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Assessment of Customer Relationship ManagementPractices In Selected Commercial Banks

(Comparative Study)

By: Samson Mulatu

October, 2016 Arbaminch, Ethiopia

  

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INTRODUCTION

REVIEW OF RELATED LITERATURE

RESEARCH METHODOLOGY

RESULTS AND DISCUSSIONS

SUMMARY, CONCLUSION AND RECOMMENDATION

OUTLINE 

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Background of the study • Massey, (2002) notes that the basics of CRM have

been around ever since the birth of commerce deriving from the fact that at the heart of every business transaction lies the process of interaction between customer and organization.

• Managing this interaction so that customers willingly return should be the goal of every customer facing organization.

Introduction 

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• Regardless of the size of an organization, businesses are still motivated to adopt CRM to create and manage the relationships with their customers more effectively.

• In this vein, CRM has nowadays been commonly argued as a strategic need for enhancing the competitiveness and performance of a bank. (Gilaninia, 2001).

• CRM practices provides a company with the information necessary to know their customers understand and identify customer needs and effectively build relationships between the organization, its customer base, and distribution partner. (W.kamakura, 1999).

 Intro..cont`d

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• In today’s banking environment, it is becoming difficult to build and maintain strong and long lasting relationships with customers (Oogarah-Hanuman, 2011).

• The longer a relationship the better a bank can understand customer needs and it is a greater opportunity to retain with the service of the bank.

• 5% increase in rates of customer retention increase up to 85% per cent in profits and cost of creating a new customer has been estimated to be five times more than that of retaining an existing customer (Reicarhheld 1999)

• Mishra (2011) also argues that the banking sector is facing massive challenges of attracting the new customers and retaining the existing ones.

Statement of the Problem

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• CRM in banking industry proves that customers have practiced challenges ranging from delay, stock out, non availability of staff at service points, unprofessional conduct or rudeness by the staff of the bank, poor standard of records or improper information, failed promises among others (Ogbadu, 2012)

• Nowadays, in Ethiopia the banking industry increases from time to time as a consequence users have many choices to prefer and as a result of this they are focusing on the quality of service. Currently many customers voice concerns about inefficiency and lack of quality in the banking Sector (Gebre , 2010).

stat..cont`d

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• (Jensen, 2001) Suggests that banks should reorient their operations towards the creation and delivery of superior customer value through an improved CRM performance if they are to survive in the modern day competitive industry.

• In the study area the number of banks increase time to time but implementing a CRM system, banks would usually focus on the customer service system rather than on the overall strategies so that banks in the industry continually losing their customers to other firms in the industry. it has greatly affected the players in the areas of market share, low sales and weak competitive positioning.

stat..cont`d

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This research project intended to address the following research questions:  - What is the level of CRM practices in the selected banks? - How do customers perceive the CRM practices of the banks? - What challenges are faced by the Banks in implementing CRM? Objectives of the study• General objective The main objective of the study is to Assess the Current CRM practices in the

selected Commercial banks at Hosanna town Ethiopia• Specific objectives

– To assess the level of CRM Practice of the selected banks.– To assess customers perception on CRM practices of the selected

banks. – To assess the challenges of implementing CRM practices in the

selected banks.

Research Question

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• To arrange their CRM practice in order to achieve their profit motives.

• To improve CRM practice for competitive advantages.• Help the banks to know the perception of their customers

related to their service.• The study tries to indicate problem areas to be researched

in future time for interested researchers. Beneficiaries of study - Banks - Customers

Significance of the Study

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Based on the broader nature of the research project the study was limit selected banks and customers

- From Commercial banks:- CBE,DB,UTB and BOA - From customer:- Credit facility users and wholesaler Scope of the Study - Selected four banks early established banks above 5 years and it have

large number of customers. - The study was confined to assess CRM practices in the selected banks in

terms of CRM dimensions such as trust, reciprocity, empathy, bonding and responsiveness are the focuses of the study.

- Customers should have a bank account and trade license at the same time they have to be engaged in either wholesaler or users of credit facilities. In addition similar/common large number of users at selected commercial banks was selected.

Limitation of the Study

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The Concept of Customer Relationship Management• CRM has different meanings to different people but it has one

goal and one function for every manufacturing sector and service sector.

• CRM is considered to be an approach to maximize customer value, profit and establish long lasting relationship with customers for organization through differentiating the management of customer relationships. (Xu c. a., 2002).

• (Hobby, 1999) Added that CRM is a management approach that helps the organizations to identify, attract and increase retention of profitable customers by managing relationships with them.

Review of Related Literature

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Conceptual Frame Works

• When there is effective relationship between customers and the bank, customers should be satisfied by the process of transaction of the bank and the customer’s level of satisfaction to the bank about the service provided to them and finally this leads to customer retention.

• When banks want to efficiently retain their customers they need to implement a comprehensive set of Customer relationship management dimension.

Conc.…cont`d…

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Research Design - Descriptive research design. Sources of Data - Primary source of data. Types of data- The study was used both qualitative and quantitative data.Population of the Study- Population size selected from customers of CBE,UTB,DB and

BOA with the following parameters :-

Research Methodology

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- Customers should have a bank account and trade license - At the same time they have to be engaged in either wholesaler

or users of credit facilities and also this users are common large number at selected commercial banks.

- They considering target population size of comparative research study because they are multi users of selected banks.

• The population sizes of the selected commercial banks are presented hereunder:-

Res..Cont`d…

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Sampling Technique and Sample Size- Yemane formula was used for sample size.

n = N 1 + N (e) 2- From total number of 390 population size 197 sample size- The study used simple random sampling technique by developing sample

frame

Res..cont`d..

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Name of bank Number of wholesalers

Number of borrowers

Total

CBE 58 61 119

DB 37 65 102

UTB 28 59 87

BOA 31 51 82

Total 390

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The 197 sample customers are distributed among the selected commercial banks in their proportion.

Tools The data were collected through questionnaire and interview method to generate

primary data of the study Processing and Analysis Techniques - Qualitative and Quantitative data analysis techniques.- The Qualitative data were analyzed using content analysis.- The Numerical data was analyzed using SPSS 20 version

Data collection Instruments and Procedures

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Name of bank Total Proportion % Sample size CBE 119 31 60DB 102 26 52UTB 87 22 44

BOA 82 21 41Total 390 100 197

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Correlations Analysis • Reliability test was applied to assure data reliability i.e.

Cronbach’s alpha for the five dimension of CRM 0.799. Thus, it shown that the data is reliable and can be used for further analysis.

• Validity :-Adopted instruments validity were checked by advisors

• All variables are significant at 0.05 confidence level• All independent variables are positive relation with dependent

variable

Results And Discussions

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- The perceptions of customer on CRM dimensions and the level of banks are presented here under.

Trust - CBE the perception of customer on trust one sample t-test result

claim that positive perception (t=3.724 p= value 0.000), For DB (t=test 4.428 p=value 0.000), For UTB (t=test 3.835 p=0.000)

and BOA t-test result assert that (t-test 3.873 p=0.000). - A t-test result claim that all selected banks positive perception on

the dimension of trust and all banks were found at good level. - The level of the banks on the dimension on trust DB is better

more truthful to its customer and followed by UTB,BOA and CBE.

R&D.. Cont`d..

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R&D.. Cont`d..

Reciprocity - The perception of customer on the dimension of reciprocity is

positive at DB and UTB and the rest two banks lacks behind BOA t= -3.209, p=0.004 and CBE t= -3.051, p=0.004 there is negative perception.

- The levels of the banks on the dimension of reciprocity DB is better more convenience to its customer and followed by UTB,BOA and CBE

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Empathy A t-test result assert that the dimension of Empathy were found

to be highly significant at 95% confidence level. On this dimension the customer perception is good almost in selected banks.

one sample t- test result claim that except CBE all banks were found at good level but CBE lacks behind. (t= -3.088 , p=0.003)

The level of the banks on the dimension on Empathy DB is better more suitable to its customer and followed by UTB,BOA and CBE

R&D.. Cont`d..

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Bonding - CBE the perception of customer on the dimension bonding is

positive a t- test result assert that (t= 4.230 p=0.000) DB (t= 4.451 p=0.000) UTB (t=4.802 p=0.000) and BOA (t= 4.392 p=0.000)

- Therefore the perception of the customers in all selected banks are positive.

- The level of the banks on the dimension on bonding DB is better more truthful to its customer and followed by UTB,BOA and CBE.

R&D.. Cont`d..

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Responsiveness- A one sample t-test result assert that dimension of

responsiveness highly significant at 95% confidence level. A t-test result claim that almost customers of three banks came up with positive perception about responsiveness dimension. But CBE is lacks behind below the average (t=2.995.p=0.000)

R&D.. Cont`d..

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Summary - The purpose of this Research Project is to Assess the current

level and ways CRM has been put in to practice by selected commercial banks in case of Hossana town Ethiopian.

- This research project considers different CRM dimensions. - From five dimensions of CRM the perceptions of customers on

dimensions of Reciprocity is decline so this dimensions were found at weak level but the dimensions of trust and bonding are in all selected bank were found at good level.

- On the other hand the rest two dimensions empathy and responsiveness are lack behind on Commercial bank of Ethiopia.

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• The study clearly revealed that the five CRM dimensions are strongly related with customer retention.

• The finding of the study indicated that, there are several problem were found in selected banks.

- Inaccurate and incomplete information provided by customers

- Lack of understanding and training for the entire staff body on CRM

- Poor communication between banks and customers - lack of a CRM department and manager - Inadequate feedback from customers.

Sum.. Cont`d…

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• The Common challenge of the selected banks is network interruption, employee turnover and CRM in selected banks led by outside of the banks from head office.

• However, in implementing CRM in to practice, the selected banks had their own gaps.

• Comparing the selected commercial banks on their ability of to implementing CRM practice, Dashen bank was found to be better implementer.

Sum.. Cont`d…

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From the results obtained :-• In banking industry trustful and quality banking services are the

basis of sound customer relationship management.• Customers of the selected commercial banks have feel safe in

conducting transactions with their banks.• It is convenient to arrive at such conclusion and generalize that

the selected commercial banks are doing their transactions well, since there were more selected commercial banks customers are willing to conduct business transaction.

• The selected commercial banks perceive that their banks were not working for mutual benefit and doesn't keeping promises of the banks.

Conclusion

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• The ability to share and understand and feel another person in a relational situation were found good level However CBE relatively weak level it needs lots of work.

• The banks work with cloth corporate DB is better level and knowing their customer the perception of customer on CBE is negative.

• The arrangements of special care to special customers CBE lack in behind so the perception of customer is negative.

The levels of selected commercial banks. DB,UTB,BOA and CBE Thus, in implementing CRM in to practice the selected banks have

their own gaps.

Con.. Cont`d..

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From Pearson correlation analysis, the study clearly shows that the five CRM dimensions positively correlated to customer retention

Challenges to implement CRM• Employee turnover, network interruption, untrained employees,

lack of customer relationship manager and department that negatively affects implementing CRM practices.

Con.. Cont`d..

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• Banks should give greater awareness on enhancing communication with its customers

• Clear and updated information about their customers.• The bank should clearly each police to its customers about

their right, responsibilities.• Providing training, opportunity to learn and advance to its

employee to encourage them.• Banks should provide value added services like sending

welcome messages, electronic good with message during birthdays, holidays and also introducing new technology or product, news about bank through telephone, email and web site of the bank.

Recommendations

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Recommendations for Further Research Project - The study focused on four selected banks in hossana town

Ethiopia. - Additional research project is needed to decide if the

relationships identified can be generalized to other banks through comparative studies considering more banks.

- This study includes only five CRM dimensions. However, there could be some other relevant factors that may

be perceived as important by customers. - Thus, future research project works which incorporate

diversified CRM dimensions will be advisable.

Rec..Cont`d…

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Thank You