CHAPTER ONE

Introduction

1.0Introduction

This chapter forms the basis of the study on an analysis of the

effectiveness of customer retention methods employed by commercial
banks. This chapter provides a background to the study, stating the
problem, purpose of the study, research questions, and significance of
the study and definition of terms.

1.1BACKGROUND OF THE STUDY

Michalakopoulos and Blery (2006) said that today, banks are facing
aggressive competition and they have to make efforts to survive in a
competitive and uncertain market place. Banks have realize that
managing customer relationship is a very important factor for theirs
success. In 1994 backwards there was only few banks in Zimbabwe
which are Barclays, standard charted, post office service bank and the
other few banks. In this period clients had limited choices for which the
banks where few and they similar services .however there was no
room to shift from one bank to the other because of the few number of
the banks where .in 1999 liberalization was introduced by the RBZ to
all commercial banks.
According to oxford dictionary (2008) Liberalization is the act of
making less restrictions or deregulation. According to my study
Liberalization is the act by RBZ of making less restriction or
deregulates the commercial banks or the financial institutions in
Zimbabwe. Since 1999 there was some entrepreneurs who start to
emerge and they was some birth of private banks like NMB bank, trust
bank, CBZ, TN and many more. By this act, Liberalization bring in the
picture of more competition, innovation and efficiency and hence
quality services to clients. The act also increase choices to the clients
so one can choose the bank he or she wants to do business with.
However one has got the liberty of moving from one bank to the other.
In the period of hyper inflation (2006-2008)many banks divert from
their core business and at the end they end up doing activities that
they forgot to provide quality services to the clients and act differently
to the agreed term and condition of RBZ liquidating or forced by the
RBZ to liquidate. Banks like intermarket and trust banks close down
with clients’ money and they failed to retrieve the money however
clients still have got fear in them so banks have to prove that they are
on the right tract for it to be able to retain their client.

1.2 STATEMENT OF THE PROBLEM

In banking institutions they are stiff competition this was caused by the
liberalizations which gave the room to the new entrepreneurs to invest
in the banking system. This gives customer also a room to choose.
Clients have a wide range of choice so the problem is, is all banks
being able to survive the competition? We are still witnessing the long
quos so how banks are able to retain their clients with such a scenario?
1.3PURPOSE OF THE STUDY/OBJECTIVES OF THE STUDY

• This study seeks to identify strategies that commercial banks use to

improve services delivery and ultimatimately gain competitive
advantage.
• To refine current understanding on consumer perception and
expectations

1.4RESEACH QUESTIONS
• Which strategies are being used by commercial banks to retain
it’s clients?
• Which strategies are being used by commercial banks to
improve service delivery and ultimately gain competitive
advantage
• Do commercial banks currently understand on consumer
perception and expectations?

1.5SIGNIFICANCE OF THE STUDY

• To the university: this research can be used as a
reference in the library for other researchers
 • To the researcher: As a student l need to know how
banks are retaining there clients, what are the benefits of
retaining the client. however the research equip the
researcher with valuable insight and approaches that are
necessary to this area of study and aii in all it gives him
hands on experience even if he want to venture in such
business
• To the banks: this reach will make all banks identify the
impotents of the retain their clients. The research will in
light the banks to also identify their weakness.
• To the client: clients can also be able to know what they
want. What makes them be loyal to one bank .however is
that bank be able to provide best quality that can make
one be loyal to that bank.
1.6 ASSUMPTIONS OF THE STUDY
This study assumes that since the clients have variety of choice,
which measures are going to be undertaken by the banks to
maintain customer relationship and to retain their customers.
however most banks are failing to implement strategies to
retain their clients. The study assumes that if the banks
implement the strategies are they able to function well.

1.7 DELIMITATION OF THE STUDY

The study is looking at the effectiveness of the customer
retention strategies being employed by the commercial banks in
Zimbabwe. However the study is will to point out that the banks
are in a stiff

competition since the introduction of liberalization, how are they

being to manage the competition. Every bank is willing to retain
as many clients as it can. the researcher is going to use the a
case study of Barclays bank. The researcher is going to look in to
the Barclays bank branches in Harare specifically. he is going to
use the sample of about 40 clients and 5 from the employee and
the other 5 from the top management. The researcher is going to
look at the period from 2008 to 2011.
1.8 SUMMARY
This chapter gives an overview; it gives the introduction of the
whole study, the background of the study that is the history of
the study. the problem state that drives me to carry out the
study. Also it point out the aims of the study which is the
strategies that are being used by the commercial banks to retain
their clients. The research questions, the significance of the
study, assumptions and the delimitatins.this lead the way to the
next chapter which is the literature review.
 CHAPTER 3

3.0INTRODUCTION

In this chapter, the researcher is going to give a description of how the

research shall be carried out in order to meet objectives of the
study .Data and information that is going to be collected and
processed mainly pertaining to address the effectiveness of the
customer retention strategies used by the commercial banks in
Zimbabwe .the chapter will clearly spell out the methods and
procedures used to gather data from the selected sample of the study.
the researcher will look at the design used , major sources of data and
information , sampling plan and the research instruments and data
collection procedures.

3.1RESEARCH DESIGN.
The research design refers to a plan, structure and strategy of
investigation conceived so as to obtain answer to research questions
and to control variance (kerlinger,2003)Research design is used to
structure the research ,to show how all of the major parts of the
research project for example the sample or groups ,measures,
treatments or program and myths of assignment work together try to
address the central research questions. Due to the nature of the study
the researcher is going to use descriptive research.

Descriptive research involves gathering data that describe events and

then organise, tabulates,depicts and describe the data collection
(glass and hapkins 1984).The advantages of descriptive research are
that as the study does not involve certain variables to be studied, it
can provide a lot of information both quantitative and qualitative data.
In addition descriptive research is useful in identifying further areas of
research. The study is also flexible, you select the method depending
on what you expect to find rather than selecting the method and then
studying. Every thing it can be good but the bad side is not completely
eliminated. However the disadvantage of the descriptive research is
that this type of research is that you can not identify the case behind
a phenomenon, you can just describe and report the observation

3.2POPULATION

According to oxford dictionary (2008) target population is the

population about which information is desired .the population that is
actually surveyed is the study population. The population is formed by
the clients that are loyal to Barclays bank especially in Harare.
However it includes also the employee and the top management
.
3.3THE SAMPLE
A sample is a small part of anything designed to show the style
,quality and nature of the whole. A sample approximates the
measurement of the whole population

.The researcher is going to use a sample size of 40 clients of any

Barclays bank in Harare.5 employees and5 from the top management.
The sample is going to be selected using random sampling method.
Clark and cook (1992:3) defines a random sample as a sample which
is chosen so that every member of the sample, independently of
which other members of the population are chosen.
Table 1: the sample
Descriptive number of the members
Clients 40
Employee 5
Management 5
3.4RESEARCH INSTRUMENT
The researcher is going to use questionnaires which are going to be
hand delivered and also over the internet to the respondents.
interviews are going to be used both face to face and depth interview
to assure the acquracy.in addition to the above the interviews are
going to attended by both the clients and the management as well as
the employees.
3.4.1INTERVIEWS
The business dictionary.com points out that the interview is a
somewhat formal discussion between two parties in which information
is exchanged.
An interview involves direct personal contact between the researcher
and the participants Higson and Bless (2004).

3.4.2ADVANTGES OF INTERVIEW
• Feed back is immediate as two ways communication takes
place.
• The researcher will able to to obtain the information which
requires detailed explanations and the researcher will have the
chance to correct misunderstanding
• The research creates good relationship with the bank because
the researcher may give influence to the institution so that it
can be able to value customer retention and their mark up
increases.
• This method renders the opportunity for completeness and
accuracy
3.4.3DISADVANTAGES OF INTERVIEWS
• However some of the respondents may be unwilling to open up
because they fear that you may be sent by their competitors to
invest gate their strategies.
• The interview are time consuming ,costly to arrange and there
are high probability of interviews bias which requires the
researcher to increase the depth o the interview
3.5QUESTIONNAIRE

The researcher is going to implement questionnaires as other method

to collect data from the respondents.
Francis Galton says a questionnaire is a research instrument consisting
of a series of questions and other prompts for the purpose of gathering
information from respondents. Although they are often designed for
statistical analysis of the responses, this is not always the case.

3.5.1ADVANTAGES
• It reduces personality clashes that may occur between
respondent and the researcher
• The respondents may have got all the freedom to state exactly
all the retention strategies they are using and how successful
they are in retaining their customers
• This data collection method will ensure greater comparability of
responses and the data to be collected and analyzed both
quantitatively and with some qualitative comments
• It is the cheapest way of collecting data since the researcher can
be able to carry out alone, he will give both the clients and the
management by himself and collect it also by him self
• Allow a the researcher to guide participants along lines of
thought with regards to the investigation
3.5.2 DISADVANTAGES
• if the questionnaire appears as unclear to the respondents that
means the feedback is also wrong
• Respondents may not respond to some other questions they feel
are too sensitive and encroach into their privacy
• Some respondents may take time to respond stating needy for
time to get conceptual insight about how they retain their
clients.
• Questionnaires also have the problem relating to question
construction and wording that exist in other types of opinion
polls
3.6VALIDITY AND RELIABILITY
In order to incorporate validity in this study the researcher will
ensure that questions are related to the objectives of the study and
will be ensured as below
Explanation of uncommon words and terms used inboth the
interviews and the questionnaires
The researcher will carry out the pilot study on questionnaires .five
respondents will be selected if necessary .this will be a pre test, the
researcher will have the insight on the level of understanding, the
level of willing ness to answer sensitive questions.
Related questions will follow each other in the sequence aiming at
ensuring a coordinated response
Simple and well structured question swill be asked to avoid
misunderstanding
The researcher will try to carry the interview mostly in the morning
the respondents will be still available and not tired
3.7DATA COLLECTION PROCEDURES
The researcher will carry out the interviews at her own. The
questionnaires will be produced in the right quantity and the
researcher will hand deliver the questionnaires by her self. And also
she will collect them after the completion. Respondents will be
given enough time to respond. Anonymity and will be confidentiality
will be guaranteed.
3.8DATA PRESENTATION AND ANALYSIS
Data collected will be represented in the given scenario and
situation that is in the form of tables because they are easy to draft
and construct ,simple to understand at one glance ,they are neat
and accurate. However they have a disadvantage of that they are
time consuming to draft, need too much paper.
The researcher is going to use charts and graphs since they are
easy to understand, also accurate and show data that they easy to
understand.
3.9SUMMARY
The chapter provides the background on how the research will be
conducted. The instruments to be employed in the study were
analyses and the concept of validity and reliability of research
instrument were discussed in detailed. Also the chapter explains the
data analysis and representation, procedures which is expected to
be used in data presentation. This lead us to the next chapter which
is data analysis.
CHAPTER 2

LITERATURE REVIEW

2.0 INTRODUCTION
Literature review is the process of reading, analyzing, evaluating
and summarizing scholar materials about a specific topic business
dictionary (2003). The purpose of literature review is to offer the
overview of significance literature published on a customer
retention strategies used by banks. It is going to elaborate both on
theoretical literature and empirical literature .in addition to the
purpose of literature review is to demonstrate your abilities to
identify the relevant information and outline existing knowledge
identify the ‘gap’

This chapter looks at theoretical and empirical literature on the

subject of service delivery by the commercial banks in Zimbabwe
.Emphases is placed on ways to improve the services delivery in
commercial banks.
2.1CUSTOMER RETENTION
According to Bridget Ryan (2000) customer retention is an
imperative in modern business .customer retention is a strategy whose
objective is to keep a company’s customers and to retain their revenue
contribution. Primarily it aims to prevent customers from defecting to
alternative brands /going to the competition.
As all members know, it costs less to keep an existing customer than
to acquire a new one, thus having a customer retention strategy is
common sense.
Customer retention is the driving force behind customer relation
management (CRM)(Blery and Michalakopoulos ,2006)
The studies across a number of industries have revealed that the cost
of retaining an existing customer is only about 10%of the cost of
acquiring a new customer, so customer retention makes powerful,
economic series. However the banking industry in India statistics state
clearly that recruiting new banking customers is a greater cost to the
bank than retaining existing ones. Banks on average lose 20 percent of
their customer base every year and yet by increasing retention by as
little as 5 percent, it is suggested these banks could increase
profitability by up to 100 percent! This statistic alone speaks volumes
as to the importance of bank customer retention saumitra Bhaduri
(2009)
According to the ICLP(2003) points out that putting in place a customer
retention strategy increases customer profitability as accusation cost
only occur at the beginning of a relation ,so the longer the relationship
,lower the mortised cost ,account maintenance costs decline as a
percentage of total cost or as a percentage of revenue. Long term
customers tend to be less inclined to switch, and tend to be less price
sensitive, long term customers may introduce new customers via
verbal referral. Long customers are believed that are likely to purchase
additional products. Customers who stay with you tend to be satisfied
with the relationship and are less likely to switch to competitors who
will make it difficult for competitors to enter the market or gain the
market share. However regular customers tend to be less expensive to
service because they are familiar with the process ,require less
‘education’ and are consistent in their buying behavior .Increased
customer retention and customer loyalty makes the employees, jobs
easier and more satisfying .In turn ,happy employees feedback into
better customer satisfaction in a virtuous circle this were the words
written by ICLP(2003 ).

Customer retention refers to keeping a client's business rather than

have the client use competitors' services or products. Businesses want
to reduce customer defections to their competitors because a
reduction in their market share and profits could result. Customer
services retention is a popular marketing strategy as it involves
focusing on meeting or exceeding clients' expectations in order to
maintain their loyalty.

When people feel loyal to a certain brand or business, they're less

likely to be persuaded by a competitor's ads and offers. Michael w.
Lowenstein (1995) found out that Maintaining customer retention
through loyalty programmer is a method commonly used by many
businesses today. A loyalty programmes typically involve a free
membership card and rewards for purchases. The reward incentives
may be for extra discount prices or prizes that can be obtained for
point rewards. For example, many airlines give air miles points that
may be saved for free air travel or prizes such as luggage or a
complimentary night's hotel stay. If consumers are collecting points
towards items they want, they're likely to keep using the products or
services of the company offering the. In this way, customer retention
can be achieved.

The most lasting way of retaining customers, however, is through

conscientious service that includes following up on any issues or
complaints. If a consumer has a negatives shopping experience with a
company, he or she may deal with that business less often or not at all.
If the firm sincerely apologizes and takes the time to have a polite
representative telephone the customer occasionally to see how they
can meet his or her needs, however, the consumer may reconsider and
keep dealing with that company despite any past unpleasantness.

Satisfaction surveys about customer service, as well as a store's

products, can help a business find areas of improvement that may help
it retain customers. Short, thoughtful surveys that ask for the
customer's opinion can be seen by consumers as a sign that the
business does care about the people it serves. When companies really
listen to their clients and are willing to make changes to please them,
it can lead to successful customer retention.

Sneakers (1990:41) customer loyalty and retention is important for any

business. Many companies understand this and they create customer
retention strategies.

These customer solutions can be something as simple as accepting a

competitors coupon so that the customer will choose to use your
institution than the competitors.

It could also include a rewards program where the customer is

rewarded with products or rebates based on their spending patterns.
The use of loyalty and retention programs really helps to keep the
company’s market share in tack.

Some companies in order to understand their customers needs offer

customer retention surveys. These surveys can be found on the back
of a receipt or could be mailed to the customer’s home after the
purchase was. Below they is a diagram to that customer retention is
important and it can be archived if it is helped by other aspects like
good marketing plan and marketing

Digram 1
campaigns

However the diagram shows that the customer retention can be

recruited and also can be retain after the industry have appropriate
marketing campaigns and marketing plan and budget. According to
Fred Reicheld ( 2008 ) customer retention is all about keeping the
customers you have spent that money to acquire and if you are in an
industry where they make multiple purchases over the years ,your
entire team should be very focused on retaining those customers .

Delivery services that’s consistent with the value proposition and

brand cross selling ,up selling asking for referrals from existing
customers developing program to increase customer loyalty and
decrease the turn over. Knowing the lifetime value for different
segments and using that data to improve the marketing prioritizing.
Retention as a major focus in the annual marketing plan .studies say it
costs ten times more than to generate a new customer than to
maintain an existing one. if accompany have got few small numbers of
customers losing a few could cripple the company than having a large
number of customers . a small increase in the retention is also
dramatically increase in the profit. in addition to the above statement
it is a great strategy to use.
According to Brian Tracy (2009) the purpose of a business is to create
and keep a customer. If a business successfully creates and keeps
customers in a cost-effective way, it will make a profit while
continuing to survive and thrive. If, for any reason, a business fails to
attract or sustain a sufficient number of customers, it will experience
losses. Too many losses will lead to the demise of the enterprise.

According to Dun and Bradstreet (2010)

Successfully creates and keeps customers in a cost-effective way, it

will make a profit while continuing to survive and thrive. If, for any
reason, a business fails to attract or sustain a sufficient number of
customers, it will experience losses. Too many losses will lead to the
demise of the enterprise.

According to Dun and Bradstreet (2010) the single, most important

reason for the failure of businesses in America is lack of sales. And, of
course, this refers to resale as well as initial sales. So your company’s
job is to create and keep a customer, and your job is exactly the
same.

2.2THE SECRET OF CUSTOMER RETENTION

No matter what type of business one may be in, customer retention is
extremely important. It is something which can make or break a
business venture as customers are what make the business
operate. If there are no customers, then there is no business.
For those who may be hoping to keep the customers which they
currently have in addition to adding to their clientele base,
there are some secrets to the art of customer retention which
may help business owners to do just that. The following will
discuss the importance of customer retention and list the
various ways to keep customers coming back to your business
time and time again this were the words of Eliezer Gonzalez
(2008).
2.2. 1WHY CUSTOMER RETENTION IS SO IMPORTANT
There are a few different reasons why customer retention is so
important. First, due to the fact that businesses operate on the
basis of customers and the purchases made by such individuals,
it is crucial to keep the customer base that you have. Keeping
the same customers returning back for more of your products
on a continual basis will help to ensure that you receive the
income necessary to run your business. According to Eliezer
Gonzalez (2008) A steady customer base and retaining the
usual customers will help to secure a steady income.

Laura Lake (2003) discovered that customer retention is so

important it shows that a business has a good reputation since
it can keep a steady customer base. Businesses which show
customer retention year after year can be said to be reputable
in nature as the same customers return to their store for more
purchases and/or services. A reputable business is one which
will often last in duration as well as show a good financial
standing.
 Customer retention is also a concept which can lead to new
clients. As with the reputation factor, a business which retains
the same customers can also result in new customers due to
word of mouth by the individuals who use the business for their
products and/or services. New customers mean not only that
the business name will be on the lips of many but also that the
business owner will see a greater income due to new clientele.

In INDIA they point out that good customer retention is vital to any
organization because a slight reduction (5%) in the customer defection
rate has a disproportionately positive effect on profitability (depending
on the cost of acquisition, ranging between 25 and 80%!). Companies
with high retention also grow faster. However, customers can only be
retained if they are loyal and motivated to resist competition. When
customers are merely satisfied with the service they receive they may
still "walk". Your customer retention management relies on the
combination of the following:

• High satisfaction with product performance and customer

service.
• High intention to continue to do business with you.
• High willingness to recommend you to others.

(High means the top-box score [typically of a five-point scale] in

quantitative measurements)

There are two components of customer retention. Both need to be

pursued.

• Customer satisfaction.
• Systematic and proactive customer relationship management.
2.4How to Promote Customer Retention

For those business owners who realize the true importance and wish to
help themselves keep the customers that they have as well as add to
their client base, there are many different ways to promote customer
retention. Some businesses will find certain ways more successful than
others and the best way to truly know their success is to try them all.
The following are some of the more successful ways of pursuing
customer retention when it comes to one's business.

One way to promote customer retention is to offer products and

services which clients want. The best way to go about this concept is to
look at the products which your business sells or services that your
business offers and determine what the general consumer public is
truly looking for in that category of item or service. In order to gain this
insight you and your company representatives should engage in
various forms of research so that you may discover what individuals
are buying. Perusing the Internet, taking surveys, reading business
venture magazines on popular products and taking note of your stock
and what is being sold can all aid in figuring out which products and
services customers want. By knowing what your customers want from
your business, you will ultimately be able to keep the customers that
you have by providing them with their desired items.
The other method to implement is CRM.
2.3CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
According to Ellen Gifford (2005) customer relationship management
(CRM)
Concerns the relationship between the organization and its customers.
To create the CRM must look at both sides the organization clients.
Customers need to grow and clients need to satisfy.
2.4IMPROVING CUSTOMER RETENTION RATES THROUGH DIRECT
INTERVATION

The significance of customer retention was first quantified by

Reichheld and Sasser (1990). They found that profits in service
industries, including credit card companies, increased in direct
proportion to the length of a customer's relationship. They noted the
experience of MBNA America, citing its "customer defection 'swat'
team staffed by some of the company's best telemarketers," which
achieved a 50% success rate in persuading customers to retain their
credit cards. At MBNA, a 5% improvement in customer retention
increased average customer value by 125%. Reichheld and Sasser
(1990) concluded that cutting defections in half could more than
double the growth rate of the average company.

Everett (1993) noted that a dedicated customer retention unit

developed by Patrick J. Swanick at the Society National Bank in
Cleveland achieved a 57% success rate in persuading callers to remain
with the bank. According to Everett (1993), these representatives first
probed for causes, then tried to resolve the problem. He added that
they followed-up on each call with a letter to the customer.

2.5BEHAVIORS AND SKILLS LINKED TO SERVICE QUALITY AND

CUSTOMER RETENTION

Zeithaml, et. al. (2003), Bowen and Lawler (1990), Reichheld and
Kenny (1990) and Schlesinger and Heskett (1991) cited the need for
customer-contact personnel to "take responsibility, think for
themselves and respond well to pressure from customers" (Schlesinger
and Heskett, 1991).
Schlesinger and Heskett (1991) further emphasized the importance of
training and support in "communication, performance management,
team building, coaching and empowerment" for front-line workers and
their managers. Both Reichheld and Kenny (1990) and Schlesinger and
Heskett (1991) found that companies that exhibited these policies and
attitudes experienced not only higher customer retention and profits,
but also an increase in employee loyalty and a reduction in job
turnover.

Zeithaml (2003) found that a "Service Performance Gap" occurred

when employees were unable or unwilling to perform the service at the
desired level. They found that this gap was common among the service
businesses they studied due to problems related to: role ambiguity;
role conflict; employee-job fit, technology-job fit, supervisory control
systems; perceived control; and teamwork.

Zeithaml, (2003) defined role ambiguity as a situation in which

employees were: (1) uncertain about what their managers or
supervisors expected from them and how to satisfy those
expectations; (2) lacked the training or skills to provide the service
needed for customer satisfaction; and (3) did not know how their
performance would be evaluated and rewarded.

To achieve role clarity, Zeithaml (2003) suggested the use of four

tools: communication, feedback, confidence and competence. They
emphasized that employees need accurate information about their
roles; specific and frequent communication from managers about what
they were expected to do; and complete and current information about
products, services and customer expectations.

Zeithaml (2003) concluded that training and feedback in two areas,

technical knowledge and interpersonal skills (which were related to
their "SERVQUAL" dimensions of responsiveness, assurance and
empathy), could increase employees' confidence and competence, and
provide greater clarity regarding their roles. Bitran and Hoech (1990)
also noted the importance of providing feedback to employees on their
interactive skills.

Bitran and Hoech (1990) suggested that high-contact, high-

communication service providers require skills in: diagnosing
problems; gathering, checking and disseminating information;
resolving conflicts; disseminating cost information; and managing
waits. The first three of these tasks are shared by customer retention
representatives.

2.6THE LINK BETWEEN CUSTOMER SATISFACTION AND CUSTOMER

RETENTION

Many authors (Reichheld and Kenny, 1990; Zeithaml (2003); Bowen

and Lawler, 1990; Schlesinger and Heskett, 1991) have cited the
relationship between customer retention and the quality of service
experienced by the customer.

Reichheld and Kenny (1990) specified six factors as imperative to

improving retention: senior management commitment; a customer-
focused culture in which all employees and managers focused their full
attention on customer satisfaction; retention information systems that
tracked and analyzed the root causes of defections; empowerment of
front line employees to take actions that provided immediate customer
satisfaction; continuous training and development; and incentive
systems based on customer retention.
Parasuraman, et. al. (1984) studied quality in four service businesses,
including credit card services, and developed a model of service
quality. They noted that:

"A variety of factors, including resource constraints,

management perceptions of consumer expectations and
the firm's service quality specifications will affect service
quality from the consumer's viewpoint."
(Parasuraman, et. al., 1984)

Parasuraman, et. al. (1984) identified a set of discrepancies, or gaps,

between how executives perceive the quality of the service they
provide and the tasks associated with delivering those services to
customers. They found that the customer's perception of service
quality depends upon the size and direction of the gap between the
service the customer expects to receive and what he or she perceives
to have been received. The magnitude of this gap (which can be either
positive or negative) was determined by four interrelated variables: (1)
the difference between actual consumer expectations and
management perceptions of those expectations; (2) between
management perception of expectations and the translation of those
perceptions into service quality specifications; (3) between service
quality specifications and service delivery; and (4) between both
service quality specifications and service delivery, and external
communications to customers. Parasuraman, et. al. (1984) noted that
these gaps "can be a major hurdle in attempting to deliver a service
which consumers would perceive as being of high quality." Because
this study focused on the interaction between the firm's
representatives and its customers, this author found the fourth gap
2.7RELATIONSHIP OF SALES SKILLS TO BEHAVIOURS LINKED TO
CUSTOMER SATSFACTION AND RETENTION

Williams, Spiro and Fine (1990) noted that very few researchers have
explored the customer-salesperson interaction from a communication
perspective. They proposed a model that focused on communication as
the primary element of this interaction. They found that, although
many authors stressed the importance of "verbal and non-verbal code
(Marks, 1981; Jackson et. al. 1988) such as message order, patterns of
argument, use of evidence, visual contact, etc. in personal selling,
most of the research had concentrated on non-sales interactions. The
customer retention function required that sales skills be combined with
service skills associated with quality and customer loyalty. This
researcher identified areas in which these two skill sets overlapped, to
determine which (if any) behaviors on the part of the representatives
might alter a customer's decision to take some or all of their business
to another supplier.

Rackham, et. al. (1971) studied whether some individuals interact

more successfully than others because they are more skilled -- "they
either do certain things that others do not, or they do them better."
While admitting that personality and aptitude factors account for some
differences, they found that interpersonal skills, which they classified
as "interactive behaviors," could be influenced more readily. (The
spelling of the term reflects the British origin of Rackham and his
associates.) They defined an interactive behavior as "one which
involves two or more people in such a way that the behavior of one
person may influence the behavior of others." This definition also
describes the desired individuals who are expected to influence the
behavior of customers in favor of retaining their accounts.
The methods developed by Rack ham, (1971) were used by Motorola
Training and Education Center in studies of the interactive behaviors
used in interpersonal discussions, sales negotiations, presentations
and meetings. Working with members of Rack ham’s organization,
Huthwaite, Inc., researchers trained in these methods (including this
author) correlated the behaviors demonstrated by individual
performers with the outcomes of their interactions. In each type of
interaction, the researchers found that the most successful performers
used significantly more of some behaviors and significantly less of
others than did either average or below average performers.

Farber and Wycoff (1992) interviewed top sales performers at more

than 50 companies. These individuals emphasized the importance of
establishing and maintaining rapport with customers. The Motorola
research identified this skill with two interactive behaviors:
"Supporting" and "Testing Understanding." Supporting was defined as
acknowledging or expressing empathy toward the feelings, ideas or
positions of the other party. Masser and Leeds (1984) also stressed the
importance of this behavior in telephone sales.

2.8 THE IMPACT OF RELATIONSHIP MARKETING ON CUSTOMER

RETENTION
Today, banks are facing an aggressive competition and they have to
make efforts to survive in a competition market. Banks have realised
that managing customer relationships is a very important factor for
their success and also it can help to retain it’s clients in very positive
way. Customer relationship management ( CRM ) it is a process or
methodology used to learn more about customers' needs and
behaviors in order to develop stronger relationships with them
(C.K.Pharalad,B Ramaswamy,chris leder and Hill sam,2007). The more
useful way to think about CRM is as a process that will help bring
together lots of pieces of information about customers, sales,
marketing effectiveness, responsiveness and market trends. Customer
relationship management in the banking sector is of strategic
importance.

However looking in the case study of Indian bank it also points out that
the customer relationship management is of paramount important for
long, Indian banks had presumed that their operations were customer-
centric, simply because they had customers. These banks ruled the
roost, protected by regulations that did not allow free entry into the
sector. And to their credit, when the banking sector was opened up,
they survived by adapting quickly to the new rules of the game.

According to a reserve bank of INDIA road-map (2009) high lighted that

the competition is increasing rapidly so the banks have to be able to
retain the clients they have it was pointed out by saumitra bhadiri
(2009). As one of the most attractive emerging market destinations,
India will see foreign banks come in, what with more freedom to come
in, grow and acquire.

Therefore, it is imperative that Indian banks wake up to this reality and

re-focus on their core asset — the customer. A greater focus on
Customer Relationship Management (CRM) is the only way the banking
industry can protect its market share which is calculated after how
they are successfully in retain their customer and boost growth.

CRM would also make Indian bankers realise that the purpose of their
business is to "create and keep a customer" and to "view the entire
business process as consisting of a tightly integrated effort to discover,
create, and satisfy customer needs

Gurmukh Sing Popli (2009)in addition to the above the Indian banks
have recorded a phenomenal growth in the past decade with the
initiation of Economic Reforms. The banks, both Public and Private,
have transformed themselves into profit-oriented business
organizations besides playing a developmental role in the economy. In
an attempt to be more profitable, the banks have become competitive
and more customer-oriented. This new orientation has compelled them
to take a more pragmatic approach for conducting the business. In the
backdrop of this scenario, the study reviewed implementation of
Customer relationship (CRM) and the impact of CRM on service quality
and customer retention in ten public and private sector banks of India
(D N Rao,2009).

It was found that the Private Sector Banks have been able to
implement the CRM practices more effectively as compared to their
Public Sector counterparts. This fact has further been according to
Saumatra Bhaduri (2009) corroborated by the findings of the service
quality level being provided by these banks. Further, it was observed
both the public and private sector banks scored the least on
responsiveness and empathy factors. Public Sector Banks have fared
better in terms of reliability and assurance whereas the Private Sector
Banks have fared better in terms of tangibility, reliability and
assurance.
Further, the results suggest that the banks (whether public or private)
are equally affected by CRM initiatives they undertake to retain the
customers.

2.9 USING TRUST AS A CATALYST FOR CUSTOMER RETENTION

To build trust into the relationships you have between your

organization and customers can be one of the biggest hurdles to
overcome when optimizing your business processes to deliver a best in
class customer experience through a company-wide, customer centric
culture(Nashir Bandali,2005)

On an annual basis, Research company Edelman (2005) publish a

report entitled the “Trust Barometer” which is recognized by the
industry as a leading indicator of how customers perceive trust across
industry sectors. On the issue of trust, Edelman identified those
customer perceptions where lowest in industries such as Banks, Media
and Insurance companies and Technology, Health Care and
Technology sectors gaining the highest perception scores ranging from
61% to 80% respectively.

Trusted Advisor has broken down trust within organizations into the
following elements:

Table 1

Elements Trust Definition

How much to buyer/client trusts the
Trustworthiness
seller or consultant
Credibility Words and credentials
Reliability How others perceive the consistent
of our actions, and our actions
 connections with our words
(integrity)
How secure or safe the client feels
Intimacy
sharing with us
Amount of focus on the client,
paying attention to whatever it is
Self-Orientation
that helps them succeed or makes
them feel insecure.

From the customer’s point of view, it shows how your organization is

committed to a best in class service and can consistently deliver a high
standard of quality that should be embodied in your organizations
culture and it’s marketing where customer expectations are initially
set. Sometimes this is called a value proposition or brand promise The
reason why trust is so important is that it allows organizations to build
long term customer relationships by creating a collaborative
environment based on the customer’s individual needs.

2.11 THE SUMMARY

In conclusive this chapter is mainly literature review. it points out what

is customer retention .what is transpiring in the financial institutions. is
there some other companies who are implementing the customer
retention to their companies. this lead to chapter three research
methodology .