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The First Entrepreneurship and Management International Conference 2007

Retention of Customers Through Relationship Marketing A study on Tabung Haji


ANUAR BAHARI KAMSOL MOHD KASSIM NORIZAH KASIM

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The First Entrepreneurship and Management International Conference 2007

Presentation Overview
Background of The Study Problem Statement Research Question Research objectives Scope of the Study Hypotheses Literature Review Research Methodology Data Analysis and Interpretation Discussion And recommendations Recommendations

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Background of The Study


The idea of establishing Tabung Haji (formerly known as Pilgrims Fund Corporation) was mooted by Royal Professor Y.M. Ungku Aziz in 1959. Working paper titled, Plan To Improve The Economy Of Prospective Pilgrims spearheaded the establishment of Pilgrims Fund Corporation (PFC).

PFCs main objective is to help the Muslims to save their money gradually for the purpose of performing Hajj or pilgrimage to Makkah.

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The First Entrepreneurship and Management International Conference 2007

Background of The Study


Serves as an alternative financial institution for depositors who wish to save their money in an interest-free financial system that deduct a certain portion for zakat (tithe) at every financial year-end. Malaysias most popular label among Muslim nations. It is the envy of other parts of Muslim world for its efficiency and success in managing Malaysian pilgrims (Lokman, 2004). However, TH has to strive endlessly to face future global challenges if it wishes to be ahead or at par with other financial institutions.

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Problem Statement
At present, Relationship Marketing (RM) has been widely considered as a companys activity that helps in developing and retaining customers through increased loyalty, satisfaction, trust and commitment.

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Problem Statement
Findings showed that although a large sum of money has been allocated for customer relation and services upgrading, but Tabung Haji was not aggressive in focusing on RM strategies when rendering financial services. TH enjoys its unwavering privileged status as the sole government-linked company that manages the pilgrims - a monopolistic company in a non-challenging marketplace.

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The First Entrepreneurship and Management International Conference 2007

Problem Statement
Lately, TH received several complaints on personnel (front-line service employees) and counter services in almost all TH branches throughout Malaysia. Some customers aired their grievances through the Internet and newspapers. Other unofficial complaints were heard through conversations among TH depositors at the respective TH branches. Some depositors also compared TH counter service to that of other financial service providers such as banks.
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The First Entrepreneurship and Management International Conference 2007

Problem Statement
Two questions that the researchers wish to pose:

Which of the following is the major relationship marketing element at THBL employees commitment, customers satisfaction, trust and loyalty? 2. Do all the elements have any relationship and contribution towards THBL relationship marketing strategy?
1.
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The First Entrepreneurship and Management International Conference 2007

Research Question
1. Which element of Relationship Marketing (customer satisfaction, employee commitment, customer trust and loyalty) did Tabung Haji Bayan Lepas (TBHL) neglect when rendering its financial services? Is there any relationship between customer satisfaction, employee commitment, customer trust, customer loyalty and THBL relationship marketing strategy? Which of the selected independent variables (customer satisfaction, employee commitment, customer trust and customer loyalty) that greatly contribute to THBL relationship marketing (from the customers perception)? Does TBHL need to focus and be more aggressive in their RM strategies to improve its efficiency and effectiveness?

2. 3.

4.

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The First Entrepreneurship and Management International Conference 2007

Research objectives
1. To identify which element of Relationship Marketing (customer satisfaction, employee commitment, customer trust and loyalty) did Tabung Haji Bayan Lepas (TBHL) neglect when handling its counter services and other financial services? 2. To identify whether there is a relationship between customer satisfaction, trust, loyalty, employees commitment and TBHL relationship marketing strategies. 3. To identify which of the selected independent variables (customer satisfaction, trust, loyalty and employee commitment) highly contribute to THBL as its relationship marketing element. 4. To recommend appropriate way of prioritizing Tabung Hajis expenses pertaining to upgrading its relationship marketing practices and strategies.
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The First Entrepreneurship and Management International Conference 2007

Scope of the Study


THBL is considered as a unique state branch office because of its location and background. This branch is located in a sparsely-populated suburban part of Penang, where its development pace is not at par as other districts in the island. THBL by far manages to obtain 40% of overall savings collection from depositors compared to other Penangs branches such as Butterworth, Lebuh Bishop, Kepala Batas and Bukit Mertajam.

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Hypotheses
H1 There is a relationship between customer satisfaction and TH financial services relationship marketing strategies H2 There is a relationship between employees commitment and TH financial services relationship marketing strategies H3 There is a relationship between customer trust and TH financial services relationship marketing strategies H4 There is a relationship between customer loyalty and TH financial services relationship marketing strategies

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Literature Review
Customer in the context of Services Marketing ( Gronroos ,2000) (Lovelock ,2001) Customer Perception in Services marketing ( Robbins , 2004) Relationship marketing ( Young , 1988.,Morgan & Hunt, 1994; Palmer, 1996,;Sorce, 2002) Customer relationship management.(Fournier, Dobsha & Mick (1988);Storbacka & Lehtinen, 2000; Gummesson 2002)

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Research Methodology
Sampling Technique Systematic sampling was used for the study. Registered customers at THBL represented the total population while every 2nd , 4th , 6th or even-numbered customer who entered THBL during data collection period were selected as respondents for the study. Survey 32 structured questions were formulated. Observation 3 months (1st June to 31st August 2007). -customer relationship marketing practices among counter staff (front-office service employees). visits to the banks that act as collecting agents on behalf of TH. Secondary Data journals, annual reports, newspaper articles, related documented files, data from TH websites and internal sources.

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Data Analysis and Interpretation


Sample Sampled population was 152 THBL depositors. Demographic profile of the sample was: 50.7% of the respondents were 21-39 years old; 40.8% were 40 years old or older; 7.2% were 13-20 years old and only 1.3% were 12 years and below. Pilot test Pilot test was conducted to ensure that all the items included in the questionnaires are reliable and valid. The questionnaires were distributed to 50 respondents through convenience sampling method. Reliability Analysis Reliability analysis was conducted to test for internal consistency of the instruments used.

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Data Analysis and Interpretation (Pilot Testing)


Variables
Customer Satisfaction Employees Commitment Trust Loyalty

Cronbachs Alpha
0.888 0.609 0.919 0.912

Relationship Marketing
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0.796

The First Entrepreneurship and Management International Conference 2007

Data Analysis and Interpretation -Correlation


Relationship Marketing Relationship marketing Pearson Correlation Sig. (2-tailed) N Customer Satisfaction Pearson Correlation Sig. (2-tailed) N Employees commitment Pearson Correlation Sig. (2-tailed) N Customer trust Pearson Correlation Sig. (2-tailed) N customer loyalty Pearson Correlation Sig. (2-tailed) N 152 .810** 0.000 152 .762** 0.000 152 .778** 0.000 152 .695** 0.000 152 152 .832** 0.000 152 .813** 0.000 152 .792** 0.000 152 152 .653** 0.000 152 .647** 0.000 152 152 .910** 0.000 152 152 Customer Satisfaction 1 Employees Commitment Customer Trust Customer Loyalty .778** 0.000 152 .813** 0.000 152 .653** 0.000 152 1 .695** 0.000 152 .792** 0.000 152 .647** 0.000 152 .910** 0.000 152 1 .810** 0.000 152 1 .762** 0.000 152 .832** 0.000 152 1

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Discussion
Four independent variables chosen were favourites among previous researchers such as Morgan & Hunt (1994); Veloutsou (2002) chose customer trust, Paolo & Ottavia (2004); Ndubisi et al., (2007) chose customer loyalty; Grossman (1998); Ndubisi et al., (2007) chose employee commitment and Leverin & Lijander (2006) chose customer satisfaction. Pearson Correlation Coefficient show all the above mentioned independent variables were positively significant with dependent variable. It can be concluded that there is a positive relationship between all these four variables and relationship marketing. Customer satisfaction scored the highest percentage (81.0%), which means satisfaction is the contributing factor for customers to return to THBL to repeat transactions.

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The First Entrepreneurship and Management International Conference 2007

Discussion
The second factor that influences customers to continuously use the service of THBL is customer trust (77.6%). TH operates on the Syariah guideline that forbids usury. Depositors who plan to perform pilgrimage will opt to save at TH because the money to be used for pilgrims should be halal and any form of fixed interest rate as practiced in conventional banking should be avoided. However, TH should be cautious as their customers might opt to turn to other alternatives such as financial institutions that offer Islamic banking systems.

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Discussion
The third factor that influences customers to frequent TH is employee commitment (76.2%). Front-line service employees (counter staff) play important role when dealing with customers at THBL. These front-line service employees need to be proactive while attending to customers such as being able to anticipate customers needs and wants.

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Discussion
The last factor that influences customers decision to make transaction at THBL is customer loyalty (69.5%). This demonstrates there are other unexplained factors that contribute to existing customers being loyal to TH by regularly making transactions at THBL.

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Recommendations
Most significant variable in customer relationship marketing (CRM) is customers satisfaction. Hence, THBL should be more concerned on customers satisfaction as an important element in developing its CRM strategy. Second most significant element is employees commitment, followed by customers trust and customers loyalty. It was found that loyalty is not a significant factor that contributes to relationship marketing strategy. Nevertheless, it is not an implication that TBHL should ignore this factor. THBL still need to focus on winning loyal enduring customers who have been their supporters for a long time. Three major focus of customer relationship strategies are customers satisfaction, employee commitment, customers trust and customers loyalty. THBL management team should generate ideas to assess their current existing Relationship Marketing (RM) strategies.

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The First Entrepreneurship and Management International Conference 2007

Recommendations
Improve the quality of services provided by its front-line service employees. Employees ought to ensure customers requests are fulfilled and met by providing necessary and adequate financial service. Employees need to be warm and friendly towards the customers. Clear, flawless, convenient, hassle-free, friendly and polite service would result in customers satisfaction. Upgrade financial service system for their customers convenience. The most important strategy is, to create awareness among the customers on a range of services available at TH. Feedback from respondents showed that most customers are unaware of the existence of collection agents. Therefore, TH should upgrade and inform customers about the services provided by its agents.

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Recommendations
THBL management team needs to provide and maintain appropriate facilities at their service or information counter. Leaflets, brochures and forms should be placed at appropriate places which are easily accessible to customers. Staff should be stationed at appropriate places so customers could approach them if they need any assistance. THBL need to evaluate their customer service counter to ensure staff would be courteous, politely and helpful by assisting customers obtain information swiftly, shortening the queue and helping customers before making any transaction. Little details could change the perception of disgruntled customers to contented customers and constructive wordof-mouth could attract potential customers and retain loyal customers.

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Recommendations
THBL needs to check and upgrade their operating system regularly to ensure the latest technology is being incorporated to enhance daily operation of the organization and to guarantee that THBL is not slacking behind. New and advanced database enable the company to manage customer relationship and consequently deliver customer-centered relationship (Xu, Yen, Lin & Chou, 2002). company.

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Recommendations
Sorce (2002) emphasized the importance of the Internet and enterprise-wide management information systems in relationship marketing. The former allows newly-established business enterprises to get low cost interactions with customers. The latter allows firms to generate a single view of a customer across all functional areas of a firm. Both of these systems concurrently allow customized communication with a single customer for very large firms. As companies upgrade their customer information database, they seek for solutions that would add value to their operations by reducing costs internally and by improving relationships with suppliers (Xu, et.al, 2002). In todays fast-paced highly and competitive world of financial institution and banking, TH is expected to perform teller operations swiftly and efficiently, thus reducing serpentine queues and most importantly, ensuring high customer satisfaction. TH is recommended to use Bank-Flex Teller, a high-performance teller application that delivers fast and secure processing transaction and enhances its efficiency and

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Thank You
Terima Kasih

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