The Impact of Customer Relationship Management

Practices on Marketing Performance:

The Case of Commercial Banks in Ethiopia, Adama

A Research Proposal Submitted For Partial Fulfillment of the

Requirements for Masters in Business Administration (MBA)

By: Assegid Libasse

Advisor
Bekele Reta (Asst. Prof)

Department Of Business Administration

Graduate Program

July, 2019
Adama, Ethiopia

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 Table of content

Contents
Table of content...............................................................................................................................i
1. INTRODUCTION..................................................................................................................1
1.1. Background of the study....................................................................................................1
1.2. Background of Banking in Ethiopia..................................................................................3
1.3. Statement of the Problem..................................................................................................4
1.4. Research Questions...........................................................................................................6
1.5. Objectives of the Study.....................................................................................................6
1.5.1. General objective...........................................................................................................6
1.5.2. Specific Objectives........................................................................................................6
1.6. Significance of the Study...................................................................................................6
1.7. Scope of the study.............................................................................................................7
1.8. Definition of Basic Terms.................................................................................................7
2. REVIEW OF RELATED LITERATURES.........................................................................8
2.1. Theoretical Review of Related Literature.........................................................................8
2.1.1. Definition and Concept of CRM...................................................................................8
2.1.2. Customer Relationship Management Dimensions......................................................11
2.1.3. Customer Relationship Management Components.....................................................11
2.1.3.1. Customer Orientation:.............................................................................................13
2.1.3.2. Organizing the business process:.............................................................................17
2.1.3.3. Knowledge Management:........................................................................................21
2.1.3.4. CRM Technology:...................................................................................................24
2.1.3.5. TECHNOLOGY ADOPTION.................................................................................24
2.1.4. Performance Measurement Metrics.............................................................................25
2.2. Empirical Review of Related Literatures........................................................................26
2.3. Conceptual Model...........................................................................................................31
3. RESEARCH DESIGN AND METHODOLOGY..............................................................32

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 3.1. Research Design..............................................................................................................32
3.2. Data type and source.......................................................................................................32
3.3. Target population............................................................................................................32
3.4. Sampling design technique.............................................................................................32
3.5. Sample size determination..............................................................................................33
3.6. Data Collection Instruments............................................................................................34
3.7. Data collection procedure...............................................................................................34
3.8. Method of data analysis..................................................................................................34
3.9. Ethical Clearance............................................................................................................34
4. Time and Budget Schedule..................................................................................................35
4.1. Time Schedule.................................................................................................................35
4.2. Budget Schedule..............................................................................................................35
Reference ........................................................................................................................................i

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 1. INTRODUCTION

1.1. Background of the study

Customer relationship management (CRM) is a concept for managing a company’s
interactions with customers, clients, and sales prospects which can achieve financial institutions
goal such as the company’s marketing effectiveness. It involves using technology to organize,
automate, and synchronize business processes. Scholars have put forward various definitions of
Customer Relationship Management practices. Stone, Woodcock & Machtynger, 2005 define
CRM as a management approach that enables the firm to identify, attract and increase of
profitable consumers by managing relationships with them. According to Sugandhi, 2007 CRM
involves establishing and maintaining long-term mutually beneficial relationships with
strategically significant customers and managerial efforts to manage business interactions with
the customers by combining business processes and technologies that seek to understand the
firm’s customers.

On the other hand, Swift, 2000, p.p. 12-13 defined CRM as a method of understanding the
customer behavior through intense communication with him/her to improve the performance
which is represented in attracting the customer, keeping him/her and increasing his/her loyalty
and profitability. It can be noticed that this definition regards CRM as mere communication on
the part of the organization to understand the customer's behavior. Parvatiyar & Sheth , 2002, p.5
mentioned that CRM is a comprehensive strategy that includes the process of acquiring certain
customers, keeping them and cooperating with them to create a distinguished value for both the
company and the customer. This strategy requires integrating the functions of marketing, sales,
customer service and exposition chain so as to achieve the highest competence and efficiency in
delivering value to the customer. As it shows, this definition regards CRM as a strategy with a
main goal of delivering a distinguished value to the customer through improving the marketing
productivity.

Similarly, Payne & Frow, 2005, p.168 defined CRM as a strategic method related to creating a
distinguished value for the contributors through improving good relationships with the main
customers and other customer categories, as it (CRM) seeks to unify the strategies of marketing

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using relationships and information technology to create profitable, long-term relationships with
customers and other parties. This value is created through providing good chances to use data
and information to understand customers and provide them with value. Consequently, this
requires the integration of customers, individuals and marketing abilities, which happens through
information, technology and applications. Kumar & Reinartz, 2006, p.6 agree with the above
definition that CRM is merely a strategic process by which the institution's more profitable
customers are chosen, and interactions between this institution and these customers is
determined, in order to achieve the goal of maximizing the present and future values for
customers.

One of the sectors in which competition is experienced intensively is that of banking. Banks are
the finance institutions that meet the economic needs of the individuals and businesses and that
perform such economic activities as collecting bank deposits, giving credits, providing capital,
and etc. In recent years there have appeared important developments in the understanding of
modern banking with the transition to automation, customer satisfaction and management of
customer relationships have taken place in the banking sector. It is clear that customer is the only
source of the banks’ present profit and future growth. Kotler and Keller (2012) stated that
creating loyal customers is at the heart of every business. Customers are central to all marketing
activities all over the world. Success and profit is not thinkable without customers. Moreover,
companies incur millions of dollars to attract customers and make them loyal. With the intense
competition building customer loyalty has become a critical strategy for most financial
institutions. The banking industry must develop strong relationships with their customers in
order to compete successfully in the competitive retail banking environment.

Several studies have been carried out to examine the impact of customer relationship on firm
performance. Some studies investigate the contribution of IT to a CRM program and then probe
whether a superior CRM capability is a robust indicator of firm performance Coltman, Devinney,
and Midgley, 2010. Other studies first conceptualize a construct for the CRM process and its
dimensions, next operationalize and validate the construct, and finally investigate the
organizational performance consequences of implementing CRM processes Reinartz, Krafft, and
Hoyer, 2004. Customer relationship management practices include information technology,
knowledge management, customer communication, customer acquisition, customer interactions
and customer response and customer transaction. Knowledge management application, customer
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response and customer interaction are the most commonly used Peck et al., 2014. Today,
organizations like banks are operating in a customer oriented environment in which customer is
the real ruler of market. This critical issue is forcing them to consider customer as an asset
requiring management Ghalandari, 2012. From this ground in today’s competitive economy,
enterprises are realizing the importance of becoming customer centric, and they are adopting
Customer Relationship Management (CRM) as a core business strategy Wu, J. 2008. In such
situation, banks like Commercial Bank of Ethiopia can use the CRM strategy to create, maintain,
and enhance strong relationships with their customers to secure their customer loyalty.

Therefore, it is important to empirically investigate the impact of CRM practices on market

performance. Such understanding will assist in better management of bank-customer relationship
and in achieving higher level of market performance among competition Ndubisi, 2006. Hence,
the proposed study will aim to empirically investigate the impact of customer relationship
management on marketing performance considering Commercial Banks of Ethiopia.

1.2. Background of Banking in Ethiopia

In Ethiopia, according to Shifera (2011), banking sector is considered as main recipient in recent
economic growth .The birth of modern banking trace back to the imperial era, Bank of Abyssina
being the first modern bank in Ethiopia. To summarize the history of modern banking in
different era; during the imperial era different banks were allowed to function in the country i.e.
both domestic and foreign banks, but after the socialist took over the power in 1974 it
nationalized all private banks and restricted the entry of any banks by policies. During the
socialist regime only three governments owned banks; the National bank of Ethiopia, the
Commercial bank of Ethiopia and Agricultural and Industrial Development bank were running in
the banking sector (Alemayehu, 2007).

A new era began after 1991, when EPRDF came in to power and allowed private ownership
through licensing and supervision of banking business proclamation No. 84/1994. Immediately
after the enactment of the proclamation, private banks began to thrive highly. Currently, after
entry of private banks in Ethiopia, banks are fighting with each other to gain the maximum
possible slice of the market share. From this practical situation, banks are discovering their
strengths and weaknesses to satisfy their customers need and want through customer relationship
management (Gashaw & Zemzem, 2014).

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1.3. Statement of the Problem
As world has become a global village, competition become tough and stiff between organizations
and formed a climate of constant change, achieving and holding a customer has become vital for
the success of any organization and Ethiopia is no exception. However, in today’s world
customers have more awareness and choice of various products and services due to modern and
sophisticated channels of communication like internet than ever before. Hence due to increased
customer awareness, customers are more demanding, and those banks having strong
relationships with their customers have strong competitive advantage in terms of increasing
profitability, market share, customer retention and attracting new and potential customers over
other banks. However, in a competitive market place, customers are easily lost through in
different services Oracle, 2002. Customers are becoming solider to please, they are smarter,
more price sensitive, more challenging, less sympathetic, and they are approached by many more
competitors with equal or better offers Kotler, 2007.

Different researches have been done about CRM frameworks but there has been limited
academic effort about the issue of the CRM process and firm marketing performance. Some
researches tried to understand the consequences of CRM Ryals & Knox, 2001; Ryals & Payne,
2001. There is some evidence focus on CRM’s impact on organizational performance (Reinartz,
Krafft, & Hoyer, 2003; Day & Van den Bulte, 2002. Different articles showed the positive
impact of CRM on different aspects of performance, for example aspects that are related to the
company Palmatier, et al, 2007) or aspect that are related to customers Gustafsson, Johnson, &
Roos, 2005; Mithas, Krishnan, & Fornell, 2005. Reinartz, 2004 attempts to relate CRM activities
that lead to satisfaction of different business performance measures. There are some other studies
that show a relationship between the activity of customer satisfaction and business performance.

For instance, Hisham Solieman, 2011, in his study customer relationship management and its
relationship to marketing performances assured that there is a positive relationship between
CRM and marketing performance such as customer satisfaction and customer loyalty. Three
major variables of CRM was tested in this study i,e focusing on the main customers, organization
efficiency and customer knowledge management. The study concluded that all elements of CRM
have positive relationship with customer satisfaction and customer loyalty.

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Dotur & Halmajan(2011) studied the role of organizations preparation on customers
relationship management and commercial performance. This research was done with 82
companies in Romania. The result showed that organization had to highly prepare to perform
customer relationship management. Moreover, customer relationship management has
significant relationship with customers and commercial performance. Cho, et. al. (2013)
investigates the impact of customer relationship management on customer satisfaction and
loyalty. The study was performed at a departmental store in Tehran, Iran. The study employed
quantitative approach. And base on 300 respondents. The main findings of the study shows that
behavior of the employees is significantly related and contributed to customer loyalty compared
to other elements of CRM i,e interaction management , relationship management and services
quality.

Kocoglue (2012), in his study titled customer relationship management and customer loyalty in
the banking industry. The study has been conducted on a sample of 350 staff employed in all
the branches in Denizili of T.C. Ziraat Bank. The study concluded that all elements of CRM I,e
customer database, learning customer needs and complaints, and providing solutions peculiar to
customers are positively correlated with customer loyalty. Feinberg and Kadam(2002) argue
that emphasizing to online business rather than traditional way of business is necessary
nowadays. So in this way, the usage of internet provides an opportunity for business to use it as
a tool for CRM. According to their research, there are 42 different e-CRM features used by the
retailers. The finding shows that there is significant relationship between CRM implementation
on websites of the retailers and customer satisfaction which leads to customer loyalty.

To conclude Payne & Frow, 2005 identified three different perspectives in the definitions of
CRM, namely, emphasis on information technology (IT) implementation, wide range of
customer oriented IT and Internet applications, and customer centric focus. And also Yim et al.
2004 and Sin et al. 2005 developed a model of CRM dimensions consisting of: key customer
focus, CRM organization, knowledge management, and technology-based CRM. To conclude,
most of the aforementioned models agree on the significance of all dimensions of CRM. Thus,
based on the above empirical evidences the researcher identified five dimensions of CRM
practices and will intend to investigate the impact of those CRM practices namely; customer
orientation, Organizing Business Processes, Knowledge Management, Technology Adoption,
and CRM technology on market performance of Commercial Banks of Ethiopia.
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1.4. Research Questions
With reference to the above statements the study will intend to investigate and answer the
following research questions.

 What is the impact of customer orientation practices on market performance of

Commercial banks of Ethiopia?
 What is the impact of organizing the business process practices on market performance of
Commercial banks of Ethiopia?
 What is the impact of Knowledge management practices on market performance of
Commercial banks of Ethiopia?
 What is the impact of Technology Adoption practices on market performance of
Commercial banks of Ethiopia?
 What is the impact of CRM practices on market performance of Commercial banks of
Ethiopia?

1.5. Objectives of the Study

1.5.1. General objective
The general objective the study will be to assess the impact of customer relationship
management practices on marketing performance of Commercial Bank of Ethiopia, Adama.

1.5.2. Specific Objectives

 To assess the impact of customer orientation practices on marketing performance.
 To examine the impact of organizing business process practices on marketing
performance.
 To evaluate the impact of knowledge management practices on marketing performance.
 To assess the impact of technology adoption practices on marketing performance.
 To assess the impact of Technology based CRM practices on marketing performance.

1.6. Significance of the Study

Today, many businesses such as banks, insurance companies, and other service providers realize
the importance of Customer Relationship Management (CRM) and its potential to help them in
acquiring new customers, retaining existing ones and maximizing their lifetime value as it is a

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source of competitive advantage in turn which improves their performance i.e. marketing
performance.

Therefore, the proposed study will have a significant importance in strengthening the existing
knowledge and understanding of CRM practices and marketing performance by examining and
empirically testing the relationship between CRM and marketing performance for the case of
Commercial Bank of Ethiopia (CBE). The study will also provide some insight or
recommendations to CBE to evaluate and improve their CRM practice based on the study
findings. Finally, the proposed study can serve as an additional reference to others researchers
who are interested in the area of CRM and marketing performance.

1.7. Scope of the study

CRM encompasses vast areas of managerial practices. However, it is difficult and unmanageable
to conduct the study in all areas that summarizes CRM in terms of time, finance, and research
manageability. Therefore, the scope of the proposed study will be delimited to an assessment of
the impact of CRM practices (customer orientation, knowledge management, technology based
CRM and organizing the business processes) on the market performance of commercial bank of
Ethiopia branches in Adama city.
To manage the research flow only employees of Commercial Bank of Ethiopia, Lion Bank,
Dashen Bank, and Wegagen Bank branches located in Adama will be subjects of the study,
through assessing how the company interacts with their potential customers.

1.8. Definition of Basic Terms

Customer: Any individual who is able to figure out and do processing of account, checking
account and all other capable person who operate by banks
Customer Relationship Management: is an enterprise approach to understanding and
influencing customer behavior through meaningful communications in order to improve
customer acquisition, customer retention, customer loyalty and customer profitability (Swift,
2001).
Market performance: refers to the enhancement of the organizational standing in the market,
improvement of the customers’ perception of organization and its products, and increase in their
loyalty toward organization Martin, 2005.

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 2. REVIEW OF RELATED LITERATURES

2.1. Theoretical Review of Related Literature

2.1.1. Definition and Concept of CRM
Customer relationship management has attracted many definitions from the people who have
been using the concept. A few important of them can be discussed as follows. To begin with,
(Swift, 2000 , p.p. 12-13)) defined CRM as a method of understanding the customer behavior
through intense communication with him/her to improve the performance which is represented in
attracting the customer, keeping him/her and increasing his/her loyalty and profitability. It can be
noticed that this definition regards CRM as mere communication on the part of the organization
to understand the customer's behavior. (Stone & Findlay, 2001, p. 167) defined CRM as the
organization carrying out a lot of information about the customer from various resources and
keeping it in order to divide the territories, analyze and reuse. This definition regards CRM as
only collecting and recording information about the customer. (Fross & Stone, 2001, p.1) defined
CRM as the company use of its abilities in the field of research methodology, technology and e-
commerce in order to manage customer relationships. This definition for CRM regards it as the
ability to use technology in the domain of dealing with customers.(Parvatiyar & Sheth , 2002,
p.5) mentioned that CRM is a comprehensive strategy that includes the process of acquiring
certain customers, keeping them and cooperating with them to create a distinguished value for
both the company and the customer. This strategy requires integrating the functions of
marketing, sales, customer service and exposition chain so as to achieve the highest competence
and efficiency in delivering value to the customer. As it shows, this definition regards CRM as a
strategy with a main goal of delivering a distinguished value to the customer through improving
the marketing productivity.

On the other hand, Payne & Frow, 2005, p.p.167-168 demonstrated that there are various points
of view related to the concept of CRM. Whereas, some points of view were in favor of regarding
CRM as correspondence in direct mail, a diagram for customer loyalty programs or databases,
other points of view regarded it as an assistant office work or a call center. Still, some considered
it data storage or taking care of data search and processing. Finally, some considered it gaining
the systems that make it able to perform e-commerce. Therefore, CRM can be viewed from a
strategic or a technological perspective. The strategic perspective puts the emphasis on the

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design of Relationship Marketing strategies and its associated implementation tactics,
irrespectively of any IT systems use, and thus overlaps with RM. It is worth mentioning that
many authors use the terms RM and CRM interchangeably to denote the same concept. In this
line, Rababah et al. (2011) described CRM as “the building of a customer-oriented culture by
which a strategy is created for acquiring, enhancing the profitability of, and retaining customers,
that is enabled by an IT application, for achieving mutual benefits for both the organization and
the customers”. Reinartz et al. (2004) defined CRM as “a systematic process to manage customer
relationship initiation, maintenance, and termination across all customer contact points in order
to maximize the value of the relationship portfolio”.

Payne & Frow, 2005, p.168 defined CRM as a strategic method related to creating a
distinguished value for the contributors through improving good relationships with the main
customers and other customer categories, as it (CRM) seeks to unify the strategies of marketing
using relationships and information technology to create profitable, long-term relationships with
customers and other parties. This value is created through providing good chances to use data
and information to understand customers and provide them with value. Consequently, this
requires the integration of customers, individuals and marketing abilities, which happens through
information, technology and applications.

(Kumar & Reinartz, 2006, p.6) agree with the above definition that CRM is merely a strategic
process by which the institution's more profitable customers are chosen, and interactions between
this institution and these customers is determined, in order to achieve the goal of maximizing the
present and future values for customers. Unlike all the above, (Ramaseshan, 2006, p.196) defined
CRM from the employment point of view as a process of achieving a continuous dialogue with
each customer on their own, using all the available means to know the quantitative expected
response of that customer as a result of practicing marketing activities to the degree that
maximizes the general profitability of the organization.. It is clear that this definition only
concerns about short-term CRM, and not long-term CRM. (Brink & et.al., 2006, p5) defined
CRM as a definite marketing activity by which the institution prepare its customers to use its
resources to produce and market a valuable product for them. CRM aims at two goals:
supporting the social cause and improving the marketing performance.

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According to the technological perspective, CRM is an IT system, which is an RM strategy
enabler (Ryals and Payne 2001). Indicatively, Glazer (1997) argues that CRM is an information
intensive process, which provides businesses a connection between marketing strategies and IT,
thus enhancing profitability and supporting the development of long-term relationships with their
customers.

In general Customer relationship management is a process consisting of monitoring clients,

collecting proper data, management and evaluation of data and finally real advantage of the
extracted data in their interactions (Kim et al, 2010; 332-313). The main goal of customer
relationship management is simply better understanding of customer behavior and enhances
loyalty and profits (Zarali, 2009, 247). In Organizations often due to the reasons including
greater continuity of services by them, high importance of maintaining and strengthening long-
term relationships with customers and deeper relationship with customers have caused the
effective factors of customer loyalty to be very important (Jayawardhena et al, 2007, 580-575).

CRM systems are used into the primary functions of sales, marketing and customer service.
Especially in the banking sector, the utilization of data relevant to customers’ needs and
behavior, can lead to the identification of the most important customers, support the development
of relationships with prospective customers and estimate not only the generated revenues but
also any future possible opportunities for investments (Zineldin, 2005). CRM processes include
all the activities that take place inside a company, which influence the customer relationship
quality and duration (Rababah et al., 2011). Geib et al. (2005) classified CRM processes into
three groups, namely delivery processes (activities associated with sales, service support,
marketing promotions and customer complaints), support processes (activities oriented towards
what the market needs with the intention to develop loyal customers) and analysis processes
(activities entailing analysis of the data acquired by processes from the other two groups and the
creation of value leading to service innovation).

The main goal of customer relationship management is simply better understanding of customer
behavior and enhances loyalty and profits (Zarali, 2009, 247). In Organizations often due to the
reasons including greater continuity of services by them, high importance of maintaining and
strengthening long-term relationships with customers and deeper relationship with customers

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have caused the effective factors of customer loyalty to be very important (Jayawardhena et al,
2007, 580-575).

2.1.2. Customer Relationship Management Dimensions

In the universe of marketing management, CRM is abounded by multiple definitions (Yim, An-
derson, & Swaminathan, 2004). Payne & Frow (2005) identified three different perspectives in
the definitions of CRM, namely, emphasis on information technology (IT) implementation, wide
range of customer oriented IT and Internet applications, and customer centric focus. Likewise,
Zablah, Bellenger, and Johnston (2004) identify five different perspectives, namely, process,
strategy, philosophy, capability, and technology-based CRM. For example, in technology and
process perspective, Richards and Jones (2008) provide the following definition: “CRM is a set
of business activities supported by both technology and processes is directed by strategy and is
designed to improve business performance in an area of customer management” (pp. 121-122).
On the process perspective, Rootman, Tait, and Bosch (2008) define “CRM refers to the process
whereby a service provider (a bank) attempts to maintain and enhance long-term relationships
with its clients” (p. 53) and Reimann, Schilke, and Thomas (2010) define “CRM is the firms’
practices to systematically manage their customers to maximize value across the relationship
lifecycle” (p. 329). In this line of thought, we provide the following definition for the purpose of
this study, “CRM is a business strategy that encompasses a set of relational practices that is
supported by people, process and technology to maintain and enhance long-term relationships
with customers.”

2.1.3. Customer Relationship Management Components

The review of the extant literature on CRM shows that "the field has begun to converge on one
common definition" (Boulding et al., 2005 p. 157). Chen and Popvich (2003) presented CRM as
a combination of three components: people, resources, and technology. A fourth component;
strategy; is suggested by other researchers (Yim et al., 2004). Based on an extensive review of
CRM definitions, Zablah, Bellenger, and Johnston (2004) concluded that CRM
conceptualizations take one, or a combination of five complementary perspectives: CRM as a
strategy, as a philosophy, as a process, as an information technology application, and as an
organizational capability. CRM as a philosophy considers customer loyalty key to business
profitability. To achieve loyalty, firm must shift their focus from getting customers to retaining

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customers (Reichheld, 2006). CRM as a philosophy directs organizations to build customer
centric cultures and to organize around customers (Piccoli, O'Connor, Capaccioli, & Alvarez,
2003; Hasan, 2003). When CRM is seen as strategy, attention is directed to maximizing the use
of organizational resources towards a favorable market position. Under this perspective,
researchers emphasize that not all relationships are good, and that customers who contribute the
highest value to the firm deserve more attention from managers (e.g., Ryals, 2005). Many
researchers see CRM as a process or "a collection of tasks or activities that help organization
achieve desired business outcomes" (Hammer, 2001). Some researchers emphasize customer
facing processes (e.g., Chen & Popovich, 2003; Reinartz, Krafft, & Hoyer, 2004), others look at
the customer knowledge management processes (e.g., Croteau and Li, 2003; Sin, Tse and Yim,
2005), and few studied information relational processes (e.g., Bin Ismail, Talukder, Panni, 2007;
Jayachandran, Sharma, Kaufman, & Raman, 2005). CRM is also seen as an information
technology solution or an enterprise application system that supports the building of profitable
customer relationships (e.g., Torggle, 2008; Ang & Buttle, 2006; Stephaou, Sarmaniotis, &
Stafyla, 2003; Teo, Devadoss, & Pan, 2006). Although the importance of technologies such as
the internet, sales force automation, call centers, and data mining in CRM is well acknowledged,
many researchers agree that CRM is more than a technology, especially with poor to moderate
empirical evidence on a direct link between technology and organizational performance (Minami
& Dawson, 2008; Day & Van den Butle, 2002; Reinartz et al., 2004).

Wang and Feng (2012) proposed that customer orientation, customer centric management
systems, and CRM technology influence organizational performance through three CRM
capabilities (interaction management, relationship upgrading, and win-back). Coltman et al.
(2011) posited that CRM capability consists of three components: (1) IT infrastructure (CRM
technology and customer information); (2) human analytic-based resources (employees' skills to
use the data effectively); and (3) business architecture and structural capabilities (incentives and
management controls that support CRM). Kim and Kim (2009) suggest that the infrastructure
factors (IT, organizational culture, human capital, and strategic alignment) influence CRM
processes (customer acquisition, retention, and expansions), resulting in customer outcome
factors (customer perceived value, customer satisfaction, and loyalty), which in turn leads to
financial results. Day and Van den Bulte (2002) proposed that customer relating capability has
three interrelated components: (1) the configuration component; including the organizational

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structure, incentives, and accountabilities, (2) the orientation component; comprising the
mindset, values, and organizational priorities toward customer relationships, and (3) the
information component, including databases and customer information systems. CRM
organizational alignment is advocated by Greve and Albers (2006), who argue that CRM
technology, the organization design, and the culture must be aligned to support the CRM
relational processes. Also, Ocker and Mudambi (2003) suggested that CRM capability depends
on the alignment of three underlying dimensions: (1) intellectual dimension which is manifested
in planning, strategy, and structure, (2) social dimension that includes culture, parties'
interactions, and domain knowledge, and (3) technological dimension represented by CRM
applications, IT capabilities, and knowledge management systems. Consistent with the RBV line
of research, Yim et al. (2004) and Sin et al. (2005) developed a model of CRM dimensions
consisting of: key customer focus, CRM organization, knowledge management, and technology-
based CRM. To conclude, most of the aforementioned models agree on the significance of four
dimensions of CRM, namely; CRM technology, CRM processes, customer orientation, and CRM
organization.

According to studies, components of the customer relationship management are:

2.1.3.1. Customer Orientation:

Customer orientation theory is traced back to McCarthy’s (1960) market orientation concept
whose primary objective was to ensure that business firms focus all its efforts on satisfying its
customers, at a profit. According to Frambach, Fiss and Ingenbleek (2016), customer
orientation is at the heart of a market orientation because customer orientation best reflects the
core of the marketing concept. That is, customer orientation underpins the sufficient
understanding of one's target buyers to be able to create superior value for them continuously.
Therefore, by organizing the firms' structure and operations around creating customer value,
business enterprises generate higher levels of satisfaction, loyalty, innovation, and performance
(Gebauer & Kowalkowski, 2012).

Assabil and Abdallah (2011) identifies the five main variables that constitute key customer focus
strategy as; dialogue with the customers; customization of products; customer needs assessment;
employee empowerment and implementation of customer needs information. Customer focus is
defined as laying emphasis on understanding what customer want and anticipating their future

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requirements (Aggarwal, 2004). This is achieved by planning based on what customer want rather
than the firms goals and listening to the customer rather than forcing the customer to listen to the
firm (Olowokudejo & Adeleke, 2011).

Customer orientation in general refers to "the set of beliefs that puts the customer's interests
first...., in order to develop a long term profitable organization" (Deshpande, Farley, & Webster,
1993, p. 27). Customer orientation is the part of the organizational culture that provides implicit
values and beliefs on which norms of accepted behavior are based (Bentum & Stone, 2005).
According to Roberts, Liu & Hazard (2005) customer centricity is the first requirement for
CRM readiness. Unlike transaction orientation, a relationship orientation dominates the
organizations mind-set, values, and norms and thus influences all interactions with customers
(Day, 2000). It includes the intense focus of organization on key customers, providing superior
service and added value for customers by providing customization that is composed of parts
including customer-oriented marketing, customer lifetime value, customization, and interactive
marketing (Lee, 2000, 24-16). In relation-based marketing companies and customers play a role
in different aspects of design, manufacturing and product and service? And this causes a strong
relationship between the company and the customer (Sin et al, 2005, 1290-1264).

Customers focus strategy emphasizes positioning of the customer as the primary basis for
organizing all organizational activities with the aim of increasing customer satisfaction and
loyalty (Gebauer & Kowalkowski, 2012). The strategy is geared towards understanding the
dynamic needs of the customer as well as establishing and sustaining customer relationships for
better retention of the customer (Yaacob, 2014). However, Jain and Singh (2002) argue that the
firm should not just focus on any other customer, but the key customers who are identifiable
through customer lifetime value analysis (Yim, Anderson, & Swaminathan, 2004). The main
objective of focusing on key customers is to establish a deep customer relationship through
personalized products and services that makes an organization a necessary partner to its most
profitable customers (Vandermerwe, 2004).

Customer Needs Assessment

Customer needs assessment is defined as the process of examining and analysing the existing
customer needs to establish the difference between current and the desired state (Messner,
2009). Firdousi (2014) posit that needs assessment can be as simple as asking customers what

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service or product they would like to have, to developing an individualized service for every
customer to satisfy their needs. Prasad, Subbaiah, Rao and Sastry (2010) argue that since
quality is judged by how best a product or service satisfy the needs of the customer, customer
needs assessment forms an important process in ensuring that the right customer needs are
identified so as to design products and service that ensure customer satisfaction. Therefore, as a
prerequisite of customer satisfaction, needs assessment is focal in designing products and
services that meet customer expectations and even beyond.

Messner (2009) posits that once a customer need is identified, the organization evaluates it to
determine if the need has enough priority or impact for resources to be allocated to meet that
need. The results then form the basis for designing solutions to bridge the needs gap. Firdousi
(2014) explains that to be effective at addressing customer needs, an organization need to select
appropriate customer needs assessment approaches and tools in order to ascertain the needs and
requirements of the customer. The process should be continuous and as holistic as possible with
customer needs assessment being conducted for all customers to create superior understanding
and design of appropriate services and products in the areas of weaknesses. Customer needs
assessment is thus, a tool utilized to identify what services could be provided to customers to
improve quality of the services offered with focus on the needs.

Customized Services

Service customization is defined as any creation or adjustment of a service to fit the

individual requirements of a customer (Ball, Coelho, & Vilares, 2006). However, this
should not be construed to limit the definition to only a specific individual customer, but
can include a group of customers who share a common need. The primary objective of
service customization is to identify profitable market segments or customers and design
products and services to optimally satisfy their needs (Coelho & Henseler, 2012).
Simonson (2005) asserts that the emphasis on customization is on satisfying as many
needs as possible for each individual customer rather than reaching many customers
and only satisfying needs of a limited number of them. In this way, customization
strategy provides solutions to the varied and dynamic customers’ demands.

Proponents of service customization argue that customization plays a pivotal role in customer
relationship management. They argue that service personalization improves customer retention

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through service quality, customer satisfaction, customer trust and customer loyalty (Coelho &
Henseler, 2012). Empirically, a study by Ostrom and Iacobucci (1995) established an indirect
relationship between service customization and customer retention. The study showed that
service customization contributes to customer satisfaction, which in turn positively influence
customer retention. That is to say, a satisfied customer has a higher rate of coming back for
more and more from the same service provider.

Customer Ongoing Dialogue

Ongoing dialogue is defined the continuous exchanges between the organization and its
customers (Kanagal, 2012). The significance of making regular contacts with the organization’s
customers is of ultimate importance in an environment where customer demands are highly
dynamic. The changing demand drives the need for interactivity, connectivity and ongoing
dialogue between an organization and its customers (Vargo & Lusch, 2004).

Merisavo and Raulas (2004) posit that one way to create brand loyalty is by communicating
actively with customers as regular communication brings value to the users of the brand by
providing them with relevant information and by reducing their efforts to search for
information. In this way, by customers appreciating regular communication from the brand,
their loyalty to the brand is enhanced. Moreover, ongoing communications with the customers
may also help reassure consumers that they are using the right brand, thereby helping to remove
cognitive dissonance (Merisavo & Raulas, 2004).

Employee Empowerment
Randolph and Kemery (2010) define employee empowerment as “a transfer of power” from the
employer to the employees. Empowerment is not only having the freedom to act, but also
having higher degree of responsibility and accountability (Blanchard, Carlos, & Randolf, 1996).
In simpler terms, employees’ empowerment involves putting employees in charge of what they
do by allowing them to take responsibility for their actions under limited direct supervision and
control (Isimoya & Bakarey, 2013). This makes them accountable for their actions. Ongori and
Shunda (2008) Ongori and Shunda (2008) explain the implication of employee empowerment to
mean allowing the employees to do what needs to be done instead of doing what they are told.
This promotes management delegation, individual responsibility, autonomous decision-making,
and feeling of self-efficacy. This in turn drives employee intrinsic motivation and desire to

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excel at what they do.

A study by Isimoya and Bakarey (2013) argue that since customer needs are variable, it is
paramount for employees to have some degree of personal contact with the customers to handle
these variations especially in-service provision. However, this relationship can only be fruitful
when the employees are allowed to make decisions affecting their delivery. Ukil (2016)
observes that empowered employees who work with enthusiasm generate higher satisfaction to
the customer. In agreement, a study by Timothy and Abubaker (2013) to explore the impact of
employee empowerment on service quality among Nigerian banks clearly demonstrates a
positive and significant relationship between employee empowerment and service quality.
Research shows an indirect relationship between employee empowerment and customer
retention. According to Ukil (2016), highly satisfied employees demonstrate higher level of
loyalty to the organization, higher level of satisfaction and better performance.

That is, quality of service offered by satisfied employees tends to be better. It is this enhanced
product or service quality that helps to retein the customers. Therefore, whether a customer
feels that a service or product meets their expectations is highly influenced by the people who
directly offer the service or the product. Naeem and Saif (2010) posit that the autonomy,
responsibility, innovation and information held and offered by the service providers gives the
customers the much-needed confidence in the service providers and enhances their level of
satisfaction and retention. This means that for an organization to demonstrate focus on
customers, their employees must be empowered with the necessary autonomy and information
that seeks to adequately address the dynamic customer concerns.

2.1.3.2. Organizing the business process:

Processes of customer relationship management require a change in the organization and the
business process structure. for this purpose, organizational structure, organizational
commitment and human resource management are important (Agarwal, 2004, 91-80). An issue
that should be considered is commitment in the organization. For this purpose it is necessary to
have instruments required in sales, marketing and technical expertise of other resources.
Success in attracting and retaining customers depends on the commitment of resources to
identify and meet the needs of key customers (Nicampa, 2001, 71). As firms align their
structure and management processes with their market goals, they become more successful in

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responding to their customers, which eventually leads to superior performance (Reinartz et al.,
2004). CRM organizing is defined as the supporting organization structure, incentives,
resources allocation, and management controls that enables building and sustaining customer
relationships (Day and Vanden Bulte 2002; Jayachandran et al., 2005; Sin et al., 2005).
Organizational structures that support cross functional communication and coordination, as well
as rewards and training programs designed around customers needs resulted in higher
relationship quality, which in turn positively influenced organizational performance (Chang,
2007).

Organizational Structure
Organizational structure is defined as the “totality of connections and relationships between all
the factors of production, as well as the totality of connections and relationships within each
factor of production or operations” (Sikavica & Novak, 1999, p 142). That is, it defines the
relationships between factors of production, and the relations within these factors (Nedović &
Božinović, 2013). Tran and Tian (2013) explain that organizational structure constitute the
formal system of task and reporting relationships that controls, coordinates, and motivates
employees so that they cooperate to achieve an organization’s goals. This according to Andrews
(2012) includes well defined job positions, their relationships to each other and accountabilities
for the process and sub-process deliverables. Hence, organizational structure directs the
competence of work, the enthusiasm of employees and coordination among the top management
and subordinates for flow of plans and goals in the organization.

Organizational structure has three broad dimensions. First, is the formalization, which
refers to the degree of prescription, the level of standards and measures of employee
behaviour in accordance with the prescribed rules and procedures (Nedović &
Božinović, 2013). A study by Sivadas and Dwyer (2000) indicate that for organizations
with low formalization, job behaviours are relatively unstructured and members have
greater freedom in dealing with the demands of their relevant tasks. This means that
low formalization would offer more flexibility and autonomy to the front-line employees
who provide services to the customers. This becomes a critical tool for addressing
emerging and dynamic customer needs in a timely manner. It will also encourage
innovation for enhanced customer satisfaction and retention. The second dimension of

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organizational structure is the concept of centralization. Nedović and Božinović (2013)
refers to the concept as the locus of decision-making authority, which lies in the higher
levels of a hierarchical relationship. Hence, centralization creates a non-participatory
environment that reduces communication, commitment, and involvement from the
employees (Sivadas & Dwyer, 2000). The study argues that a highly centralized
structure slows down the responsiveness of the organization, reduces staff commitment
and motivation. These in turn negatively affect organizational efficiency and delivery of
value to the customers.

The third dimension of the organizational structure is the integration. Integration looks at how
the various departments or sections of the organization are inter connected. It is imperative for
employees in different departments to easily and readily access information from different
sections to effectively address customer needs. Chung-Jen and Jing-Wen (2007) argue that
integrative work structure provides opportunities for employees to learn from their colleagues.
This learning framework empowers employees with the necessary information for efficient
customer service. The presumption is that well integrated organizations offer an opportunity to
deliver value that satisfies and retentions the customers.

Employee Reward Systems

Employee reward is the compensation which an employee receives from an organization for his
or her service (Jiang & Xiao, 2009). Rewards are used by organizations to strengthen certain
behaviours. The rewards may extrinsic or intrinsic. That is, monetary rewards or those items
which can be converted to currencies as well as soft rewards such as having a comfortable
office; favourable interpersonal relationship inside the organization; having access to decision-
making involvement; the challenge and sense of achievement; and preferable growth
opportunities (Jiang & Xiao, 2009). Reward systems are anchored on the theory of positive
reinforcement. The theory is concerned with the use of stimuli to produce desired behaviours
among employees (Skinner, 1963). That is, the use of incentives to elicit and strengthen the
desired behaviours. Rewards can be either intrinsic such as praise and acknowledgement or
extrinsic such as salary, promotion, freedom in office and job security (Wei & Yazdanifard,
2014).

Sajuyigbe, Olaoye and Adeyemi (2013) posit that well rewarded employees feel that they are

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being valued by the organization and are encouraged to work harder and better if they are aware
that their well-being is taken seriously by their employers, and that their career and self-
development are also being honed and taken care of by their organization. This leads to
employee motivation and enhanced positive performance. Hunter, Schmidt and Judiesch (1990)
assert that motivated employees are more productive, more efficient, and more willing to work
towards organizational goals than the employees who are experiencing low levels of motivation.

This increased efficiency translates into better customer service delivery, which positively
influences customer satisfaction and retention (Njanja, Maina, Kibet, & Njagi, 2013).
Empirically, a study by Ali and Ahmed (2008) sought to establish the effect of reward on
employee satisfaction and performance among staff of Unilever Company. The study
established a positive relationship between rewards and work satisfaction as well as motivation.
Duberg and Mollen (2010) explored the impact of reward systems within the health and
geriatric care sector. The study identified salary, bonuses, and sharing as important aspects that
create enjoyable work place and happy workers who are more efficient.

Organizational Goals
Establishment of organizational goals is a concept linked to management by objectives. Peter
Drucker first fronted the management by objectives concept in 1954. The concept requires all
managers to set specific objectives to be achieved in the future and encourages them to
continually ask what more can be done (Thomson, 2011). Since all organizations exist for a
purpose, Thomson (2011) posits that to achieve that purpose, organizational management sets
goals and objectives that are common to the whole organization. These goals form the basis of
performance evaluation.

Lawlor and Hornyak (2012) assert that employees are motivated when given clear goals and are
provided with feedback about their performance. Effective goals as indicated by Williams
(2012) should be, specific (identify exactly what is being pursued); measurable (having a
number to track progress); attainable (achievability of the goal); realistic (doability from a
business perspective); and time bound (ability to be completed within reasonable amount of
time). The goals therefore steer the organizational activities towards a focused direction. For
effective customer relationship management, the organization should have well spelt out goals
and how these goals are to be achieved with the available resources. A study by Singh and Khan

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(2012) to explore how to increase customer retention and loyalty in B2B World, advices that
while expanding the organization’s customer base it is crucial to work towards clearly defined
goals of customer retention. Further, a review by Lunenburg (2011) show that individuals who
are provided with specific, difficult but attainable goals perform better than those given easy,
nonspecific, or no goals at all. However, the individuals must have sufficient ability, accept the
goals, receive feedback and engage in continuous development. This superior performance
accrues from having clear goals that positively influence customer satisfaction and retention.

Performance Standards/Measurement
A performance measurement system is a balanced and dynamic system that enables support of
decision-making processes by gathering, elaborating and analysing information (Kurien &
Qureshi, 2011). The concept of using a balanced set of measures means, having different
measures with different perspectives to measure and establish the overall performance of the
organization (Taticchi, Tonelli, & Cagnazzo, 2010). Moreover, situations are not static, which
means the system should be able to continuously monitor not only the internal environment but
also the external context and reviews objectives and priorities.

Overall, performance measurement plays a key role in the development of strategic plans and
evaluating the achievement of organizational objectives as well as acting as a signalling and
learning device (Henri, 2004). By controlling action and directing behaviour, performance
measurement is expected to focus the actions of employees’ specific organizational objectives.
This promotes better service delivery, customer satisfaction, and retention. Furthermore,
employees would feel more motivated if they achieve measurable outputs.

2.1.3.3. Knowledge Management:

The main reason of a company from the perspective of knowledge management is the transfer
and application of knowledge. Knowledge can be gained by understanding customer
experiences and information. Main aspects of knowledge management include knowledge
creation, sharing knowledge and accountability. Knowledge about major customers is essential
to the success of customer relationship management and can lead to the development of a
learning relationship with customers, and significantly increase the competitiveness of the
organization. Customer information can be received via interactive communication. Business
intelligence tools such as data mining and data warehouse enables companies to use the

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Customer data into strategic business intelligence (Stefanou et al, 2003, 634-617).

Knowledge based theory, proposes that knowledge management practices such as knowledge
acquisition, knowledge storage, knowledge creation, knowledge sharing and knowledge
implementation play a critical role in achieving high level productivity; financial and human
resource performance; and improved sustainable competitive advantage (Gholami, Asli, Nazari-
Shirkouhi, & Noruzy, 2013).

Knowledge Creation
Gholami, et al. (2013) define knowledge creation as the utilization of internal and external
resources of an organization to generate new knowledge for achieving the organizational goals.
Knowledge creation therefore involves the interactions between tacit and explicit information in
spiral movement that leads to the creation of new knowledge (Srisamran & Ractham, 2014).
This cyclic movement means that the use of the knowledge in actively involved in development
of the new knowledge.

Knowledge creation is particularly important in customer relationship management. The

arguerment is that both the external and intenal environments of the organization possess
critical information that can be brought together, rearrranged or constructed to create unique
knowledge that can be used to better the organization’s decision making. Srisamran and
Ractham (2014) posit that the process facilitates knowledge of customer needs and motivation
for continuous performance improvement. Huiming and Yi (2010) argue that competitive
advantages and growth do not emerge from merely making decisions in the present but from
creating knowledge over periods of time. Grant (2000) gives examples of research and
development; experimental learning and simulations as some of the knowledge creation
mechanism.

Knowledge Acquisition
According to ALHawari, Talet, Alryalat and Hadi, (2008) customer knowledge acquisition is
defined as the process of pursuing certain knowledge that is necessary for gaining new
customers to the company. However, as indicated by Gholami, et al. (2013) knowledge
acqusition encompass the process of acquiring and learning appropriate knowledge from the
organization’s various internal and external resources, such as experiences, experts, relevant
documents, surveys among others.

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The significant difference between knowledge creation and knowledge acquisition is that in the
later, the user does not take an active role in the development of the knowledge but rather adopt
what already exists in the environment. Huiming and Yi (2010) posit that the relationships that
provide knowledge vary in nature, and can be both formal and informal such as daily activities
or structured intentions of data mining and information exploration, among others. Some
sources of knowledge as identified by Grant (2000) include inherited knowledge possessed by
the organization’s founders, on job trainings, attendance of work related conferences, training
programmes, workshops, benchmarking with other organizations, interaction with other actors,
or establishing of strategic alliances.

Knowledge Sharing
Knowledge sharing may be defined as the process through which personal and organizational
knowledge is exchanged between and among individuals, and within and among teams,
organizational units, and organizations (Gholami, et al., 2013; Paulin & Suneson, 2012). Foss,
Husted and Michailova (2010) simply define knowledge sharing as the provision or receipt of
information, know how, and feedback on a product or a procedure. This means that the process
of knowledge sharing is intertwined with other elements of customer knowledge management
such as knowledge creation, acquisition, storage, and implementation. The term knowledge
sharing and information sharing has been used interchangeably in literature. However, Paulin
and Suneson (2012) try to offer clarity by arguing that knowledge can never be shared as it
exists in a context and the receiver interprets it in the light of his or her own background. In the
study, knowledge is viewed as information that offer meaning and is of value to the bearers.

The information exchange in this case can be either focused or unfocused. Moreover, the
process can be formal or informal. Hence, Brčić and Mihelič, (2015) posit that knowledge
sharing is a complex human process that requires dynamic interaction and good relationships
between the giver and the receiver of the information. Therefore, it is important to understand
what drives the knowledge transfer process between customers and the members of an
organization. Research shows that apart from the collective and organizational constructs, the
intra and inters individual factors such as motivation, willingness; communication,
expectations, and collaboration play a critical in igniting knowledge sharing. The significance
of knowledge sharing to customer retention is well illustrated in literature. Many organizations

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employ various methods to enhance their information sharing with the customers. In the current
technological era, numerous platforms have emerged where organizations instantly share
product or service information with their customers. These include social media platforms such
as Facebook, WhatsApp, Twitter, blogs among others.

2.1.3.4. CRM Technology:

According to this study, CRM technology includes all the information systems used to support
front office functions (sales, customer service, and marketing) and back office applications that
deal with data integration and analysis (Jayachandran et al., 2005). Usually companies start with
isolated applications, and as the business scale grows, they face the challenge of integrating
client information which drives the adoption of CRM software packages (Mithas, Krishnan, &
Fornell, 2005). From an architectural view CRM can be classified into operational, analytical,
and collaborative (Ngai et al., 2009; Torggle, 2008; Da Silva & Rahimi, 2007; Teo, Devadoss, &
Pan, 2006). Operational CRM is concerned with the automation of business processes,
analytical CRM provides the tools to analyze customers characteristics and behaviors to support
the organization's customer management strategies, whereas collaborative CRM focus on
enhancing the interactions with customers through all contact points (e.g., call centers, front
office portals, and interactive voice response systems). CRM can also be classified according to
the level of IT employment into: non-IT assisted CRM, IT-assisted CRM, IT-automated CRM,
and integrated CRM (Stephaou, Sarmaniotis, & Stafyla, 2003). Computer Technologies are used
in developing computerized communications and technology aligned with business objectives.
The use of customer relationship management software enables companies to customize services
to provide a higher quality and lower cost. It also leads employees to work better with customer
contact points (Zinledin et al, 2005, 1290-1264).

2.1.3.5. TECHNOLOGY ADOPTION

Consumers’ adoption of technology, offered by the firms, can be more strenuous than
employee’s use of technology (Curran, J. M., & Meuter, M. L., 2005). Jain et al. (2007) have
suggested customer’s technology orientation as an important part of the dimensions of measuring
effectiveness of customer relationship management. Technology has been recognized as an
essential tool for leveraging competitive advantage by ensuring customer interaction.

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Technology in case of banking can entail a variety of options for instance Automatic teller
machine (ATM), internet banking as well as mobile banking (Kolodinskyet al., 2004).
Through technology like mobile banking, consumers can electronically transact through mobile
phones technology (Riquelme. Et al., 2010). With the advancement of technology, consumers are
increasingly taking the benefits of efficiencies it offers. Several factors are considered to affect
the adoption of technology like age, gender, computer skills, readiness of the technology and
social influence (Kleijnen et al., 2004). With the emergence of online banking, an increased
amount of attention has been shed on the consumers’ perspective of the adoption of technology
(Tan, M. and Teo, T.S., 2000). Banks still fail to make a majority of the customers to adopt these
technology based services over issues like security concerns as well as uncertainty (Kuisma et
al., 2007; Littler and Melanthiou, 2006). Especially risks like security and privacy have drawn a
lot of attention, where probable loss can occur owing to transgression of security by hacker or
fraud. Moreover, other forms of online crime has emerged such as phishing where a miscreant
tries to steal away valuable information from the customers such as his user name, password or
in some cases more sensitive information like credit card details(Lee,M.C;2009). According to
Kuisma et al., (2007) in many cases, consumers are disinclined to adopt technologies like-
banking for financial loss which may occur due to transaction error. Kuisma et al., (2007) has
also added that more often many customers are apprehensive of malfunctions of websites of
online banking.

2.1.4. Performance Measurement Metrics

Research points to a multiplicity of marketing metrics. While Meyer (1998) noted many
hundreds of measures tapping into marketing effectiveness, Ambler and Riley (2000) identified
a total of 38 measures of marketing effectiveness, Clark (1999) found 20 such measures, and
Davidson (1999) proposed 10 key metrics on marketing measurability. Attempts have been made
to sort out numerous measures of marketing metrics into some over-arching metrics. Kokkinaki
and Ambler (1999), for instance, deduced that marketing metrics can be summarized into six
categories: 1) financial measures (i.e. turnover, contribution margins, and profits), 2) measures of
competitive market (i.e. market share, advertising share, and promotion share), 3) measures of
consumer behavior (i.e. customer penetration, customer loyalty, and new customers gained), 4)
measure of consumer intermediate (i.e. brand recognition, satisfaction, and purchase intention),
5) measures of direct customer (i.e. distribution level, profitability of intermediaries, and quality
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of service), and 6) measures of innovativeness (i.e. new products launched and revenue of these
products as a percentage of total turnover). Notably, since marketing performance is a
multidimensional construct, different metrics should theoretically be seen as complements rather
than substitutes (Barwise & Farley, 2004).

Along with the identification of different types of marketing metrics, the focus of interest
gradually shifted from traditional aggregate performance measures (such as market share, sales
or profit) to performance indictors measured at the individual customer level (Kotler & Keller,
2006). As an illustration, the relationship marketing domain witnesses a tremendous growth in
research investigating customer equity and customer lifetime value predom- inantly in consumer
markets (Rust, Ambler, Carpenter, Kumar, & Srivastava, 2004; Rust, Zeithaml, & Lemon, 2000).
Similarly, researchers in business markets argue the effective management of customer
relationships requires a thorough understanding of customer profit- ability starting at the
individual account (Bowman & Narayandas, 2004; Eggert & Ulaga, 2006). Given the rising
importance of measuring marketing metrics at the individual account level, this study seeks to
capture the construct of marketing metrics by examining the actual usage of measures of
consumer behavior, consumer intermediate, direct customer, and innovativeness when assessing
performance at an individual customer level.

In the competitive world, companies deliver products and services that are almost personalized
for every customer. Indeed, organizations can achieve competitive advantages in sale and service
marketing through customizing their mass services. Nowadays, successful companies strive to
transfer their mass services to individual customer relationship management. Marketing
performance refers to the improvement of the organizational status in the market (market share),
improvement of the customers‟ perception of organization and its products, and increase in their
loyalty toward organization (Sanmartin and Camero, 2005). Market performance refers to the
enhancement of the organizational standing in the market, improvement of the customers‟
perception of organization and its products, and increase in their loyalty toward organization
(Martin, 2005).

2.2. Empirical Review of Related Literatures

Wu and Luwu (2012) investigated the relationship between customer’s relationship management
and marketing and commercial performance. The population was hotel industries in Taiwan. The

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result showed that customer’s relationship management had a significant and positive effect on
marketing and commercial performance in hotel industries in Taiwan. Thus researchers
suggested that companies had better preference before customer relationship management
performance when they knew the exact benefit of that.

Shahosseini et al (2011) studied the relationship between the update special value and the service
on customers buying behaviors. This study investigated the relationship between special values
of brand services and their components and customers buying behaviors in Ansar Bank. The
result showed the effect on customers buying .This variable was not related to internal
perception. Furthermore, variables such as internal reaction and loyal perception and long term
buying of customers’ were important .Internal reaction is due to customers internal perception
and don’t have direct effect on special values of brand services.

Dotur&Halmajan(2011) studied the role of organizations preparation on customers relationship

management and commercial performance. This research was done with 82 companies in
Romania. The result showed that organization had to highly prepare to perform customer
relationship management. Moreover, customer relationship management has significant
relationship with customers and commercial performance.

Khaligh et al. (2012) investigate the impact of CRM on customer loyalty and retention in the
telecom industry Iran. The data are collected from 200 Iranian telecom services users. Finding
shows that commitment and vision of the management system is highly required for a successful
CRM implementation. The structure of the strategy should be based on flexibility and explicitly
of the policies especially pricing policies. These factors are very important to increase customer
loyalty and benefit of the firm.

Cho, et. al. (2013) investigates the impact of customer relationship management on customer
satisfaction and loyalty. The study was performed at a departmental store in Tehran, Iran. The
study employed quantitative approach. And base on 300 respondents. The main findings of the
study shows that behavior of the employees is significantly related and contributed to customer
loyalty compared to other elements of CRM i,e interaction management , relationship
management and services quality.

Hisham Solieman, (2011), in his study customer relationship management and its relationship
to marketing performances assured that there is a positive relationship between CRM and

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marketing performance such as customer satisfaction and customer loyalty. Three major
variables of CRM was tested in this study i,e focusing on the main customers, organization
efficiency and customer knowledge management. The study concluded that all elements of
CRM have positive relationship with customer satisfaction and customer loyalty.

Kocoglue (2012), in his study titled customer relationship management and customer loyalty in
the banking industry. The study has been conducted on a sample of 350 staff employed in all
the branches in Denizili of T.C. Ziraat Bank. The study concluded that all elements of CRM I,e
customer database, learning customer needs and complaints, and providing solutions peculiar to
customers are positively correlated with customer loyalty.

Khaligh et al. (2012) investigate the impact of CRM on customer loyalty and retention in the
telecom industry in Iran. The data are collected from 200 Iranian telecom services users.
Finding shows that commitment and vision of the management system is highly required for a
successful CRM implementation, the structure of the strategy should be based on flexibility and
explicitly of the policies especially pricing policies. These factors are very importance to
increase customer loyalty and benefit of the firm (Khaligh et al.2012).

According to the research Bhattachacharya(2011)CRM is implemented in an organization to

reduce cost and increase company performance, which means profitability result through
customer satisfaction and loyalty. Indeed in a successful CRM implementation, data are collected
from internal and external sources such as sales department, customer service, marketing, after
sales services, and procurement, This is crucial in obtaining a holistic view of each customer
requirement in real times systems. This information will able to aid employees to make fast
accurate decision when dealing with the customers in different areas and touch points. The
finding of this study shows that the customer perception and treatment given to each customer
individual able to assist in solving many customers problems. Thus, customer satisfaction and
loyalty would be achieved through a successful CRM implementation. Therefore, organization
should discover different requirements of the customers and adjust their policies according to
their needs increase the firms competitiveness.

According to the conceptual framework proposed by Faed (2010), customer relationship

management amplifies the relationships of customers and competitors in a firm to increase the
share of the organization in marketplace by integration technology, procedures and people. The

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aim of CRM is to maintain the customers and increase their satisfaction and loyalty and
organization profit. Customer satisfaction and pleasing are two main elements in successful
CRM implementations for retaining customer’s loyalty to firm.

Wang and Lo ( 2004 ) found that model is based on two perspective. First, measures the factors
related to customer behavior such as: repurchasing, cross and customer acquisition rate, and
second, measures the relationship quality, such as customer satisfaction and customer loyalty
(Wang and Lo, 2004). Data were collected randomly from 400 selected customers of two
security companies from China. The finding show that emotional and functional behavior of
customers has positive impact on customer satisfaction and customer satisfaction has positive
effect on customer behavior based on CRM elements. Finally, the result of this study shows that
customer behavior based on CRM have a positive customer and brand loyalty.

Wang and Lo, 2004 Zineldin, (2006) developed a triangle strategy between quality, CRM, and
customer loyalty which is leading to company’s’ competitiveness. This research was designed to
measure satisfaction and loyalty of the customers based on two main conditions where the
customer database information and strategy of CRM should be well structured and the capacity
of the system should be enough to produce data accurate analysis. According to the findings of
the research, any changes of the quality of the services or productions in a firm over time could
be used as an indicator to find the level of customer loyalty a through a well-structured CRM
strategy. If the indicators of interaction, infrastructure, and atmosphere are linked to the product
and process quality, it helps the researchers to find what changes are required in CRM strategy to
improve customer satisfaction and loyalty. Izquierdo et al.(2005) developed a model in which,
car repair and maintenance are tested as a case where long- term customer relationship is
frequentative. Path analysis is used to evaluate the association of customers, perception market
loyalty and market position .The hypotheses were evaluated using a path analysis, which
examines the relationship between marketing activities and economic performance.

This model is proposed based on performance of the market and economic. The measures of
proposed model are as follows (lzquierdo el.al. 2005):
1) The position of market
2) Customer loyalty
3) Customer insight

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 4) Economic and market performance

The findings suggest that CRM implementation include attraction activities which are service
quality, commercial practices and loyalty programs such as bonus, contact, and satisfaction and
complain handling. This result in appropriate perception of customers leading to increasing
customer loyalty and therefore, Economic performance of the firm would be increased.

Feinberg and Kadam(2002) argue that emphasizing to online business rather than traditional way
of business is necessary nowadays. So in this way, the usage of internet provides an opportunity
for business to use it as a tool for CRM. According to their research, there are 42 different e-
CRM features used by the retailers. The finding shows that there is significant relationship
between CRM implementation on websites of the retailers and customer satisfaction which leads
to customer loyalty.

2.3. Conceptual Model

The main objective of this study is to address the impact of CRM dimensions on marketing
performance of commercial banks in Adama. It is essential for the banks to enhance and improve

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a strong relationship with their customers in order to deliver products and services that meet their
needs and expectations in order to satisfy them (Winer, 2001). The conceptual framework of the
study developed based on the literature reviewed above, and shows the relationship between
CRM dimensions and marketing performance.

Independent Variables Dependant Variable

Customer Relationship Management Practices

Customers Orientation

Organizing the Business Process

Marketing
Knowledge Management
Performance

Technology Adoption

CRM Technology

Source: compiled by the researcher, (2019)

Figure 2.1 shows the relationship of independent and dependent variables.

3. RESEARCH DESIGN AND METHODOLOGY

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3.1. Research Design
According to Zikmund (2003), research design is a blue print for selecting the sources and types
of data relevant to the research questions and provides the basic direction for carrying out a
research project to obtain answers to research questions.

The researcher will use an explanatory research design to conducting the proposed study. The
researcher will try to explain the impact of CRM practices on marketing performance of the case
company by using multiple regression analysis. Though, the research design will be explanatory
type, descriptive statistics will be used to describe the current reality of banking sector related to
the research variables. Whereas, the research approach will be both qualitative and quantitative
research approach, it is a means for testing objective theories by examining the relationship
among variables. These variables, in turn, will be measured, typically on instruments, so that
numbered data will be analyzed using statistical procedures. The design will allow the researcher
to draw conclusions on the relationship between CRM Practices and Market Performance.

3.2. Data type and source

The study will employ both primary and secondary data sources. Primary data will be collected
from employees of the company through closed ended questionnaires and structured. As the
secondary data; books, articles, journals, were reviewed to develop conceptual framework.

3.3. Target population

The target populations of the study will be 398 employees of the four selected commercial banks
and branch managers of (commercial bank of Ethiopia Adama Main District, Dashen Bank
Adama Branch, Lion Bank Adama Branch and Wegagen bank Adama Branch) excluding
secretaries, guards and other supportive staffs whom they are insignificant for the study.

3.4. Sampling design technique

There are twenty four commercial banks in Adama including the government banks (CBE), from
these banks; the researcher will intend to collect data from four banks in order to conduct the
study. The selection of those banks will be one from the state bank and three from the oldest
private Banks. Since the establishment of private banks in Ethiopia is not more than fifteen years
ago, Banks with less than fifteen years of establishment has excluded from the proposed study
since they have less number of customers and branch expansion, this will reduce difficulty of
conducting on the industry base in the city commercial banks, because it requires great deal of

32 | P a g e
time and money. Hence, the researcher purposively select four commercial banks (one from
public and three from private) branches found in Adama city based on their existence on the
market more than fifteen years; Namely commercial bank of Ethiopia Adama Main District,
Dashen Bank Adama Branch, Lion Bank Adama Branch and Wegagen bank Adama Branch.

3.5. Sample size determination

The total numbers of employees in commercial bank of Ethiopia (147 employees), Wegagen
(65employees), Lion Bank (82) and Dashen (104 employees) in Adama there will be 398
employees. The researcher used Yamane’ (1967) formula to calculate sample size.

N
n=
1+ N (e) ²

Where n is the sample size, N is the population size, and e is the level of precision. By using this
formula at 95% confidence level and 5% level of precision the sample size were obtained as
follows:

398
n= =199.5
1+398 (0.05)²

Accordingly, the table below shows the proportionate sampling for each Banks.

Table 3.1: proportionate sample distribution for each Banks

No List of Banks Total number of Proportion (percent) No. of sample

employees size

1 CBE 147 36.93% 74

2 Wegagen Bank 65 16.33% 33
3 Lion Bank 82 20.60% 41
4 Dashen Bank 104 26.13% 52
Total 0 0 0
The formula for proportionate sampling will be shown below

E
n=
N

Where n is the sample size for each bank, N is the population size, and E is number of employees
in each bank. Therefore, the sample size for the study will be 200 employees.

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3.6. Data Collection Instruments
The data will be collected through structured questionnaires with closed Likert type statements
questions. The Likert type scale, commonly used in business research will be applied because it
allows participants to provide their perceptions and opinions both in terms of direction (positive
or negative) and intensity (degree of agreement or disagreement). The questionnaire will utilize a
five point likert scale namely Strongly disagree (SD), Disagree (d), Neutral (U), Agree (A) and
Strongly Agree (SA) which will be assigned scores of between 1 and 5. The ratings will provide
a scale of 1 (To no extent) to 5 (To a very great extent). This will allow the researcher to draw
conclusions based on responses made from the respondents.

3.7. Data collection procedure

Before collecting the data, the instruments of the data will be prepared carefully and permission
of the selected firms will be taken. Then the objectives of the study will be explained to subjects.
Based on their willingness to participate in filling questionnaire the questionnaire will be
distributed. To enhance the response rate, the questionnaires will be delivered by hand and
collect by hand on a scheduled pickup date.

3.8. Method of data analysis

Data generate by questionnaire will be cleaned, edited and coded before analysis is done. Then,
Data will be inserted into the computer SPSS package and will be processed using descriptive
statistics to identify the characteristics of variables under study. The study will also use
correlation regression analysis in order to explain the relationship between variables to test the
research questions.

3.9. Ethical Clearance

A formal letter will be written from Unity University Adama campus, Department of Business
Administration to all concerned authorities of the banks. The data collection only will be started
after getting consent from the parties mentioned above. In addition to this, name of the
employees (selected for the sample) will not be included to maintain confidentiality.

4. Time and Budget Schedule

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4.1. Time Schedule
S.No Activities Duration
1 Proposal development and defense Week one
2 Data collection Week two,
3 Data analysis Week three, four,
4 Writing thesis submitting to advisor Week five
5 Writing final thesis Week six
6 Thesis defense Week seven
The above table (activities) will be conducted from June/2019 to September 2019.

4.2. Budget Schedule

S.No Purpose Cost

1 Photocopy service 3800
2 Thesis binding 2000
3 Internet service and others 2000
4 Restaurant (Cafe) 1000
5 Stationary materials 3500
6 Transport 1800
Total 0

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