EFFECTS OF CUSTOMER RELATIONSHIP MANAGEMENT ON

CUSTOMERS’ SATISFACTION: A CASE STUDY OF OROMIA BANK

BOSAT BRANCH, ADAMA ETHIOPIA.

HARAMBEE UNIVERSITY

FACULTY OF BUSINESS AND ECONOMICS

DEPARTMENT OF MBA POST GRADUATE PROGRAM

BY: - MELKAMU TAKELE

THE THESIS IS SUBMITTED TO HARAMBEE UNIVERSITY SCHOOL

OF POSTGRADUATE STUDIES IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS
ADMINISTRATION

PRINCIPAL ADVISOR: TESHALE TEREFE (PHD.)

JULY, 2023

ADAMA, ETHIOPIA

I
 HARAMBEE UNIVERSITY

ADVISOR’S APPROVAL SHEET

This is to certify that the thesis entitled “effects of customer relationship management on
customers’ satisfaction: A case study of Oromia bank bosat branch Adama” submitted in partial
fulfillment of the requirements for the degree of Master of Business Administration, the post
graduate Program of Harambee University, and has been carried out by Melkamu Takele, under
my supervision. Therefore, I recommend that the student has fulfilled the requirements and
hence hereby can submit the thesis to the school of postgraduate studies.

________________________ ______________________ _________________

Name of Principal Advisor Signature Date

I
 HARAMBEE UNIVERSITY

EXAMINERS’ APPROVAL SHEET

We, the undersigned, members of the board of examiners of the final open defense by Melkamu
Takele have read and evaluated his/her thesis entitled “effects of customer relationship
management on customers’ satisfaction: A case study of Oromia bank bosat branch
Adama”, and examined the candidate. This is, therefore, to certify that the thesis has been
accepted in partial fulfillment of the requirements for the degree of Master of Business
Administration.

________________________ _____________________ __________________

Name of the Chairperson Signature Date

________________________ ______________________ __________________

Name of Principal Advisor Signature Date

________________________ ______________________ ___________________

Name of Internal Examiner Signature Date

________________________ ______________________ ____________________

Name of External Examiner Signature Date

________________________ ______________________ ____________________

SPGS Approval Signature Date

Final approval and acceptance of the thesis is contingent upon the submission of the final copy of
the thesis to the School of Post Graduate Studies (SPGS) through the school graduate committee
of the candidate’s department.

Stamp of SPGS Date______________________

II
 STATEMENT OF DECLARATION
I, Melkamu Takele, hereby declare that all the corrections and recommendations suggested by
my advisor are incorporated in to this thesis entitled: “effects of customer relationship
management on customers’ satisfaction: A case study of Oromia bank bosat branch
Adama”. I, also declare that this thesis is my original work and all sources of materials used for
the thesis have been duly acknowledged. The matter embodied in this work has not been
submitted earlier for award of any degree or diploma to the extent of my knowledge and belief.

Declared by:

________________________ ______________________ _____________________

Name of the Designate Signature Date

Place of submission_________________________

III
 ACKNOWLEDGEMENT
First and foremost, thanks to the Almighty God for assisting me in every ups and downs of my
life in general and to accomplish my thesis in particular. He has given me strength and
encouragement throughout all the challenging moments of completing this thesis. I am truly
grateful for His unconditional and endless love, mercy, and grace. Thank you, Lord, for the
blessings you have bestowed on my life. You have provided me with more than I could ever
have imagined. You have surrounded me with people who always look out for me. You have
given me family and friends who bless me every day with kind words and actions.

I would like to extend my special thanks and indebtedness to my thesis principal advisor Teshale
Terefe (PHD) for his unreserved guidance, invaluable assistance and constructive comments.

Additionally, I would like to express my sincere gratitude to my wife and children for
encouraging me to pursue my MBA study.

Lastly but not least my sincere thanks go to all individuals who contribute a lot for the successful
accomplishment of my thesis.

IV
Table of Contents
ADVISOR’S APPROVAL SHEET ............................................................................................................... I
EXAMINERS’ APPROVAL SHEET .......................................................................................................... II
STATEMENT OF DECLARATION .......................................................................................................... III
ACKNOWLEDGEMENT ........................................................................................................................... IV
ABSTRACT................................................................................................................................................ VII
CHAPTER ONE ........................................................................................................................................... 1
INTRODUCTION ........................................................................................................................................ 1
1.1 Background of the Study .................................................................................................................... 1
1.2 Statement of the Problem .................................................................................................................... 2
1.3 Research Objectives ............................................................................................................................ 4
1.3.1 General objective ......................................................................................................................... 4
1.3.2 Specific Objectives ...................................................................................................................... 4
1.4 Significance of the Study .................................................................................................................... 4
1.5 Scope of the Study .............................................................................................................................. 5
1.6 Organization of the Study ................................................................................................................... 5
CHAPTER TWO .......................................................................................................................................... 6
REVIEW OF RELATED LITERATURE .................................................................................................... 6
Introduction ............................................................................................................................................... 6
2.1 Theoretical Review ............................................................................................................................. 6
2.1.1 Customer Relationship Management ........................................................................................... 6
2.1.2 Component of Customer Relationship Management ................................................................. 10
2.1.3 CRM Benefits ............................................................................................................................ 15
2.1.4 Customer Relationship Management (CRM) in finance Sector................................................. 16
2.1.5 Benefits of CRM in financial sector........................................................................................... 18
2.1.6 Customer Satisfaction ................................................................................................................ 19
2.1.7 Components of Customer Satisfaction ....................................................................................... 22
2.1.8 Theoretical Foundation .............................................................................................................. 23
2.2 Empirical Review.............................................................................................................................. 24
2.3 Conceptual Framework and Hypotheses........................................................................................... 29
2.4 Research Hypotheses ........................................................................................................................ 29
CHAPTER THREE .................................................................................................................................... 30

V
RESEARCH METHODOLOGY ................................................................................................................ 30
Introduction ............................................................................................................................................. 30
3.1 Research Approach ........................................................................................................................... 30
3.2 Research Design................................................................................................................................ 30
3.3 Target Population .............................................................................................................................. 31
3.4 Sample size and Sampling Techniques ............................................................................................. 31
3.5 Source of Data and Method of data collection .................................................................................. 31
3.6 Research validity and reliability ....................................................................................................... 32
3.7 Data Analysis methods ..................................................................................................................... 33
3.8 Ethical Considerations ...................................................................................................................... 34
CHAPTER FOUR....................................................................................................................................... 35
DATA ANALYSIS AND INTERPRETATIONS ...................................................................................... 35
4.1 Introduction ....................................................................................................................................... 35
4.2. Demographic Characteristics of the Respondents............................................................................ 35
4.3 Descriptive Analysis ......................................................................................................................... 38
4.4. Inferential Statistics ......................................................................................................................... 40
4.4.1. Correlation Analysis ................................................................................................................. 40
4.4.2. Regression Analysis .................................................................................................................. 41
CHAPTER FIVE ........................................................................................................................................ 48
SUMMARY, CONCLUSION AND RECOMMENDATIONS ................................................................. 48
5.1 Summary of Major Findings ............................................................................................................. 48
5.2 Conclusions ....................................................................................................................................... 50
5.3. Recommendations ............................................................................................................................ 51
5.4 Limitations and Future Research Directions ..................................................................................... 51
REFERENCES ....................................................................................................................................... 52

VI
 ABSTRACT
In an extremely competitive market, enterprises need to maintain positive relationship with their
customer. The purpose of the study was to check the effect of customer relationship management
(CRM) on customers’ satisfaction with reference to Oromia bank Bosat Adama. Quantitative
research approach along with Explanatory and descriptive research design were adopted to
address the specific objectives of the study. Population of the study was Oromia bank corporate,
medium micro and retail customers of which a sample size of 393 was selected by using
Yamane’s formula. Structured questionnaires were used to collect primary data from the
targeted sample respondents. Of which, 305 valid and usable responses were obtained and
utilized for analysis. SPSS version 20 statistical tool was also used for carrying out both
descriptive and inferential statistics analyses. Multiple linear regression models were
implemented to investigate the relationship between customer relationship management and
customer satisfaction. Descriptive statistics of the study variables showed that customers of
Oromia Bank agreed on three CRM dimensions (i.e. Customer handling, communication, and
trust,) while strongly agreed that Oromia Bosat is highly committed to its customers in providing
services from the mean score of customer service one can understand that customers of the bank
are moderately satisfied by the su given to them. The correlation result of the study showed that
results of the findings revealed that conflict handling, communication, trust and commitment
dimensions of customer relationship management had strong and positive relation with customer
satisfaction in the context of Oromia bank corporate customers. Conflict handling had relatively
the highest positive and statistically significant effect on customer satisfaction followed by
communication. Trust and commitment showed the least influence on customers’ satisfaction as
compared to the first two CRM dimensions. It can be concluded that exerting more effort on
building efficient and effective customer relationship management increases the level of
customers in Oromia bank bosat branch. The bank makes its CRM as strong and reliable the
customer will be more satisfied and retain with the bank. Managements of Oromia bank Bosat
should work on the improvement of conflict handling and implementation of more
communication. This would improve their customer’s satisfaction more.

Key words: Customer Relationship Management, Customer Satisfaction, Conflict handling,

Communication, Trust, Commitment

VII
 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The past decade has been marked due to a significant change that has transformed the entire
financial industry across the globe. The intense competition, deregulation, dynamic technological
forces have shaped the way banks manage their businesses. This wave of change has brought
about significant deviations regarding interacting with the customers not only in the developed
economies, but also in the developing countries such as Ethiopia. To combat these changes and
to sustain in the business it has become imperative for the financial industries to embrace
customer-oriented strategies which will aim at maintaining customer satisfaction and satisfaction
as well. This call for importance of adopting effective Customer Relationship Management
practices. This continued focus is motivated by the fact that enhanced customer satisfaction
increases satisfaction and loyalty, competitive advantage, market share and profits as well as
improved organizational performance (Carter, 2010; Voss &Voss, 2008).

Several organizations including banks spend a significant part of their time, energy and resources
chasing new business. Even though it is important to replace lost business, grow the business and
expand into new markets, one of the primary goals is to keep existing customers and enhance
customer relationships (Weinstein, 2002). Business leaders realize that retaining profitable
customers is essential to their organization’s success (Herhausen & Schogel, 2013). Although
finding new customer is very important, the emphasis is shifting towards retaining profitable
customers and building lasting relationship with them. To retain customers in the highly
competitive and changing market arena, most companies are emphasizing on maintaining and
continuously expanding their customer base using customer centered marketing strategies for
survival aimed at maintaining and enhancing relationships with customers
(Krishnamoorthy&Srivasan, 2013). Customer satisfaction is important to most companies
because the cost of acquiring a new customer is far greater than the cost of maintaining the
existing customer (Ro-King, 2005). Kotler (2006) insists that acquiring new customers can cost
five times more than the costs involved in satisfying and retaining the current customers and that

1
the customer profit rate tends to increase over the life of the retained customer. Thus, one
strategic focus that banks can implement to remain competitive would be to retain as many
customers as possible. This is achieved through effective customer relationship management
(CRM) and customer satisfaction practice. CRM practices enable banks to enhance quality
service delivery and the resultant customer satisfaction (Chan & Ahmad, 2013)

Studies done on relationship between CRM and customer satisfaction concluded that there is a
positive and significant relationship. Yao and Kong, (2011) revealed that a positive relationship
exists between CRM and customer satisfaction. Chen and Popovich (2003), have asserted that
customer relationship marketing is important element of organization that help them assess
customer satisfaction, satisfaction, loyalty and profitability in terms of repeat purchases, money
spent, and longevity. While customer relationship management has always been a topic of great
interest to managers and researchers, there have been exist few studies conducted directly to the
topic. Therefore, this study seeks to examine the effect of customer relationship management on
consumers’ satisfaction in Adama City Oromia Bank Bosat Branch.

1.2 Statement of the Problem

The banking industry has grown over the past years in Ethiopia and the world at large. As a
country becomes more developed, there is greater need for banking service to facilitate the
peoples’ monetary transactions (MOFED, 2010)

In today’s competitive business environment, giving quality services to customers is a very

critical exercise. Meeting customer expectation by giving quality services is very important to
loyal customers. CRM consists of a historical view and analysis of all the acquired or to be
acquired customer in the firm for a long time. If the customers are satisfied, they will always be
loyal to the firm and the business remains forward to the development of its power.
(http://www.managementstudyguide.com).

The purpose of service is to seek out and deal with service failures (Robert, 1995, pp.53–71); it is
the seeking out part that distinguishes recovery from complaint handling, as a vast majority of
unsatisfied customers do not bother to complain. Instead, they vote with their feet and switch to
another service provider.

2
In a competitive and dynamic business environment, organizations have to deliver excellent
customer experience and build a strong relationship with customers who can guarantee repeat
purchase for the continuity of the business. This applies even to Banks whose environment
dynamism in the current times is posing many challenges including intense competition,
globalization and technological advancement and hence calling for importance of adopting
effective customer relationship management practices. Banks that practice well established
relationship marketing policies perform better than others that do not (Molina et al, 2007). Also
Best (2002) and Mithas et al., (2005) indicated that customer relationship management (CRM)
practices are intended to bring customer satisfaction and satisfaction in service industry
reflecting in the company’s revenue.

The size of banking industry and its transaction represents the economic change in a country.
The banking industry plays an important role in achieving the desired socio economic
development of a country by distributing savings to productive uses and providing mobility to
the capital. This shows the economic development of a country depends on the availability

of banking industry (Peters and Waterman, 1982). After defining and getting a clear vision of
CRM, its use in the private and public banking sectors has been highlighted. It has been found
out that through maintaining customer service quality, customer satisfaction can be attained. This
leads to profitability and growth of the organization (Brown, 2000). Thus, any bank that wishes
to either grow in size of its banking operation or improve its profitability must consider the
challenges affecting its customer relationship (Ashok and Rajesh, 2009).

Clow and Kurtz, (2003) stated that banks profitability is closely related with customer ‘s
satisfaction. They also claimed that, customer defection costs companies millions of dollars each
year in lost revenue. The greater revenue and cost savings from that customer. In this context, the
benefits of long-term satisfaction of existing customers, such as increased profitability, reduced
costs in relation to the individual customer and word of mouth referrals from satisfied customers,
become important (Gilmore, 2003). Oromia Bank is also experiencing unique challenges such as
escalating competition between banks and new entrants. These new challenges, coupled with
increasing new customer demands and technological advancements have resulted in Oromia
Bank losing potential business opportunity due to customers’ switching from banks to alternative
service providers.

3
Relationship marketing literature is sated with studies that explores on effects of CRM to
improve customer satisfaction (Boulding et al., 2005; Mithas et al., 2005, Uppal, 2008 and
Sharma et al., 2011); and the effects of customer retention on customer satisfaction (Khan,
2012.) and the effects of CRM on customer satisfaction (Mithas et al, 2005; Hassan, 2015; Long
et al., 2013; Izquierdo et al., 2005; Khedkar, 2015).

Despite these numerous studies, there are a relatively few empirical studies that have a clear
focus on the relationship between CRM, customer satisfaction and satisfaction of the company.
Furthermore, there is no research conducted to examine the effect of CRM on customer
satisfaction with particular reference to Oromia Bank Bosat Branch.

1.3 Research Objectives

1.3.1 General objective
The general objective of this study is to examine the effect of customer relationship management
(along its dimensions) on customer satisfaction with particular reference to Oromia Bank Bosat
Branch.

1.3.2 Specific Objectives

 To ascertain the effects of conflict handling dimension of customer relationship management
dimensions on customers’ satisfaction in the Oromia Bank Bosat Branch

 To investigate the effects of communication dimension of CRM on customers’ satisfaction in

the Oromia Bank Bosat Branch

 To identify the effects of trust dimension of CRM on customers’ satisfaction in the Oromia
Bank Bosat Branch

 To examine the role of commitment dimension of CRM in determining customers’

satisfaction in the Oromia Bank Bosat Branch

1.4 Significance of the Study

The findings of this study would provide greater insights to management, policy makers and
other stakeholders in the sector to understand the relationship between CRM and satisfaction and
satisfaction as mediating variable. The finding of the study is also helpful in identifying possible

4
gaps of customer relationship management practice of Oromia Bank Bosat Branch, Adama City
and its contribution on customer satisfaction. Also customers would benefit through the service
made initiatives by towards better customer satisfaction. Lastly, the study could also contribute
to the existing body of knowledge and can serve as insight or input for further research on the
area of CRM and customer satisfaction.

1.5 Scope of the Study

The study was limited to the Oromia Bank Bosat Branch, which was located in the Adama city,
Ethiopia. In addition, the study is delimited to current customers that exist at the branch under
the study only. Conceptually, the study has confined itself to assess the effect of CRM on
customers’ satisfaction where by customer relationship management would have four dimensions
(trust, communication, conflict handling and commitment) as predictor variables and customers’
satisfaction as outcome variable.

1.6 Organization of the Study

The study is organized into four chapters. Chapter one covers background of the study, problem
of the study, research questions, objectives, scope of the study, limitation and organization of the
study respectively. Chapter two provides literature review that includes the theoretical and
empirical review pertinent to the study. Also Conceptual framework of the study was discussed.
Chapter three consisted of the methodology for the study to be employed. This chapter explains
in detail how the research was conducted. It looks at the research design, the target population,
sample and sampling techniques, data collection instruments and data collection procedure, data
analysis method, research reliability and validity and ethical consideration respectively. Chapter
four, finally, displays demographic features, statistical analyses (both descriptive and inferential),
results of the findings, and their specific interpretations. A review of the key findings,
conclusions and recommendations are depicted in the last chapter.

5
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

Introduction
This chapter reviews selected theoretical and empirical literature relevant to the study. A
discussion of previous works on the study variables is presented. The section also discusses
research gaps and emerging trends, and also proposes a conceptual framework that depicts the
relationship between variables and aid the development of research objectives and hypotheses.

2.1 Theoretical Review

The following review of the literatures represents the literature related to the research study
variables.

2.1.1 Customer Relationship Management

The attention on a sustainable Customer Relationship Management (CRM) has been getting
magnified in recent times. The concept that long-term relationships are more profitable than
short-term transactional relationships has evolved and steadied within the organizational
philosophies. Knox et al. (2007) have viewed customer relationship management as an
organization wide process of treating different customers differently to increase value for both
customer and organization.

CRM is a strategy view of how to handle customer relationship from a company perspective.
“The strategy deals with how to establish developed and increase customer relation from
profitability perspective, based upon the individual customer needs and potentials. The basic
underlying CRM is that the basis of all marketing and management activities should be the
establishment of mutually beneficial partnership relation with customers and other partners in
order to become successful and profitable”. (Ghavami et al., 2006).

“CRM is the integration of customer focuses in marketing, sales, logistics, and accounting. I.e. in
all parts of the organization operation and structure. Those are the activities a business performs
to identify, qualify, acquire, develop and retain increasingly loyal and profitable customers by

6
delivering the right products or services to the right customer through the right channel at the
right time and the right cost” (Johansson & Storm, 2002). CRM can be best describing as an
evolution of marketing from product or brand management to customer management. (Peelen
2006).
This research deal with CRM as a business philosophy rather than just a technology.” It is
believed that in order to reach a successful CRM implementation, one would need to do much
more than just plug in a new technology and assume that it is going to be functional. CRM is not
just about call center solutions, direct mail, webpages, or sales force automation, or viewing
CRM as an internal activity emphasizing on establishing, maintaining, and enhancing
relationships with customers and partners at a profit.” (Hazobon 2006).

Therefore, in this study, technology is seen as a supportive tool that facilitates the activities
needed to achieve successful customer relationship management implementation.

Ryals and Knox (2007) have identified CRM as identifying, satisfying, retaining and maximizing
the most valuable customers. They have included the practices, strategies and technologies used
by the organization to manage and reflect on customer information as part of the CRM process.
Modern businesses have started viewing CRM as an outcome of business strategy which
provides seamless integration of every business function that gets in touch to the customer
(Boulding et al., 2005).
Moreover, Dyche, (2002) has defined CRM as a business infrastructure that enables appropriate
means to create and retain loyal customers and increase in their value. Wang et al., (2004) have
viewed customer value as a strategic weapon to build and sustain competitive advantage
resulting from effective customer relationship management.

Earlier researchers have validated customer relationship as a critical tool to business

performance. In this regard, Buttle, (2004) has defined customer relationship as a series of
interactive episodes between dyadic parties over time. He has listed that relationships between
the customer and seller evolve generally through five phases: awareness, exploration, expansion,
commitment and dissolution. In recent times, the advancement in information technology and
customer-centric organizational shifts has contributed to the evolution of CRM. Chen and

7
Popovich, (2003) have identified CRM as an integrated approach of people, processes and
technologies to understand the customers. Sin et al. (2005), Chen and Ching, (2004) and Hong-
kit Yimetal, (2004) have recognized four dimensions of CRM: focusing on key customers,
organizing processes around CRM, managing knowledge and incorporating CRM-based
technology. Sin et al, (2005) have measured these dimensions by the data from 3 surveys
conducted on 641 business executives in Hong Kong.

The fact that Business managers cannot take effective decisions if they are not provided with
correct customer data renders concentration on data generation tools. Customer knowledge is
generated generally through customer interactions or touch points across the firm’s functional
areas (Menguc et al., 2013). Valmohammadi, (2017) asserted successful application of CRM is
predicated on effective transformation of this information to customer knowledge. The decision
makers at strategic level of an organization are enabled to generate insights on customer
preferences and enhance customer profitability when generated customer knowledge is
disseminated throughout the organization.

Menguc (2013) established that customer relationship performance and sales team financial
performance are positively associated with the sales team’s customer knowledge creation
capability. This way of managing customer knowledge enables the functional processes to be
customer-centric which need to be established, maintained and continuously adjusted based on
the customers’ current and anticipated needs (Hong-kit Yim et al., 2004).

Having put all these, the three aforementioned dimensions can hardly be optimized if they are
not incorporated within an efficient CRM technological framework. Modern technological
booms have necessitated leveraging the technological advancements in creating and analyzing
customer data patterns and forecast the needs models (Ahearne et al., 2010). In that way,
incorporation of technology optimizes applications of customer knowledge management and
condenses key customer focus by synthesizing insights on customer preferences for the
managers. Afterwards, organizing processes to support the customer focused strategy can be
framed based on the availability of the resources and identified customer preferences (Sin et al.,
2005).

8
Firms nowadays are relying heavily on latest information management tools such as customer
database management, data warehousing and data mining to respond with timely and effective
personalized offers to the customers (Lambe et al., 2009). Rapp et al., (2010) pointed that
enhanced customer satisfaction, higher customer satisfaction and long-term customer
relationships are among the many outputs sought by the incorporation of CRM-based
technology.

Customer relationship management is comparatively a new concept, which arose in 1980s,

according to Reinartz and Kumar, (2012) and Hollensen, (2015). CRM is an acronym for
Customer Relationship Management. There is no generally accepted definition of CRM even
though CRM is considered to be an essential business approach. Swift (2001, p. 12) viewed
CRM as an “enterprise approach to understanding and influencing customer behavior through
meaningful communications in order to improve customer acquisition, customer satisfaction,
customer loyalty, and customer profitability”.

Kincaid (2003, p. 41) defined CRM as “the strategic use of information, processes, technology,
and people to manage the customer’s relationship with your company (Marketing, Sales,
Services, and Support) across the whole customer life cycle”. It involves the integration of
marketing, sales, customer service, and the supply-chain functions of the organization to achieve
greater efficiencies and effectiveness in delivering customer value”.

CRM is derived from the term, ‘relationship marketing’ which was given considerable attention
by well-regarded academics including Kotler. The contemporary definition of CRM by Rababah
et al. (2011, p. 22) explains holistically how customer satisfaction fits into CRM:
“CRM is 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.”
Others define CRM simply as a relationship building strategy for adding value to the firm and
sustaining competitive advantage (Kumar, 2010; Datta, 2012). Each definition implies a long-term
goal in applying CRM to grow the customer base.

9
Customer focus is another strategic tool which has been identified as a value-addition method to
prioritize the most profitable customer segments for the organization (Rygielski et al., 2002).
This is generally done through offering advanced flexibility in the forms of customized products
and services to those customers who contribute the most to the sales revenues (Hong-kit Yim et
al., 2004). Payne and Frow, (2005) have argued that the customer-centric processes must be
coordinated around the companywide cross-functional operations to reap the rewards from the
customers. Padmavathy et al, (2012) have stressed that an embedded customer-focused strategy
within the cross-functional teams is essential to providing a satisfying experience to the firm’s
customers. Mithas et al, (2005) have substantiated this in their study conducted on US firms to
conclude that the application of CRM applications positively related with improvement of
customer knowledge and customer satisfaction.

The definitions above accentuate CRM as a complete set of approaches for administrating
customer relations in terms of marketing, customer and support services. The organizations can
use information technology and information systems to combine CRM procedures to please
customers. For the purpose of this study, CRM will be defined as organization of comprehensive
information regarding customers through the use of complicated software and analytical tools to
cautiously manage client contact points to maximize profit and retain the customers.

2.1.2 Component of Customer Relationship Management

Kim et al, (2003) propose a framework of CRM from information processing view point in the
aspects of relationship initiation, worth, positioning and commitment. The approach suggests
that, customer information is crucial in administrating, attracting and retaining successful
relations with customers across the developmental phases. The argument continues that, when
organizations concentrate on their association with customers, some of the customers will be
retain and provide value for the firm in terms of generating higher profits. Therefore,
organizations can improve their relationships with customers by properly managing customer
information. A related conceptual framework of CRM was anticipated to integrate business
procedures, organizational arrangement, investigative structures and technology to represent
customers view (Chan, 2005). Kim et al. (2003), in a different study developed a framework of
CRME to consist of customer knowledge, interaction, value and satisfaction.

10
The study declares that, business interactions are handled well only when CRM activities aim at
satisfying the customers‟ personal and distinctive needs. Through incorporation of business
processes and technology, organizations are able to sustain and improve the relations with
customers.

From functional and organizational capabilities perspective, Reinartz (2004) offered a model for
CRM processes based on three different levels of relationships namely; initiation, maintenance,
and termination. Payne et al, (2005) further studied the significance of business strategy in CRM
implementation. The authors developed a model that assigned the business strategy with
customer strategy to establish value for both firm and customers. By so doing, the lifetime value
of advantageous clients is maximized. A major critical element of CRM includes trust, trust,
commitment, cooperation, communication, share values, conflict, power, non-opportunistic
behavior and interdependence. Literature discuss above suggests that, when organizations
implement CRM processes by considering business strategy, organizational motivation and
information technology, then customer relations established can be retained. The integration of
these elements permits firms to gain knowledge about profitable customers in order to achieve
business performance increase.

A) Conflict Handling

Naoui and Zaiem (2010) defined conflict handling as tension and frustration between two or
more social entities that arise from the incompatibility of actual and desired responses. They also
viewed as an opportunity for the company to show its engagement towards its client through its
efforts to resolve the conflict and its willingness to openly discuss reasons and possible
satisfactory solutions. Also other defined conflict handling as a supplier’s ability to avoid
potential conflicts, solve manifest conflicts before they create problems, and discuss solutions
openly when problems do arise. How well this is done will determine whether the outcome is
loyalty, "exit" or "voice". Frequency and bi-directionality communications has the strongest
effects on interpersonal conflict and that communication should be meaningful, supportive and
appropriate to be more effective (Fitz Hugh and Piercy, 2010). According to Morgan and Hunt
(2004), effective conflict handling can have a dramatic impact on customer satisfaction rates,
redirect the spread of damaging word of mouth, and improve end result performance.

11
Effective resolution of customer problems and relationship marketing are linked closely in terms
of their mutual interest in customer satisfaction, trust, and commitment. What could drive a
customer to the competitor may not be occurrence of a problem, but how the problem was
handled. However, this is a reactive approach to conflict handling. A more admirable approach,
which is proactive in planning and implementation includes, avoiding potential conflicts, solving
conflicts before they visible, and recognizing potential sources of conflict and stopping them.
These efforts would bring about better relationship and loyalty to the firm.

B) Communication

Communication is described as a part of relationship marketing that explains the exchanging of

ideas, feelings and impressions between a customer and a seller in a warm and personal way. .
Communication has been defined differently by different authors. According to Naoui and Zaiem
(2010) communication is defined as the consumer’s perception of the extent to which a retailer
interacts with its regular customers in a warm and personal way. Such an interaction is reflected
in the feelings of familiarity and friendship, personal knowledge, and the use of the client’s
family name and/or first name on the sales spot. According to Bosch, et al (2006)
communication is the formal and informal sharing of timely information between the supplier
and the customer through various methods from one individual or group to another.

Thuo (2008) affirmed that through communication the customers are informed about the
features, benefits, availability, and usage of a particular product or service for persuasion
purpose. When there is effective communication between an organization and its customers, a
better relationship will result and customers will be more loyal (Ndubisi, 2007). Bidirectional
communication leads to a strong relationship satisfying both parties, which in turn leads to
increased loyalty. Communication should be proactive rather than just reactive and it has three
sub constructs. These are the frequency, relevance and timeliness of communication from the
organization to the customer (Macmillan et al, 2005).

A study conducted by Rootman et al., (2011) on relationship marketing and customer satisfaction
lessons for South African banks with the aim of understanding relationship marketing and
customer satisfaction. The study found that communication was one of the variables that had a
strong positive relationship on customer satisfaction. The study recommended that

12
communication between the bank employees and customers would be improved by use of
appropriate and preferred communication methods, trustfulness and honesty communication that
is not misleading, informing clients about new products or services, and their usage and benefits.

C) Trust

Trust as a dimension of relationship management can be described as the willingness of a party

to rely on the honesty and integrity of the other party in the business relationship. This implies
that one party has faith and confidence on the promise by the other party to keep their promise
and vice versa (Chattananon & Trimetsoontorn, 2009). According to Jusˇcˇius and Grigaite,
(2011) Trust is the cornerstone of long-term relationships. Trust is a willingness to rely on an
exchange partner in whom one has confidence. A betrayal of this trust by the supplier or service
provider could lead to defection (Ndubisi&Wah, 2005). It means taking mutually agreed words
as fact and reducing one’s perception of the likelihood that either party will act opportunistically
(Leung et al, 2005). In the context of relationship marketing, trust is defined as the dimension of
a business relationship that determines the level to which each party feels they can rely on the
integrity of the promise offered by the other (Chattananon &Trimetsoontorn, 2009).

In business, trust refers to the confidence that one partner, the customer, has in the business’s
reliability and integrity to deliver goods and services (Proctor, 2000). Trust relates to the belief
that a customer has in an honest investment and engagement with the service provider (Peltier et
al., 2006.

It becomes the moral values that are established to enhance their business relationship between
Office and customers. Prior studies find trust to be the core of the relational approach and
consider it key to the development of the notion of commitment in provider-user relationships
(Ratnasingam et al., 2003). Trust is also considered as a key element and exists if a customer
believes a service provider is reliable and has a high degree of integrity (Keshvari et al., 2012).
Loyalty will occur if the customers truly trust the Office they make transaction. Banks should
focus on how to provide satisfaction on customer; if it is achieved, it will cause customer trust on
the banks, then in a long term it will create customer loyalty. It becomes the moral values that are
established to enhance their business relationship between banks and customers.

13
According to Farootan (2008), trust plays a big role in relationship marketing for it makes the
customers build confidence on the office and its products and services. The customer relationship
management aims to satisfy the customer through trust that results to increased customer loyalty
and satisfaction. The Office service providers build trust to their customers by keeping to their
promises. These promises should be honored and fulfilled consistently. A study conducted by
Alrubaiee and Al-Nazer (2010) on the impact of relationship marketing orientation on customer
loyalty in the banks in Jordan confirmed that customers trust in public sectors was a crucial
aspect of relationship marketing. The study recommended that banks to increase mutual trust by
showing hospitality, degree of honesty, transparency to be observed so as to build customer trust
with the bank and bank service providers.

A similarly study, on the role of relationship marketing in customer orientation process in the
industry with focus on loyalty with the objective of investigating the impact of relationship
marketing on customer loyalty was conducted by Teleghani, (2011). The study found out that
there was a strong positive relationship between trust and customer satisfaction. The study
recommended that openness and honesty to be observed in order to retain customers.

D) Commitment

Commitment is an important determinant of the strength of a customer relationship management

strategy and a useful construct for measuring the likelihood of customer loyalty and predicting
future purchase frequency and it is one of the most common dependent variable used in buyer-
seller relationships.

In buyer-vendor contexts principally in the trade-to- patron relationships, commitment is unique

as an aspiration for sustained relationship and an effort to make sure its protection or as a pledge
for relational balance between exchange partners. Commitment is based on affective
explanations such as emotional attachment, belonging, and admire for the companion,
manifested within the type of a liking to develop and toughen the connection with a further
individual or crew (Sharma et al., 2001). Emotional commitment is explained in phrases of the
similarity of values and targets among partners, implying that relationship members share beliefs
about correct and valuable behaviors and objectives. Commitment is in most cases used to

14
investigate both man or woman and behavior in firms and mark out types of action characteristic
of specific sorts of persons or organizations (Wong &Sohal, 2002).

In general, commitment refers to an orientation that specific intentions and behaviors

characterize with the purpose of realizing value for both parties over the long term (Vesel &
Zabkar, 2010). Rauyruen and Miller (2007:24) suggest that the commitment of a customer to the
organization is a very important driver of Relationship Marketing in service industries. They
refer to commitment as “an implicit or explicit pledge of relational continuity between exchange
partners”. In simpler terms, commitment refers to the customer being motivated to stay with an
organization. Commitment can also be perceived as a manner of responding to the needs of
customers and is therefore a key dimension of being market oriented. Thus, commitment is
perceived to be a central expectation or norm within an organization customer relationship, and
measuring up to this expectation is to drive customer satisfaction (Ndubisi, 2006).

According to Du Plessis (2010:20), commitment stems from trust, shared values and the belief
that it will be difficult to find partners that can offer the same value. Van Vuuren, Roberts-
Lombard and Van Tonder (2012:86) suggest that when a customer is committed to a
relationship, such customers could be more willing to act due to their need to remain customers
who are more committed and who are more willing to develop an overall positive impression of
the business. This impression is based on aspects such as the duration of the relationship,
inclusive of different transactions, whether positive or negative. These customers are therefore
illustrating a greater willingness to remain loyal to the business.

Palmatier (2008) underlined commitment increase the quality of the relationship bonds necessary
for high – performance exchanges; relationship investments improve other performance –
enhancing aspects of the exchange. Furthermore, commitment represents exchange partners’
desire to maintain valued relationship and thus their relational motivation toward partners.

2.1.3 CRM Benefits

Companies employ CRM to develop stronger relationships with customers. Josiassen et al.,
(2014) found that firms who have strong relationships with customers perform better than those
who do not. However, companies can achieve many other benefits from using CRM practices.

15
Some examples of benefits include enabling communication, providing timely feedback, analysis
of customer information, and providing customized product offerings (Josiassen et al., 2014).

Some of the most obvious benefits of CRM include customer satisfaction, increased cross-selling
opportunities, increased customer acquisition, and the addition of profitable customers (Oztaysi
et al., 2011). Managers in the Organization sector use CRM systems to target profitable
customers, integrate across channels, improve customer service, increase sales force
effectiveness, coordinate marketing messages, increase employees’ motivation, improve decision
making, and customize products (Yang, 2012). In short, CRM systems strengthen the
relationship between buyers and sellers (Yang, 2012). However, companies have found benefits
to CRM system use outside of the obvious benefits in customer facing situations.

A key benefit of CRM use is the reduction in customer abandonment rates. CRM allows
companies to track customer issues, monitor service response, and assign customer inquiries to
the appropriate expert (Xu et al., 2002). Firms can resolve customer issues quickly and improve
customer satisfaction by getting customers to the right expert who can quickly solve their
problem (Xu et al., 2002). Customer satisfaction is an essential measure of business success.
There are several benefits of increased customer satisfaction including higher levels of customer
loyalty, customer referrals, and customer satisfaction (Terpstra et al., 2012).

The potential benefits of CRM are numerous, and the list continues to grow as companies find
new and creative ways to use customer information to deliver value added products and services.
Researchers have grouped the key benefits of CRM into four categories of (a) improved market
share, (b) cost reduction, (c) customer satisfaction, and (d) the integration of the operations
across the supply chain (Lee et al., 2010). Even with all the benefits that CRM systems offer,
many businesses have implemented CRM systems that their leaders see as failures.

2.1.4 Customer Relationship Management (CRM) in finance Sector

When it first introduced in early 1990s, customer relationship management systems (CRM) were
promoted as the answer for expanding relationships and building loyalty and customer-centric
strategy, this led many banks to invest heavily in CRM. Since CRM plays a critical role in
creating customer loyalty, it has been applied in areas such as banking; retails, insurance and
telecommunication. In their efforts to increase efficiencies and reduce costs, leading banks have

16
encouraged to spend resources on IT infrastructure and expanding the functionality of ATMs. An
effective or successful implementation of the CRM system can contribute to the organization in
terms of improved sales, market share profitability, and customer satisfaction and reduced
customer turnover, service cost and time (Rajnish et al., 2003).

Xu, et al, (2002) stated that customer Relationship Management (CRM) came into the power
when banking institutions were getting more and more competitive. The focus of CRM helped
banks to understand the Customer’s current needs, what they have done in the past, and what
they plan to do in the future to meet their own goals. Banks in recent years have adopted the
principles of Marketing Orientation and focused on relationship development. The technical
revolution has had its impact on the banking industry to adopt CRM as a strategic tool.
Mahaswar and sweta, (2015) have said that the beginning of the millennium saw the introduction
of new technology into the banking industry which has helped to remove the hurdles in the
progress of banking sector. Due to the tough competition in the banking industry, it is very
necessary for financial institutions to build and maintain a strong relationship with the customers
in order to achieve the ultimate goal of customer Satisfaction.

For this reason, customer relationship management (CRM) has become more important in the
service industry; especially in the banking industry. Innovation in the area of information
technology which gives to banks customers’ great benefits and the concept of anywhere and
anytime banking has puts banks in tough competition. The modern day customer is not only
quality conscious but also very particular about time and services offered. Any gap in their
perception and reality will prompt them to change their brand preferences. This has induced the
banks to focus on relationship marketing and CRM has become paramount important for banks.

Duygu and Sevcan, (2012) states that in recent years, in such fields as banking, where there is a
strong competition, customer satisfaction has gained a good deal of importance. It may be very
easy to let another bank capture a displeased customer. To raise the customer satisfaction to the
highest level and retain their customers, the banks are to attach importance to customer
relationship management. Peppard, (2000) described that financial service organizations are one
of the early adopters of customer relationship management systems. Before applying customer
relationship management systems within the industry, banks and other insurance companies
developed close relationships with their customers by providing personal customized services

17
which was mainly a costly, inefficient and time consuming process. But, according to Gupta and
Shukla, (2002) through CRM systems and information and communication technology (ICT)
banks can provide large customer variety, lower price and customized service and all at the same
time.

According to Onut et al., (2006), banks and other service providers realize the importance of
Customer Relationship Management (CRM) and its potential to help them acquiring new
customers, retain existing ones, and maximize their lifetime value. Foss, (2002) in his work
stated that most of the banks around the world are trying to use CRM techniques to achieve
various outcomes. These are creating customer-centric culture and organization; securing
customer relationships; maximizing customer profitability and aligning effort and resource
behind most valuable customer groups. Many researchers have reported that banks which
develop a customer-centric strategy are moving on success track and getting higher profits.

2.1.5 Benefits of CRM in financial sector

Benefits of CRM can be categorized into three groups namely: Benefits for Office, benefits for
customers and benefits for employees. Hen and Popovich, (2003), CRM applications have the
ability to deliver storage of customer data at a much smaller cost than old network technologies.
For given banks, CRM systems can accumulate, store, maintain, and distribute customer
knowledge. Peppard (2000) noted that effective management of information has a very important
role to play in CRM because it can be used for product tailoring, service innovation; consolidate
views of customers, and for calculating customer lifetime value. CRM systems assists
organization evaluates customer loyalty and profitability based on repeat banks, the amount of
transaction, and longevity.

Nguyen et al, (2007) supported that the CRM if used properly, would enhance a bank’s ability to
achieve the ultimate goal of retaining customers in order to gain a strategic advantage over its
competitors. A CRM system is a sound business strategy for banks to help create brand value
and identify and understand their customers’ needs by providing targeted, timely and relevant
information that can add value to their customers and identify specific products and services that
can benefit customers. CRM systems provide tools that can segment, and deliver the right
service, at the right time, by acting on dynamic customer information. This allows the ability to
track and build strong relationships with profitable customer. Lowel and Anton, (2004) stated

18
that CRM systems enable banks to better understand their customers. It allows gaining
substantial market share in the shrinking market, improving customer satisfaction and
satisfaction, help to reduce operating cost thus enhances profitability and revenue. These systems
improve sales process work flow and provide differentiated services for high value customers.
The consolidation of customer information in single platform increases the customer services.

Customer relationship management systems facilitate knowledge integration. This integration

provides organization the ability not only to determine their customers’ current needs and wants
but the capacity to anticipate and solve future needs as well by providing customized services
and goods. Customers buying habits can be analyzed by looking into the CRM database. New
product information can be send to customers by looking into their previous buying behavior.
New products and services can be promoted by analyzing the interest of customers and none or
less used products are removed by looking into the information in the database.

The advantages gained by the banks through implementation of customer relationship

managements are forming customer database, learning customer needs, making the way of bank
management customer-based, utilization of technology for efficient service and using CRM as a
competitive tool. CRM system helps banks to keep and record the customer information, like
their goals, needs and events. Moreover, saved knowledge is updated into the CRM system, so
that the customers’ information will be up to date without being outdated. With these
connections the information is always expands in the CRM system that enhances the profile data
for customers and works like a strong instrument in making business decisions. Greenberg,
(2004) stated that through developing the total lifetime value of customer, CRM can raise the
true economic worth of a business. Moreover, successful CRM strategies promote customers to
purchase more products, stay loyal for longer periods and be in touch effectively with a
company.

2.1.6 Customer Satisfaction

Bateson and Hoffman (2002), define customer satisfaction as focusing a firm marketing effort
towards the existing customer's base. Payne, (2005) noted that instead of trying to acquire a new
customer, firms engulfed in customers’ satisfaction efforts must make sure that the existing
customer are satisfied as so to create and maintain long term relationship. Also Gets and
Thomas, (2001) state that customer satisfaction occurs when customer purchase a product or

19
services again and again, this phenomenon is called customer satisfaction over an extended
period of the time. Huit (2000) defined customer satisfaction as the process by which consumers
interpret price and attribute value to a good or service.

Satisfaction is derived from the Latin satis (enough) and facere (to do or make). Thus, satisfying
products and services have the capacity to provide what is being sought to the point of being
"enough." Two related words are satiation, which loosely means enough up to the point of
excess, and satiety, which can mean a surfeit or too much of enough, as if to say that too much is
necessarily undesirable. These terms illustrate the point that satisfaction implies a filling or
fulfillment. (Masrujeh 2009).

Clearly defining and understanding customer satisfaction can help any company identify
opportunities for product and service innovation and also serve as a basis for performance
appraisal and reward systems. It can also serve as the basis for a customer satisfaction surveying
program that can ensure that quality improvement efforts are properly focused on issues that are
most important to the customer. (LI 2002)

Referring to the above definition the concept of customer satisfaction is referring to a pleasurable
fulfillment response, while dissatisfaction is an un pleasurable fulfillment response. The
experience of some part of it component of the definitions allows the satisfaction evaluation to
be directed at any or all elements of the customer’s experiences. This can include product,
service, process and any other component of the experiences.

The most common way of operational sizing satisfaction is to compare the customer’s perception
of an experience, or some part of it with their expectation. This in known as, the expectation
disconfirmation model of customer satisfaction. Basically, the model suggests that if customers
perceive their expectation to be met, they are satisfied. If their expectation is underperformed,
this is negative disconfirmation and they will be dissatisfied. Positive disconfirmation occurs
when perception exceeds expectation. The customers may pleasantly surprise or even delighted.
This model of customer satisfaction assumes that customers have expectations, and that they are
able to judge performance. A customer satisfaction paradox has been identified by expectation
disconfirmation researchers. At times, customer's expectation but the customer is still not
satisfied. This happen when the customer's expectations are low. (Buttle 2004).

20
Customer satisfaction is a state of mind that a customer has about a company when their
expectations have been met or exceeded over the lifetime of the product or service. The
achievement of customer satisfaction leads to company loyalty and product repurchase.
However, customers who are merely satisfied are only at the first stage and they can easily
switch to other companies. At Most Customers range from being moderately satisfied to
moderately dissatisfied, which means that most customer are essentially ambivalent in their
loyalty to a particular business. These customers would

Likely defect in the presence of even a modest motivator; such as getting a better price or finding
a more convenient store location. (Masrujeh 2009).

Improving customer relationships and increasing their loyalty isn't simply about managing
interaction with customers better or targeting them better. It is about serving them in a
fundamentally improved way. This generally requires changes outside the sales and marketing
area, in order to redefine the customers experience with the organization in some meaningful
way. (Calhoun 2001).

Khan and Hussain (2013) opine that customers who are willing to pay higher prices for a product
or service tend to be brand conscious and prestige sensitive. In addition, Keiningham et al,
(2007), define customer satisfaction as continuation of a business relationship with the firm. For
Internet service providers (ISPs), it is continuing to use the same provider. And for discount
retailers, it is the continued repeat shopping with the retailer”. Ngai et al., (2008) views the
concept of customer satisfaction as central to Customer Relationship Management. In today’s
competitive business world, it is beneficial for businesses to retain their already existing
customers.

Also Mary et al., (2007) observe that financial service institutions like the sector are focusing on
retaining their existing customers and in doing this, they work on the services provided, develop
smarter use of technological use e.g. digitization etc. revisit processes to improve the customer
experiences and ensures that the organizational culture supports satisfaction. Customer
satisfaction has been shown to be a primary goal in firms that practice relationship marketing.
While the precise meaning and measurement of customer satisfaction can vary between
industries and firms there appears to be a general consensus that focusing on customer

21
satisfaction can yield several economic benefits (Buttle, 2004). As customer tenure lengthens,
the volumes purchased grow and customer referrals increase.

Customer satisfaction is extremely vital for business to remain competitive. It has recently
become more significant compared to customer acquisition. According to research conducted by
Maxham (2000) customer satisfaction had been measured by four dimensions, that is, overall
firm satisfaction; positive words of mouth; repeat purchase intentions; and loyalty to the firm.
Also a study done by Lin and Wu, (2011), revealed that there exists a statistically significant
relationship between quality commitment, trust and satisfaction and customer satisfaction and
future use of product. In addition, study found that trust and commitment lead directly to
cooperative behavior that are conducive to relationship marketing success; and important in the
establishment and maintenance of long term relationships with customers (Robert-Lombard and
Du Plessis, 2012). For the purpose of this study, customer satisfaction is defined as the
company’s ability to maintain their obtainable customer base.

2.1.7 Components of Customer Satisfaction

Retaining customer relationships are viewed as one of the crucial possession for companies
(Collier and Bienstock, 2006). As a result, some researchers have developed interest in
examining the strategies for attracting and sustaining good relationships with obtainable
customers (Gonza´lez et al., 2004). Finn, (2005) suggests that, Relationship quality plays an
important role in sustaining long lasting relationship. Information as a main resource can help
organizations to appreciate their customers and reinforce their customer base against their
competitors (FruchterandSigue´, 2005).

Thus, distributing information with customers can make and retain the assurance of customers.
One of the efficient way to attract prospects is through the assistance of retain customers who
offers referrals (Johnson et al., 2003; Collier and Bienstock, 2006). A referral from existing
customers permits the sales force of the organization to penetrate into markets which are
untouchable (Boles et al., 2000). However, this strategic business potential of referrals is
disregarded very little attention has been given to it academically (see Boles et al., 2000). Finn,
(2005) suggests that, keeping high quality relationship with clients seems to boost their readiness
to offer referrals. This leads to achievement of retained relationship. As soon as clients expect

22
continued dealings, the clients will be willing to respond by referring colleagues, family and
friends to their companies (Johnson et al., 2003).

Base on the above academic literature reviewed, it is suggested that, when quality relationship
exist between customers and their service providers, the relationship is sustaining mainly by the
distribution or sharing of information. Customers then feel close and part of the company which
boost their moral to provide referrals to their service providers. This happens mainly because
customers anticipate future interaction with their service providers. Therefore, the components of
customer satisfaction in this study are; relationship quality, information sharing, willingness to
provide referrals and anticipation of future interaction.

2.1.8 Theoretical Foundation

The relationship marketing (RM) has been considered as the theoretical foundation of the study.
The word relationship marketing was firstly proposed by Berry 1983 who defines it as
“fascinating, sustaining, and increasing relationships with customers”. Relationship marketing is
definite as founding relations with customers and other stakeholders at an income, by reciprocal
exchange and realization of promises (Gronroos, 1991). According to relationship marketing
theory the base of customer relationship management can be found in relationship marketing
(Frow& Payne, 2006). The words “relationship marketing” and CRM are often used
interchangeably (Parvatiyar & Sheth, 2001). Relationship marketing theory accentuates a long-
standing interactive links among the supplier and the customer, as well as long-standing
productivity, to allow the co-creation of value slightly than its independent sharing (Harker &
Egan, 2006).

Relationship marketing is an important thought for new types of marketing, and the practice of
using CRM to handle relations with customer (Gummesson, 2008). Consequently, according to
literature this study customer relationship management based on relationship marketing theory to
create long-term relationships with customer to attain profits and competitive benefits. (Kotler
2000), Relationship marketing has an aim to make long-standing, reciprocal fulfilling relations
with customers, dealers or distributors in order to get or maintain their long-standing preference
and businesses.

23
2.2 Empirical Review
Different banks have different cultures, which are based on the beliefs, objectives, and
aspirations of the organization. As a result, regardless of the firm's dynamics, banks will strive to
defend and retain the organization's culture. According to (Bremer, 2012), it may be necessary to
alter or even change the organizational culture in some cases 26 to fit new market shifts and
needs. While firms will seek to keep their culture, market realities and client tastes and
preferences may force a firm to consider modifying its culture, (Cameron & Quinn, 2011).
According to (Dawson, 2010), two powerful causes will push an institution to modify its culture:
competition and the need to sustain customer loyalty. Changes in organizational culture have
varying implications on a company's performance depending on the scale of the change and the
subject matter of the change. According to (Bremer, 2012), changing an organization's culture in
a way that has various effects on different parts of the market can be detrimental to the entity's
performance. It is vital for firms to plan ahead of time for the effects of a transformation in
organizational culture, (Dawson, 2010). This shows that, while a cultural transformation may be
necessary for the organization's existence, it may be harmful to other aspects of the firm. Many
organizational beliefs and values are formed as a result of establishing an identity, and these
beliefs and values are then utilized to guide stakeholders' behavior in organizations.

An entity's identity is defined by its beliefs and values, according to (Zakari & Owusu-Ansah,
2013). Researchers looked at organizational culture and performance in an empirical study of the
Organization business in Ghana. Beliefs and values are frequently established in reaction to an
organization's goal and vision, according to (Zakari & Owusu-Ansah, 2013).
This helps to explain why various organizations hold distinct values and ideas. According to
(Zakari & Owusu-Ansah, 2013), organizations strive to implant these beliefs and values in all
employees, especially through the human resources department, in order to maintain the
organization's identity. The recruitment process, according to (Cameron & Quinn, 2011), is a
good tool for enforcing the organization's ideas and values.

According to (Cameron & Quinn, 2011), the organization's values and beliefs should be instilled
in individuals as part of the recruitment and training process to ensure that the personnel's
development encompasses the organization's viewpoints and values. In a study on CRM and
organizational performance in Nigeria, Gabriel and Adiele (2013) discovered that the process of

24
having all individuals in the organization appreciate and identify with the culture is a critical
component in enforcing the culture of an organization. The authors also argue that imposing a
culture on an organization's employees is ineffective. They further argue that imposing culture
by force defeats the purpose of cultural development in the first place. A superior solution in this
circumstance would be to design a culture enforcement plan that assures that the entity's
personnel willingly identify with the produced culture.

Establishing a new culture in a business and having individuals freely adopt and implement 27 it
in their daily operations is a big difficulty, (Boateng, 2012). A study on the dynamics of
organizational culture shift (Shahzad, Luqman, Rashid, Khan, & Shabbir, 2012) revealed a
number of factors that influence the successful transition from one culture to another.
Employee attitudes regarding current and proposed cultures have a substantial impact on the
success of culture transformation, according to (Shahzad, Luqman, Rashid, Khan, &Shabbir,
2012). This research contradicts (Burton Shaw-Gunn & Salameh, 2009), who argue that
involving employees in the formation of a new culture can influence the efficacy of a culture
change. This is due to the fact that people are naturally averse to change. One of a company's
most significant aims is to gain and increase market share. As a result, businesses will design
customer retention strategies.

Kumar (2008) defines customer retention tactics as "steps done by an entity to ensure that
customers remain loyal to the company's brand." According to (Ferrell & Hartline, 2008),
customers can be kept in a variety of methods, including identifying, fulfilling, and possibly
exceeding their expectations. According to Customer Relationship Management, customer
retention strategies (CRS) are components of customer relationship management (Jha, 2008).
(CRM). Because organizations will examine client expectations when designing CRS, they will
be able to develop effective and well-informed strategies. As a result, management has a
thorough understanding of client expectations, allowing them to develop strategies to
achieve those goals Jha, (2008). As a result, the CRM improves as a result of exceeding
customers' expectations.

According to (Keiningham & Vavra, 2001), meeting customers' expectations can be challenging
at times. For example, if a company expects to receive high-quality products and services at low
prices, this strategy could hurt revenue. In this regard, (Ferrell & Hartline, 2008) advise

25
determining an equilibrium level below which CRS will have a negative influence on the long-
term performance of the company. Businesses typically use a range of techniques to keep clients.
The strategy chosen is frequently influenced by a variety of elements, one of which is the sort of
market in which the company works (Auka, 2012). A company operating in a monopolistic
market is less likely than a company operating in a completely competitive market to implement
an intense client retention strategy in order to increase performance (Gabriel &Adiele, 2013).
Customer retention strategies include the use of loyalty programs in which customers are
rewarded in some way for their loyalty to the company, the monitoring of client relationships,
and the development of customer clubs, among others. According to a study on the effectiveness
of customer retention approaches (Molapo & Mukwada, 2011), 28 different strategies are
adopted depending on their suitability for client retention. To keep clients, (Molapo & Mukwada,
2011) argue for the invention and implementation of lock-in methods. Lock-in strategies are ones
that are designed to lure customers with lucrative offers while simultaneously making switching
to other goods or services difficult.

(Keiningham &Vavra, 2001) disagree with this approach, stating that a lack of variety may cause
clients to acquire a negative attitude toward the organization, and, more crucially, that there are
other substitutes available at more favorable terms.

Instead, (Keiningham &Vavra, 2001) suggest that monitoring customer relationships is the most
effective way to keep consumers. Monitoring customer connections, according to (Keiningham
&Vavra, 2001), comprises measuring the clients' overall well-being.

As a result of the qualitative and quantitative client assessments, the company is more proactive
when making plans. Such an approach would be based on gaining a deeper understanding of the
clients' desires, allowing products and services to be adapted to their needs.
The introduction and growth of technology has resulted in considerable changes in the
corporate sector, resulting in completely different approaches and responses to specific
situations. One of the areas of the business industry that technology has transformed is the
operations division. According to experts, technology has enhanced the efficiency with which
businesses are run (Sheth, Parvatiyar, & Shainesh, 2001). Technology has had a huge impact on
CRM, according to (Sturdy, 2012). Technology has improved communication between
businesses and their customers, helping them to better understand and respond to their interests

26
and preferences, according to (Sturdy, 2012). CRM may considerably improve an organization's
performance, according to (Eid, 2012). Using technology to improve CRM positions a company
in a better position to perform better in this area. The consequences of incorporating technology
into every aspect of a company's operations are immense.

(Heczková & Stoklasa, 2014) conducted a study on the importance of database implementation
in enterprises and discovered a bevy of benefits. Database systems, according to (Heczková &
Stoklasa, 2014), can have a positive impact on CRM since they make it easier to handle and
retrieve enormous amounts of client data. According to (Heczková & Stoklasa, 2014), databases
can be especially effective in keeping track of individual clients' expectations and so enhancing
the potential for tailoring services to the client's specific demands. They stress the importance of
implementing database usage, notably in the financial sector.

Databases, according to (Injazz & Karen, 2003), can significantly assist financial organizations
in complying with Know Your Customer (KYC) 29 rules. The KYC rules require financial
institutions to take steps to verify their clients' identities due to the prevalence of problems such
as identity theft. Such strategies are essential for developing a positive image for a company and,
as a result, gradually improving the entity's performance (Injazz & Karen, 2003). Technology,
according to (Nigel, Kraemer, & Gurbaxani, 2004), plays a crucial role in CRM enhancement
because of its wide range of applicability. Technology has a huge impact on how activities and
processes are modified, according to (Sturdy, 2012). According to a study on the impact of
technology on the Organization industry (Gabriel &Adiele, 2013), technology has produced a
near-total transformation of the sector. According to the study, this assumption is predicated on
the introduction of alternate Organization channels (ABCs). ABCs have transformed the way
organizations are covered in terms of location and demographics (Gabriel &Adiele, 2013). Two
of the ABCs noticed are mobile organization and internet organization. These ABCs, according
to (Ampoful, 2012), have resulted in a variety of services previously unavailable to clients. This
is linked to better performance in the organizing industry.

Social media platforms, which are essentially technological products, can be used to improve
CRM and hence increase an organization's performance. Customer involvement is required to
guarantee that CRM is effective, according to (Kangu, Wanjau, Kosimbei, & Arasa, 2013).
Businesses' use of social media platforms for both marketing and customer contact makes this

27
possible. The relevance of entities' relationships with their customers via social media platforms
is emphasized by (Kangu, Wanjau, Kosimbei, &Arasa, 2013). Customers are more likely to
provide reliable feedback as a result of these interactions. Social networking methods are highly
accurate in providing information about customers' interests, preferences, and expectations in the
Organization industry. Organizations can work from a position of knowledge with such solid
data, allowing them to establish strategies based on facts (Karr, 2012). Service quality is defined
by (Schneider & White, 2004) as the overall influence of a certain service's performance on the
level of satisfaction received by the service's recipient. The management of this service quality in
order to ensure that the service gives improved satisfaction is known as service quality
management (SQM).

According to Burton Shaw- Gunn & Salameh (2009), all properties of an entity, including
seemingly trivial details, influence its performance. As a result of this assumption, it becomes
critical to ensure that all components of an organization are well managed in order to ensure that
all operations are at their peak. SQM is critical since it involves customers directly. The quality
of service 30 supplied to a client has a major impact on the chance of the consumer developing
loyalty to the company (Peris-Ortiz & lvarez-Garca, 2014). According to a study (Brink &
Berndt, 2004) on SQM and business performance, there is a direct correlation between the two.
This means that improving SQM has a positive impact on an organization's performance.
However, because everyone's tastes and preferences are different, achieving each client's
expectations remains a challenge. e. In this case, (Sakwa & Oloko, 2014) suggests that while
clients' expectations vary, the changes are minimal. As a result, (Sakwa
& Oloko,, 2014) advocates for the standardization of an ideal point. Measures such as the
adoption of a customer service policy can help to standardize customer service (Karr, 2012).

28
2.3 Conceptual Framework and Hypotheses
The conceptual framework hypothesized that CRM directly affects customers’ satisfaction. The
study assumes that customers’ satisfaction depends on the successful implementation of CRM.
The underlying arguments concerning the conceptual framework and hypotheses are informed by
empirical and theoretical literature review.

Independent Variables Dependent Variable

Conflict Handling

Communication

Customers
Trust Satisfaction

Commitment

Source: Researcher’s own model

Figure 1 Conceptual framework

2.4 Research Hypotheses

In line with the above specific objectives of this study, the following alternative hypotheses are
formulated:

H1: Conflict handling dimension of CRM has statistically a significant and positive effect on
customers’ satisfaction in Oromia Bank Bosat Branch, Adama

H2: Communication dimension of CRM has statistically a significant and positive effect on
customers’ satisfaction in Oromia Bank Bosat Branch, Adama

H3: Trust dimension of CRM has statistically a significant and positive effect on customers’
satisfaction in Oromia Bank Bosat Branch, Adama

H4: Commitment dimension of CRM has statistically a significant and positive effect on
customers’ satisfaction in Oromia Bank Bosat Branch, Adama

29
 CHAPTER THREE

RESEARCH METHODOLOGY

Introduction
This chapter of the study deals with methodology of the study. It includes the research design,
study population, sample size and sampling techniques, source of data and method of data
collection, and presentation and methods of data analysis.

3.1 Research Approach

Research approach can be classified in to qualitative and quantitative. Qualitative analysis is the
analysis of qualitative data such as text data form interview transcripts, unlike quantitative
analysis which, is statistics driven and largely independent of the researcher. Quantitative
research is the systematic and scientific investigation of quantitative properties and phenomena
and their relationships. Kothari, (2004) stated that the objective of quantitative research is to
develop and employ mathematical models, theories and hypothesis pertaining to mutual
phenomena. In this study quantitative research approach was employed. For the quantitative
methodology, researcher was used the scientific method, which starts with the specific theory
and hypotheses, and where researchers quantitatively measure and analyze based on established
research procedures (Swanson & Holton, 2005).

3.2 Research Design

This study adopted both descriptive and explanatory research design which was cross-sectional
in nature. According to Copper and Schindler (2003), cross-sectional research design aims to
obtain accurate data from respondents at a specific point in time. Descriptive research design
involves ‘’what, when, where, why and how‟ of consumers’ behavior (Copper & Schindler,
2003). It provides an accurate description of predictions, narration of facts and characteristics of
phenomena. On the other hand, explanatory research design is used to address the causal
relationships between the variables in order to determine their significance.

This research design is concerned with explanations of the nature of relationships between
variables which is explained by hypothesis testing (Copper & Schindler, 2003). For the purpose
of this study, the researcher was conducted an explanatory research in attempt to explain

30
statistically the cause and effects relationships between customer relationship management and
customer satisfaction in Oromia Bank Bosat Branch Adama City.

3.3 Target Population

The target population for this study was corporate, medium micro and retail customers of
Oromia Bank Bosat Branch, Adama. Currently the Bosat branch, Adama has about 2200
number of clients. These populations were chosen because they possess the required information
on the topic.

3.4 Sample size and Sampling Techniques

The study was adopted Yamane’s formula of sample size with an error of 5% and with
a confidence coefficient of 95% (Yamane, 1967) for calculating a finite population, the
calculation yields 451 respondents.

𝑁
n=
1 + 𝑁(𝑒)2

Where: n is the sample size

N is the population size and;

℮ is the allowed margin of error = 0.05

Accordingly, n=2200/ (1+2200(0.05)2) = 393

After deciding sample size, the researcher applied systematic sampling method in order to reach
at the final respondents. According to Mugenda and Mugenda (2003) and Saunders (2009),
systematic sampling method involves selecting Kth subject for inclusion in the sample. In this
research every nth term (where n was determined by any page number of a book that contains a
minimum of 393 respondents randomly). Therefore, the study has taken 393 respondents as
target respondents from these clients who borrowed money from the institution.

3.5 Source of Data and Method of data collection

The study was used of both primary and secondary data in its construction. Primary data was
collected mainly through questionnaires from customers. The questionnaire was containing cloth
ended questions where respondents’ opinions is quantified by rating them on a five point Likert

31
scale ranging from 1 = strongly disagree to 5 = strongly agree. Secondary sources of data for this
study was include annual reports, statistical report, and other relevant data sources were used and
reviewed for undertaking this study.

The questionnaire was divided into two main sections I and II. Section one describes the
demographic profile of the respondents including gender, age range, education level, and for how
many years the customer using the institution services. Section two (II) was divided into two
parts (A, & B) representing Customer Relationship Management Practices, and Customer
satisfaction respectively. Customers’ satisfaction scale is adopted from Rai et al., (2013).

3.6 Research validity and reliability

According to Sekaran (2003), validity is the degree by which the sample of test items represents
the content the test is designed to measure. Also validity is the degree to which a test measures
what it was intended to measure (Kothari, 2004). In this study to ensure the instrument validity,
the questionnaires were provided to thesis advisor, research experts, manager and customers.
They were asked to check the quality of the questionnaires, if they measure the intended
variables, and if they serve the purposes of the research. Their comments were taken in
consideration for developing the final questions.

Reliability of research instrument is the extent to which it produces consistent results on repeated
trials and measures. It reflects the degree to which the test scores are free from measurement
errors (Cooper and Schindler, 2003). Reliability of the instrument is determined by conducting a
pilot test before the data collection exercise commenced. The test was conducted using a pilot
sample of 40 clients who are excluded from the main survey. The pilot study results were enable
the researcher to assess the content, sequence, form and layout of questions and difficulties in
comprehending the questions as recommended by Malhotra et al., (2002). The study also applies
Cronbach’s alpha coefficient to check the reliability of the instrument which is recommended by
Malhotra et al, (2002) as a standard measure of inter item consistency reliability. Reliability
refers to the consistency of measurement and is frequently assessed using the test–retest
reliability method (Saunders, Lewis &Thornhill, 2009). Computation of Cronbach’s Alpha score
was used in measuring internal reliability (Shukla, 2008). This facilitated the necessary revision
and modification of the research instrument.

32
Table 3.1 CRM Dimensions Reliability Statistics

Items Number of Items Cronbach’s Alpha

Conflict Handling 9 0.80

Communication 7 0.74

Trust 8 0.77

Communication 3 0.78

Customer Satisfaction 8 0.73

Overall 35 0.87

Source: Researcher’s survey, 2023

3.7 Data Analysis methods

Data was analyzed by using both inferential statistics and descriptive statistics and measures to
summarize and relate variables. To analysis the data, different kinds of statistical methods
including descriptive statistics (frequency, percentage and average) and inferential statistics
(correlation and multiple regressions) were used. Descriptive statistics was used mainly to
organize and summarize the demographic data of the respondent. And correlation analysis was
used to show the relationship between CRM and customer satisfaction in Oromia Bank Bosat
Branch Adama City. On the other hand, multiple regression analysis was carried out to measure
the effect of customer relationship management on customer satisfaction. Data from
questionnaire was analyzed by Statistical Package for Social Sciences (SPSS) because it is user
friendly and widely accessible (Lugumiliza, 2012)

Also study was used multiple regression models to analyze the effect of independent variables on
the dependent variable using the combined linear equation. The application of multiple
regression models was to establish the line of best fit and the most accurate model for describing
the relationship between the independent variables and dependent variable. The combined linear
regression model for establishing the effect of multiple independent variables on dependent
variable is stated as follows:

33
CS=b0+b1CH+b2Cm+b3T+b3Ct+ε̍

Where: CS = Composite index of customer satisfaction

b0 = constant, b1, b2, b3 = Regression coefficients

CH = Conflict handling, Cm = Communication, T = Trust, Ct=Commitment and ε̍ = Error term

3.8 Ethical Considerations

This study was undertaken within ethical frameworks of social research which are
confidentiality, informed consent and the use of no deception (Saunders, 2003). The
researcher was seeking approval by obtaining a letter of introduction from Harambee University
to conduct the research and an introductory cover letter was availed to the respondents. The letter
contains the brief explanation about the purpose of the study under the subject and why their
contribution is important. The respondents were briefed before questionnaire administration and
they were assured their right not to participate, confidentiality and that the data collected were
used for academic purposes only.

34
 CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATIONS

4.1 Introduction
This chapter displays the major findings, analysis and discussion of the sample population based
on the primary data gathered from customers of Oromia Bank Bosat Branch. The information
obtained from the respondents was summarized using frequency distribution. The summarized
data was then analyzed by using descriptive, correlation and regression to check the hypothesis
and answer the research question. Data was analyzed using SPSS version 20. Accordingly, first
the sample respondents’ information was presented using frequency and valid percent. Then
customer’s level of agreement and disagreement for each dimension and the dependent variable,
customer satisfaction, presented using the aggregated mean value. At last results of correlation
and regression analysis are presented and discussed. After distributing 393 questionnaires to the
targeted customers of Oromia Bank Bosat Branch, a total of 347 questionnaires were collected
this accounted for 88.3% of the total distributed questionnaires. Then, further screened for
missing data and other inconsistency, it was found 305 valid and usable questionnaires for
statistical analysis.

4.2. Demographic Characteristics of the Respondents

The first part of the questionnaire consists of the demographic characteristics of the respondents.
It requested a limited amount of information related to their personal and socio-demographic
status. Accordingly, the following variables such as sex, age, education and customer category
were summarized and described in the subsequent Figures below.

35
 Sex of Respondents

Female

47% Male
53%

Figure 4.1 Sex data

The results on Figure 4.1 showed that out of 305 respondents participated in this study, both
male 163 (53.3%) and female customers shared similar proportions 142 (46.6%) even though
male respondents were slightly higher in number. This implies that almost equal number of male
and female respondents participated in this study.

Age of Respondents

Above 60

46-60

31-45

18-30

0 20 40 60 80 100 120 140

Series 3 Series 2 Series 1

36
In terms of Figure 4.2 above, the age range of the respondents, majority 116(38.0%) was found
within 18 - 30 years old followed by 102(33.4%) and 56(18.4%) were found within the age range
of 31 – 45 years and 46 – 60 years respectively. The rest 31(10.2%) were above 60 years old.
This indicates that adult respondents below 45 years old were larger in number than elders. It’s
true that about 70% of Ethiopian population is young and can be part of the study at large. This
finding is relevant in its indication that customers of Oromia Bank are respondents from all age
groups, young to the elders. However, it would be interesting to cross reference this finding with
findings regarding other variables and see if there’s valuable insight to arrive at.

Respondent's Level of Education

140
120
100
80
60
40 Series 3
20
0 Series 2
High School
1st degree
Masters and Series 1
above Others

0-20 20-40 40-60 60-80 80-100 100-120 120-140

Figure 4.3 Educational Level

Their educational backgrounds reflected that the majority 127 (42.1%) of the respondents were
first degree holders followed by 78 (25.8%) high school certification, 52 (17.2%) diploma and
the rest 48 (15.9%) are Masters and PhD holder respectively.

Almost two fifth of the respondents were well-educated educated and it was a good opportunity
to get respondents with possibility of understanding the questions and overall purpose of this
survey would be higher.

37
 Customer's Category
Series 1 Series 2

120

100

80

60

40

20

0
CORPORATE MEDIUM AND RETAIL
MICRO

Figure 4.4 customer’s category

Finally, majority of the respondents were retail customers which comprise 112(36.7%) while the
rest 93(30.5%) represents the corporate customers and 100(32.8%) are medium and micro
customers. Oromia Banks customers are categorized into three basic groups – retail, medium
micro and corporate customers. It is evident that the company’s retail customers are more in
number. In general, it can be concluded that the overall demography of the respondents was
characterized by domination of both male and female respondents, well-educated adults under
retail customer category. Majority of the respondents were retail than medium micro and
corporate customers.

4.3 Descriptive Analysis

Under the description of study variables, summary of CRM dimensions (conflict handling,
communication, Trust, Commitment) and Customer Satisfaction are discussed. Respondents
evaluated this dimension with five-point Likert scale. According to Best (1987), the scale is set
in such a way that respondents strongly disagreed if the mean scored value is in the range of 1.00
– 1.80; disagreed within 1.81 – 2.60; neither agreed nor disagreed within 2.81 - 3.40; agreed if it
is in the range of 3.41 – 4.20; while strongly agreed when it falls within 4.21 – 5.00. In addition,
standard deviation shows the variability of an observed response.

38
Table 4.1: Descriptive Statistics

N Mean Std. Dev.

Conflict handling 305 3.75 1.235
Communication 305 4.00 1.241
Trust 305 3.92 1.221
Commitment 305 4.52 1.164
Customer Satisfaction 305 3.81 0.994
Valid N(list wise) 305
(Source: Own Survey, 2023)

Referring the results on Table 4.2, the grand mean of conflict handling dimension was found to
be 3.75 (Std. 1.235). It indicates that the majority respondents inclined to agree on the
importance of conflict handling on their satisfaction. The standard deviation indicates
considerable variation of the respondents in regards to the handling of the conflict. This implied
that handling the disputes between customers and the bank influences the respondents’
satisfaction level.

Referring the communication dimension of CRM, (grand mean, 4.00 with Std. 1.241) reveals
majority of the respondents agreed on importance of communication on their satisfaction.
Besides, the ease of communicate, its convenience, exceeding customer’s expectation affect the
respondents’ level of satisfaction. The study found that communication was one of the variables
that had a strong positive relationship on customer satisfaction. The study recommended that
communication between the bank employees and customers would be improved by use of
appropriate and preferred communication methods, trustfulness and honesty communication that
is not misleading, informing clients about new products or services, and their usage and benefits.

As far as trust dimension, the grand mean of 3.92 (Std. 1.221) indicates that the respondents
agreed on the necessity of trust toward their level of satisfaction, courteousness of employee
could be obtained after effective trust. However, they neither agree nor disagree on feeling safe
transaction with Oromia bank, though variation in their perception was evident with Std. of
1.221. This implies the company went to a basic step in satisfying what the respondents’ wanted
in the market through problem recognition, information search, and choice and post decision

39
evaluation. This study found out that there was a strong positive relationship between trust and
customer satisfaction. The study recommended that openness and honesty to be observed in
order to retain customers.

The grand mean (4.52) of commitment dimension illustrates that commitment leads to increase
satisfaction level of Oromia bank customers. Commitment increases the quality of the
relationship bonds necessary for high – performance exchanges; relationship investments
improve other performance – enhancing aspects of the exchange. Furthermore, commitment
represents exchange partners’ desire to maintain valued relationship and thus their relational
motivation toward partners.

Customer satisfaction refers to the extent to which customers are happy with the products and
services provided by a business. In this regard, the total mean of this dimension was found to be
3.81. It implies that majority of the respondents were satisfied with the overall service provided
by Oromia bank. This leads to customers loyal to the company and reflects positive word of
mouth as well as recommend to others to use the company service.

4.4. Inferential Statistics

Inferential statistics comprises different tests namely correlation analysis among variables,
assumption of data test for their suitability or fitness to the intended regression analysis model
namely normality, collinearity, linearity and homoscedasticity, and regression analysis. Finally,
the multi-regression analysis in terms of model summary, ANOVA test and determination of
beta coefficients are conducted to address the objectives of this study.

4.4.1. Correlation Analysis

The study conducted a Pearson correlation analysis to measure the strength of linear association
between two variables. Correlations are perhaps the most basic and most useful measure of
association between two or more variables (Marczyk, Dematteo & Festinger, 2005). It helps in
determining the strength of association in the model. Pearson correlation coefficients reveal
magnitude and direction of relationships (either positive or negative) and the intensity of the
relationship (-1.0 + 1.0). To interpret the direction and strengths of relationships between
variables, the guidelines suggested by Field (2005) were followed. His classification of the
correlation coefficient (r) refers 0.1– 0.29 is weak; 0.3 – 0.49 is moderate; and > 0.5 is strong.

40
Table 4.2: Correlation Analysis

Correlations
Conf_H Communication Trust Commitment Cust_Satis
Conf_H 1
Communication .446** 1
Trust .478** .389** 1
Commitment .572** .590** .517** 1
Cust_Satis .443** .557** .234** .483** 1
**. Correlation is significant at the 0.01 level (2-tailed); N=305
Source: Researcher’s survey,
2023

As can be observed from the Person correlation result, the correlations between the dependent
and independent variables were statistically significant. In addition, the statistical evidence
depicted that all independent variables have strong positive correlation with customer
satisfaction.

Table 4.2 shows that there were significant correlation coefficients established between customer
relationship management dimension and customer satisfaction. From the above table, it is
observed that in the overall, there is a positive and significant relationship between all the
predictor variables and outcome variable. The correlation coefficients (r) for all variables range
from 0.234 to 0.557, which show weak to moderate correlation. The most correlated dimension
with customer satisfaction is communication dimension of CRM (r=0.557, p<0.001) followed by
commitment (r =.483, p<0.001), conflict handling (r=.443, p<0.001), and trust (r =.234 p<0.001).
Therefore, this implies that as the CRM dimensions performs better, the customer satisfaction
also do same and vice-versa.

4.4.2. Regression Analysis

4.4.2.1. Assumption Tests of Linear Regression Model

Linear regression is an analysis that assesses whether one or more predictive variables explain
the dependent (criterion) variable. The regression assumptions are Multicollinearity,
Homoscedasticity and Normality test.

41
4.4.2.1.1. Multicollinearity Test
According to Brooks (2008), Multicollinearity will occur when some or all of the independent
variables are highly correlated with one another According Burns and Bush (2003), the VIF is a
single number, and a rule of thumb is that as long as the VIF is less than 10, multi-collinearity is
not a concern. With a VIF of greater than 10 associated with any independent variable in the
multiple regression equation, it is prudent to remove that variable from consideration or to
otherwise reconstitute the set of independent variables.

Table 4.3: Multicollinearity Test

Coefficients a
Model Collinearity Statistics
Tolerance VIF
Conflict handling .563 1.777
Communication .815 1.226
Trust .714 1.400
Commitment .600 1.667
a. dependent variable: COS
(Source: Own Survey, 2023)

4.4.2.1.2. Homoscedasticity
The normal scatterplot chart plots the values one would expect to get if the distribution were
normal (expected values) against the values actually seen in the data set (observed values). The
expected values are a straight diagonal line, whereas the observed values are plotted as
individual points. If the data are normally distributed, then the observed values (the dots on the
chart) should fall exactly along the straight line (meaning that the observed values are the same
as you would expect to get from a normally distributed data set). Any deviation of the dots from
the line represents a deviation from normality. Therefore, the scatterplot plot of the all variable
considered in this study looks like a straight line with a wiggly snake wrapped around it, then it
showed little deviation from normality. In Figure 4.5, it shows that each of the overall outcome
against the predictor variable. The plot shows that how the points are randomly and evenly

42
dispersed throughout the plot. And, these patterns are indicatives of a situation in which the
assumption of linearity and homoscedasticity have been met.

Figure 4.5: Homoscedasticity Test

4.4 .2.1.3. Multivariate Normality Test

To check that a distribution of scores is normal, it needs to look at the values of Kurtosis and
Skewness. Both of which have an associated standard error. The values of skewness and kurtosis
should be zero in a normal distribution. Positive values of skewness indicate a pile-up of scores
on the left of the distribution, whereas negative value indicates a flat distribution. The further the
value is from zero, the more likely it is that the data are not normally distributed.

There are two main methods of assessing normality - graphically and numerically. This study
used graphic method to check for normality assumption.

Figure 4.5 depicted below shows that the standardized residuals tended to follow a straight
line diagonally from the bottom left to the upper right. The fact that the residuals follow a
somewhat straight-line provides evidence that the assumption of normality has not be grossly
violated. A quick inspection of Figure 4.5 supports the assumption of normally distributed
residuals. Similarly, a test of the histogram of standardized residual should show a roughly
normal curve when the assumption of regression and most technique met that error terms are

43
normally distributed. The histogram figure 4.6 below shows that the assumption of normally
distributed error is met.

Figure 4.6 Normal probability plot (P-P) of the regression standardized residuals.

Figure 4.7: Frequency distribution of standardized residual

44
4.4 .2.1.4. Multiple Linear Regression Analysis
According to Marczyk (2005), linear regression is a method of estimating or predicting a value
on some dependent variable given the values of one or more independent variable. Hence, in this
study, multiple regression analysis is used to know by how much the independent variables i.e.,
customer relationship management dimensions explain the dependent variable - customer
satisfaction.

Model Summary

Table 4.4: Model Summary

Model Summary

Model R R Square Adjusted R Std. Error of the Durbin-

Square Estimate Watson
1 .843a .710 .707 .54407 1.683
a. Predictors:(Constant), CH, Cm, T, Ct
b. Dependent Variable: COS
(Source: Own Survey, 2023)

In the above table, the R2 is a statistical measure of how close the data are to the fitted
regression line. It is the coefficients of multiple determinations for multiple regressions.
The value of R2implies .710 (71.0%) of the variance in the dependent variable (customer
satisfaction) can be predicted from the CRM variables. The remaining 29.0%of the
variation in the dependent variable is not explained.
Table 4.5: ANOVA Test

ANOVAa

Model Sum of Squares df Mean Square F Sig.

Regression 217.868 4 54.467 184.000 .000b

1 Residual 88.805 300 .296

Total 306.674 304

a. Dependent Variable: COS

b. Predictors:(Constant), CH, Cm, T, Ct
(Source: Own Survey, 2023)

45
The ANOVA table shows the overall significance/acceptability of the model from a
statistical perspective. As the significance value of F statistics shows a value of 184.000
and p-value (.000), which is less than p<0.05, the model is significant. This indicates that
the variation explained by the model is not due to chance.

Table 4.6: Estimated regression Coefficients

Coefficients a

Model Unstandardized Coefficients Standardized T Sig.

Coefficients
B Std.Error Beta

(Constant) .420 .119 3.525 .000

CH .296 .032 .379 9.150 .000

1 Cm .149 .023 .225 6.554 .000
T .281 .032 .322 8.750 .000

Ct .165 .033 .200 4.975 .000

a. Dependent Variable: COS
(Source: Own Survey, 2023)

Where,

COS= Consumer Satisfaction,

CH = Conflict handling,

Cm = Communication,

T = Trust and

Ct = Commitment

0= Constant,

1to 4 =beta coefficients,

And e = error terms.

COS= .420 + .296CH + .149Cm + .281T +.165Ct

46
The data findings analyzed also shows that taking all other independent variables at zero, a
unit increase in Conflict handling will lead to a 29.6 % increase in customer satisfaction in
the case of Oromia Bank. A unit increase in communication will lead to a 14.9 % increase
in customer satisfaction in the case of Oromia bank; a unit increase in trust will lead to a
28.1%increase in customer satisfaction in the case of Oromia bank and a unit increase in
commitment will lead to a 16.5% increase in customer satisfaction in the case of Oromia
bank.

47
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Major Findings

Based on the results of finding, the grand mean of conflict handling dimension was found to be
3.75 (Std. 1.235). It indicates that the majority respondents inclined to agree on the importance
of conflict handling on their satisfaction. The standard deviation indicates considerable variation
of the respondents in regards to the handling of the conflict. This implied that handling the
disputes between customers and the bank influences the respondents’ satisfaction level.

Referring the communication dimension of CRM, (grand mean, 4.00 with Std. 1.241) reveals
majority of the respondents agreed on importance of communication on their satisfaction.
Besides, the ease of communicate, its convenience, exceeding customer’s expectation affect the
respondents’ level of satisfaction.

The study found that communication was one of the variables that had a strong positive
relationship on customer satisfaction. The study recommended that communication between the
bank employees and customers would be improved by use of appropriate and preferred
communication methods, trustfulness and honesty communication that is not misleading,
informing clients about new products or services, and their usage and benefits.

As far as trust dimension, the grand mean of 3.92 (Std. 1.221) indicates that the respondents
agreed on the necessity of trust toward their level of satisfaction, courteousness of employee
could be obtained after effective trust. However, they neither agree nor disagree on feeling safe
transaction with Oromia bank, though variation in their perception was evident with Std. of
1.221. This implies the company went to a basic step in satisfying what the respondents’ wanted
in the market through problem recognition, information search, and choice and post decision
evaluation. This study found out that there was a strong positive relationship between trust and
customer satisfaction. The study recommended that openness and honesty to be observed in
order to retain customers.

The grand mean (4.52) of commitment dimension illustrates that commitment leads to increase
satisfaction level of Oromia bank customers. Commitment increases the quality of the
48
relationship bonds necessary for high – performance exchanges; relationship investments
improve other performance – enhancing aspects of the exchange. Furthermore, commitment
represents exchange partners’ desire to maintain valued relationship and thus their relational
motivation toward partners.

Customer satisfaction refers to the extent to which customers are happy with the products and
services provided by a business. In this regard, the total mean of this dimension was found to be
3.81. It implies that majority of the respondents were satisfied with the overall service provided
by Oromia bank. This leads to customers loyal to the company and reflects positive word of
mouth as well as recommend to others to use the company service.

49
5.2 Conclusions
The aim of this study was to investigate the effect of customer relationship management
practices on customer satisfaction in the case of Oromia bank bosat branch in Adama. Some of
the recommendations made might help the effective implementation of customer relationship
management marketing practices so as to bring improvement in retaining the existing customers
as well as create or attract new patron customers. The multiple linear regression analysis, based
on the primary data collected through standardized questionnaire, was conducted with a total of
305 valid and usable responses. The objectives of the study were to investigate the influences of
conflict handling, communication, trust and commitment dimensions of CRM on customer
satisfaction of Oromia bank customers in Adama. Based on the findings summarized in the
previous section, the following conclusions were drawn.

Results of the findings illustrated that conflict handling was found to be the first significant
variable of Oromia bank customer satisfaction.

In this case, CRM positively influenced customer satisfaction in the banking service as it is
expected that customers often faced with issues related to banking quality against the service
charge they paid. Since it has an implication that the existence of relationships among customer
value-orientation, CRM could enhance the implementation of customer-related strategies results
in assuring customer satisfaction resulted in improving customer repurchase intention and
profitability at large.

50
5.3. Recommendations
Based on the conclusions drawn in the previous section, the following measures are
recommended for Oromia bank in order to reach the ultimate benefits from the implementation
of CRM activities and enhance customer satisfaction.

 In order to enhance customer satisfaction, the company should make continuous effort to
enhance the CRM dimensions specially the conflict handling, communication, trust, which
has significant effect on customer satisfaction.

 As the findings of the study showed the conflict handling has the highest influence on
customer satisfaction. Hence the concerned department should enhance settlement of
disputes between two parties.

 The communication dimensions also have strong effect next to conflict handling on customer
satisfaction. The concerned department should focus on communication barrier.

5.4 Limitations and Future Research Directions

Lack of cooperation of the respondents, CRM has no less than twelve dimension, but only four
are included in this study and Dearth of literature concerning the same industry are limitations of
the study. Further research is suggested on investigating regarding the effectiveness of CRM on
the corporate, medium micro and retail customers’ perspective. Besides, more customers and
other stakeholders from different branches need to be assessed to have a clear picture regarding
the impact of CRM practices on customer satisfaction.

51
 REFERENCES
Alrubaiee, L. & Al-Nazer, N. (2010). Investigate the impact of relationship marketing orientation
on customer loyalty: The customer’s perspective. International Journal of MarketingStudies.
2(1). p.155-174.

Baglou, R. &Zomorrodpoush, F. (2009). Specifying the Position of Customers, Information

Quarterly. Ianship&Librar management In Libraries and Information Centers, No. 47

Benjamin M., Israel A., Ranga P. (2014). A Study on Customer Care Management Factors in
Financial institutioning Sector of Haryana State India, International Journal of Management
and International Business Studies. Volume 4, Number 1 (2014), pp. 117-122.

Beerli, A., Martin, J.D., and Quintana, A. (2004). A Model of Customer Loyalty in the Retail
Financial institutioning Market. European Journal of Marketing. Vol. 38, No. 1/2, pp. 253-
275.

Bhattacharya, A. (2011). Preeminent Analysis of Customer Relationship Management (CRM).

International Journal of Research in Management & Technology, 1(1), 45-51.

Blattberg, R.C., Getz, G. & Thomas, J.S. (2001). Customer Equity: Building and Managing
Relationships As Valuable Assets. Harvard Business School Press, Boston, MA.

Boles, J.S., Johnson, J.T. & Barksdale, H.C. Jr. (2000). How Salespeople Build Quality
Relationships: A Replication and Extension. Journal of Business Research, Vol. 48, Pp. 75-
81

Bosch, K, Talt, M. & Venter, E. (2006). Business Management: An Entrepreneurial Perspective

Port Elizabeth: Brazilian Experience. Journal of Internet Financial institutioning and
Commerce. 1(3). P. 23-39.

Chattananon, A. &Trimetsoontorn, J. (2009). Relationship marketing: A Thai case, International

Journal of Emerging Markets, 4, (3), 252-274.

Cheng, J.H., Chen, F.Y. & Chang, Y.H. (2008). Airline Relationship Quality: An Examination
Of Taiwanese Passengers. Tourism Management, Vol. 29 No. 3, Pp. 487-99.

52
Chen, I. J. &Popovich, K. (2003). Understanding Customer Relationship Management (CRM):
People, Process and Technology. Business Process Management Journal, Vol. 9 No. 5 Pp. 672-
688

Hellier, P. K., Geursen, G. M., Carr, R. A., & Rickard, J. A. (2003).Customer Repurchase
Intention: A General Structural Equation Model. European Journal Of Marketing, 37,
1762–1800.

Ioanna, P. D. (2002). The Role Of Employee Development In Customer Relations: The Case Of
UK Retail Financial institutions. Corporate Communication, 7(1), Pp. 62-77

Khedkar E. B. (2015). Effect of Customer Relationship Management on Customer Satisfaction

And Loyalty. International Journal of Management (Ijm), Volume 6, Issue 5, Pp. 01-07

Kotler, P., & Armstrong, G. (2011). Principles of Marketing (14th Ed.). New Jersey: Prentice
Hall.

Lombard, M. R. (2011). Customer retention through customer relationship management: The

exploration of two-way communication and conflict handling. African Journal of Business
Management, 5(9), 3487–3496. https://doi.org/10.5897/AJBM10.759

Maleki, A. &Darabi, M (2010). Different Frameworks of Implementing Customer Relationship

Management, Automobile Industry Monthly Magazine, 130

Mckim, B. & Hughes, A.M. (2001). How to Measure Customer Relationship Management
Success.Journal of Database Marketing, Vol. 8 No. 3, Pp. 224-31.

Mithas, S., Krishnan, M.S. &Fornell, C. (2005). Why Do Customer Relationship Management
Applications Affect Customer Satisfaction? Journal of Marketing, Vol. 69 No. 4, Pp. 201-9.

Molina, A., Martı´N-Consuegra, D.&Esteban, A. (2007). Relational Benefits and Customer

Satisfaction in Retail Financial institutioning. International Journal of Financial institution
Marketing, Vol. 25 No. 4, Pp. 253-71.

Naoui, F. B. &Zaiem, I. (2010). The impact of relationship quality on client’s loyalty: An

application in the pharmaceutical industry. International Journal of Pharmaceutical and
Healthcare Marketing, 4, (2), 137-156.

53
Negi R and Katema E (2010). Relationship Marketing and Customer Loyalty: The Ethiopian
Mobile Communications perspective. International Journal of Marketing Management
(IJMM), 5(10):113-124.

Parvatiyar, A., &Sheth, J. N. (2001). Customer Relationship Management: Emerging Practice,

Process, and Discipline. Journal of Economic and Social Research, 3(2), 1-34.

Payne, A. &Frow, P. (2005). A Strategic Framework for Customer Relationship

Management.Journal of Marketing, Vol. 69 No. 4, Pp. 167-76

Rai, A. K & Srivastava, M. (2013). Investigating the Mediating Effect of Customer Satisfaction
in the Service Quality – Customer Loyalty Relationship. International Journal of Research in
Marketing, Vol. 26, Pp 96 – 108

Rastghalam, N. S &Sajad, K. M. (2014). Studying Effect of Customer Relationship Management

on Customer Satisfaction Case Study: Moallem Insurance Company in Isfahan Province,
Iran”. International Journal of Academic Research in Business and Social Sciences,
September, Vol. 4, No. 9 Pp. 105 -113

Robert-Lombard M, Du Plessis L (2012). Customer relationship management (CRM) in a South

African service environment: an exploratory study. African Journal of Marketing
Management 4: 152-165.

Ro-King, M. (2005). The value concept and relationship marketing. European Journal of
Marketing. 30 (2). p. 23-45.

Rootman, T. & Sharp, G. (2011). Relationship marketing and customer retention lesson for
South African Financial institutions. Southern African Business Review. 15(11). p. 50-68.

Rosenberg, L.G. &Czepiel, J.A. (1984). A Marketing Approach For Customer Retention,
Journal of Consumer Marketing, Vol. 1, Pp. 45-51.

Soimo, V., Wagokis, J., Okello, B. (2015). Influence of relationship marketing on customer
retention. A case of commercial financial institutioning industry in Nakuru Town in Kenya.
International journal of economics, commerce and management. 7(8). p. 23-42.

54
Speier, C. &Venkatesh, V. (2002). The Hidden Minefields inthe Adoption of Sales Force
Automation Technologies. Journal of Marketing, Vol. 66 No. 3, Pp. 98-111.

Thomas, J.S. (2001). A Methodology for Linking Customer Acquisition to Customer Retention.
Journal of Marketing Research, Vol. 38 No. 2, Pp. 262-8.

Wanjiku, A. (2013). Relationship marketing and customer loyalty in mobile telecommunication

industry in Nairobi, Kenya. MBA thesis. Kenya: University of Nairobi.

Weinstein, A. (2002). Customer-Specific Strategies- Customer Retention: A Usage Segmentation

and Customer Value Approach. Journal Of Targeting, Measurement And Analysis For
Marketing, 10(3), 259-268.

55
 APPENDIX
HARAMBEE
UNIVERSITY SCHOOL
OFPGSTUDIES MBA
PROGRAM
Questionnaires to be filled out by bank
customers
Dearmyrespectedrespondents,thesequestionnairesaredesignedtogathermorenecessary data for
research work to be conducted on the topic of “Effect of customer relationship
managementoncustomers’satisfaction:ThecaseofOromiabank BosatbranchAdama,
Ethiopia”.Toattainthismainobjective,yourgenuineandtimely responseofthequestionnaire
designedfor the purpose willhave agreateffect.Allinformationprovided willbe used for
academicpurpose onlyand willbetreated in strict confidentiality.
Valuedrespondent,youarekindly requestedtorespondtoallstatementsineachsectionby ticking
whereappropriately (√)orfillintherequiredinformationandcompleting thestatements guidelines
provided in each question.
Finally,Iamgratefulforyourkindcooperationandwouldliketoextendmy heartfelt
appreciation,inadvanceforgivingmealltherelevantandnecessaryinformationconcerning
yourrespective company.
For further information and clarificationpleasedon’thesitate to contact meat +251-910-749-432
Best
regards!
Section I.
DemographicInformation

1. Gender: Male[ ] Female[ ]

2. Age: 18-25 [ ] 26-35 [] 36-45 [] 46-55 [ ] above56 [ ]
3. Educationalbackground:Highschoolandbelow [ ] Certificate[ ] Diploma[ ] First
degree [ ] Master degree [ ] ≥PhD degree[ ] others specify
4. Occupation: Employee[ ] Business person [] Retired[] Students [ ] others [ ]
5. Forhow longhaveyou been acustomer ofthis bank?
Less thanoneyear [ ] 1-5years [ ] 6-10years [ ] ≥11years [ ]
Part II.

56
 Detailedinformation

Section A: CustomerRelationshipManagement
Dimensions
6. Kindly indicate with a tick (√) the extent to which you agree or disagree with each
statement.With1=stronglydisagree,2=disagree,3=neutral,4=agree,5=strongly agree.
S.N Statement 1 2 3 4 5

1 Communication
1.1 Informationprovided bythe Oromiabank are accurate

1.2 Thebank informsmeabout anychangein serviceprovided

1.3 The bank always provides information on new product/ services

provided.

1.4 Thebank provides timelyand trustworthyinformation.

1.5 Thebank uses themost convenient channels of communication.

1.6 Thebank keeps a customer complaintlogbook.

1.7 Thebank utilizesInformation communication technologyintransmitting

information to me.

2 Conflict handling
2.1 I am satisfied with the complaints handlingprocedureofthe Oromiabank

2.2 Mycomplaintisquicklyresolved whenIpresent it to thisorganization.

2.3 Iamalwayssatisfied withtheanswersIreceivewhen Ipresentmy
complaint.

2.4 I always receive answerswhenIpresent mycomplaintto this

organization.
2.5 Ialwayshaveanopportunitytopresentmycomplaintstothemanager and
amicablyresolve it.

57
2.6 Thebank tries to avoid potential conflict.
2.7 Thebank tries to solvemanifest conflicts beforetheycreate problems.
2.8 Employees of the bankareveryactiveto respondforthe manifestation of
customer problem.

2.9 Employeesofthebankhavethehabitofdiscussingwithcustomerwhen
problem arises.

3 Trust

3.1 Thebank wordsand promise arereliable.

3.2 Thebank is consistent in providingqualityservice.
3.3 Employees of the bankshow respect to the customer.
3.4 Thebank fulfillsits obligations to customers.
3.5 Ihavetruston the bankproducts/services offeredto me.
3.6 Thebank is veryconcerned with securityformytransaction.
3.7 Ihavetrust on thewaythe bank handles information confidentiality.
3.8 Ihavetrust onthe bankin transaction handling.
4 Commitment
4.1 Thebank makesadjustments to suit myneeds.
4.2 Thebank is flexiblein servingmyneeds related to services.
4.3 Thebank offers personalized services to meet myneeds.

Section B:
Customersatisfaction

Kindlyindicatewithatick(√)theextenttowhichyouagreeordisagreewitheachstatement
usingtheratingscaleof1=stronglydisagree,2=disagree,3=neutral,4=agree,5=strongly

58
agree.

S.N. Statement 1 2 3 4 5

1 I am satisfied with thevarietyof services offered bythe bank

2 I am satisfied with theinterest rates charged bythebank.
3 I am satisfied with the bank’s servicecharges.
4 I am satisfied with theserviceprocessesatOromiabank
5 Thebanknetwork(e.g.branches,ATMs,)makeitaccessibleinallthe
entirecountry

6 Iamsatisfiedwiththelocationofthebank’sservicesystems(ATMs,branches)
.

7 Thebank offers value forthe money Ipay.

8 Ifeel satisfiedwithOromiabank

Thankyou foryourcooperation!!

59