.6, out of the total respondent 25(61%) of respondent use
suggestion box. 5(12.2%) respondent were use telephone, 11(26.8%) of

18
respondents used direct contact with the representative to provide comment and
no respondents use email to provide comment. Therefore, the researcher can
understand that suggestion box is the most widely used method which is used by
the majority of clients of the bank. Also the respondents who responded for
question no 10; there are also clients which use two methods in combination such
as suggestion box and direct contact with the representative. There for the
researcher concluded that most of the client use suggestion box. But now a day
there are several technology so, the bank should introduce this technology to the
bank and also the bank manger must tell the clients that they can also use other
methods to provide comments. It increases the customer confidence and loyalty
in the bank.

Table 4.7 Customer satisfaction

Respondents
(No of respondents) Percentage
Items
frequency
Are you satisfied with the
performance of the bank?
A. Yes 27 65.85
B. No 14 34.15
Total 41 100%

Table 4.7 indicates that whether the clients are satisfied by the service which is
delivered by the bank accordingly, 27(65.85%) of the respondents were satisfied
by the service provided by the bank and the rest 14(34.15%) of the respondents
are not satisfied by the service which is provided by the bank. The 14 clients
which responded ‘no’ in question number ‘10’ specified there reason in question
number ‘11’ of these 7(50%) because of delay in delivering service 5(35.7%)
because of workers are not willing to help their clients and 2(14.3%) because of

19
short service delivering time clients are not satisfied with the performance of the
bank.
The researcher concluded that here the majority of the respondents i.e. customer
of the bank were satisfied with the service delivered by the bank it is good for the
bank. But also there are some clients who are not satisfied with the performance
of the bank so it should improve its strategy in order to serve the unsatisfied
customer other wise, in this competitive world which is full of strong
competitions and the bank may be snatched its clients by those strong
competitors.

Table 4.8 Customer loyalty

Respondents
Items (No of respondents) Percentage
frequency
Do you think that you are the
loyal customer of the bank?
A. Yes 16 39
B. No 25 61
Total 41 100%

Loyalty measures the client willingness to stay with a specific vendor for the long
period of time. Table4.8 shows the loyalty of the clients to the bank. Accordingly
16(39%) of the respondent responded ‘yes’ that means they are loyal customer of
the bank and the rest 25(61%) of the clients are not loyal customer of the bank.
From this the researcher concluded that most of the respondents are not loyal
customer of the bank. Therefore the bank should do a lot in customer relationship
management and also it should devise a new strategy that can help the bank so as
to retain its customer.

20
In addition regarding the loyalty of customers the bank manager asked that “what
measure does the bank use to make customers loyal?”
And he replied that “the bank use several measures to make customers satisfied
with the service and to make them loyal such as: the Bank provide coupons for
those customers who save money more than Birr 1000, the Bank provide free
service for those who are interested to open saving account in the bank and also
the Bank delivers service during lunch time.”
From this the researcher concludes that the customers of the bank did not
recognize the effort of the Bank. There fore the Bank should try to differentiate
its competitive advantage from the competent Banks. And also the Bank should
modify or devise new strategies that can help the Bank to retain its customers.

Table 4.9 Handling customer complaints

Respondents
Items (No of respondents) Percentage
frequency
Does the bank employee
handle customer complaints
properly? 43.9
A. Yes 18 56.1
B. No 23
Total 41 100%
The above table, table4.9 revealed that 18(43.9%) of the total respondent
responded ‘yes’ that means the bank employees handle customers complaints
properly the rest 23(56.1%) were respond ‘No’ that means the bank employees
do not properly handle the complaints of customers. The researcher concluded
that the bank employees are not good in handling the customer complaints. So,
the bank management should train the worker (employees) of the bank. Unless

21
the unsatisfied clients might shift to other private bank and may also
communicate bad word of mouth to other customer. These will harm the bank in
retain its customers.
Regarding this the manager of the Bank asked “how the Bank handles its
customers compliant?”
He replied that “the Bank provides several mechanisms that the clients of the
Bank can give their compliant like: suggestion box, telephone, e-mail etc and the
Bank handles these complaints properly as soon as it is collected.”
The researcher understood from the responses of customers and manager of the
Bank that the Bank did well in providing a means complain but from the
responses of customers the Bank doesn’t properly handle the complaints timely.

Part II. This part of data analysis show the responses of employee for the
questionnaires
Table 4.10 Work Experience of employees in the bank
Respondents
Items (No of respondents) Percentage
frequency
How long have you been
working in the bank?

22
 A. Less than one year 3 16.7
B. For the last two year 9 50
C. More than year 33.3
6
Total 18 100%

As indicated in table 4.10 out of the total respondents 3(16.7%) of the

respondents have been worked for less than one year, 9(50%) of the respondents
are worked for the last two years finally 6(33.3%)of the respondents have been
given service for more than two years. The above data implies that majority of
the employees of the bank had been given service for the last two years. Besides
the respondents i.e. employees of the bank are well experienced in giving service
for the clients.

For the question raised in question number ‘2’ that is what your duties is you are
accountable? Out of the total respondents 5(27.8) are cash receiver, 2(11.1%)
were auditor 1(5.55%) were customer service officer 2(11.1%) were loan process
and the rest of the respondents did not respond for the question. From this we can
conclude that majority of the respondents (employees of the bank) have high
contact with the customers of the bank.
Table 4.11 Satisfaction of employees on their duties
Respondents
Items (No of respondents) Percentage
frequency
Are you satisfied with the
duties that you are assigned by
the bank? 61.1
38.9
A. Yes 11
B. No 7
Total 18 100%

23
As indicated on the above table, table 4.11, 11(61.1%) of respondent were
satisfied with their duties they are assigned by the bank and the remaining
7(38.9%) were not satisfied with their duties. Thus the researcher understood that
majority of employees are satisfied with their duties but there are also employees
who are unsatisfied with the duties assigned by the bank.

These employees may have a negative effect on the service which is delivered by
the bank. So the bank should use different mechanism to make them satisfied.

For the question raised in question number ‘4’ the respondents i.e. unsatisfied
employees specified so many reason. Among these majority of employees
specified the task that were assigned by the bank is repetitive so, it is boring and
also the number of customer that they treat per a day were many in number it is
very tiresome for the employees.

Table 4.12 Customer complain in the bank

Respondents
Items (No of respondents) Percentage
frequency
Have you ever seen customer complain in
your bank on the service provided?
A. Yes 14 77.8
22.2
B. No 4
Total 18 100%

As indicated in table 4.12 out of the total respondent 14(77.8%) of respondents

answer ‘yes’ that means they saw customer complain in the bank and the

24
remaining 4(22.2%) of employees responded ‘no’ that means they never say any
customer complain in the bank service. Based on this fact it’s undoubtedly to
conclude that the bank have problem in providing service to its client. Most of
the time the cause of complains in the bank which is raised by the customer of the
bank are: delays in giving service to customer because of large size of customer
per a day, short service delivery duration are the major causes of complaints in
the bank.
As much as possible the bank should improve the compliant which is provided by
clients, otherwise the bank may loose its customer to its strong competitors.

Table 4.13 Customer retention

Respondents
Items (No of Percentage
respondents)
frequency
On your opinion does the bank management
formulate suitable CRM for retaining the
existing customer?
A. Yes 7
58.9
B. No 11 61.1
Total 18 100%

As shown in table 4.13 7(38.9%) of respondent responded yes that means the
bank had formulate suitable CRM for retaining the existing customer where as

25
the remaining 11(61.1%) answered that the bank didn’t formulate suitable CRM.
Therefore the researcher concluded that the bank has a problem in formulating
suitable CRM so, the bank should improve or change the previous CRM strategy
so as to retain the existing customer and to make then loyal.
From the responses of employees the researcher understood that the Bank did not
formulate suitable CRM. But the Bank manager responded for the question “does
the Bank management formulate suitable CRM for attracting and retaining
customers?” that the Bank had devises suitable CRM that can help the Bank to
retain its customers. From these controversial responses the researcher
understood that the Bank management didn’t take any input from employees and
customers of the Bank while formulating CRM.

Table 4.14 Weakness in the bank in providing service

Respondents
Items (No of respondents) Percentage
frequency
Do you have seen any weakness in
the bank in providing service to its
clients? 72.2
27.8
A. Yes 13
B. No 5
Total 18 100%

According to the table4.14, 13(72.2%) of the respondents agreed that the bank
had weakness (problem) in providing service where as, 5(27.8%) of the
respondent responded ‘no’ that means the bank had no any weakness in providing
service to its customer. This result shows that majority of respondent have seen
weakness in the bank service providing system.

26
4.15 Customer handling
Respondents
Items (No of respondents) Percenta
frequency ge
Is the bank is effective in
handling its customer?
A. Yes 13 72.2
27.8
B. No 5
Total 18 100%

As indicate on table4.15 out of the total respondents 13(72.2%) of them

responded ‘yes’ that means the bank is effective in handling its customer and the
rest 5(27.8%) of respondent responded that the bank is not effective in handling
its customer. Therefore the researcher concluded that majority of the respondents
agreed that the bank is effective in handling its customer. Even though the bank
is good in handling its customer, the bank should improve its culture of handling
customer and by this if can make its customer loyal.

For question which is raised in question number 11 among the determinant factor
that enables the bank to retain its existing customer most of the respondents
responded that service quality, use of modern technology, visionary management,
fast service provision mechanisms, as much as possible long duration of service
provision time, good customer treatment, skilled men power and giving
appropriate answer for customer complaints are the major tools that the bank
should use to retain its customer and to make them loyal.

for question which is raised in question number 12 among the reason which
contribute for the loosing of customer most of the respondent responded that lack
of skilled man power, the existence of inexperienced employees in the bank,

27
unavailability of modern technology that can facilitate the service which is
provided by the bank, delay in service delivery, in appropriate treatment of
customer, not responding for the complaints which is raised by the clients are the
major ones.

For the problem which is specified by the respondents in question number 12 the
respondents also provided different suggestion that enables the bank to avoid
effectively deliver service to its customer among these: the bank should provide
service with the support of modern technology, the bank management should
design effective customer relationship management strategy and, the bank should
also give training for the inexperienced employees by these and other mechanism
the bank can give better service for the customer and it can get the first choice of
any customer.

CHAPTER FIVE

5. Summary, conclusion and Recommendation

5.1 Summary of Major Finding

This research was conducted to investigate customer relationship management
and its effect on customer loyalty in current business of commercial bank of
Ethiopia, Megalla branch. To successfully meet the objective of the study,
questionnaires were distributed and collected and interview with the manger of
the bank was held. The researcher have tried to see the effect of customer
relationship on customer loyalty in the perspective of customers, employees and
manger based on their comparative exposure to the case under the study. The
major findings of the study are summarized as follows:-

28
 From the total respondents majority of the respondents i.e. 27(65.85%) were
usual customer f the bank.
 20(48.78%) of the customers of the bank use the bank service regularly.
 Among the total respondents 34(82.9%) of respondent agreed that the bank
provide a means of complain and only the remaining 7(17.1%) of the
respondents didn’t have any information regarding complain collection
mechanisms of the bank.
 Regarding the satisfaction of customer on the performance of the bank in
providing service majority of the respondent i.e. 27(65.85%) were satisfied.
 From the total respondent 25(61%) of the respondents were not loyal
customer of the bank.
 23(56.1%) of the total respondents responded that the bank didn’t handle
customer complain properly.
 Regarding the work experience of employees majority of the respondent
9(50%) had a two years experience and 6(33.3%) of employees had more then
two year experience.
 Regarding the satisfaction of employees on their duties which were assigned
for 11(61.1%) were satisfied on their duties.
 14(77.8%) of the total respondent responded that they saw and collect
customer complains in the service which is provided by the bank
 From the total respondents majority of employees i.e. 11(61.1%) responded
that the bank didn’t formulate suitable customer relationship management
technique to retain the existing customers
 13(72.2%) of respondents responded that the bank is effective in handling its
customers.

29
5.2 Conclusion
 Majority of the respondent’s i.e. the customer of bank are usual customer of
the service which is provided by the bank. And also most of the respondent of
the bank use the services regularly.
 The bank did well in providing a means of complain
 Majority of the respondent use suggestion box for providing complain,
comment, suggestion in the service which is provided by the bank.
 Majority of the respondent are satisfied on the performance of the bank
service providing system
 Regarding the loyalty of customer majority of customers are not loyal
customers of the bank.
 Majority of the respondent responded that the bank employees did not
properly handle the complaints of customer.
 Majority of employees of the bank are well experienced in giving service for
the clients of the bank.
 Majority of the respondents i.e. employees of the bank are satisfied with their
duties that they are assigned for
 Majority of the employees saws customer complaint on the service which is
provided by the bank
 Most of employees of the bank responded that the bank did not formulate
suitable customer relationship management technique for attracting and
retaining customers.
 Majority of the respondents have seen weakness in the bank service providing
system
 Most of the employees of the bank believe that the bank is not effective in
handling its customer.

30
5.3 Recommendation
Based on the conclusion of the study the following recommendations are
forwarded:

 The bank should keep customer satisfaction by providing better service with
good performance. In order to make them loyal the bank always needs to
improve its service providing mechanism with the daily requirement of its
customer.
 In fact, majority of the respondents i.e. customer of the bank are satisfied with
the performance of the bank service providing system. But the bank should
know the fact that all satisfied customers are not necessarily loyal customers
of the bank. Therefore the bank should renew itself by showing the existing
competitors other wise, the customers of the bank may shift to other
competitors.
 Now a day’s many private banks use the duration of service giving time as a
competitive advantage. Therefore, the bank should length (increase) its
service giving time
 The bank should increase the number of windows which provide service to
reduce service delays.
 Even though, majority of the respondents are satisfied with the duties which
were assigned by the bank but still there are few employees who are not
satisfied with their duties therefore the bank should use job rotation since the
job is repetitive it is so boring.
 The bank is better to use modern technologies to fasten money transfer and
service delivery.

31
 The bank should give training for employees to improve their skill and
knowledge in providing quality service specifically how they can handle
customer complain properly.
 The bank should increase switching cost, by differentiating its service from
other competitors this enable the bank to retain customer and to make them
loyal.
 The bank didn’t have a good culture regarding customer compliant handling
mechanism so; the bank should properly collect customer suggestion,
complains and also give appropriate response in the right time.
 Even through suggestion box is the most widely used method to provide
different comments or suggestion for the bank. The bank should do a lot in
email and free telephone service which are fast complain collection
mechanism from costumer
 The bank management should establish suitable customer relationship
technique that can retain the existing customer of the bank and to make them
loyal customer of the bank.

Reference

 Antony Lawrence (2010), customer relationship management, 2nd edition,

Himaly publishing house, New Delhi

32
 Buttle, F & Burton, J.(2001), Does service failure Inflence customer
loyalty? Journal of consumer behavior.
 Ellen Gifford(2002), customer relationship management principles,
strategy & Ideas for effective customer relationship management.
http://ww. business ball. com
 Esther A. Demly, 9 2009), the impact of building customer loyalty as a
means of sustaining continious organization growth in highly competitive
uk retail market.
 Gee, R., Coates, G & Nicholoson, M.(2008) , understanding and profitably
managing customer loyalty. Marketing intelligence & planning, 2014, 359
– 374.
 Gronroos, C. (2007), service management and marketing: customer
management on service competition (3rd ed), England: wiley Higher
education .
 Kotler and Gary Armstrong (2006) principle of marketing, 11th edition,
prentice hall of India pvt Ltd, New Delhi.
 Van Looy B. Gemines P. & Van Dierdonck, R.(2003) service
management: an integrated Approach (2nd ed). Harlow, England prentice
Hall.
 Bull. C. (2003), strategic issues in customer relationship management
implementation. Business management journal, 9(5) 592-602
 Chauduri, A & Hol brook, M.(2001), The chain effects from brand trust
and brand effect to brand performance, journal marketing 65(2), 87 – 93
reterived from http:// online, segepus. com.
 Dick, A. & Basu, K. (1994), customer loyalty towards an integrated
conceptual framework. Journal of accadamy of maketing science, vol
22(2), 99 – 113.

33
  Kumer, V & Shah D. (2004), building & sustaining profitable customer
loyalty for the 21th c, journal of retailing, 80, 317 – 330.
 Lewis, B & Soureli, M.(2006). The Antecedents of customer loyalty in
retail banking. Journal of customer behaviour, 5,15 – 31.
 http:// ww. business bell.com

Appendix

DIRE DAWA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS DEPARTMENT
QUESTIONNAIRE FOR CUSTOMER

34
I am student of dire dawa University I am doing research paper to identify the
problem of customer relationship management and its effect on customer loyalty
in case of commercial bank of Ethiopia, Megalla branch

Objective of the research

The objective of this study is to identity the main customer oriented area that
should be addressed to improve the organizational performance with the need and
requirement of customers. And also, to identity the strength and weakness of the
bank regarding, customer relationship management.

Dear respondents; please fill in the listed questions with the help of the data
collector as genuinely as possible. Your cooperation in this regard is very
beneficial and complete responses will be highly appreciated.

Instructions
1) No need to write your name
2) Fill answer by circling among the choice
3) Please, give more attention in filling the questionnaire and try to return
when you completed filling the questioner as fast as possible.

1) Sex
A. Male B. Female
2. Age
A. Between 18 – 25 C. Between 35 – 45
B. Between 25- 35 D. Above 45

3. Educational level
A. below 12 C. Diploma E. Above 1st degrees

35
 B. Certificate D. First degree
4. Occupation
A. MerchantC. Teacher
B. Student D. Farmer
5. Are you usual customer of commercial bank of Ethiopia?
A. Yes B. No
6. How often do you use the bank?
A. Always C. irregularly
B. Sometimes D. Often
7. Does bank provides you a means to complain?
A. Yes B. No
8. Which method you use to provide comment for the bank?
A. Suggestion book C. Telephone
B. E-mail D. Directly to representative
9. If you have any other means to provide complain please write?
_________________________________________________________________
_________________________________________________________________
______________
10 Are you satisfied with the performance of the bank service?
A. Yes B. No
11. If your answer for No 10 is ‘No’ please write the reason

12. Do you think you are loyal customer of the bank?

A. Yes B. No
13. What is the strength of the bank regarding customer treatment?

36
14. What is the weakness of the bank in providing service?

15. Do the bank worker handle customer complaints properly?

A. Yes B. No
16. Do you believe the bank employees are willing to help the customer?
A. Yes B. No C. Sometimes
17. If you have additional comment

DIRE DAWA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS DEPARTMENT
QUESTIONNAIRE FOR EMPLOYEES

I am student of Dire dawa University I am doing research paper to identify the

problem of customer relationship management and its impact on customer loyalty
in case of commercial bank of Ethiopia, Megalla branch

Objective of the research

37
The objective of this study is to identity the main customer oriented area that
should be addressed to improve the organizational performance with the need and
requirement of customers. And also, to identity the strength and weakness of the
bank regarding, customer relationship management.

Dear respondents; please fill in the listed questions with the help of the data
collector as genuinely as possible. Your cooperation in this regard is very
beneficial and complete responses will be highly appreciated.

Instructions
1) No need to write your name
2) Fill answer by circling among the choice
3) Please, give more attention in filling the questionnaire and try to return
when you completed filling the questioner as fast as possible.

1. How long have you been working in this job?

A. Less than one year
B. For the last two years
C. more the two years
2. What are the bank duties you are accountable for?

3. Are you satisfied with the duties you are assigned by the bank
A. Yes B. No

4. If your answer is no please write the reason?

5. Have you ever seen customer complain in your bank on the service provided?
A. Yes B. No

38
6. If your answer for question no 5 is yes please write the cause for the
complaints

7. On your opinion does the bank management formulate suitable CRM for
retaining the existing customer?
A. Yes B. No
8. Do you have seen any weakness in commercial bank of Ethiopia service
providing system?
A. Yes B. No
9. If your answer is ‘no’ for question no 8 is yes mention some of the weakness

10. Is the bank is effective in handing its customer?

A. Yes B. No
11. Based on your experience in banking industry whet is the determinant factor
that enables the bank to retain existing customer?

12. Based on your experience what is the cause for loosing customer?

13. For the above problem what should to be done by the bank?

14. If you have additional

39
Interview for the manager

1. What measures the Bank uses to make customers loyal?

2. Does the Bank formulate suitable CRM to attract and retain customers?
3. How the Bank handle its customer’s complaints?
4. How the Bank measure the loyalty of its customers?

40