The Effect of Customer Relationship Management

Practices on Customer Loyalty:

The Case of Selected Branches of Cooperative Bank
of Oromia in Adama City

By:
Biniam Girma

Department Of Business Administration

Graduate Program

July, 2020
Adama, Ethiopia

1
 The Effect of Customer Relationship Management
Practices on Customer Loyalty:
The Case of Selected Branches of Cooperative Bank of
Oromia in Adama City

A Thesis Submitted For Partial Fulfillment of the Requirements for

Masters in Business Administration (MBA)

By: Biniam Girma

Advisor:
Bekele Reta (Asst. Prof)

Department Of Business Administration

Graduate Program

July, 2020
Adama, Ethiopia
2
 Letter of Approval
The Effect of Customer Relationship Management
Practices on Customer Loyalty:
The Case of Selected Branches of Cooperative Bank of
Oromia in Adama City
Prepared by: Biniam Girma

Approved By a Board of Examiners

___________________ _____________ __________

Chair Person Signature Date

___________________ _____________ _________

Internal Examiner Signature Date

___________________ _____________ _________

External Examiner Signature Date

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 Declaration

I, the undersigned, declare that, this study “Effect of Customer Relationship Management
Practices on Customer Loyalty of Coop Bank Adama Branches” is my original work and has not
been presented for a degree in any other university, and that all sources of materials used for the
study have been duly acknowledged.

Declared by:

Name: Biniam Girma

Signature: ______________

Date: __________________

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 Confirmation
This is to certify that Biniam Girma has carried out this thesis on the topic entitled “Effect of
Customer Relationship Management Practices on Customer Loyalty of Coop Bank Adama
Branches” Under my supervision. Accordingly, I here assure that his work is appropriate and
standard enough to be submitted for the partial fulfillment of the requirements for the award of
the Masters Degree in Business Administration.

Bekele Reta (Asst.Prof)

Signature: ______________

Date: __________________

iii
 Acknowledgments
I wish to extend my deepest gratitude to my advisor Bekele Reta (Asst.Prof) for his professional
guidance and advice throughout my study.
I also want to sincerely thank Coop Bank employees and customers for the assistance they
accorded to me during data collection period. In addition, my heartfelt appreciations to the staff
of Unity University Adama campus for their unreserved support during the research study.
Finally, my acknowledgement extends to all my family and friends for their unreserved
encouraging support to accomplish this study.

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 Table of Contents
Contents Page
Declaration ......................................................................................................................................ii
Confirmation ..................................................................................................................................iii
Acknowledgments ..........................................................................................................................iv
Acronyms/ Abbreviations.............................................................................................................viii
List of Tables ..................................................................................................................................ix
List of figures...................................................................................................................................x
Abstract...........................................................................................................................................xi
CHAPTER ONE: INTRODUCTION..............................................................................................1
1.1. Background of the study....................................................................................................1
1.2. Statement of the Problem ..................................................................................................3
1.3. Research Questions ...........................................................................................................6
1.4. Objectives of the Study .....................................................................................................6
1.4.1. General objective ...........................................................................................................6
1.4.2. Specific Objectives ........................................................................................................6
1.5. Significance of the Study...................................................................................................7
1.6. Scope of the study .............................................................................................................7
1.7. Definition of Basic Terms .................................................................................................7
1.8. Organization of the Study..................................................................................................8
CHAPTER TWO: REVIEW OF RELATED LITERATURES.......................................................9
2.1. Theoretical Review of Related Literature .........................................................................9
2.1.1. Definitions of Customer Relationship Management (CRM) ........................................9
2.1.2. Concepts of Customer Relationship Management (CRM)..........................................10
2.1.3. Types of CRM .............................................................................................................13
2.1.4. Major Elements of CRM .............................................................................................14
2.1.4.1. Key Customer Focus................................................................................................14
2.1.4.2. CRM Organization...................................................................................................15
2.1.4.3. Knowledge Management .........................................................................................16
2.1.4.4. Technology Based CRM..........................................................................................17
2.1.4.5. Interaction Management (Communication).............................................................17
2.1.4.6. Information Technology Implementation................................................................18
2.1.5. Performance Measurement Metrics.............................................................................20
2.1.5.1. Customer Satisfaction..............................................................................................21

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 2.1.5.2. Customer Loyalty ....................................................................................................22
2.1.6. Customer Relationship Management in the Banking Industry ...................................23
2.2. Empirical Review of Related Literature .........................................................................24
2.2.1. The Impact of CRMPs on Customer Loyalty..............................................................24
2.3. Conceptual Model of the Study ......................................................................................29
CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY .......................................30
3.1. Introduction.........................................................................................................................30
3.2. Research Design .................................................................................................................30
3.3. Data Type and Source.........................................................................................................30
3.4. Target Population................................................................................................................30
3.5. Sample Size Determination ................................................................................................31
3.6. Sampling Technique ...........................................................................................................31
3.7. Data Collection Instruments ...............................................................................................32
3.8. Data Collection Procedure..................................................................................................32
3.9. Method of Data Analysis ....................................................................................................32
3.10. Ethical Consideration......................................................................................................33
3.11. Validity and Reliability...................................................................................................33
3.11.1. Assessing Reliability ...................................................................................................33
3.11.2. Test of Validity............................................................................................................34
CHAPTER FOUR: DATA PRESNTATION, ANALYSIS AND DISCUSION ..........................35
4.1. Introduction.....................................................................................................................35
4.2. Response Rate .................................................................................................................35
4.3. Demographic Characteristics ..........................................................................................35
4.4. Descriptive Analysis .......................................................................................................37
4.4.1. Customer Relationship Management Practices ...........................................................37
4.4.1.1. Key Customer Focus................................................................................................37
4.4.1.2. Interaction (Communication) Management.............................................................39
4.4.1.3. CRM Organization...................................................................................................39
4.4.1.4. Customer Knowledge Management ........................................................................40
4.4.1.5. Technology based CRM ..........................................................................................42
4.4.1.6. Information Technology Integration........................................................................43
4.4.1.7. Customer Loyalty ....................................................................................................43
4.5. Inferential Statistics for CRMPs and Marketing Performance .......................................45
4.5.1. Correlation Analysis....................................................................................................45

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 4.5.2. Multiple Regression Analysis .....................................................................................46
4.5.2.1. Multi-co linearity Test .............................................................................................46
4.5.2.2. Model summery .......................................................................................................47
4.5.2.3. F- Test and T -Test ..................................................................................................48
4.5.2.4. Coefficients of Regression Analysis........................................................................48
4.5.2.5. Research framework or model summery .................................................................52
CHAPTER FIVE: SUMMARY OF MAJOR FINDINGS, CONCLUSION AND
RECOMMENDATION.................................................................................................................53
5.1. Summary of Major Findings ...........................................................................................53
5.2. Conclusion ......................................................................................................................54
5.3. Recommendation ............................................................................................................54
5.4. Limitation and Suggestion for Future Research .............................................................55
Reference .......................................................................................................................................56
Appendix........................................................................................................................................60

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Acronyms/ Abbreviations
COM: Communication
KCF: Key Customer Focus
CRM: Customer Relationship Management
CRO: Customer Relationship Management Organization
CR: Customer Retention
CL: Customer Loyalty
ICTI: Information Technology Integration
KM: Knowledge Management
TCR: Technology Based Customer Relationship Management

viii
List of Tables

Table 2.1: summarized Definitions of CRM from different point of view----------------------16

Table 3.1: Reliability of constructs -------------------------------------------------------------------32
Table 4.1 Description of response rate ---------------------------------------------------------------33
Table 4.2 Respondents’ frequency distribution of Age -------------------------------------------34
Table 4.3 Respondents’ frequency distribution of Educational Qualification ------------------34
Table 4.4 Respondents’ frequency distribution of Work Experience ----------------------------35
Table 4.5: Descriptive statistics on key customer focus -------------------------------------------36
Table 4.6: Descriptive statistics on key customer focus -------------------------------------------36
Table 4.7: Descriptive statistics on CRM Organization -------------------------------------------37
Table 4.8: Descriptive statistics on Knowledge Management ------------------------------------37
Table 4.9: Descriptive statistics on Technology based CRM Practices -------------------------38
Table 4.10: Descriptive statistics on Information Technology Integration Practices ----------39
Table 4.11: Descriptive Statistics on Customer Loyalty-------------------------------------------40
Table 4.12 Correlation matrix between constructs of CRM practices and CL -----------------41
Table 4.13: Multi co linearity test of independent variables --------------------------------------43
Table 4.14: Regression Model between CRM Practices and CL ---------------------------------43
Table 4.15 ANOVA Result between constructs of CRMPs and CL -----------------------------44
Table 4.16 Regression Coefficients between CRMPs and CL------------------------------------44

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List of figures

Figure 2.1: Conceptual framework ------------------------------------------------------------------30

Figure 4.1: shows the summery relationship of the selected variables -------------------------58

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 Abstract
The emergence of new banks in the banking industry makes competition intense, attracting and
retaining customer is vital for the success of any organization. So as to achieve this
performance, Customer Relationship Management is the most important concept that companies
use for managing their interactions with customers. The main aim of this research was to
examine the impact of customer relationship management practices on customer loyalty of Coop
Bank. To study the impact of customer relationship management practices six dimensions of
CRM practices were used as independent variables and tests the respondents understanding
perspectives on the impact of customer relationship practices on Customer loyalty. A sample of
152 employees and customers were taken using non-probability sampling particularly purposive
and convenience sampling technique. A questionnaire was used as a research tool for the
collection of data. Collected data was analyzed using descriptive statistics, correlation and
regression. From the result of the analysis it is concluded that all variables of customer
relationship management Practices (key customer focus, Interaction Management, CRM
Organization, knowledge management, Technology based CRM and IT Integration Practices)
strongly, significantly and positively affected customer loyalty of the bank. To achieve strong
competitive advantage in terms of increasing profitability, market share, customer retention and
attracting new and potential customers over other banks they should establish a strong
relationship with their customers and also has to establish clear business goals related to
customer acquisition, development, retention, and reactivation and commits time resources to
meet CRM goals.

Key word: Customer Relationship Management, CRM Practices, Customer Loyalty

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 CHAPTER ONE
INTRODUCTION
This chapter consists of the back ground of the study, statement of the problem, research
questions, and objectives of the study, significance of the study, scope of the study, definition of
terms and organization of the paper.
1.1. Background of the study

One of the key developments in marketing has been the advent of Customer Relationship
Management strategies, designed primarily to create and manage long lasting customer
relationships. The concept that long-term relationships are more profitable than short-term
transactional relationships has evolved and steadied within the organizational philosophies.
According to, Payan and Frow, 2009 customer relationship management as a revolted version of
relationship marketing and define it as creation, development, and improvement of individual
relationships with customers in order to maximize their total life cycle value. Seeman and Hara,
2006, defined Customer Relationship Management as a technology that aimed to create and
maintain the individual relationships with profitable customers through appropriate use of the
information and communication technologies.
On the other hand Richards and Jones, 2008 defined Customer Relationship Management (CRM)
is a systemic managerial process for creating, maintaining, and developing relationships with
customers in every position in order to maximize relationship value. Knox et al. (2007) have
viewed customer relationship management as an organization wide process of treating different
customers differently to increase value for both customer and organization. Ryals and Knox
(2007) have identified CRM as identifying, satisfying, retaining and maximizing the most
valuable customers. They have included the practices, strategies and technologies used by the
organization to manage and reflect on customer information as part of the CRM process. Modern
businesses have started viewing CRM as an outcome of business strategy which provides
seamless integration of every business function that gets in touch to the customer (Boulding et
al., 2005).
Moreover, Dyche (2002) has defined CRM as a business infrastructure that enables appropriate
means to create and retain loyal customers and increase in their value. Wang et. al., (2004) have
viewed customer value as a strategic weapon to build and sustain competitive advantage

1
resulting from effective customer relationship management. The complete study and formal
constructive approach of CRM leads to win the market competition (Rajesh & Manivannan:
2013). CRM is a way of collecting, processing, analyzing, storing and managing data about
business customers through business policies, strategies and rules. Thus, CRM is designed for
optimizing profit, revenue and customer satisfaction. It aligns the enterprise around the customer
segments. It develops customer satisfying behaviors by linking the processes from suppliers to
customers Gartner, 2003. CRM is for acquiring, satisfying and retaining customers. CRM thrives
for providing satisfaction and delight at each level of customer interaction Pahuja & Verma,
(2008). Therefore, satisfied customer gets delighted and becomes loyal (Jauhari, 2001).

Consumer loyalty is seen as strength of the relationship between individual's relative attitude and
repeat patronage (Isnadi, 2005). In addition, customer loyalty is seen as one of the major
facilitators of service quality that emerged from the literature. Customer loyalty happens when
there is repeated purchasing by the same customers and their willingness to recommend the
product to other customers without any outright benefits, and eventually the repeated usages
would generate positive and quantifiable financial results. Customer loyalty creates good and
admirable feelings in the mind of the customers. Customer loyalty is when customers are ready
to stay maximum time with the organization. According to warden (2007) customers become
loyal when they are provided with some loyalty programs that increase their lifetime
commitment. It is obvious that customer is the only source of the banks’ present profit and future
growth. Kotler and Keller (2012) stated that creating loyal customers is at the heart of every
business. Formant, Lamparello, Melnick (2000) stated that banks which develop a customer-
centric strategy get higher profits. Thus, Customers are central to all marketing activities all over
the world. Success and profit is not thinkable without customers.

According to Das, et al. (2009), CRM in the banking industry is entirely different from other
sectors, because banking industry is purely related to financial services, which needs to create
trust among the people. Establishing customer care support during on and off official hours,
making timely information about interest payments, maturity of time deposit, issuing credit and
debit ATM card, creating awareness regarding online and e-banking, adopting mobile request etc
are required to keep regular relationship with customers. Lui. (2007), Banking sector is a definite
industry where marketing relationship is greatly reliant on customer’s reliability, retention, and
reliance. Many studies describe that banks became more commercial when engaged in these
2
types of connections as reflected. Customer retention is very important aspect for banks profits
(Beerli et al; 2004). The main concern of banks is to maximize income and profits and attain
position within market and increase the justice level of customers so that they remain content.
The earning level of banks goes down due to the lack of customer encouragement which also put
impact on customer relationship (Goyal & Joshi, 2012).

Many studies have been carried out on customer relationship management. Basman Al Dalayeen
(2017), studies the impact of CRM on customer satisfaction in Jordan two banks. Results
exposed that high positive relation among that variables the customer relationship management
and customer satisfaction. Sanaullah Nazir (2014), studies the impact of customer relationship
management on customer satisfaction in the hotel industry. The result shows there is a high
positive relationship among the customer relationship management and customer satisfaction or
businesses cannot be successful without concentration on CRM. Priya et al. (2013), study the
customer relationship management measuring tools on customer satisfaction between different
banks that study shows the positive relations between the variables. Arup Kumar & Bivraj
Bhusan (2012), study that there is significant relation between customer relationship
management, customer satisfaction and customer retention the relation among these variables in
State Bank branches of India. Furthermore, Khaligh et al. (2012), examines the impact of
customer relationship management on loyalty and customer retention in Iranian telecom industry.
This study declares that the elasticity or unambiguously the value strategy is vital cause to
increase the customer retention and profit of the company.
The above studies have identified the necessity of sustaining a strong relationship with
customers. Banking industry must adopt customer-centric strategies in order to fully maintain
and enhance this relationship with existing customers for the survival of banks (Roy and
Shekhar, 2010). The evolution in telecommunications and technology services may offer many
challenges to CRM. Therefore, this paper was intended to examine effect of Customer
Relationship Management practices on customer loyalty of the company.

1.2. Statement of the Problem

Businesses and particularly financial institutions have been affected to some degree in what is
happening in the global market place. Now, not only the organizations aim to satisfy the
customers but they attempt to do this more efficiently and effectively than their rivals in the

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competitive market place in order to attain their goals. The most important goal of an
organization is to maintain customer satisfaction and focus on customer centric approach in their
organizational and marketing strategies. The significance of customer satisfaction cannot be
dismissed while happy customers are like free advertising for the financial institutions. It is
necessary to put the customer at the centre of the business according to its strategies, events and
processes. In fact, it is easier and more profitable to sell to present customers than to find new
ones. Financial institutions are setting their strategies to ensure customer satisfaction, retention;
therefore their employees should be more customer-focused and service-oriented in order to
satisfy their customers.

The emergence of new banks in the banking industry makes competition intense. However, in
the Ethiopian banking industry, there appears to be limited effort to engage to CRM practices for
securing long-term growth and profitability. For any given service sector, the growth and
survival of companies is highly dependent on how loyal their customers are. According to
Lovelock (2004), the foundation for true loyalty lies in customer satisfaction. Highly satisfied or
even delighted customers are more likely to become loyal apostles of a firm, consolidate their
buying with one supplier and spread positive word of mouth. In contrast dissatisfaction drives
customers away and is a key factor in switching behavior. Loyalty requires a positive attitude of
the consumer towards a company and its services; retention, on the other side, can also exist with
a negative attitude towards a company (Bruhn, 2009). Thus, most of the literature has been found
(show) that Customer loyalty to be a competitive tool for many companies; here application of
CRM practices comes as a solution.

The impact of CRM practices on different industries have been extensively studied and most of
the CRM literatures are written in the context of the developed countries, CRM`s successful
implementation in an integrated and holistic manner have been found to have a positive impact
in satisfaction and loyalty of customers, reduction of costs and enhancement of competitive stand
in the market. For instance, Hisham Solieman, (2011), in his study customer relationship
management and its relationship to marketing performances assured that there is a positive
relationship between CRM and marketing performance such as customer satisfaction and
customer loyalty. Three major variables of CRM was tested in this study i,e focusing on the main
customers, organization efficiency and customer knowledge management. The study concluded

4
that all elements of CRM have positive relationship with customer satisfaction and customer
loyalty.

Arup Kumar & Bivraj Bhusan (2012), study shows that there is significant relation between
customer relationship management, customer satisfaction and customer retention the relation
among these variables in State Bank branches of India. Furthermore, Khaligh et al. (2012),
examines the impact of customer relationship management on loyalty and customer retention in
Iranian telecom industry. This study declares that the elasticity or unambiguously the value
strategy is vital cause to increase the customer retention and profit of the company

Cho, et. al. (2013) investigates the impact of customer relationship management on customer
satisfaction and loyalty. The main findings of the study shows that behavior of the employees is
significantly related and contributed to customer loyalty compared to other elements of CRM i,e
interaction management , relationship management and services quality. Kocoglue (2012), in his
study titled customer relationship management and customer loyalty in the banking industry. The
study concluded that all elements of CRM I,e customer database, learning customer needs and
complaints, and providing solutions peculiar to customers are positively correlated with customer
loyalty. In addition, Payne & Frow, (2005) identified three different perspectives in the
definitions of CRM, namely, emphasis on information technology (IT) implementation, wide
range of customer oriented IT and Internet applications, and customer centric focus. And also
Yim et al. 2004 and Sin et al. 2005 developed a model of CRM dimensions consisting of: key
customer focus, CRM organization, knowledge management, and technology-based CRM.

To conclude, most of the aforementioned models agree on the significance of all dimensions of
CRM. Thus, based on the above empirical evidences the researcher identified six dimensions of
CRM practices including Interaction Management (Communication) and information technology
(IT) implementation (which is most of the researchers not include as part of CRMPs but it is
obvious that intensive Communication with customer and complaint Handling processes are
prerequisites to Build customers Trust and finally make them loyal) and intend to investigate the
impact of those CRM practices namely; key customer focus, knowledge management, CRM
organization, technology-based CRM, Interaction Management (Communication) and
information technology (IT) implementation dimensions and their impact on customers’ loyalty
by considering Cooperative Bank of Oromia as a case company.

5
The researcher has further checked whether there were similar studies in the selected research
domain. To this end, the Human Resource Department was interviewed and replied there is gap
to be filled from research and there was no research conducted in this research area (Source:
Human Resource Department, 2020. Moreover, by inserting the keywords at Google scholar also
proved lack of research in this specific area at Coop Banks.

1.3. Research Questions

With reference to the above statements the study was intended to investigate and answer the
following research questions.

1) What is the effect of key customer focus practices on Customer loyalty of Cooperative
bank of Oromia?
2) What is the effect of Interaction Management (communication) practices on Customer
loyalty of Cooperative bank of Oromia?
3) What is the effect of CRM Organization practices on Customer loyalty of Cooperative
bank of Oromia?
4) What is the effect of Knowledge management practices on Customer loyalty of
Cooperative bank of Oromia?
5) What is the effect of Technology Based CRM practices on Customer loyalty of
Cooperative bank of Oromia?
6) What is the effect of Implementation of Information Technology infrastructure for
intensive communication on Customer loyalty of Cooperative bank of Oromia?
1.4. Objectives of the Study
1.4.1. General objective

The general objective the study is to examine the effect of customer relationship management
practices on Customer loyalty of Cooperative bank of Oromia, Adama.

1.4.2. Specific Objectives

 To assess the effect of key customer focus practices on Customer loyalty.
 To assess the effect of Interaction Management (communication) practices on Customer
loyalty.
 To examine the effect of CRM Organization practices on Customer loyalty.

6
  To evaluate the effect of Knowledge management practices on Customer loyalty.
 To assess the effect t of Technology Based CRM practices on Customer loyalty.
 To assess the effect of Information Technology Integration practices on Customer loyalty
1.5. Significance of the Study

The study had a significant importance in strengthening the existing knowledge and
understanding of CRM practices and customer loyalty by examining and empirically testing the
relationship between CRM and customer loyalty for the case of Cooperative bank of Oromia
(Coop Bank). The study will also provide some insight or recommendations to Cooperative bank
of Oromia to evaluate and improve their CRM practice based on the study findings. Finally, the
study can serve as an additional reference to other researchers who are interested in the area of
CRM and customer loyalty.

1.6. Scope of the study

CRM encompasses vast areas of managerial practices. However, it is difficult and unmanageable
to conduct the study in all areas that summarizes CRM in terms of time, finance, and research
manageability. Therefore, the scope of the proposed study was delimited to an assessment of the
impact of CRM practices (key customer focus, Interaction Management ,CRM Organization,
knowledge management, Technology based CRM and IT Integration Practices) on Customer
loyalty of Cooperative bank of Oromia branches in Adama city.

To manage the research flow only employees and Potential Customers of Cooperative bank of
Oromia branches located in Adama was subjects of the study, through assessing how the
company interacts with their potential customers.

1.7. Definition of Basic Terms

Customer: Any individual who is able to figure out and do processing of account, checking
account and all other capable person who operate by banks
Customer Relationship Management: is an enterprise approach to understanding and
influencing customer behavior through meaningful communications in order to improve
customer acquisition, customer retention, customer loyalty and customer profitability (Swift,
2001).

7
Communication: Communication is all formal and informal exchanges that make meaningful
and timely information exchange between buyer and seller (Ranjbarian & Barari, 2009)..
Key Customer focus: is a strategic tool which has been identified as a value-addition method to
prioritize the most profitable customer segments for the organization (Rygielski et al., 2002).
CRM Organization: is defined as the supporting organization structure, incentives, resources
allocation, and management controls that enables building and sustaining customer relationships
(Day and Vanden Bulte 2002)
Knowledge management: is the transfer and application of knowledge about their customer and
business processes.
CRM Technology: are all the information systems used to support front office functions (sales,
customer service, and marketing) and back office applications that deal with data integration and
analysis (Jayachandran et al., 2005).

Information Technology Integration: Technology in case of banking can entail a variety of

options for instance Automatic teller machine (ATM), internet banking as well as mobile
banking (Kolodinskyet al., 2004).
Customer Loyalty: is a highly deep commitment to keep on purchasing a product or service in
the future regardless of the fact that there are situational factors and marketing efforts, which
have been potential to create switching behavior Yim, David & Chan (2008).

1.8. Organization of the Study

This research is organized into five chapters: 1st Chapter contain the introductory part dealing
with back ground of the study, the statement of the problem, objectives of the study, scope of the
study, significance of the study and definition of basic terms. The 2nd chapter focuses on the
theoretical review and empirical review taken from different sources. The 3rd chapter presents the
research methodology of the study. The 4th chapter presents data analysis, presentation and
interpretation of the study and finally, the 5th chapter presents the summary of major findings,
conclusion, recommendations and limitation & suggestion for future researches.

8
 CHAPTER TWO
REVIEW OF RELATED LITERATURES
This part of the study provides theoretical and empirical review collected from different sources
and specific to concepts or ideas of Customer Relationship Management, Customer Relationship
Management practices and customer loyalty. Based on the literature reviewed, the selected
conceptual framework is also presented.

2.1. Theoretical Review of Related Literature

2.1.1. Definitions of Customer Relationship Management (CRM)

The concept of Customer Relationship Management (CRM) is defined by many authors in

different ways because everyone has different perception about customer relationship
management strategies. Some authors consider customer relationship management as a revolted
version of relationship marketing and define it as creation, development, and improvement of
individual relationships with customers in order to maximize their total life cycle value (Payan
and Frow, 2009). Another definition refers to customer relationship management as a technology
that is aimed to create and maintain the individual relationships with profitable customers
through appropriate use of the information and communication technologies (Elaine D. Seeman,
Margaret O'Hara, (2006). On the other hand, customer relationship management is a systemic
managerial process for creating, maintaining, and developing relationships with customers in
every position in order to maximize relationship value (Richards and Jones, 2008).

Customer Relationship Management has been defined as a concept applied by organizations in

order to enhance customer related outcomes such as customer attraction, customer interaction,
customer loyalty and customer retention (Husnain and Akhtar, 2015). Definitions of relationship
management reported in Rasul (2016) characterized this concept as activities managed by the
organization to achieve three major objectives; to establish, maintain and improve relationships
with customers. Similarly, Bohling et al (2006) defined CRM as a management approach which
consists of methodologies, processes and software which help in establishment of an organized
relationship with customers. CRM means to create and maintain a specified relationship with
profitable customers through using appropriate information and communication technology
(Payne & Frow, 2005).

9
Furthermore, CRM can be defined as an organizational approach that seeks to understand and
influence customer behavior through meaningful communications in order to improve customer
acquisition, retention, loyalty and profitability (Swift in Ngai, 2005:583). Swift, (2000) defined
CRM as a method of understanding the customer behavior through intense communication with
him/her to improve the performance which is represented in attracting the customer, keeping
him/her and increasing his/her loyalty and profitability. It can be noticed that this definition
regards CRM as mere communication on the part of the organization to understand the
customer's behavior. (Stone & Findlay, 2001, p. 167) defined CRM as the organization carrying
out a lot of information about the customer from various resources and keeping it in order to
divide the territories, analyze and reuse. This definition regards CRM as only collecting and
recording information about the customer. (Fross & Stone, 2001, p.1) defined CRM as the
company use of its abilities in the field of research methodology, technology and e-commerce in
order to manage customer relationships. This definition for CRM regards it as the ability to use
technology in the domain of dealing with customers.

Table 2.1: summarized Definitions of CRM from different point of view

2.1.2. Concepts of Customer Relationship Management (CRM)

The review of the extant literature on CRM shows that "the field has begun to converge on one
common definition" (Boulding et al., 2005 p. 157). Chen and Popvich (2003) presented CRM as
a combination of three components: people, resources, and technology. A fourth component;
strategy; is suggested by other researchers (Yim et al., 2004). Based on an extensive review of

10
CRM definitions, Zablah, Bellenger, and Johnston (2004) concluded that CRM
conceptualizations take one, or a combination of five complementary perspectives: CRM as a
strategy, as a philosophy, as a process, as an information technology application, and as an
organizational capability. CRM as a philosophy considers customer loyalty key to business
profitability. To achieve loyalty, firm must shift their focus from getting customers to retaining
customers (Reichheld, 2006). CRM as a philosophy directs organizations to build customer
centric cultures and to organize around customers (Piccoli, O'Connor, Capaccioli, & Alvarez,
2003; Hasan, 2003).

When CRM is seen as strategy, attention is directed to maximizing the use of organizational
resources towards a favorable market position. Under this perspective, researchers emphasize
that not all relationships are good, and that customers who contribute the highest value to the
firm deserve more attention from managers (Ryals, 2005). Parvatiyar & Sheth , 2002, p.5)
mentioned that CRM is a comprehensive strategy that includes the process of acquiring certain
customers, keeping them and cooperating with them to create a distinguished value for both the
company and the customer. This strategy requires integrating the functions of marketing, sales,
customer service and exposition chain so as to achieve the highest competence and efficiency in
delivering value to the customer. As it shows, this definition regards CRM as a strategy with a
main goal of delivering a distinguished value to the customer through improving the marketing
productivity.

And also Payne & Frow, (2005) defined CRM as a strategic method related to creating a
distinguished value for the contributors through improving good relationships with the main
customers and other customer categories, as it (CRM) seeks to unify the strategies of marketing
using relationships and information technology to create profitable, long-term relationships with
customers and other parties. Kumar & Reinartz, (2006) agree with the above definition that
CRM is merely a strategic process by which the institution's more profitable customers are
chosen, and interactions between this institution and these customers is determined, in order to
achieve the goal of maximizing the present and future values for customers.

Many researchers see CRM as a process or "a collection of tasks or activities that help
organization achieve desired business outcomes" (Hammer, 2001). Some researchers emphasize
customer facing processes (Chen & Popovich, 2003; Reinartz, Krafft, & Hoyer, 2004), others

11
look at the customer knowledge management processes (Croteau and Li, 2003; Sin, Tse and
Yim, 2005), and few studied information relational processes (e.g., Bin Ismail, Talukder, Panni,
2007; Jayachandran, Sharma, Kaufman, & Raman, 2005). CRM is also seen as an information
technology solution or an enterprise application system that supports the building of profitable
customer relationships (Torggle, 2008; Ang & Buttle, 2006). Although the importance of
technologies such as the internet, sales force automation, call centers, and data mining in CRM
is well acknowledged, many researchers agree that CRM is more than a technology, especially
with poor to moderate empirical evidence on a direct link between technology and
organizational performance (Minami & Dawson, 2008; Day & Van den Butle, 2002; Reinartz et
al., 2004).

CRM is also seen as an information technology solution or an enterprise application system that
supports the building of profitable customer relationships (Torggle, 2008; Ang&Buttle, 2006).
Although the importance of technologies such as the internet, sales force automation, call
centers, and data mining in CRM is well acknowledged, many researchers agree that CRM is
more than a technology, especially with poor to moderate empirical evidence on a direct link
between technology and organizational performance (Minami & Dawson, 2008; Day & Van den
Butle, 2002; Reinartz et al., 2004). CRM is an IT system, which is an RM strategy enabler (Ryals
and Payne 2001). Indicatively, Glazer (1997) argues that CRM is an information intensive
process, which provides businesses a connection between marketing strategies and IT, thus
enhancing profitability and supporting the development of long-term relationships with their
customers.

Unlike all the above, (Ramaseshan, 2006, p.196) defined CRM from the employment point of
view as a process of achieving a continuous dialogue with each customer on their own, using all
the available means to know the quantitative expected response of that customer as a result of
practicing marketing activities to the degree that maximizes the general profitability of the
organization.. It is clear that this definition only concerns about short-term CRM, and not long-
term CRM. (Brink & et.al. 2006, p5) defined CRM as a definite marketing activity by which the
institution prepare its customers to use its resources to produce and market a valuable product for
them. CRM aims at two goals: supporting the social cause and improving the marketing
performance. In an attempt to summarize the most important concepts of CRM, (Zablah & et.al.,

12
2004) demonstrated that there are five points of view for defining CRM. The points of view are
the process, the strategy, the philosophy, the ability and the technology.

Recently more attention was directed to CRM as an organizational capability that contributes to
the creation of a competitive advantage (Campbell, 2003; Day & Bulte, 2002; Day, 2000).
According to the capability view, firms need to acquire and integrate resources that increase their
responsiveness to the changing needs of individual customers (Peppers & Rogers, 2004). One
can argue that CRM as a capability is the most comprehensive view of CRM, because it
combines CRM processes with other complementary tangible and intangible assets deemed
necessary to carry out such processes.

2.1.3. Types of CRM

Customer relationship management has different types that some of them have been indicated in
the following section.

Operational customer relationship management: in this system, an employee is asked to

undertake all functions of customer relationship management from marketing and sale to post-
purchase services and customer feedback. Operational customer relationship management
includes public business section (sale force automation), customer service and support, and
enterprise marketing automation (Richards and Jones, 2008).

Analytical customer relationship management: the collected data from operational customer
relationship management is analyzed for categorizing the customers and recognizing the up-
selling and cross-selling. In the ideal condition, the commercial decisions are screened based on
the resulted feedback from past decisions and analysis during time. It is possible to decrease the
customer losses through analytical customer relationship management implementation. This can
be done through recognizing the customers may leave the organization and effort to increase
their loyalty. As a result, the goals of profitability and costs decrease can be done (Greenberg,
2002).

Participative customer relationship management: this technique facilitates the interactions

between organization and customers through several communication channels (such as
telephone, post, internet, e-mail, and face-to-face communications). Also the coordination
between team of the employees and communication channels is supported in this model. The
participative customer relationship management is asystem that integrates the employees,

13
processes, and data so that the organizations can deliver favorable services for their customers.
On the other hand, participative customer relationship management results in the efficient and
effective interactions with customers through all of the communication channels. Indeed, the use
of internet-based cooperation and participation can decrease the customer services costs.
Participative customer relationship management facilitates the multi-channel interaction between
individual customers through services centers integration (Greenberg, 2002).

2.1.4. Major Elements of CRM

CRM dimensions have not been widely researched by many scholars and it is considered a new
scholarly area with only a few studies in the banking sector and call centers (Abdullateef et al.,
2010). The range of information on this concept is therefore quite limited. CRM consists of four
broad behavioral dimensions, key customer orientation, CRM organization, knowledge
management and technology -based CRM (Sin et al., 2006). It is essential that all of these
dimensions work systematically in an organization to guarantee its improved performance (Sin et
al., 2006). This categorization is derived from this fact that the successful customer relationship
management is resulted from four areas including strategy, employees, technology, and process.
Also it is should be remembered that it is possible to achieve a competitive advantage through
coordinating these strategic areas (Salomoun et al, 2005). In this regard, Major critical elements
of CRM are to be examined in this study.

2.1.4.1. Key Customer Focus

It is important in the first instance to confirm that the main purpose behind customer-oriented
behaviors is to increase customer’s long-lasting satisfaction and create customer-loyalty. The
identified customers are defined as the ones that the information is accessible for recognizing and
contacting them in the company. Also key customers includes the identified ones that provide
more values for company through providing more profits, active long-term relationships, and
powerful leadership for the company (Akroush etal, 2011). Customer focus is a strategic tool
which has been identified as a value-addition method to prioritize the most profitable customer
segments for the organization (Rygielski et al., 2002). This is generally done through offering
advanced flexibility in the forms of customized products and services to those customers who
contribute the most to the sales revenues (Hong-kit Yim et al., 2004). Payne and Frow (2005)
have argued that the customer-centric processes must be coordinated around the company wide

14
cross-functional operations to reap the rewards from the customers. Padmavathy et al. (2012)
have stressed that an embedded customer-focused strategy within the cross-functional teams is
essential to providing a satisfying experience to the firm’s customers.

In addition, As noted by Sheth et al.(2000) a customer-focused structure, culture, policy, and

reward system should permeate any organization that strives to implement CRM successfully.
This involves an overall customer-centric focus and continuously delivering superior value to
selected key customers through personalized/ customized offerings. Key elements of this
dimension consist of customer-centric marketing, key customer lifetime value identification,
personalization and interactive co-creation marketing. Accordingly, Sheth et al., (2000) define
key customer focus as a composition of dialog with customers on customizing their needs,
customizing products, customer needs assessment and implementation of customer needs
information.

2.1.4.2. CRM Organization

In order to ensure that service employees always maintain customer-oriented behaviors,
organizations have to develop an appropriate working environment. This includes providing staff
with modern tools and technology, customer-satisfaction tracking and complaints management
systems, inspirational leadership, and appropriate rewards systems (Hamid et al., 2011). CRM
cannot be successful even if the organizations enjoy the most advanced technology and adapt a
customer-oriented approach, unless the project completely integrates employees (Sin et al.,
2006). In addition, CRM success also requires an effective service concept as well as suitable
operational procedures. All the organization’s resources have to be harnessed in order to
implement CRM successfully and in turn, improve organizational performance (Hamid et al.,
2011).

The key considerations in order to successfully organize the whole company around CRM are as
follows: organizational structure, organization-wide commitment of resources, and human
resources management as noted by Sadek et al., (2011). Internal marketing plays the most
important role of customer-oriented and customer services delivery in every organization.
Internal marketing is resulted from interaction between human resource management and
marketing (Akroush etal, 2011). As firms align their structure and management processes with
their market goals, they become more successful in responding to their customers, which

15
eventually leads to superior performance (Reinartz et al., 2004). CRM organizing is defined as
the supporting organization structure, incentives, resources allocation, and management controls
that enables building and sustaining customer relationships (Day and Vanden Bulte 2002;
Jayachandran et al., 2005; Sin et al., 2005). Organizational structures that support cross
functional communication and coordination, as well as rewards and training programs designed
around customers needs resulted in higher relationship quality, which in turn positively
influenced organizational performance (Chang, 2007).

2.1.4.3. Knowledge Management

Information about customers can be gathered through interactions with them or from different
touch points within the organization itself (Sigala, 2004). Managing knowledge effectively can
help an organization to successfully build better customer relations that can result in a positive
impact on organizational performance (Abdullatif et al., 2010; Sin et al., 2006; Fan, 2011).
Customer knowledge management refers to acquiring, sharing, and developing the customer
knowledge among employees for making profit to the organization and customers. Janz and Pras
(2003) identified three fact of knowledge management competence. They are knowledge
development, knowledge dissemination, and knowledge application. In order to improve the
organizational efficiency and effectiveness, insure from delivering desirable products and
services to the customers and acquire their satisfaction, it is necessary to manage the
organization’s knowledge about customers. Therefore, it can be concluded that knowledge
management is an integrative part of customer relationship management (Salomoun et al, 2005).

Customer knowledge is generated generally through customer interactions or touch points across
the firm’s functional areas (Menguc et al., 2013). Valmohammadi (2017) asserted successful
application of CRM is predicated on effective transformation of this information to customer
knowledge. The decision makers at strategic level of an organization are enabled to generate
insights on customer preferences and enhance customer profitability when generated customer
knowledge is disseminated throughout the organization. Menguc et al. (2013) established that
customer relationship performance and sales team financial performance are positively
associated with the sales team’s customer knowledge creation capability. This way of managing
customer knowledge enables the functional processes to be customer-centric which need to be

16
established, maintained and continuously adjusted based on the customers’ current and
anticipated needs (Hong-kit Yim et al., 2004).

2.1.4.4. Technology Based CRM

Development of every organization in information technology area improves its capability in
collecting, saving, analyzing, and sharing knowledge about customer. This leads to increase the
organization’s capability in responding the customers’ needs and maintaining them. According to
Mohammed (2012) CRM strategy will end in failure if the information technology is not used
properly. In reality, the advancement in Information Technology has the capability to collect,
analyze, and share customer information which will lead to a customer satisfaction and thus
retaining customers. Thus, Computer Technologies are used in developing computerized
communications and technology aligned with business objectives. The use of customer
relationship management software enables companies to customize services to provide a higher
quality and lower cost. It also leads employees to work better with customer contact points
(Zinledin et al, 2005, 1290-1264).

Having put all these, the three aforementioned dimensions can hardly be optimized if they are
not incorporated within an efficient CRM technological framework. Modern technological
booms have necessitated leveraging the technological advancements in creating and analyzing
customer data patterns and forecast the needs models (Ahearne et al., 2010). In that way,
incorporation of technology optimizes applications of customer knowledge management and
condenses key customer focus by synthesizing insights on customer preferences for the
managers. Afterwards, organizing processes to support the customer focused strategy can be
framed based on the availability of the resources and identified customer preferences (Sin et al.,
2005). Firms nowadays are relying heavily on latest information management tools such as
customer database management, data warehousing and data mining to respond with timely and
effective personalized offers to the customers (Lambe et al., 2009). Rapp et al., (2010) pointed
that enhanced customer satisfaction, higher customer retention and long-term customer
relationships are among the many outputs sought by the incorporation of CRM-based
technology.

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 2.1.4.5. Interaction Management (Communication)
Communication is all formal and informal exchanges that make meaningful and timely
information exchange between buyer and seller (Ranjbarian & Barari, 2009). Communication is
a very important tool when you want to build relationships with their customers or business
partners, and also can be a tool for the adhesive connection between the company and customers
so communication has a vital role in relationships. Communication has a meaning as the ability
to provide timely and accurate information. Communication is an interactive dialogue between
the company and its competitors which includes the pre-sale, sale, consumption and phase after
consumption (Ndubisi, 2007). In CRM, communication is often overlooked. This is unfortunate,
because all the other elements are experienced through communication. Communication,
especially timely communication, strengthens trust by helping to resolve disputes and
expectations (Rashid, 2003).

The success of a communication can be affected by several things, including the clarity of ideas
to be conveyed, perceived similarity between the sender and receiver of information, lack of
distortion, and the appropriate communication channels. The communication process also affects
the success of the relationship between the company and its customers. Communication in a
CRM related to the value obtained by the customer, providing the right information, and
trustworthy as well as information regarding the change in services offered and proactive
communication when problems occur between companies and customers (Ndubisi, 2007). If
Relationship marketing is to succeed it must include all the messages contained in marketing
communications. It is necessary to create, maintain and expand relationships with customers
(Grönroos, 2004). Communication is the process of moving the understanding in the form of
ideas or information from one person to another (Handoko, 2003: 272). While Shimp (2003: 4)
states that communication is a process where thinking and understanding conveyed between
individuals or between organizations and individuals. Communication is an activity undertaken
to maintain relationships with customers through the availability of timely and accurate
information, provide information if there is a new service, create and fulfill the services
requested by the customer as well as the information provided is always accurate.

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 2.1.4.6. Information Technology Implementation
ICT was introduced in 1990s and developed rapidly. This technology is basically different from
other technologies and not only influences on its area but also it facilitates economic and non-
economic activities and improves efficiency and productivity. One of the greatest challenges
ahead of organizations is use of web-based technologies. Internet is a new channel for economic
transactions and making income. Rapid development of e-commerce and internet and financial
and banking sectors, customers are becoming more and more interested in use of online banking.
Development and facilitation of access to monetary services is one of the greatest achievements
of banking system in the world (Abdolvand et al, 2012). The present era is the age of
unpredictable changes and companies are confronted with issues like elimination of borders of
markets, fragmentation of markets, short products lifecycle, rapid changes in customers'
purchase model and so on in competition (Rahnama et al, 2012). Exact customers' information is
necessary for successful performance of CRM and technology lays an important role in
organizational smartness for implementation of CRM strategy (Omidvariyan, 2006). Use of
information technology has many advantages in CRM. In the following sentences, we deal with
main advantages of use of IT in CRM:

 Increase in customer's loyalty: an effective e CRM system can establish relationship

with customers with a constant trend (without attention to relationship channel).
Information collected by e CRM system helps an organization with identification of real
costs of customer maintenance. This information enables an organization to allocate its
resources and time to the most profitable customers. Considering the fact that the same
behavior towards all customers is incorrect, classification of the best customers enables
organizations to manage customers' affairs effectively. These actions increase customers'
loyalty. One of the instruments which is used by organizations in order to increase
customer's loyalty is personalization (Greenberg, 2001). CRM software can generate
information for customers which are extracted from different resources like customers'
data bank pr transaction system. A transaction system is a system which registers
previous transactions information. In any e-purchase, this system provides the best
suggestion for the customer based on its previous information. Moreover, personalization
concept is a mechanism for avoiding waste of time. A personalized system can display

19
 site advertisements and contents based on customers' interest. For instance, Amazon
website proposes similar items for purchasers. This process adds value to customers.
 Effective marketing: using e CRM, we can have information on every customer. Having
detailed information on a customer enables an organization to predict a customer's
favorable product and his or her purchase schedule. This key information enables an
organization to survive in competition and be powerful in marketing and sale (Mostaghel,
2006).
 Improvement of customer services and support: use of IT in a comprehensive e CRM
system can create a bank of customer information and help an organization with
establishing relationship with customers. Therefore, useless contacts of customers with
the organization reduced and this results in better service and more powerful support.
 Higher efficiency and reduction in costs: one of the other advantages of CRM is
reduction in transactions cost (Romano, 2002). Data storage and recovery by e CRM can
help reduce human force and other costs. Collection of customers' data in an info bank
enables marketing and sales section to share information and take steps towards common
targets (Mostaghel, 2006). E CRM play effective roles in financial efficiency using cost
tracking, better recognition of costs and contribution to capital return indices.

2.1.5. Performance Measurement Metrics

The performance elements which CRM is expected to influence positively are; customer loyalty,
profitability, market share, sales turn over, return on investment and profitability. Hermans
(2009) points out that there is a link between loyalty and financial results. Loyalty is viewed as a
product of customer satisfaction. The continuous levels of satisfaction would later translate to
better financial rewards for the organization.

Performance measurement metrics can be classified into different categories: financial versus
non-financial, one-dimensional versus multi-criteria, output and outcome measures, tangible
versus intangible indicators (Sigala, 2004). Managers primarily rely on quantitative performance
metrics such as revenue, market coverage, sales, profitability, and share of new customers,
frequency of visit etc., but they increasingly include qualitative indicators such as customer
satisfaction, retention or brand familiarity (Hermans 2009). Financial indicators have been
criticized as being unsuitable for strategic decisions (Hamid et al., 2011). They also have proven

20
to be inadequate for assessing investments of which benefits will be intangible, indirect or
strategic. Hamid et al., (2011) and Mohammed (2012) state that experts on CRM acknowledge
the usefulness of cross-functional frameworks, like the Balanced Score Card approach, but
further suggests using four categories of metrics to measure CRM performance such as strategic,
customer, operational and output metrics.

In this study, based on the above analysis the researcher will intend to adopt a qualitative
performance measure, and this includes construct of customer satisfaction and loyalty as a
performance measure. The different variables which make up the construct “performance” are
discussed next. These are assumed to be dependent on the practice of CRM.

2.1.5.1. Customer Satisfaction

The key to customer retention is customer satisfaction and companies need to measure customer
satisfaction regularly. Marketers are paying too much attention to satisfaction of the customer.
Sugandini (2002), states that customer satisfaction and service quality are prerequisites of
customer loyalty. A highly satisfied customer stays longer, buys more and promotes the
company for free to other consumers Lyu et al (2000). 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. Customer Satisfaction: is an emotional reaction or positive feelings of
expressing the difference between perceived service and customer expectations regarding
specific product or service (Jeong and Lee, 2010). The customer's satisfaction is the most
important criteria by which the organization can judge the quality of a product or service and is a
source of loyal to the organization and thus its survival in the market.

And also Customer satisfaction is important because satisfied customers are less likely to switch
to a competitor (Kotler, 2002). According to Doyle (2002), a highly satisfied customer will
exhibit the following characteristics: (1) stays in loyal longer, (2) buys more, (3) talks favorably
about the company, (4) pays less attention to competing brands and advertising, and (5) the
company will cost less to serve than new customers. Mouri (2005) ascertains that experience
which satisfies the need and desire of customer may increase the possibility of long term
relationship. A customer requires different satisfaction level at different stages of relationship
(Spath et al., 2007).

21
Accordingly many organizations currently trying to build a permanent correlation with the
customers to convince them that the product or service perfectly matching their expectations &
needs. And also it is of mutual benefit between the customer (complete satisfaction) and the
organization (high profits). (Kotler, 2003). Every organization wants a long term relationship
(Authors, 2013) with their customer, especially in banking; this is because customers become
significant leverage to the organization. Especially in the bank, they will take necessary action to
retain their customers (Fraering & Minor, 2013). Customers will satisfy if the services or the
product that given to them is beyond expectation. Lovelock and Weirz (2011) posit that
successful relationship are built on mutually satisfying exchanges in which exchange partners
gain value from the transaction. Customer satisfaction has been found to be linked to customer
loyalty. (Negi and Eyob,2013; Kim et al., 2004). High level of customer satisfaction heightens
customer loyalty and prevents customers from defecting (Kim et al., 2004).

2.1.5.2. Customer Loyalty

In the literature, the framework for customer loyalty has been discussed from an attitudinal,
behavioral or an integrative approach (Kim et al., 2004). While customer loyalty can be defined
as a deeply held commitment to continue with the patronage of a preferred product, service or
service provider consistently in the future even in the face of marketing efforts capable of
causing defection and situational influences. Customer loyalty represents a commitment to do
business with the organization, with the purchase of goods and services repeatedly, and
recommend services and products to your friends and groups (McIlroy & Barnett, 2000). Yim,
David & Chan (2008), defined customer loyalty as a highly deep commitment to keep on
purchasing a product or service in the future regardless of the fact that there are situational
factors and marketing efforts, which have been potential to create switching behavior. Prior
studies confirm that service companies have received incredible benefits of loyal customers
(Bagherzad, Chavosh, & Hosseinikhah, 2011). Hayes (2008) argues that customer is the only
source of a profitable growth, and customer loyalty may contribute in it. Chu (2009) explains
loyalty as a commitment to a certain product for repeat purchase. There is a difference between
the purchase rate of loyal and non loyal customers Bowen et al., (2003). Tseng, (2007) argues
that loyal consumers are very important and valuable assets for a firm. It is up to the company to
retain these customers for a long term relationship.

22
Customer loyalty has two dimensions. One is attitudinal and other one is behavioral Aydin et al.,
(2005). Attitudinal loyalty is related to preference, recommendation and purchase intentions of
the customers. Behavioral is related purchase share and frequency. On the other hand, behavioral
loyalty examines customer’s pattern of past purchases. Singh and Sirdeshmukh (2000) favoring
the behavioral approach conceptualize loyalty as a behavioral intention to maintain an ongoing
relationship with a service provider. Typically, loyal customers are willing to pay a premium for
a service or product and more understanding to service failure. However, customers’ loyalty can
also be due to high switching barriers or lack of real alternatives or lock-ins.

On the other hand, Bowen and Chen (2001) state that an individual may reside at a hotel because
it has the most convenient location, Nevertheless, an individual may also change to a new hotel
when it is located across the street and provides better deals. As this example illustrates, repeat
purchase behavior does not always indicate commitment; rather, it may signify a random actual
repeat purchase, or spurious loyalty. Yet, this spurious loyalty can be disregarded when
attitudinal loyalty is the construct of interest. Shankar and his colleagues (2003) also maintain
that attitudinally loyal customers are not likely to change to an incrementally more attractive
alternative, in that they have a certain degree of attachment or commitment to the product or
service.

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 (Reichheld, and Sasser, 2000), 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 Goodwin, and Gremler. (2006).

To conclude, Loyalty requires a positive attitude of the consumer towards a company and its
services; retention, on the other side, can also exist with a negative attitude towards a company
(Bruhn, 2009). Six indicators were used to measure customer loyalty: share information, say
positive things, recommends a friend, continue purchasing, purchase additional service and test

23
new service (Brodie, Roberts and Varki, 2003). Customer loyalty can be achieved through a
successful CRM implementation.

2.1.6. Customer Relationship Management in the Banking Industry

Enterprises product benefits of form, time, place and property that will satisfy the customers ’
demands through goods and service. Forming and marketing of the goods and services that
satisfy the customer demands is the basis of producing benefit. ( Altitas, 2000:). Whether the
customer is satisfied or not depends on whether the he compares what is offered to him with his
own expectations. If what is offered suits the expectations, the customer is satisfied. If what is
offered is above the expectations, the customer is highly satisfied and pleased. (Kother, 2004:
36) for example, if the real performance of a product or service in a bank is below the
expectations, the result is dissatisfaction, but if it equal or higher, customers satisfaction is
achieved Kocoglu, Duygu ,2012;Gubuz, (2008). In recent years, such fields as banking, where a
strong competition, customer satisfaction has gained a good deal of importance. It may be very
easy to let another bank capture a displeased customer. To raise the customer satisfaction to the
highest level and retain customers, the banks are to attach importance to customer relationship
management (CRM).

According to Mithas et al., (2005) CRM applications are likely to have an effect on customer
satisfaction for at least three reasons. First, CRM applications enable firms to customize their
offerings for each customer. By accumulating information across customer interactions and
processing this information to discover hidden patterns, CRM applications help firms customize
their offerings to suit the individual tastes of their customers. Customized offerings enhance the
perceived quality of products and services from a customer’s viewpoint. Because first, quality is
a determinant of customer satisfaction, it follows that CRM applications indirectly affect
customer.

The advantages provided to the banks by customer relationship management are as followings:
(Duygu, 2012; Alagoz, 2003;)

 Picking out the real customers in a bank in the long run and helping to make the
relationships effective,
 Making the way of bank management customer-based,

24
  Bringing, with technology, in the foreground the human relationships based on gathering
and using information by institutionalizing the personal sale concepts,
 Reshaping the selling and marketing campaigns of the bank,
 A successful customer relationship management system, providing a permanent
advantage of competition,
 Increasing the total productivity of the bank.

2.2. Empirical Review

Hisham Solieman, (2011), in his study customer relationship management and its relationship to
marketing performances assured that there is a positive relationship between CRM and
marketing performance such as customer satisfaction and customer loyalty . Three major
variables of CRM was tested in this study i,e focusing on the main customers, organization
efficiency and customer knowledge management. The study concluded that all elements of CRM
have positive relationship with customer satisfaction and customer loyalty.

Webalem (2012) investigates the practical application of CRM in one of the leading state owned
commercial bank in Ethiopia, CBE. She had assessed CRM application effectiveness from the
four behavioral dimension of CRM which are Customer focus, Organizational dimension;
Technology based dimension, and Knowledge management. The data were collected from
selected branches, and 300 customer’s perception on CRM deployment and a sample 58
employees who are engaged in CRM deployment were part of the investigation. Accordingly,
employees perceive CBE as a company that is highly organized around CRM while its
performance perceived to be unsatisfactory regarding the application of technology based CRM
as compared to the other dimension used to assess the application of CRM as a whole.

To the contrary, customer perception about CRM application in CBE were also investigated,
thus the finding show that CBE has been doing well in the CRM organizational dimension as
compared to other dimension by recording the lowest performance in technology based CRM
performance. Finally the finding concludes that CBE technology based CRM performance as
observed from the level of automation in the service and other function is low. And end up with
recommendation on adopting CRM based technology as enabler of CRM in general and its
dimension in particular.

25
Kolis & Jirinova (2013) described in their research a link between CRM and company’s financial
performance. Four key dimensions of customer relationship management – customer satisfaction,
loyalty, value and equity were taken into consideration to undergo this research. Each dimension
is tested for correlation with financial performance indicators which described how effectively
the company transforms sales into profit, was chosen as the main financial performance
indicator. Cengiz (2010) in his working paper reviewed and studied on the importance of
measuring customer satisfaction. It has evolved through the study that customer satisfaction in
this competitive market is must and measuring it is not specially a onetime process. It will
eventually leads to consecutive processes to attain success. The satisfaction will play a vital role
in customer expectations and can create a customized marketing mix.

Simonet, Kamdem, and Nguefack (2012) carried out a study to measure the impact of CRM on
the commercial performance of MFIs in Cameroon. They used a censored to bit model to regress
a performance score on a set of CRM practices namely the satisfaction of customers with regards
to past experiences, the computerized management of the customer relationship, and the
closeness of the contacts between the MFI and their customers. The study concludes that the
computerized management of the customer relationship and the proximity (closeness) of the
social contacts exert a positive influence on performance, while satisfaction toward past
experiences with customers exerts a negative and very significant influence on performance.

Hassan et al. (2015) with regards to his studies on Shell Pakistan proposed that, CRM
significantly impact on customer satisfaction and customer retention and all variables positively
relates. The study concludes that, the implementation of CRM grows a company’s market size,
enhances outputs, and establishes long lasting customer relationship due to the customer in-depth
knowledge gain.

Cho, et. al. (2013) investigates the impact of customer relationship management on customer
satisfaction and loyalty. The study was performed at a departmental store in Tehran, Iran. The
study employed quantitative approach. And base on 300 respondents. The main findings of the
study shows that behavior of the employees is significantly related and contributed to customer
loyalty compared to other elements of CRM i,e interaction management , relationship
management and services quality.

26
Lombard (2012) discovered that, a unit increase in CRM positively affects customer satisfaction
and customer retention in the insurance organization. Literatures suggest insurance industry has
never been able to exceed customer expectation even though it serves as reference for
assessment. Therefore, there is the need to understand customer expectation in order to retain
them (Walker & Baker, 2000; Siddiquiet al., 2010). Martey (2014) suggested that, when CRM is
practiced successfully, organizations are able to meet customer expectations which automatically
promote customer retention in the restaurant industry in Ghana. Abu (2011) studied CRM as a
strategic tool for competitive advantage: a case study of SIC in Ghana. Findings of the study
shown that, SIC hardly practice CRM strategies and this explains why customer satisfaction is
low and this ultimately affects customer retention.

Khaligh et al.(2012) investigate the impact of CRM on customer loyalty and retention in the
telecom industry Iran. The data are collected from 200 Iranian telecom services users. Finding
shows that commitment and vision of the management system is highly required for a successful
CRM implementation. The structure of the strategy should be based on flexibility and explicitly
of the policies especially pricing policies. These factors are very important to increase customer
loyalty and benefit of the firm.

Kocoglue (2012), in his study titled customer relationship management and customer loyalty in
the banking industry. The study has been conducted on a sample of 350 staff employed in all the
branches in Denizili of T.C. Ziraat Bank. The study concluded that all elements of CRM I,e
customer database, learning customer needs and complaints, and providing solutions peculiar to
customers are positively correlated with customer loyalty.

Dotur&Halmajan(2011) studied the role of organizations preparation on customers relationship

management and commercial performance. This research was done with 82 companies in
Romania. The result showed that organization had to highly prepare to perform customer
relationship management. Moreover, customer relationship management has significant
relationship with customers and commercial performance.

Sanaullah Nazir (2014), studies the impact of customer relationship management on customer
satisfaction in the hotel industry. They implement the purposive sampling on 130 applicants from
the various hotels of Islamabad. Consequences exposed there is a high positive relationship
among the customer relationship management and customer satisfaction or businesses cannot be

27
successful without concentration on CRM. Basman Al Dalayeen (2017), studies the impact of
CRM on customer satisfaction in Jordan two banks. This study based on target population. The
size of sample is 119 applicants. Results exposed that high positive relation among that variables
the customer relationship management and customer satisfaction.

Khabiri (2014) examined the factors affecting the consumer partnership in the word-of mouth
communication. The results showed that four variables, namely trust, commitment,
communication, and competence had a significant effect on the quality of the relationship and
the quality of relationship had a significant positive effect on the word-of-mouth communication
among the club’s customers. Mohammadi et al. (2013) indicated that customer satisfaction is the
most influencing factor. Besides, the role of the quality of relationship, customer expectations,
image of organization, perceived quality, relationship marketing, perceived value, and loyalty
were demonstrated to have positive and significant impact on word-of-mouth communication. In
addition, the benefits of confidence, social benefits, and special treatment benefits had positive
impact. Ndubisi and Wah (2005) also found a significant relationship between conflict handling
and customer loyalty, indirectly through trust and perceived relationship quality. Organizations
that encourage disappointed customers to complain and empower employees to remedy the
situation on the spot have been shown to achieve higher revenues and greater profits (Kotler and
Keller, 2006: 419 - 420).

Wang and Lo, 2004 Zineldin, (2006) developed a triangle strategy between quality, CRM, and
customer loyalty which is leading to company’s’ competitiveness. This research was designed to
measure satisfaction and loyalty of the customers based on two main conditions where the
customer database information and strategy of CRM should be well structured and the capacity
of the system should be enough to produce data accurate analysis. According to the findings of
the research, any changes of the quality of the services or productions in a firm over time could
be used as an indicator to find the level of customer loyalty a through a well-structured CRM
strategy. If the indicators of interaction, infrastructure, and atmosphere are linked to the product
and process quality, it helps the researchers to find what changes are required in CRM strategy to
improve customer satisfaction and loyalty.

28
 2.3. Conceptual Model of the Study
The conceptual framework shown in Figure 2.1 is developed based on the literature review. The
conceptual framework will illustrate the linkage between CRM practices with customer Loyalty.
Figure 2.1: Conceptual framework
Independent Variables Dependant Variable

Key Customers Focus

CRM Practices

Interaction Management
Customer
CRM Organization
Loyalty
Knowledge Management

Technology based CRM

IT Integration Practices

Source: compiled by the researcher, (2020)

Figure 2.1 shows the relationship of independent and dependent variables.
The independent variables are expected to influence loyalty. To summarize, Customer focus is a
strategic tool which has been identified as a value-addition method to prioritize the most
profitable customer through offering advanced flexibility in the forms of customized products
and services to those customers who contribute the most to the sales revenues, CRM
Organization needed to develop an appropriate working environment. This includes providing
staff with modern tools and technology, customer-satisfaction tracking and complaints
management systems, inspirational leadership, and appropriate rewards systems. Customer
knowledge management refers to acquiring, sharing, and developing the customer knowledge
among employees for making profit to the organization and customers. CRM Technologies are
used in developing computerized communications. Communication has a meaning as the ability
to provide timely and accurate information. Communication, especially timely communication,
strengthens trust by helping to resolve disputes and expectations. In this study, six indicators
were used to measure customer loyalty: share information, say positive things, recommends a
friend, continue purchasing, purchase additional service and test new service (Brodie, Roberts
and Varki, 2003). Customer loyalty can be achieved through a successful CRM implementation.

29
 CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1. Introduction
This part of the study consists of research design, type and source of data, population, sampling
techniques, sample size determination, data collection instrument, data collection procedure,
methods of data analysis, ethical issues, validity and reliability of the study.
3.2. Research Design
The study adopted empirical investigation with descriptive and explanatory research design since
the major focus of the research is the effect CRM practices on loyalty. Explanatory studies and
descriptive survey designs were used to allow for the gathering of information, summarize,
present and interpret it for the purpose of clarification (Creswell, (2003). Whereas, the Research
approach is qualitative and quantitative research approach, it is a means for testing objective
theories by examining the relationship among variables. These variables, in turn, were measured,
typically on instruments, so that numbered data were analyzed using statistical procedures.
Therefore, in order to accurately describe the effect & relationships between the independent
variables and the dependent variable Descriptive and explanatory research studies are employed
which helps to use both qualitative and quantitative data analysis.
3.3. Data Type and Source

The study employed both primary and secondary data sources. Primary data was collected from
employees and key customers of the banks through closed ended questionnaires. As the
secondary data; books, articles, journals, was reviewed to develop conceptual framework
3.4. Target Population

From total 15 cooperative banks of Oromia branches located in Adama city, the researcher was
collected data from 8 branch banks in order to conduct the study. Hence, the researcher
purposively select 8 branches found in Adama city based on their establishment years (who
achieved greater than 5 years) and based on number of potential customers they have.

Therefore, the total target population of the study (from those branches) was 343. From total
target population 156 were employees of cooperative banks of Oromia in Adama city 8 branches
(from Hawas Branch, Adama Branch Torben Obo Branch, Gendeharaa Branch, Kechema

30
Branch, Derartu Branch, Burka Branch, Dembela Branch) including secretaries, guards and other
supportive staffs and from 73160 total account holder customers from those banks the researcher
considered only key customers or long years of service and frequent interaction. The total of key
customers is 187.
3.5. Sample Size Determination

The total numbers of employees and key customers of Cooperative Bank branches in Adama city
was 343. The researcher used Yamane’ (1967) formula to calculate sample size.

N
𝑛=
1 + N(e)²

Where n is the sample size, N is the population size, and e is the level of precision. By using this
formula at 95% confidence level and 5% level of precision the sample size were obtained as
follows:
343
𝑛= = 184.65 ≈ 185
1 + 343(0.05)²

The total numbers of employees working in Cooperative Bank branches in Adama city and
potential (key) customers are 343. From total target population 185 was considered as sample
size of the study. Since the total target populations are small all clerical workers (104 employees)
and 81 potential (key) customers were considered as sample size of the study excluding
secretaries, guards and other supportive staffs whom they are insignificant for the study and,
through considering the heterogeneity of sample respondents on the basis of different units/
departments within the organization.
3.6. Sampling Technique

For the purpose of this study, the researcher used non probability sampling techniques
particularly purposive and convenience sampling technique since the total population of the
study is large and heterogeneous in type purposive and convenience sampling technique was
preferred. Then the samples were selected from each branch based on their job title (clerical
workers only). Since the information required for the study involves selection of respondents
who have enough awareness about the bank’s CRM practices and Customer Loyalty, purposive
sampling technique was used to have the right respondents from every concerned section
(branches) and the researcher was also purposively selected samples from customers based on

31
their educational level (who has at least college diploma (certificate) and above as they can read
and understand the questionnaire and based on their convenience.
3.7. Data Collection Instruments
The data was collected through structured questionnaires with closed Likert type statements
questions. The Likert type scale commonly used in business research, because it allows
participants to provide their perceptions and opinions both in terms of direction (positive or
negative) and intensity (degree of agreement or disagreement). The questionnaire would utilize a
five point likert scale namely Strongly disagree (SD), Disagree (D), Neutral (N), Agree (A) and
Strongly Agree (SA) which will be assigned scores of between 1 and 5. This allowed the
researcher to draw conclusions based on comparisons made from the responses.
3.8. Data Collection Procedure
Before collecting the data, the instruments of the data was prepared carefully and permission of
the selected firms were taken. Then the objectives of the study were explained to subjects. Based
on their willingness to participate in filling questionnaire the questionnaires were distributed. To
enhance the response rate, the questionnaires were delivered by hand and collect by hand on a
scheduled pickup date.
3.9. Method of Data Analysis

Data generate by questionnaires were cleaned, edited and coded before analysis is done. Then,
Data will be inserted into the computer SPSS package and were processed using descriptive
statistics to identify the characteristics of variables under study. The study also used tables,
frequencies, and percentages to analyze and present the collected data. In addition, the collected
data were analyzed by Regression analysis and correlation analysis because it helps to
investigate the relationship between the independent variable of CRM practice with customer
loyalty and its impact on the dependent variables customer loyalty.

Base on the conceptual model of the study expressed by Figure 2.1, mathematically the
relationship between CRM dimensions and customer loyalty is expressed in the multiple
regression equation as:
Y = X0 +X1 (KCF) + X2(CRO) +X3 (KMT) +X4 (TCR) + X5 (COM) + X6(ICT) +e
Where: Y= Customer Loyalty.
KCF = Key Customer Focus.

32
 CRO = CRM organization.
KMT = Customer Knowledge management.
TCR = Technology based CRM
COM= Interaction Management (Communication)
ICT= Information Technology Integration
e= Error (level of precision)
X0= the constant parameter.
X1= Coefficient of Key Customer Focus
X2= Coefficient of CRM organization.
X3= Coefficient of Customer Knowledge management.
X4= Coefficient of Technology based CRM.
X5= Coefficient of Interaction Management (Communication)
X6= Coefficient of Information Technology Integration
In accordance with the above mathematical model the constructed research questions were tested
by considering significance level of each constant parameter in multiple regression analysis.
3.10. Ethical Consideration
A formal letter was written from Unity University Adama campus, Department of Business
Administration to all concerned authorities of the banks. The data collection was started after
getting consent from the parties mentioned above, and all information gathered were
confidentially treated.
3.11. Validity and Reliability
3.11.1. Assessing Reliability

Reliability has to do with the accuracy and precision of a measurement procedure (A measuring
instrument) is reliable if it provides consistent results. As multiple items in all constructs were
used, the internal consistency/reliabilities of CRM Practices and Customer Loyalty were assessed
with Cronbachs Alpha and the reliability values for all constructs are confirmed as greater than
0.7, which are considered ideal (Pallant 2005). The following table shows the summary of
reliabilities of all constructs.

33
Table 3.1: Reliability of constructs
Construct Variables Cronbach’s Alpha Result Number of items
Key Customer Focus .794 8
CRM .765 8
Practices Interaction (Com.) Management
CRM Organization .727 7
Knowledge Management .949 9
Technology based CRM .826 5
IT Integration Practices .871 4
Customer Loyalty .945 12
Total 53
Source: Researcher’s Survey data, (2020)
3.11.2. Test of Validity

Validity is the most critical criterion and indicates the degree to which an instrument measures
what it is supposed to measure. Malhotra (2010) mentioned about three types of validity in his
study: content validity, predictive validity, and construct validity. This study addressed content
validity through the review of literature and adapting instruments used in previous research.

34
 CHAPTER FOUR
DATA PRESNTATION, ANALYSIS AND DISCUSION

4.1. Introduction
This chapter presents the data analysis and interpretation part of the research. The study
attempted to examine the Impact of Customer relationship management Practices on Customer
Loyalty of Cooperative bank of Oromia. Therefore, the questionnaire were developed in five
scales ranging from five to one; where 5 represents Strongly agree, 4 Agree, 3 Neutral, 2
Disagree, and 1 Strongly disagrees. In order to assess the relationship between Customer
relationship management Practices and Customer loyalty, Correlation and regression analysis
were conducted for scale typed questionnaire. The collected data were presented and analyzed
using SPSS version 25.0 statistical software. The study used correlation analysis, specifically
Pearson correlation to measure the degree of association between different variables under
consideration. Regression Analysis was used to test the impact of independent variable on
dependent variable.

4.2. Response Rate

From a total of 185 questionnaires which were distributed to employees of Coop bank and key
customers 152 (82.16%) questionnaire were obtained and identified as valid and used for
analysis. Based on these, the response rate is 82.16%.
Table 4.1: Description of response rate
No Name of the Firm No. of No. of No. of
Questionnaire Questionnaire Questionnaire
Distributed Collected Uncollected
1 Coop bank employees 104 96 8
2 Key customers 81 56 25
Total 185 152 33
Source: Researcher’s Survey data, (2020)
4.3. Demographic Characteristics
The demographic profile of the sample respondents were presented and analyzed below. The
purpose of assessing respondents’ age is used to determine whether the researcher considered
heterogeneity of sample units. On the other hand assessing the work experience and education
level of the respondents’ is that, when the respondents are more experienced and educated they
have better opportunity to understand the case and give better response than else.

35
Table 4.2 Respondents’ frequency distribution of Age
Frequency Percent Valid Percent Cumulative Percent
Valid 20-25 years 31 20.4 20.4 20.4
26-30 years 50 32.9 32.9 53.3
31-35 years 30 19.7 19.7 73.0
36-40 years 24 15.8 15.8 88.8
Above 40 years 17 11.2 11.2 100.0
Total 152 100.0 100.0
Source: Researcher’s Survey data, (2020)
As it is shown in the table 4.2, the researcher divided the age of the respondents in to five
categories, starting from 20- 25 years of age to above 40. Therefore respondent’s age from 26 up
to 30 years covers 32.9%, age of 31 up to 35 covers 19.7%, age of 36 up to 40 are 15.8%, and
above 40 are 11.2% of respondents. Therefore, 121 respondents (79.6%) of respondents were
above age of 26 years. Thus, it can be implied that the respondents were matured enough which
can ensure the value of the study, and the responses obtained are valid.
Table 4.3 Respondents’ frequency distribution of Educational Qualification
Frequency Percent Valid Percent Cumulative Percent
Valid College Diploma 28 18.4 18.4 18.4
First Degree 101 66.4 66.4 84.9
MA/MSC/MBA or above 23 15.1 15.1 100.0
Total 152 100.0 100.0
Source: Researcher’s Survey data, (2020)
Regarding Table 4.3 the result indicates educational qualification of respondents, 28 respondents
(18.4%) are Diploma holders, 101 respondents (66.4%) have 1st degrees and 23 respondents
(15.1%) have 2nd Degree (MA/MSC/MBA or above). From the educational background of
respondents, 124 respondents (81.5%) were 1st and 2nd degree holders. According to the
response, the respondents provide relevant and reliable information needed for the study and they
are fit in line with the response of the questionnaire.
Table 4.4 Respondents’ frequency distribution of Work Experience
Frequency Percent Valid Percent Cumulative Percent
Valid less than 2 years 24 15.8 15.8 15.8
2-5 years 67 44.1 44.1 59.9
6-10 years 44 28.9 28.9 88.8
10 years and above 17 11.2 11.2 100.0
Total 152 100.0 100.0

36
Source: Researcher’s Survey data, (2020)
From the total respondents, 24 respondents (15.8%) fall at a work experience of less than 2
years, 67 respondents (44.1 %) fall at a work experience level of 2-5 years, 44 respondents
(28.9%) were with 6-10 years experience and the rest 17 respondents (11.2%) were at a work
experience of more than 10 years. From this it can be concluded that the majority of respondents,
128 respondents (84.2%) fall at a work experience above two years. This implies that most of the
respondents have sufficient knowledge and experience about their firm and the subject matter of
the study.

4.4. Descriptive Analysis

The research questionnaire designed using 5 point Likert scale to collect appropriate responses,
in relation to this the respondents indicated the extent they agree with the statements by
choosing: 5-Strongly Agree, 4-Agree, 3-Neutral, 2-Disagree and 1-Strongly Disagree. A mean
(M) score of 0- 1.5 means that the respondents response for the question indicate poor
performance, between 1.50 to 2.50 means low performance, 2.50 to 3.50 indicate average, 3.50-
4.50 indicate above average and a mean above 4.50 indicate High performance. Based on the
response of the respondents Mean computed on the following tables.

4.4.1. Customer Relationship Management Practices

4.4.1.1. Key Customer Focus

Customer focus is a strategic tool which has been identified as a value-addition method to
prioritize the most profitable customer segments for the organization (Rygielski et al., 2002).
This is generally done through offering advanced flexibility in the forms of customized products
and services to those customers who contribute the most to the sales revenues (Hong-kit Yim et
al., 2004). Key Customers focus strategy emphasizes positioning of the customer as the primary
basis for organizing all organizational activities with the aim of increasing customer satisfaction
and loyalty (Gebauer & Kowalkowski, 2012). This involves an overall customer-centric focus
and continuously delivering superior value to selected key customers through personalized/
customized offerings. Key elements of this dimension consist of customer-centric marketing, key
customer lifetime value identification, personalization and interactive co-creation marketing. In
order to collect respondents’ perception towards the key customer focus practices eight questions
provided and the result of the findings are provided in the following table.

37
Table 4.5: Descriptive statistics on key customer focus
Item Key Customer Focus
no & Coop Banks: Std.
code N Mean Deviation
KCF1 always provides personalized services for its key customers 152 3.77 .714
KCF2 Strives to constantly surprise and delight key customers. 152 3.81 .761
KCF3 makes an effort to find out what the key customer needs and wants are 152 3.87 .694
KCF4 Strengthens the emotional bonds with key customers by wishing them on 152 3.47 .539
KCF5 Through regular contacts, works with individual key customer 152 3.61 .728
KCF6 All people in COOP BANKs treat customers with great care 152 3.59 .825
KCF7 COOP BANK staff are competent in handling customer concerns 152 3.86 .685
KCF8 gives individual attention to customers & tries to understand their Feelings 152 3.95 .726
Valid N (listwise) 152
Source: Researcher’s Survey data, (2020)
As it is indicated on the table 4.5, based on the mean value, the variables for Key Customer
Focus practices of Coop Banks vary from the highest (3.95), for Coop Bank gives individual
attention to customers and try to understand their Feelings to the lowest (3.47) for Coop Bank
Strengthens the emotional bonds with key customers by wishing them on important occasions.
The highest respondents’ agree on Coop Bank gives individual attention to customers and try to
understand their Feelings with the mean and standard deviation score of (Mean= 3.95, S.D =
0.726), Coop Bank makes an effort to find out what the key customer needs and wants are with
mean and standard deviation score of (Mean= 3.87, S.D = 0.694), COOP BANK staff are
competent in handling customer concerns (Mean= 3.86, S.D = 0.685), COOP BANK Strives to
constantly surprise and delight key customers (Mean= 3.81, S.D = 0.761), always provides
personalized services for its key customers (Mean= 3.77, S.D = 0.714), Through regular contacts
with customers, COOP BANK work with individual key customer to customize its offerings
(Mean= 3.61, S.D = 0.728), and All people in COOP BANKs treat customers with great care
(Mean= 3.75, S.D = 0.727). it can be concluded that most of the respondents agreed as COOP
BANK focus and work with its key customers in order to retain them and have a competitive
advantages through them. However, they are neutral on COOP BANK Strengthens the emotional
bonds with key customers by wishing them on important occasions with (Mean= 3.47 and S.D =
0.539). Therefore, the bank has to work on the observed gap as it has value on customer loyalty
because wishing them on important occasions may strength their relationship especially
profitable customer for the organization.

38
 4.4.1.2. Interaction (Communication) Management
Communication is an activity undertaken to maintain relationships with customers through the
availability of timely and accurate information, provide information if there is a new service,
create and fulfill the services requested by the customer as well as the information provided is
always accurate. Communication in a CRM related to the value obtained by the customer,
providing the right information, and trustworthy as well as information regarding the change in
services offered and proactive communication when problems occur between companies and
customers (Ndubisi, 2007). In order to collect respondents’ perception towards the interaction
(communication) management practices eight questions provided and the result of the findings
are provided in the following table.
Table 4.6: Descriptive statistics on key customer focus
Item Interaction (Communication) Management
no & Coop Banks: Std.
code N Mean Deviation
COM1 provides timely information for its key customers 152 3.86 .631
COM2 provides accurate and reliable information for its customers 152 3.71 .843
COM3 Relationship with customers are managed effectively and supported 152 3.80 .822
COM4 Use information from customers to design\improve product\ services 152 3.82 .776
COM5 periodically call its clients to reminder on their personalized services 152 3.93 .815
COM6 periodically send email and newsletter to its clients 152 3.89 .862
COM7 The customers freely express opinions to the staff of COOP BANKs 152 4.13 .832
COM8 openly discuss with its customers on solutions when problem arise 152 3.76 .926
Valid N (listwise) 152
Source: Researcher’s Survey data, (2020)
Table 4.6 shows that, all variables mean is higher than 3.5 which indicate that majority of
respondents agreed as the bank effectively communicate its customer and work with them. The
mean ranged from the highest 4.13 for customers freely express opinions to the staff of COOP
BANKs to the lowest 3.71 for provides accurate and reliable information for its customers.
Therefore, most of the respondents agreed that interaction (communication) management
practices of COOP BANKs are good.

4.4.1.3. CRM Organization

CRM organizing is defined as the supporting organization structure, incentives, resources
allocation, and management controls that enables building and sustaining customer relationships

39
(Day and Vanden Bulte 2002; Jayachandran et al., 2005; Sin et al., 2005). Organizational
structures that support cross functional communication and coordination, as well as rewards and
training programs designed around customers needs resulted in higher relationship quality, which
in turn positively influenced organizational performance (Chang, 2007). In order to collect
respondents’ perception towards the CRM organization practices seven questions provided and
the result of the findings are provided in the following table.
Table 4.7: Descriptive statistics on CRM Organization
Item no
CRM Organization Std.
& code Coop Bank: N Mean Deviation
CRO1 Has established clear business goals 152 3.51 .846
CRO2 Top management provides effective leadership 152 3.65 .848
CRO3 Commits time and resources to meet CRM goals. 152 4.08 .810
CRO4 Systems designed to make it easy for customers to do business. 152 3.63 .995
CRO5 Has Customer-centric performance standards 152 3.59 1.268
CRO6 Provides increased customer convenience by expanding branches. 152 3.83 .975
CRO7 Frontline employees empowered to exceed customer expectations 152 3.61 .799
Valid N (listwise) 152
Source: Researcher’s Survey data, (2020)
Regarding Table 4.7 all respondents state their agreement to all CRM organization dimensions
with the mean score of greater than 3.5. This shows that COOP bank has established clear
business goals related to customer acquisition, development, retention, and reactivation and
commits time resources to meet CRM goals. Top managements provide leadership for building
customer relationships as a major goal of the bank. To address and meet CRM goals COOP bank
Commits time and resources, established Customer-centric performance standards to monitor at
all customer touch points in this Frontline employees are encouraged and empowered to
positively exceed customer expectations and moreover Coop Bank Systems are designed to make
it easy for customers to do business with it and expanding its branches for convenience services
so as to address customer needs. Therefore, the overall result of the survey indicates that most of
the respondents agreed as Coop Bank effectively organizing its business processes around CRM
goals.

4.4.1.4. Customer Knowledge Management

Knowledge can be gained by understanding customer experiences and information. Main aspects
of knowledge management include knowledge creation, sharing knowledge and accountability.

40
Knowledge about major customers is essential to the success of customer relationship
management and can lead to the development of a learning relationship with customers, and
significantly increase the competitiveness of the organization. Knowledge based theory, proposes
that knowledge management practices such as knowledge acquisition, knowledge storage,
knowledge creation, knowledge sharing and knowledge implementation play a critical role in
achieving high level productivity; financial and human resource performance; and improved
sustainable competitive advantage (Gholami, Asli, Nazari-Shirkouhi, & Noruzy, 2013). In order
to collect respondents’ perception towards the Customer knowledge management practices nine
questions provided and the result of the findings are provided in the following table.
Table 4.8: Descriptive statistics on Customer Knowledge Management

Item no
Customer Knowledge Management Std.
& code Coop Bank: N Mean Deviation
KMT1 Takes customer feedback seriously and replies to it. 152 3.43 1.046
KMT2 Has effective recovery strategy that guarantees for service failures. 152 3.60 .871
KMT3 reviews customer information periodically 152 3.54 .948
KMT4 Customer feedback taken using variety of direct & indirect measures 152 3.44 .947
KMT5 Shares to its employees the feedback given by the customers. 152 3.64 1.020
KMT6 provided electronic-information to its customer 152 3.73 .891
KMT7 Periodically upgrade customer database for effective CRM. 152 3.87 .740
KMT8 Employees easily & readily access customer information from the database 152 3.81 .787
KMT9 Employees have the knowledge to answer customer’s questions. 152 3.80 .781
Valid N (listwise) 152
Source: Researcher’s Survey data, (2020)

According to the data in the Table 4.8, respondents state their agreement to four of knowledge
management practices with the mean score of greater than 3.5 for that Coop Bank Periodically
upgrade customer database for effective customer relationship management, as concerned
employees can easily and readily access customer information from the database and provided
electronic-information to its customer. And also concerning customers feedback most of the
respondents agreed as Coop bank Shares to employees the feedback given by the customers so as
Employees and executives has the knowledge to answer customer’s questions and as it has
effective customer recovery strategies including guarantees for service failures. Thus, this
performance makes the bank more productive and profitable. However, even the bank had
provide effective recovery strategy & guarantees for service failures the result on the above table

41
also shows lower performance for taking customer feedback seriously & replying to it and
reviews of customer information periodically with the mean value of lower than 3.5.

To improve the competitiveness of the organization, Knowledge about major customers is

essential. Therefore, Coop bank has to work with the observed gap in order to improve the
overall customer knowledge management performance and to be competitive enough.

4.4.1.5. Technology based CRM

CRM technology includes all the information systems used to support front office functions
(sales, customer service, and marketing) and back office applications that deal with data
integration and analysis (Jayachandran et al., 2005). Usually companies start with isolated
applications, and as the business scale grows, they face the challenge of integrating client
information which drives the adoption of CRM software packages (Mithas, Krishnan, & Fornell,
2005). In order to collect respondents’ perception towards the Technology based CRM practices
five questions provided and the result of the findings are provided in the following table.
Table 4.9: Descriptive statistics on Technology based CRM Practices
Item no Technology based CRM Practices N Mean Std.
& code Coop Bank: Deviation
TCR1 Uses technology to automate sales, and service. 152 3.58 .946
TCR2 ISs are designed to give comprehensive data 152 3.49 .884
TCR3 Technology is easy to be used by the Customers. 152 3.68 .786
TCR4 Technology products have created conveniently 152 3.92 .842
TCR5 Technologies meets basic business requirements 152 3.82 .877
Valid N 152

Source: Researcher’s Survey data, (2020)

Table 4.9 shows that, on the average all variables mean is higher than 3.5 which indicates
majority of respondents agreed as CRM technology of the Bank is good except for COOP
BANK information systems are designed to give comprehensive data about all aspects of its
customers, so that it can also able to be responsive with the mean value of lower than 3.5. It is
obvious that responsiveness is one of the marketing performance indicator and technology based
CRM are integrated and practiced as to be responsive for customer to attract and retain them
meeting their wants and needs with the right time and place in order be competitive enough and
get higher marketing performance. Therefore, COOP bank has to work on the observed gaps in
order to improve the overall Technology based CRM outcomes.

42
 4.4.1.6. Information Technology Integration

Information Technology (IT) is the umbrella term that encompasses technologies used to create,
store, change and use the information in its different configurations (PEPPERS & ROGERS
GROUP, 2004). In CRM, IT responds to the computer requirements of the system, represented
by software and hardware. Pedron (2001) postulates that the CRM strategy is closely related to
the advances of IT and, through this tool, it is possible to seek customer loyalty. In order to
collect respondents’ perception towards the Information Technology Integration practices four
questions provided and the result of the findings are provided in the following table.
Table 4.10: Descriptive statistics on Technology based CRM Practices
Item no Information Technology Integration Practices N Mean Std.
& code Coop Bank: Deviation
ICT1 Integrated Latest IT infrastructures (i.e. mobile apps…) 152 3.70 .990
ICT2 ICT System enables data sharing within the banks 152 3.72 .885
ICT3 ICT System allow interactions among users in different areas 152 3.82 .864
ICT4 ICT System has well integrated 152 3.88 .845
Valid N 152
Source: Researcher’s Survey data, (2020)
Table 4.10 depict that, on the average all variables mean is higher than 3.5 which indicated that
majority of respondents agreed on information technology integration practices of the Bank. The
mean ranged from the highest 3.88 for Coop bank ICT System are well integrated in various
company departments to the lowest 3.70 for COOP BANK integrated latest information
technology infrastructures ( such as mobile application and internet services ) to offer quality
services. Therefore, most of the respondents agreed that IT integration practices of COOP
BANKs are good.

4.4.1.7. Customer Loyalty

Customer loyalty broadly refers to customer behaviors that indicate a desire to better an ongoing
relationship with a company (Palmatier, 2006). Loyal customers are often worth the marketing
effort, owing to their willingness to buy additional products and spread positive word of mouth
as well as their reliability as a source of continuous revenues (Zeithaml, Berry, & Parasuraman
1996). Loyalty requires a positive attitude of the consumer towards a company and its services;
retention, on the other side, can also exist with a negative attitude towards a company (Bruhn,
2009). Six indicators were used to measure customer loyalty: share information, say positive

43
 things, recommends a friend, continue purchasing, purchase additional service and test new
service (Brodie, Roberts and Varki, 2003). Customer loyalty can be achieved through a
successful CRM implementation. In order to collect respondents’ perception towards the
customer loyalty performance of the bank twelve questions provided and the result of the
findings are provided in the following table.
Table 4.11: Descriptive statistics on Customer Loyalty Performance
Item Customer Loyalty N Mean Std.
no & Coop Bank: Deviation
code
CL1 customers are always happy with the front-line staff services 152 3.63 .874
CL2 customers are happy with COOP BANK response time 152 3.88 .736
CL3 Commitment by both management and employees to achieve
152 3.67 1.066
customer satisfaction and loyalty is a policy in COOP BANK
CL4 Customers giving positive word of mouth witnesses to other 152 3.59 .972
CL5 service provided stimulates Customers to buy repeatedly 152 3.80 .814
CL6 Customers encourage their friends and relatives 152 3.72 1.011
CL7 have loyal customers as result of having consistent services 152 3.82 1.043
CL8 have loyal customers as a result of having organizational
152 3.84 .750
structures and processes that are customer focused
CL9 have managed to increase its profitability because of loyal
152 3.74 .842
customers as a result of its it relationship policy
CL10 assess the level of repeat purchase with valuable customers in its
152 3.78 .699
business processes
CL11 have managed to increase its profitability because of loyal
customers as a result of its relationship policy and business 152 3.78 .650
architecture
CL12 reward loyal customers through its business architecture 152 3.43 .891
Valid N (listwise)
152
Source: Researcher’s Survey data, (2020)
According to the result in Table 4.11, about 92% variables mean is greater than 3.5 which
indicate majority of respondents agreed on customer loyalty performance of Coop Banks. It can
be concluded that most of the respondents state their agreement as Coop banks were working to
satisfy and retain their customers’ especially profitable customers and customer loyalty
performance of the Coop banks is good. Except rewarding their loyal customers through their
business architecture with mean=3.43, which indicate most of the respondents are neutral.
Therefore, in order to sustain their business with their loyal customers and retain them for long

44
lasting they have to integrate rewarding system in their business policy and architecture finally to
improve overall loyalty performance.

4.5. Inferential Statistics for CRMPs and Marketing Performance

4.5.1. Correlation Analysis
Correlations are the measure of the linear relationship between two variables. A correlation
coefficient has a value ranging from -1 to 1. Values that are closer to the absolute value of 1
indicate that there is a strong relationship between the variables being correlated whereas values
closer to 0 indicates that there is little or no linear relationship. The sign of a correlation
coefficient describes the type of relationship between the variables being correlated. A positive
correlation coefficient indicates that there is a positive linear relationship between the variables:
as one variable increases in value, so does the other.
To explore the relationship between customer relationship management practices and customer
loyalty, a correlation analysis was conducted. The results of the correlation between CRMPs and
loyalty performance are summarized in Table 4.12 below.
Table 4.12 Correlation matrix between constructs of CRM practices and CL
KCF COM CRO KMT TCR ICT CL
KCF Pearson Correlation 1
Sig. (2-tailed)
COM Pearson Correlation .554** 1
Sig. (2-tailed) .000
CRO Pearson Correlation .405** .495** 1
Sig. (2-tailed) .000 .000
KMT Pearson Correlation .318** .387** .563** 1
Sig. (2-tailed) .000 .000 .000
TCR Pearson Correlation .431** .384** .505** .542** 1
Sig. (2-tailed) .000 .000 .000 .000
ICT Pearson Correlation .286** .310** .166* .234** .220** 1
Sig. (2-tailed) .000 .000 .040 .004 .006
CL Pearson Correlation .534** .539** .562** .564** .601** .362** 1
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
c. Listwise N=152
Source: Researcher’s Survey data, (2020)

45
The correlation results in Table 4.12 above, showed that the key customer focus had significant,
positive and strong relationship with customer loyalty at (R = 0.534; P < 0.01); interaction
(communication) management significantly and positively correlated with customer loyalty with
(R = 0.539, at P < 0.01), CRM organization significantly and positively correlated with customer
loyalty with (R = 0.562, at P < 0.01), knowledge management significantly and positively
correlated with customer loyalty at (R = 0.564, P < 0.01), technology based CRM practice
significantly and positively correlated with customer loyalty at (R = 0.601, at P < 0.01) and IT
integration practice had significant, positive and moderate relationship with customer loyalty at
(R = 0.362; P < 0.01). The correlation analysis implied that the six independent variables had the
potential to influence customer loyalty of OOP BANKs.

4.5.2. Multiple Regression Analysis

Multiple regression analysis is the method for analyzing the collective relationship of two or
more independent variables on a dependent variable (Kanom, 2011). The researcher conducted a
multiple regression analysis so as to know how much the independent variable explains the
dependent variable. The regression was conducted between CRMPs (independent variable) and
Customer loyalty performance (dependent variable). The results of the regression analysis are
presented as follows:

4.5.2.1. Multi-co linearity Test

In multiple regression model, before making a regression analysis it is important to test the multi
co linearity test. Multi-colinearity is used to determine whether there is similarity of independent
variable with the other independent variables in the regression model or not. This assumption
can be assessed by examining tolerance and the variance inflation factor (VIF). VIF values well
below 10 and the tolerance statistics well above 0.2 can safely to conclude that there is no co
linearity within the data (Field, 2009). A good regression model must not have a strong
correlation among its independent variables or must not have a multi-co linearity problem and
that the value of variance inflation factor (VIF) must have a value between 1 and 10 and the
tolerance level should be more than 0.2 (SPSS Inc., 2017) . The result of Multi co linearity test is
shown in the below table:

46
Table 4.13: Multi co linearity test of independent variables
Collinearity Statistics
Model Tolerance VIF
1 Key Customer Focus .624 1.603
Communication Management .581 1.721
CRM Organization .555 1.801
Customer Knowledge Management .582 1.719
Technology Based CRM .601 1.664
IT Integration .868 1.153
a. Dependent Variable: CL
Source: Researcher’s Survey data, (2020)
The result in table 4.13 shows that the co linearity between independent variables had no series
problem since the value of tolerance for all independent variable is greater than 0.1 and all VIF is
less than ten (VIF<10) (Pallant 2005). From the above table hence, we can conclude that there is
no co linearity within the data of the study.

4.5.2.2. Model summery

A multiple regression model R-squared is determined by pair wise correlations among all the
variables, including correlations of the independent variables with each other as well as with the
dependent variable. The multiple correlation coefficients (R) are a measure of the strength of the
relationship between customer loyalty performance and the six construct variables (CRM
practices i.e. KCF, COM, CRO, KMT, TCR and ICT). Large values of the multiple R represent a
large correlation between the predicted and observed values of the outcome.

Table 4.14: Regression Model between CRM Practices and Customer Loyalty

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .758a .574 .556 .24533
a. Predictors: (Constant), ICT, CRO, KCF, TCR, KMT, COM
Source: Researcher’s Survey data, (2020)
As shown in the table 4.14, there is causal relationship between CRM Practices and Customer
Loyalty. R represents the correlation between the observed values and the predicted values of
dependent values and the value of R produced by the regression procedure range from 0 to 1.
The larger the value of R indicates that there is strong relationship between the observed and

47
predicted values. Consequently, for this particular case the R value is 0.758 which indicates that
there is a strong relationship.
From the table above, the coefficient of determination was found to be 0.574 indicating that
customer relationship management practices account for 57.4% of the variability in customer
loyalty performance. This suggests that 42.6% of the variation is not explained by CRM practice.

4.5.2.3. F- Test and T -Test

F- Test or simultaneous test was applied to check whether all the independent variable
simultaneously influenced the dependent variable. The requirement is P-value or the significant
of the variables must be less than 0.05. With this result of significant, the F-test result could be
seen in Table 4.15. Furthermore, T- Test is used to test whether each independent variable
influenced the dependent variable. The requirement is that the significance in Coefficient, (see
Table 4.15 below) is less than 0.05
Table 4.15 ANOVA Result between constructs of CRMPs and Customer Loyalty

Model Sum of Squares df Mean Square F Sig.

1 Regression 11.755 6 1.959 32.554 .000b

Residual 8.727 145 .060

Total 20.482 151

a. Dependent Variable: CL
b. Predictors: (Constant), ICT, CRO, KCF, TCR, KMT, COM
Source: Researcher’s Survey data, (2020)
As it is shown in the Table 4.15, ANOVA results of the multiple regression analysis. The
significance value of 0.000 indicates that the regression relationship is significant in predicting
the impact of the six constructs of the independent variables (CRMPs) on customer loyalty
performance of the Bank.

4.5.2.4. Coefficients of Regression Analysis

In this section, Regression analysis conducted in the light of each research objectives. The
relationship and level of contribution between constructs of CRM practices and customer loyalty
performance was investigated using Regression analysis. This provided Regression Coefficients
which indicated the strength and direction of relationship with their level of significance.

48
Table 4.16 Regression Coefficients between CRMPs and Loyalty Performance

Unstandardized Coefficients Standardized Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) .312 .311 1.005 .317

KCF .236 .091 .179 2.604 .010

COM .119 .057 .147 2.064 .041

CRO .114 .052 .158 2.166 .032

KMT .143 .053 .192 2.702 .008

TCR .177 .049 .254 3.627 .000

ICT .142 .059 .139 2.381 .019

a. Dependent Variable: CL
Source: Researcher’s Survey data, (2020)
Based on the research model developed in chapter two the mathematical relationship between
CRM dimensions and Customer Loyalty was expressed in the multiple regression equation as:
Y = X0 +X1 (KCF) + X2 (COM) + X3(CRO) +X4 (KMT) +X5(TCR) + X6(ICT) +e

In accordance with the this mathematical model the constructed research questions has tested by
considering significance level of each constant parameter and Regression Coefficients in
multiple regression analysis. The result of Regression Coefficients indicated in the table above
interpreted as follows:

From the data given in Table 4.16 above, the standardized coefficients of β-value and the p-value
for key customer orientation on loyalty performance were β=0.179 and p=0.010 respectively.
These values showed that key customer orientation had strong significant influences on customer
loyalty performance because, according to this data, the p-value, which is p=0.010, was less than
level of coefficient indicated by 0.05. This, in turn indicated that from the standardized
coefficient of β= 0.179 that as one unit of key customer focus practices increases, there would be
17.9% an increase on customer loyalty performance.

Based on Table 4.16, standardized coefficients β-value and p-value for Interaction
(Communication) management Practices on customer loyalty performance were β= 0.147 and
the t- statistic value was calculated to be 2.064 at p=0.041 respectively; these values show that
Interaction Management practices had positive and significant influences on Customer loyalty
performance. Since the p-value 0.041 which is less than level of coefficient 0.05. This indicates

49
that when other variables are held constant, Interaction Management practice from the
standardized coefficient 0.147 as one unit of Interaction Management practices increases 14.7%
increase on customer loyalty performance.

The coefficient of CRM Organization practices was β=0.158, which means a unit change in this
variable increases customer loyalty performance by 15.8%, keeping other variables constant. The
t-statistic value of CRM Organization practices was 2.166 significant at p value < 0.05, which
makes the CRM Organization practices and customer loyalty performance had positive and
statistically significant relationship.

From the data given in Table 4.16 above, the standardized coefficients and the p-value for
customer knowledge management practice on customer loyalty performance were β= 0.192 and
2.702 respectively. These values showed that customer knowledge management practice had
strong significant influences on customer loyalty performance because, according to this data,
the p-value, which is 0.008, was less than level of coefficient indicated by 0.05. This, in turn
indicated that from the standardized coefficient of β=0.192 that as one unit of customer
knowledge management practice increases with 19.2%, there would be an increase on customer
loyalty performance.

Based on generated data, Technology based CRM practice positively and significant influenced
Customer loyalty performance, where the t- statistic value was calculated to be 3.627 at p value <
0.05. The value of the coefficient of Technology based CRM practice was also found to be β=
0.254 which means that, keeping other things constant, a unit change in Technology based CRM
practice cause 25.4% increase in customer loyalty performance of Coop bank.

It also found that IT integration practice has a positively and significantly influence the customer
loyalty performance, where the t- statistic value was calculated to be 2.381 are significant at p
value < 0.05. The value of the coefficient of IT integration practice was also found to be β=0.139
which means that, keeping other things constant, a unit change in IT integration practice causes
13.9% increase in customer loyalty performance.

This study is consistent with the study of Hisham Solieman, (2011) who found that all elements
of CRM have positive relationship with customer satisfaction and customer loyalty. Similarly
with study of Kocoglue (2012), who found that all elements of CRM I,e customer database,

50
learning customer needs and complaints, and providing solutions peculiar to customers are
positively correlated with customer loyalty.

In general this study is in line with the studies of Simonet, Kamdem, and Nguefack (2012)
Khaligh et al.(2012) Basman Al Dalayeen (2017) Arup Kumar & Bivraj Bhusan (2012) Cho, et.
al. (2013) who found customer relationship management practices significantly and positively
influenced customer loyalty.

51
4.5.2.5. Research Framework or Model Summery
In general, the survey result showed that there is a positive relationship and strong significant
relationship between independent variables of CRM practices and Customer loyalty
performance.
The figure 4.1: shows the summery relationship of the selected variables.

Key Customer Focus Practices

Customer Relationship practices

β= 17.9%, t=2.604

Interaction Management Practices

β =14.7%, t=2.064
00
Customer
CRM Organization Practicesβ =15.8%, t=2.166
00 Loyalty
Performance
Knowledge Management Practices
β =19.2%, t=2.702

β =25.4%, t=3.627
Technology Based CRM Practices

IT Integration Practices β =13.9%, t=2.381

Source: Survey data findings, (2020)

The finding of this study is consistent with the studies of Hisham Solieman, Kocoglue (2012),
(2011) Simonet, Kamdem, and Nguefack (2012) Khaligh et al.(2012) Basman Al Dalayeen
(2017) Arup Kumar & Bivraj Bhusan (2012) Cho, et. al. (2013) who found customer relationship
management practices significantly, positively and strongly influenced customer loyalty.
Therefore, as it is indicated on the above figure, by improving the CRM Practices i.e. key
customer focus, Interaction (communication) Management practices, CRM organization,
knowledge management, Technology based CRM and IT integration practices of COOP BANKs
customer loyalty performance of the bank could significantly and positively improved.

52
 CHAPTER FIVE
SUMMARY OF MAJOR FINDINGS, CONCLUSION AND
RECOMMENDATIONS
This chapter presents summary of findings which are organized based on the research objectives,
as well as the conclusions that are drawn from the findings of the study and the recommendations
based on the findings.

5.1. Summary of Major Findings

According to the data analysis provided in the previous chapter, summary of the major findings
has been presented as follows:
 Key Customer Focus practice had strong significant influences on Customer Loyalty at p-
value 0.010 which is less than level of coefficient 0.05 and β=0.179. This indicates that as
one unit of key Customer focus practice increases 17.9% there is an increase on
Customer Loyalty performance.
 Interaction (Communication) Management practice had strong significant influences on
Customer Loyalty at p-value 0.041 which is less than level of coefficient 0.05 and β=
0.147. This indicates that as one unit of Interaction (Communication) Management
practice increases 14.7% there is an increase on Customer Loyalty performance
 CRM Organization Practice and Customer Loyalty positively and significantly related.
CRM Organization Practice has β=15.8% contribution on Customer Loyalty performance
at tolerance level t=2.166 and significance level 0.032 which is less than 0.05.
 Knowledge management practice had strong significant influences on Customer Loyalty
at p-value 0.008 which is less than level of coefficient 0.05 and β= 0.192. This indicates
that as one unit of Knowledge management practice increases with 19.2% increase on
Customer Loyalty performance.
 Technology based CRM practice and Customer Loyalty positively and significantly
related. Technology based CRM practice has a positive impact and 25.4% contribution on
Customer Loyalty performance at t=3.627 and significant level 0.000.
 Information Technology Integration practice and Customer Loyalty positively and
significantly related. Information Technology Integration practice has β= 13.9% on
Customer Loyalty performance at tolerance level t=2.381 and significance level 0.019.

53
5.2. Conclusion
Based on the findings using the data collected and by using multiple regression analysis, the
results of the study showed that:
The independent variables, key customer focus, Interaction (communication) Management
practices, CRM organization, knowledge management, Technology based CRM and IT
integration practices were significantly and positively related and influenced the dependent
variable, customer loyalty performance at (β= 0.179, p = 0.010), (β= 0.147, p = 0.041), (β=
0.158, p = 0.032), (β=0.192, p = 0.008), (β= 0.254, p= 0.000) and (β= 0.139, p= 0.019)
respectively.

The finding of the study also showed that 57.4% of corresponding change in determining
customer loyalty of COOP BANKs was the results of the change in CRM practices jointly. The
test of overall significance of all the six variables jointly, that is, key customer focus, Interaction
(communication) Management practices, CRM organization, knowledge management,
Technology based CRM and IT integration practices were significant at 0.000 levels which
found out that the model used for this survey was also to be valid.

5.3. Recommendation
Based on the study results and conclusions drawn above, some recommendations are proposed as
a means of alleviating the problems found.

 One area that needs attention from management is in the area of complaints handling.
The data received from the field showed that customers have in one way or the other felt
dissatisfied complained about the service or product the bank has in offer. Customers of
Coop bank have the general feeling that when complaints are made, the bank does not put
in enough effort to resolving them. For this reason some customers have sort to not
making complains. This is risky as it could lead to lose of customers within a short
period.
 Coop bank should integrate customer feedback mechanism to improve the efficiency in
customer response to issues and thus enhance flexibility and access to customer response
services. This will increase customer satisfaction and retention and impact positively
towards improved performance. For this Coop bank is recommended to launch electronic

54
 systems for investigating the complaints, recognize the complainant customers and turn
them to satisfied and loyal customers.
 There is need to concentrate more on customer focused services, complaint management,
friendliness of employees, competitive charges on services, information and
communication technology, high quality service, and other CRM variables of the study as
findings have shown that commitment to the use of these variables lead to customer
retention, customer loyalty, increase in profit and competitive advantage.
 In addition, Attention must be paid to the presence of information systems, so that they
are supported with all information related to customers in order to support decision-
making.
 Finally the study recommends that Coop bank should frequently monitor and evaluate the
current CRM practices. It is essential to regularly monitor, analyze and assess the existing
CRM practices so as to tell if they are effective.

5.4. Limitation and Suggestion for Future Research

While these results are valuable, the limitation of this study must also be considered. Potential
limitations of this research are not considering or conducting other performance measures, only
taking customer loyalty as the performance measures, and not considering the other contextual
factors i.e. type of industry. Base on this, the researcher suggests some researches that the
academics and the researchers can conduct in the future, studying the scope of the effect of CRM
on the general performance of the financial institution, studying the degree of the integration of
the financial institution in the light of CRM, Assessing the performance of the Ethiopian
financial institutions (Banking Industry) in the light of CRM (comparative study).

55
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realtionship management performance: a customer-based., perspective from chaina.
Managing service quality. 14(2/3), 169-182.

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Appendix

DEPARTMENT OF BUSINESS ADMINISTRATION

POST GRADUATE PROGRAM
QUESTIONNAIRE
Dear respondents, the purpose of this questionnaire is to gather data on the impact of customer
relationship management practices on customer loyalty of cooperative Bank of Oromia in order
to fulfill the University’s (Unity University) requirement set for awarding of a Masters Degree in
Business Administration. The study is purely for academic purpose and thus not affects you in
any case. So, your genuine, frank and timely response is vital for successfulness of the study.
Therefore, I kindly request you to respond to each items of the question very carefully.
Contact Address
If you have any question, please do not hesitate to contact me and I am available as per your
convenience at (Mobile: 0919-21-21-51/0926-22-15-05)
Thank you for scarifying your precious time in advance
General Instructions
 There is no need of writing your name
 Where answer options are available please tick (√) in the appropriate box for all parts
PART I: Demographic Information
1. Age: 20-25 years 26-30 years
31-35 years 36- 40 years above 40 years
2. Educational Qualification
Certificate College diploma (TVET)

First Degree MA/MSC/MBA or above

3. How many years have you worked at (with) LIB?

Less than 2 years 2-5 years 6-10 years Over 10 years

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PART I: CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES
Please indicate the extent of your agreement or disagreement to the following statements by use
of either ‘x’ or √ in the provided boxes.
1 strongly Disagree, 2 Disagree, 3 Neutral, 4 Agree, 5 Strongly agree

Disagree

Disagree
Strongly

Strongly
Neutral

Agree

Agree
KEY CUSTOMER FOCUS 1 2 3 4 5
KCF1 COOP BANKs always provides personalized services for its
key customers
KCF2 COOP BANKs strives to constantly surprise and delight key
customers.
KCF3 COOP BANKs makes an effort to find out what the key
customer needs and wants are
KCF4 COOP BANK strengthens the emotional bonds with key
customers by wishing them on important occasions.
KCF5 Through regular contacts with customers, COOP BANKs
works with individual key customer to customize its offerings.
KCF6 All people in COOP BANKs treat customers with great care
KCF7 COOP BANK staff are competent in handling customer
concerns
KCF8 COOP BANK gives individual attention to its customers and
tries to understand their Feelings
INTERACTION MANAGEMENT (COMMUNICATION) 1 2 3 4 5
COM1 COOP BANKs provides timely information for its key
customers
COM2 COOP BANK provides accurate and reliable information for
its customers
COM3 Relationships with customers are managed effectively and
supported by top management and staffs
COM4 COOP BANKs use information from customers to design or
improve its products or services.
COM5 COOP BANKs periodically call its clients to reminder them
on their personalized services
COM6 COOP BANK periodically send email and newsletter to its
clients to inform them about services provided and new
products
COM7 The customers freely express opinions to the staff of COOP
BANKs

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COM8 COOP BANK openly discuss with its customers on solutions
when problem arise
CRM ORGANIZATION 1 2 3 4 5
CRO1 COOP BANK has established clear business goals related to
customer acquisition, development, retention, and reactivation.
CRO2 COOP BANK top management accepts and provides
leadership for building and maintaining customer relationships
as a major goal of the bank.
CRO3 COOP BANK commits time and resources to meet customer
relationships management goals.
CRO4 COOP BANK systems are designed to make it easy for
customers to do business with it.
CRO5 In COOP BANKs Customer-centric performance standards
are established and monitored at all customer contact points.
CRO6 COOP BANK provides increased customer convenience by
expanding its branches.
CRO7 COOP BANKs frontline employees are encouraged and
empowered to positively exceed customer expectations.

KNOWLEDGE MANAGEMENT 1 2 3 4 5
KMT1 COOP BANKs takes customer feedback seriously and replies
to it.
KMT2 COOP BANKs has effective customer recovery strategies
including guarantees for service failures.
KMT3 COOP BANKs reviews customer information periodically
KMT4 In COOP BANKs Customer feedback is taken using a variety
of direct and indirect measures.
KMT5 COOP BANK shares to its employees the feedback given by
the customers.
KMT6 COOP BANKs provided electronic-information to its
customer
KMT7 COOP BANKs periodically upgrade customer database for
effective customer relationship management.
KMT8 Concerned employees can easily and readily access customer
information from the database
KMT9 COOP BANK employees and executives have the knowledge
to answer customer’s questions.
TECHNOLOGY BASED CRM 1 2 3 4 5
TCR1 COOP BANK uses technology to automate its marketing,
sales, and service functions.
TCR2 COOP BANK information systems are designed to give

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 comprehensive data about all aspects of its customers
Customers, so that it can also able to be responsive.
TCR3 COOP BANK technologies are easy to be used by its
Customers.
TCR4 COOP BANK Technology products have created
convenience to the customers.
TCR5 The technology in use in COOP BANK meets the basic
business requirements
IT INTEGRATION 1 2 3 4 5
ICT1 COOP BANK integrated latest information technology
infrastructures ( such as mobile application and internet
services ) to offer quality services
ICT2 COOP BANK ICT System enables data sharing within the
company
ICT3 COOP BANK ICT System allows interactions among users in
different areas of the company
ICT4 COOP BANK ICT System has well integrated in various
company departments

PART II: CUSTOMER LOYALTY

Please indicate the extent of your agreement or disagreement to the following statements by use
of either ‘x’ or √ in the provided boxes
1 strongly Disagree, 2 Disagree, 3 Neutral, 4 Agree, 5. Strongly agree
Disagree

Disagree
Strongly

Strongly
Neutral

Agree

Agree
CUSTOMER LOYALTY 1 2 3 4 5
CL1 COOP BANK customers are always happy with the front-line
staff services
CL2 customers are happy with COOP BANK response time
CL3 Commitment by both management and employees to achieve
customer satisfaction and loyalty is a policy in COOP BANK
CL4 Customers giving positive word of mouth witnesses to other
about COOP BANK confidently.
CL5 The service provided by COOP BANK stimulates Customers
to buy repeatedly
CL6 Customers encourage their friends and relatives to use the
services offered by COOP BANKs.
CL7 COOP BANK have loyal customers as a result of having
consistent services for all customers
CL8 COOP BANK have loyal customers as a result of having
organizational structures and processes that are customer

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 focused
CL9 COOP BANK have managed to increase its profitability
because of loyal customers as a result of its it relationship
policy
CL10 COOP BANK assess the level of repeat purchase with valuable
customers in its business processes
CL11 COOP BANK have managed to increase its profitability
because of loyal customers as a result of its it relationship
policy and business architecture
CL12 COOP BANK reward loyal customers through its business
architecture
If you have any comment well come:-
Thank you very much!!!

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