Professional Documents
Culture Documents
BY
NYIRAGA NOERENA
2013/FEB/BBA/B11472/DAY
SUPERVISOR
NAMARA ASIIMWE (MRS)
MARCH, 2016
0
CHAPTER ONE
1.1 Introduction
This chapter covers the introduction, background of the study, problem statement, purpose of the
study, objectives of the study, research questions, and scope of the study and significance of the
study.
In recent years, CRM has emerged as a top commercial priority. CRM is not simply a method
used by leading firms to gain a competitive advantage: it has become a necessity for their
survival (Buttle, 2004:1). The focus is increasingly on CRM, with the dominant business
environment evolving from a production orientation to a marketing orientation. While, in the
past, firms focused on increasing profits by reducing production costs, they have adopted a sales
orientation, in terms of which the main objective is increasing profits through increasing sales
volume. Previously, firms were expected to identify client needs and provide value to clients.
Presently, firms focus on satisfying client needs, at a profit. This requires that the focus of the
entire firm must be on identifying and meeting client needs. With CRM, the client helps the firm
to provide the benefit bundle that the client values. Value is thus created with clients, not for
them (Gordon, 1998). The overall provision of service delivery can thus be customized for the
individual client, according to his/her needs.
the organisation and reference of other prospects to the organization (MsMurrian and Matulich,
2006). This in overall generates higher level of revenue to the organisation henceforth, building
up a financially sustainable business.
to this study and The measures of performance in this study will explore are: profitability;
customer loyalty; customer retention and customer satisfaction.
Therefore, this study is aimed to establish whether failure on the part of Barclays Bank Uganda
to retain its customers is a result of poor customer relationship management.
study.
CHAPTER TWO
STUDY LITERATURE
2.1 Introduction
This chapter presents a review of available literature, by scholars in the area of study thats
customer relationship management and organizational performance and it focuses on the
following; the literature survey and
He further noted that the individual companies continue to register increased sales volume in
terms of telephone lines, the usage period for telephone lines acquired is less than five months,
meaning that customers only respond because of the short time rewards that come from different
promotional offers. Once the offer ends, the customer will switch to another network with better
rewards and promotions. This leaves very small numbers of loyal customers on each individual
network.
It was found out that the challenge all marketers face today is in finding ways of increasing
customer loyalty and retention. Transforming indifferent customers into loyal ones and
establishing a long term relationship with customers is critical for organizational success.
CRM can be further described as a comprehensive set of activities that covers all functions of the
firm interacting with and supporting a consumer. These activities ultimately build customer
satisfaction by providing in their needs, wants, and desires over the long term (Wilmshurst &
Mackay, 2002:169). According to Gordon (1998:9), it is an ongoing process of identifying and
creating new value with clients and then sharing the benefits from this over a lifetime of
association.
According to Picton et al. (2005), CRM is a view that emphasizes the importance of the
relationships developed between an organization and its customers. It involves the strategic and
tactical management tasks to achieve positive communications and long term customer
relationships. Berkowitz (2006) also defines customer relationship management (CRM) as the
organizations attempt to develop a
benefit of both the customer and the organization. Personal relationships with clients are
important, as loyalty to service firms has been associated with clients personal relationships with
a service provider (Swartz et al, 2000). Therefore, service providers, including financial
institutions like banks, should focus on building relationships with their clients to reap the long
term rewards of support and loyalty.
Benefits from customer relationship management to clients Successful relationships with clients
involve a mutual fulfillment, with benefits to both parties, namely the service firm and the client
(Swartz, 2000).
A client will desire a relationship with a specific service provider if he/she finds that the benefits
to be received will significantly exceed the associated costs of obtaining such benefits. Clients
want firms to manage all client interactions and focus on building a relationship over time
(Wilmshurst, 2002). Clients are willing to build long term relationships based on trust and
mutual respect with firms that provide differentiated and personalized services (Customer
Relationship Management in Financial Services, 2001).
According to Finch (1994), a strong relationship with clients is one in which the client is
completely satisfied; feels appreciated; has learned he/she can trust and depend on the service
provider; and is satisfied that the services offered are reliable. As CRM is a fairly recent
marketing concept, limited research has been undertaken on the dimensions of a relationship
between a service provider and its clients.
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There are about five dimensions of such a relationship have been repeatedly identified in
research, namely trust; bonding; concern; reciprocity; and loyalty (Swartz et al, 2000).
i.
Trust refers to the confidence in the dependability of one party to act in the long term
interests of the other party. A party to a relationship has trust, if the feeling that the other
party can be depended on exists (Beckwith, 2001). In the banking branch of the financial
services industry, for example, clients will trust the bank if they believe the bank will
ii.
iii.
iv.
v.
(such as income in the form of bank charges) and the client (such as the security of funds).
Loyalty refers to the emotional and psychological commitment between parties. In the
banking branch of the financial services industry, for example, clients will be loyal to a
specific bank if they always return for existing and new banking products and services.
Banks will be loyal if they always listen to their clients enquiries and focus on assisting
them in all their banking needs.
Therefore, the degree of a relationship with a client will depend on the extent of these
dimensions in the interaction between the service provider and the client. However, it is
important to remember that many other possible dimensions exist in this complex aspect of a
relationship between a service provider and its clients.
10
willing to make a stable relationship with its customers, there are different ways to have an
interaction with them including interaction along touch points and distribution channels. The
main purpose is to find out how and when the customers would like to interact with the
organization Gulycz (2002). The interaction activities should be well customized and organized
through the available touch points. The touch points provide in relation to the customers profiles
developed by data gathered from the former records of the customers. Peppers and Rogers
(1997) stress that the touch points must be used for distribution of different products, services
and communication with the customers. According to the works of Lindgreen et al. (2006) and
Peppers et al. (1999), interaction management is implemented by a few methods such as getting
customers feedback and increase the interaction with customers by attractive ways such as using
social network.
Relationship Development: According to Ford (1980), the study of relationship development
primarily involves research into structures and processing of the relationship between customer
and supplier. Lindgreen et al. (2006) argue that the relationship development process concerns an
interaction where connections have been developed between two parties.
The most important activity to achieve relationship development is known as monitoring of the
relationship management process such as service or complaint management Lindgreen et al.
(2006). This relationship processes include procedures, mechanisms, schedules, and activities in
which the products and services have been delivered to customers (Beckwith, 2001). The key
performance indicators such as rate of retention, life time value of the customers, and customer
satisfaction should be set by the organization (Gulycz, 2002). According to the works of Hanley
(2008) and Lindgreen et al. (2006), relationship development can be made through commitment
to convince customers that their feedback is taken seriously.
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Quality of Services: According to Gulycz (2002) in an attempt to understand the factors that
induce customer satisfaction, the concept of service quality is increasingly common in the
literature. Studies show that service quality has a positive effect on consumer satisfaction and
also has a significant relationship with customer loyalty, and the profitability of the firms.
According to the works of (Gulycz, 2002), the quality of services could be implemented by a few
methods such as: Meeting customer expectation of good service level and having many varieties
of products; Provide good quality products with reasonable price and to handle the customer
complains about the products and services tactfully.
Behavior of the Employees: An employee that conforms with organization behavior and value
is likely to strengthen the connection between the consumer and the firm. A reverse pattern of
effects is to be expected when the employee act through his/her own behavior. In these cases, a
consumer may think that the organization actually does not deliver the symbolic benefits that
s/he had expected for and may evaluate the organization in a negative way. In other words, under
circumstances such as the ones described, an employee will probably exert a strong impact on
organization reputation and attitudes (Gulycz, 2002). According Lindgreen et al. (2006), the
effect of positive employees behavior could be expressed by increasing speed of response to
customer and ensure employees are friendly and respectful to customer.
2.3.2Customer loyalty
Customer loyalty is one of the most important factor or the issue facing by the business today.
Unless the companies can retain the loyalty of their customer, they will lose their customer for
repeat purchase and the long term future of that business will be uncertain Linton (1993).
According to Tikkanen et al. (2002), customer loyalty has been defined as the strength of the
relationship between the individuals relative attitude and repeat patronage. Therefore,
Rosenberg (1984) pointed out that considering the brand loyalty reflects the likely habitual
behaviour of the consumers when brand make changes in the price, product features, its
communication and distribution programmes etc. It is an important part of the marketing side for
the expansion of the customer loyalty which focuses on the marketing strategy due to the
benefits related with the existing retaining customer (Salami, 2005). Discovering an exact
measurement of loyalty is very important due to its profitability.
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To obtain loyalty and to outweigh other competitors, service providers must be able to obtain
high levels of customer satisfaction for the service supplied Reinartz et al. (2004). How much
should a company invest in building loyalty so that the costs do not exceed the gains?
2.3.3Customer Retention
Unfortunately, most marketing theory and practice centers on the art of attracting new customers
rather than on retaining and cultivating existing ones (Chen et al., 2002). The emphasis
traditionally has been on making sales rather than building relationships, on pre-selling and
selling rather than caring for customers afterwards. The key to customer retention is customer
13
satisfaction and companies need to measure customer satisfaction regularly. A highly satisfied
customer stays longer, buys more and promotes the company for free to other consumers Kotler
(2008). 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.
According to Kotler (2008), of the companies who register a complaint, between 54 and 70%
will do business again with the organization if their complaint is resolved and the figure can go
to a staggering 95% if the customer feels that the complaint was resolved quickly. Chen et al.,
(2002), proposed that companies should come up with several mottos which can include: - A
customer is the most important person ever in the office whether in person, telephone, or mail; A
customer is not dependent on us, we are dependent on him; A customer is not an interruption to
our work; he is the reason of it.
that the idea of preventing high value customers from defecting is an important one but not
enough for any business. They argue that defection is not the problem but the change in spending
behavior. They continue to argue that the change in spending behavior accounts for a larger
change in value than defection itself. This is as important for industries whose customers
generally deal with more than one company e.g. consumer goods retailing as it is for industries
like telecom or printing where customers seem to have a single provider. This may mean that
whatever the industry, it is important to retain customers as customer retention is regarded as key
for good business performance. A 5% increase in customer retention can increase profitability by
25 - 85% (Reichheld et.al, 1990).
2.3.4Customer Satisfaction
Customer satisfaction is a psychological concept that involves the feeling of wellbeing and
pleasure that results from obtaining what one hopes for and expects Zablah, A. R. (2014).
However, the emphasis in marketing is shifting from discrete transactions and short-term
economic exchange towards long-term relationships between organizations. In business-tobusiness marketing, customer satisfaction with a product / service can be seen as something that
helps cement the parties for the long term, or drives a wedge between them (Gulycz, 2002).
According to Moller et.al (1995) customer satisfaction in business-to-business marketing is seen
to relate to the inter-organizational exchange process. The satisfaction of business parties can be
seen as a critical turning point in the development of buyer-seller relationships.
Satisfaction is however not a universal phenomenon, this means that not everyone gets the same
satisfaction out of the same experience (Kaufman, 2004). This is because within the same
industry, different customers could have different needs, objectives and experiences that
influence their expectations. Expectations are a mutable internal standard, which is based on a
multitude of factors including needs, objectives, past personal experience etc.
Barclays Bank offers a wide range of services that are designed for ease of use like the different
account types to meet the needs of particular types of customers in a bid to ensure customer
satisfaction.
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2.3.4.1
Relationship
between
Customer
Relationship
Management
and
Organizational Performance
Different researches have been done about CRM frameworks but there has been limited
academic effort about the issue of the CRM process and firm performance. Some researches tried
to understand the consequences of CRM. There is some evidence focus on CRMs impact on
organizational performance. Different articles showed the positive impact of CRM on different
aspects of performance, for example aspects that are related to the company (Levine, 2000) or
aspect that are related to customers (Gustafsson et al, 2005).
Reinartz et al. (2004) attempts to relate CRM activities that lead satisfaction to a different
business performance measures. There are some other studies that show a relationship between
the activity of customer satisfaction and business performance (Kamakura, de Rosa, 2002). There
is also some study that expresses the association between activities that lead to customer loyalty
and commitment - profitability and retention (Kotler, P. 2008).
Reinartz et al. (2004) also tried to establish a link between CRM and organizational performance.
As mentioned before they found CRM has three distinct customer relationship-related stages:
initiation, maintenance, and termination. They found CRM has an impact on perceptual
performance across the three stages. In the initiation and maintenance stages, some support was
found for CRM's impact on Performance, but little support was found for CRM's impact on the
termination stage.
Some researchers stress that sales force efficiency and effectiveness will improve by applying the
CRM process (Chin, 2002). He expressed that one potential CRM benefit that did not make the
list includes improved employee motivation
16
Yonas, B. (2013), Believed an organization can develop time of product modification for a
customer compared to competition and increase a number of newly introduced products
compared to the competition. She also expressed CRM cause increase sales volume of individual
customers and also sales revenue with individual customers. Customer satisfaction and loyalty is
as consequences of CRM process too.
Kim et al (2003) also suggested a model that emphasizes CRM process can improve customer
satisfaction, increase customer loyalty, reduce customer cost and increase customer revenue and
profit for organizations.
The length of interaction with customers will be increased and also the time of delivering
services to customers will be decreased for organizations that apply CRM.
Levine (2000) expressed that CRM can decrease the marketing and sale cost. It can also decrease
the customer loose rate and increase customer value. Customer relationship management helps to
improve customer perception about product and
revenue.
Picton et al., (2005) emphasis that customer relationship management can impact on different
measures of performance. He showed CRM can decrease the marketing and service cost. The
revenue of the company also increases by cross /up selling. CRM process stress on customer
segmentation based on customer needs and information. So the company can improve product
/service quality.
Yonas, B. (2013) expressed if companies notice on CRM process, it can help them to increase
their profit and also the shareholder revenue. Due to one of the important activities of CRM
process is gathering data about current and potential customers and creating a database, so the
employee has access to important information about customers and their needs and can improve
their service based on their requirements so it can lead employee satisfaction.
sensitive to risk management capability of banks. While Lindgreen (2011) found that highly
leveraged microfinance institutions perform better by reaching out to more clientele, enjoy scale
economies, and therefore are better able to deal with moral hazard and adverse selection,
enhancing their ability to deal with risk. However, higher risk threatens the long term survival of
the bank, Reinartz et al. (2004). Equilibrium between risk and return must be maintained through
Recognition of both the potential value of opportunity and the potential impact of adverse
effects, Swartz (2004), As an approach to risk management, the Capital Asset Pricing Model,
suggests elimination of unsystematic risk through diversification and investors rewards should be
based on systematic risk. Nellis et al., (2004) found out that non-banking activities are less risky
and thus can be used to diversify the risk inherent in the commercial banking firm. Such
diversification could engulf real estate, fund management, insurance, and broking activities,
(Panayiotis, 2008). The researcher is of the opinion that since operational risk cannot be
eliminated completely through diversification, it can be categorized as systematic risk and has to
managed effectively.
Service quality is a determinant of whether a customer ultimately remains with or defects from a
company (Zeithaml et al., 1996). In marketing management literature service quality takes a
prominent position. It is usually defined as customers impression of relative inferiority or superiority
of service provide and its service. Also it is often considered similar to overall attitude of customer
towards company.
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DEPENDENT VARIABLE
MANAGEMENT
BANK PERFORMANCE
Trust
Profitability
Bonding
Customer loyalty
Concern
Reciprocity
Loyalty
Customer Retention
MODERATING VARIABLES
Customer satisfaction
Regulatory Environment
Quality of services
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CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
This chapter focuses on the research design which will be employed in the study, Area and
population of study, sample and sampling design used, research instruments, data analysis and
the problems experienced during the study.
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The sample size will be determined using Krejcie and Morgan (1970) who assets that in
correlational research at least 30 subjects are required to establish a relationship.
The table below shows the sample selection adopted from Krejcie and Morgan (1970). Where N
= Population Size and n = Sample Size.
N-n
Nn
N-n
N-n
N-n
10 - 10
100 80
280 - 162
800 - 260
2800 - 338
15 - 14
110 86
290 - 165
850 - 265
3000 - 341
20 - 19
120 92
300 - 169
900 - 269
3500 - 346
25 - 24
130 97
320 - 175
950 - 274
4000 - 351
30 - 28
140 103
340 - 181
1000 - 278
4500 - 354
35 - 32
150 108
360 - 186
1100 - 285
5000 - 357
40 - 36
160 113
380 - 191
1200 - 291
6000 - 361
45 - 40
170 118
400 - 196
1300 - 297
7000 - 364
50 - 44
180 123
420 - 201
1400 - 302
8000 - 367
55 - 48
190 127
440 - 205
1500 - 306
9000 - 368
60 - 52
200 132
460 - 210
1600 - 310
10000 - 370
65 - 56
210 136
480 - 241
1700 - 313
15000 - 375
70 - 59
220 140
500 - 217
1800 - 317
20000 - 377
75 - 63
230 144
550 - 226
1900 - 320
30000 - 379
80 - 66
240 148
600 - 234
2000 - 322
40000 - 380
85 - 70
250 152
650 - 242
2200 - 327
50000 - 381
90 - 73
260 155
700 - 248
2400 - 331
75000 - 382
95 - 76
270 159
750 - 254
2600 - 335
100000 - 384
3.4
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3.4.1
Questionnaire
This involves using a predetermined set of questions designed to collect information from a
respondent on the subject under study. The researcher believes that the use of this tool can be
useful in exploratory studies in which various dimensions and facts of a problem are examined,
but in which hypothesis are not posed and tested (Kothari, 2004). Both closed and open ended
questionnaires are used.
3.4.2 Interview
According to Grazianno (2010) an interview can be defined as a method of data collection where
the researcher/investigator follows a rigid procedure and seeks answers to pre-conceived
questions through personal interviews. This involves face to face conversation between the
researcher and the respondents for the purpose of obtaining information. This is useful as it
enables gathering of information on attitudes, values, beliefs and motives of the respondents
towards relationship marketing and customer retention.
3.4.3 Observation
This involves a purposive or intentional examination of something, particularly for the purpose
of gathering data. The University of Harvard defines observation as the unobtrusive method of
gathering data. This provides the researcher with a richer and more direct account of the
phenomena under study. Observation will be used because of its provision of firsthand
information and its supplements on other methods (Efuetngu 2005). Observation is made on
customer relationship management and performance.
23
The researcher interprets and makes explanations of content gathered from the field basing on
the research objectives. Any explanations of meanings, discussions and interpretation of
emerging information and data is presented in form of tables
3.7 Procedure
The researcher will receive an introductory letter signed by School dean of school of business
administration which will introduce the researcher to the respondents. The letter will contain the
topic of the study and the objective of the study. The researcher will address the respondents
briefing them on their role in the study which will be to fill the questionnaires. For the case of the
interview, an appointment will be sought from the respondents after which interviews are
conducted. Data will be recorded as the interview session goes on.
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Drivers
of
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