Background of the Study

In today’s the banking sector faces enormous amount of challenges regarding demand for vast amount
of customer, deposits, loans and the urge to keep up with the up to dated technologies. The banking
sector realized the cruciality of the CRM (customer relationship management) in its acquisition of new
customers and retain the existed ones

Many findings have been depicted the un-interwind relationship between the customer relationship and
its impact on the prosperity of the sector. CRM is increasingly important to firms as they seek to
improve their profits through longer term relationships with customers. In recent years, many have
invested heavily in information technology (IT) assets to better manage their interactions with
customers before, during and after purchase (Bohling et al., 2006). CRM is one of the major sources of
competitive advantage in banking sector. Furthermore, CRM is an extensively accepted instrument that
supports customer-oriented organizations’ decisions (Mohammed, Rahid, & Tahir, 2014)

Customer relationship management is concerned with the creation, development and enhancement of
individual customer relationships with carefully targeted customers and customer groups resulting in
maximizing their total customer life-time value. Customer relationship management is one of the
strategies to manage as is focuses on understanding customers as individuals instead of as part of a
group [Lambert, 2010]

Having in mind that the above statement ABAY Sc. bank Bambis area branch has Customer relationship
management in its firm. Customer retention refers to the activities and actions of companies and
organizations to reduce the number of customer defections and making them loyal. The goal of
customer retention programs to help companies retain as many customers as possible, often through
customer loyalty and brand loyalty initiatives. It is important to remember that retention begins with the
first contact customer has with a company and continues throughout the entire lifetime of the
relationship (Anonymous, CRM, http://www.ngdata.com, accessed in Nov,15,2022).

Building customer loyalty is creating a strong tight connection to customers. It is a dream of any
marketer and often the key to long term marketing success. [Kotler, 2009]. In order to build loyalty the
company uses the following methods; - Fluent communication with customers:- it incurs listen
thoroughly list and respond appropriately which vital part of the CRM. Developing loyalty programs:- to
customer loyalty programs that companies can offer are frequency programs and club marketing
programs FP’s (frequency programs,[ Kotler, etal 2009].

Statement of the problem

In the sector even though there is a common understanding on the vitality of CRM for the escalation of
the organizational profitability there is a drawback when we come to implementation of the CRM. And
in fact, it has a lot of problem while practicing it.

The banking industry has grown over the past years in Ethiopia and the world at large. As a country
becomes more developed, there is greater need for banking service to facilitate the peoples’ monetary
transactions (MOFED, 2010). In today’s competitive business environment, giving quality services to
customers is a very critical exercise. Meeting customer expectation by giving quality services is very
important to loyal customers. CRM consists of a historical view and analysis of all the acquired or to be
acquired customer in the firm for a long time. If the customers are satisfied, they will always be loyal to
the firm and the business remains forward to the development of its power.
(http://www.managementstudyguide.com)

It has been found out that through maintaining customer service quality, customer satisfaction can be
attained. This leads to profitability and growth of the organization (Brown, 2000). Thus, any bank that
wishes to either grow in size of its banking operation or improve its profitability must consider the
challenges affecting its customer relationship (Ashok and Rajesh, 2009).

As Mishra etal,(2011),that the banking sector is facing enormous challenges of attracting the new
customers and retaining the existing ones. This specific include competition between banks, increased
customer’s demand and lack of knowledge to cope up with the new and emerging technologies. This
idea was supported by Oogarah-Hanuman, 2011) in today’s banking environment it is becoming difficult
to build and maintain strong and lasting relationships with customers. Mainly problems in handling
customers, lack of advanced banking technologies, less emphasis to Customer relationship management
in relation to marketing performance (Ranson,2012), lack of enough knowledge about Customer
relationship management.

A study conducted on imperatives of Customer relationship management in commercial banking

industry proves that customers have experienced challenges ranging from Daley, stock out, non-
availability of staff at service points, unprofessional conduct or redness by the staff of the bank, poor
standard of records or improper information, failed promises among other (Ogbadu&Usman,2012).
However, Customer relationship management is no a day new concept to many organization.

A research conducted by Semunesh (2009) reveals that banks operating in Addis Ababa faced difficulty
in applying new strategy, lack of timely and organized data, and availability of huge information gap
between different stakeholders. Another study reveals banks have been operating at less than their
production frontier due to technical inefficiency and inefficiency among the banks was varied and time
variant (Tesfahun, 2014)

The research conducted by Semunesh and Tesfahun reveals that there is lack of timely and organized
data, technical inefficiency and hinderance in applying new strategies and give less attention for
customer and lack of prolonged customer relationship are the yardstick of poor CRM.

Considering all the above statements customers are not satisfied by the services they are received or the
tardiness of the sectors not being able to meet their customers expectation and due the lack of
competitive spirit among the market banks failed to deliver high standard services to their customers
while the other face of the world enjoyed it for the CRM fruit.
 The variables that we are used to measure Customer relationship management, have an impact on
customer loyalties and be able achieve organizational profitability from many perspectives. These
variables are. strategy, technology, people, process and customer.

Based on the literature gaps identified above, the research would attempt to measure the contribution
of customer relationship management practice on banking performance and forward its
recommendation based on the result.

Research Questions

Is there a significant relationship between organizational performance and customer relationship

management?

What Process aspects in banking CRM practice are key success factors for organizational performance?

How Technology utilization affect organizational performance in customer management?

To what extent People aspect (top management, motivated employee and partners) contribution is key
success factor for organizational performance?

How is Strategy aspect of customer relationship management a key success factor for effective banking
performance

Research objectives

General objectives

The general objective of the research is to assess the importance of the Customer relationship
management and its impact on organizational success.

Specific objectives of the research

To provide information on effects of customer relationship management on employee satisfaction.

To assess the strength and weakness of CRM practice while, implementing the strategy in banking
activity.

To show the gap in applying effective customer relationship management practice.

To assess customer loyalty, it’s importance to customer’s retentions.

To analyze Customer relationship management would have contributions to CLV (customer life time
value)

Significance of the study

The study’s importance is to the bank under study by sowing the gap that have been observed in the
organization’s customer relationship management so as to maintain the defect and rendering its service
at its best as possible. In that way the company would achieve its organizational success through giving
outstanding services to its loyal customer and the new coming ones. There for this research will benefit
both parties.

Scope of the study

The scope of the study will be limited to the importance of Customer relationship management and its
impact keeping the customer loyal to the organization so as to achieve organizational success in ABAY
Bank Sc. Due to time, budget and information constraints the research concentrate on Addis Ababa,
Bambis area branch ABAY bank Sc. for obtaining the necessary information which would help to make
the research meaningful.

Organization of the Study

This paper is organized in to five chapters. chapter one deals with introduction background of the study,
statement of the problem, objective of the study, significance of the study, scope of the study, limitation
of the study. Chapter two compromises the review of related literature. Chapter three deals with
research methodology, sampling technique, target population, sampling method, source of data, data
collection method, and method of data analysis. Chapter four is about data analysis and presentation
and finally chapter five include summary and conclusion, research schedule and research budget,
reference books.

Limitation of the study

Limitation of the study would be Unwillingness of respondents in giving the reliable information
especially on their income. Lack of well-organized documents (references) on the subject matter, Unable
to get painstakingly filled information from bank employees on the subject matters because they were
busy in their work, some respondents were not willing to fill in the questionnaire completely in
customers perspective.