Nawaz Tabassum

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The impact of customer relationship management on

Customer retention in banks of Pakistan

A Thesis Submitted to the

Superior University

In Partial Fulfillment of the Requirements for the Degree of

Master in business administration

y

!a"a# Tabassum

M P$%%&'(

)ear

*&%*

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Acknowledgment:

I must offer my than-s to Allah Almighty by "hose blessings I have been able to

+omplete my thesis report on1 2ffe+t of Integrating mar-eting 3ommuni+ations to build

brand equity1

I also offer my than-s to honorable Re+tor Prof. Ch. Abdul Rehman for providing me a

+han+e to "or- on thesis.

I also offer my than-s to iss khansa irem for her valuable guidan+e and +ontribution

in ma-ing my report meaningful and useful.

I also than- to all my teachers ! friends 4 for their -ind behavior and full +ooperation

during the study period.

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Abstract:

This resear+h study loo-s at the role of +ustomer relationship management on +ustomer

retention. For this study4 %6& +ustomers from different ban-s "ere as-ed questions

about +ustomer relationship management support 73RM84 +ustomer satisfa+tion 73S84

+ustomer -no"ledge 7398 +ustomer value 73:8 and +ustomer retention 73R8. ;hen the

surveys "ere +ompleted and returned4 the data "as entered into SPSS for analysis.

Several tests "ere run on the data4 and signifi+ant findings "ere present. I found that as

+ustomer relationship management raised then +ustomer retention also turn to in+rease. I

also found4 as there is in+rease in +ustomer relationship management then the +ustomer

satisfa+tion4 +ustomer value and +ustomer -no"ledge also raised. The results and data

are dis+ussed in depth "ithin this report. There are also several limitations as "ell as

future resear+h impli+ations at the end of this resear+h study.

"eywords < 3ustomer Relationship Management4 3ustomer Satisfa+tion4 3ustomer

9no"ledge 3ustomer :alue and 3ustomer Retentions.

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Acronyms :

3RM< 3ustomer relationship management

3.v< 3ustomer value

3s< 3ustomer satisfa+tion



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Table of Contents

Declaration of Originality .................................................................................. IAbstract ................................................................................................................ IIAcknowledgment ................................................................................................. IIIAcronyms .....0000................................................................................00 I:Chapter #: $ntroduction 000000000000000000000. = %.% introdu+tion000000000000000000000. = %.* purpose statement 000000000000000000... %* %.5 ob,e+tives 000000000000000000000... %5 %.( signifi+an+e 000000000000000000000 %5

%.6 resear+h questions 000000000000000000.. %( %.' -ey term definition00000000000000000.0. %6Chapter %: &iterature Re'iew 00000000000000000...0. %' *.& theoreti+al Model 00..0000000000000000. (*Chapter (: Data) ethodology. 0..0..0000000000000...0. (5 5.% Data000000000000000000000000.

5.%.% Data +olle+tion 0000000000000000............

(5

(5 5.%.* Population and sample 0000000.00000000... (6 5.%.5 Sampling te+hniques 0000000000000000.. (6 5.* Methodology 0000000000000000000..... (6

Chapter *: Analysis 0000.....0..0..0000000000000...0. 6& (.& Results 0000000000000000000000... 6& (.% Reliability Test00000000000000000000

(.* Frequen+y table0000000000000000000..

(.* Des+riptive summary 00000000000000000

6&

6%

6*

(.*.* >istogram..000000000000000000......... 6( (.*.5 S+atter plot 00000000000000000000 6? (.*.( 3orrelation 000000000000000000........ '? (.*.6 Regression 00000000000000000000. =?Chapter+: Discussion) conclusion ..0..0000000000000...0.. @% 6.& Dis+ussion 000000000000000000000.. @% 6.%3on+lusion 000000000000000000000.. @5References 0000000000000000000000000.0.. @6Appendi, 000000000000000000000000000... @?

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Chapter - #

$ntroduction

#.# introductions:

3ustomer e/pe+tations are +hanging throughout the "orld. 3ustomer relationship

management 73RM8 strategies have be+ome important all over the "orld due to these

+hanges in e/pe+tations from +ustomers and nature of mar-ets. 3hanges are +oming

a+ross the "orld4 but they present 3RM strategies opportunities in South Afri+a and

other developing +ountries.

3ustomer Relationship Management 73RM8 is a managerial fun+tion that helps to build

long term relationships "ith +ustomers. 3RM +an be defined as the development and

maintenan+e of mutually benefi+ial long$term relationships "ith strategi+ally signifi+ant

+ustomers1. The implementation of 3RM helps the organi#ations be+ause they a++rue

benefits from these strategies4 su+h as greater loyalty and resulting profits. 3RM strategy

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fo+uses on the a+quisition4 retention and overall +ustomer profitability of the spe+ifi+

group of +ustomers. 7Rou/ and >erbst4 *&&68

B A+quisition of +ustomers< this means that to find out ne" +ustomers for their produ+ts4

also required to develop strategies to attra+t potential +ustomers to pur+hase the produ+t

be+ause the +ost of attra+ting a ne" +ustomer is greater to be five times more the +ost of

-eeping a +urrent +ustomer happy

B Retention of +ustomers< this means that organi#ations also need to fo+us on e/isting

+ustomers to ensure that they +ontinue pur+hasing and +ontinue supporting the produ+t

be+ause organi#ations +an in+rease their profitability by boost their +ustomer retention

B Profitability< 3ustomer profitability means to all the +osts asso+iated "ith a transa+tion

In the +ase of 3RM Profitability is determined a++ording to the lifetime value of the

+ustomer to the organi#ation4 li-e in+ome and e/penses lin-ed "ith ea+h +ustomer and

their respe+tive transa+tions over time.

Those Crgani#ations +an implement 3RM su++essfully if they have a great deal of

information about the +ustomer and "here there are differentiated needs among the

+ustomers. Finan+ial servi+es meet the +riteria for the implementation of 3RM as

indi+ated by 9otler. Finan+ial institutions +lassified their +ustomers and their needs on

the basis of information that "hy ban-s offer different produ+ts to different +ustomers.

Some +ustomers give importan+e to a mortgage bond in addition to their +urrent a++ount

and +redit +ard4 "hile other +ustomers give importan+e4 to vehi+le finan+ing. 3ustomer sdemands are different in finan+ial +ir+umstan+es4 that s "hy different pa+-ages being

offered to +ustomers. It is also possible4 finan+ial institutions tailor their pa+-ages for

spe+ifi+ +ustomer. 7Rou/ and >erbst4 *&&68

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If any business "ants to su++eed in global +ompetitive mar-et4 "here +ustomers are

important and brand loyalty de+reasing "ill have to move to +ustomer relationship

management 73RM8. 3ustomer relationship management helps organi#ations to provide

e/+ellent +ustomer servi+e through the effe+tive use of individual a++ount information.

For this organi#ations requires a more +omple/ approa+h4 be+ause they not only

investigate +ustomer needs4 but also they have to build relationships "ith both e/isting

and potential +ustomers4 by satisfy their needs. Crgani#ations "ill require a loyal

+ustomer base to se+ure their sustainability and loyal +ustomers +an be generated

through 3RM. 3RM +an assist organi#ations in building long term benefi+ial

relationships "ith +ustomers "hi+h has a dire+t influen+e on the value proposition to

+ustomers4 and the +ompetitive position of the organi#ation in the mar-et. 3RM helps

+ustomer loyalty and in+reased profits for the organi#ation due to +ustomer retention.

7Eombard4 *&%%8

an- produ+ts are easy to dupli+ate so ban-s provide nearly identi+al servi+es4 they +an

only distinguish themselves on the basis of pri+e and quality. Therefore4 ban-s use

+ustomer retention to gain a strategi+ advantage and survive in ban-ing +ompetitive

environment. Furthermore4 to su++eed in the ban-ing industry servi+e e/+ellen+e4

meeting +lient needs4 and providing innovative produ+ts are essential. Most private

ban-s +laim that +reating and maintaining +ustomer relationships are important and3RM provide positive values to them 73hong and )ong4 *&&=8.

Many ban-s are in this position "ith many of their +ustomers be+ause ban-ers are not

only selling produ+ts and servi+es. First and foremost4 they are selling their organi#ation

reputation "ith every +ustomer relationship1. A ban- has to +reate +ustomer

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relationships to deliver value added +ore produ+t4 +ore produ+t involves added tangible

and intangible elements for +reating and enhan+ing the produ+t surrounding14 and that

is the nature of +ompetition. To prote+t its value added4 a ban- needs to manage4 +reate

and enhan+e long$term +ustomer relationships. 7Aliyev4 *&&@8

3RM serves to all sta-e holders for the purpose of value +reation< +ustomers4 employees

and shareholders Crgani#ations -no" the importan+e of the vital role played by

relationships in a+hieving and maintaining the +utting edge at the mar-et pla+e.

3ustomer gives an opportunity to the organi#ation to serve him. 2very organi#ation sets

its poli+ies and strategies to manage relationship "ith its +ustomers to survive in the

+ompetitive environment. 7>ussain4 *&&?8

Resear+her dra" tentative +on+lusions as to "hy +onsumers appear to remain loyal to the

same finan+ial provider4 they hold less favorable vie"s to"ard these servi+e providers.

3learly4 here are arguments for ban- management to +onsider the fa+tors that in+rease

+ustomer retention rates4 "ith resear+h providing suffi+ient ,ustifi+ation for +ustomer

retention efforts by ban-s 73hong and )ong4 *&&=8

3ustomer retention is in+reasingly seen as an important managerial issue4 espe+ially

in the +onte/t of saturated mar-et or "here the gro"th of ne" +ustomers is lo".

3ustomer retention is a -ey ob,e+t ive of relationship mar-et ing4 primarily be+ause its

deliver superior relationship e+onomi+s4 i.e. it +osts less to retain than to a+quire

ne" +ustomers. The assumption is that generali#ed theories4 "hi+h imply universalappli+ability4 tend to ignore the individual impa+t of +on+eptuali#ed business

+onditions on effe+tive +ustomer retention strategies. The fa+t is that both

theoreti+ians and managers should +onsider in developing and implementing +ustomer

retention strategies.1 7 ha vami 4 *&&'8

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A++ording to Pa-istan 2+onomi+ Survey *&%&$%% In Pa-istan4 servi+es se+tor gre" by

(.% per+ent along "holesale and retail se+tor gre" at 5.? per+ent but finan+e and

insuran+e se+tor sho"s negative gro"th of '.5 per+ent in *&%&$%% as +ompared to last

year. So+ial Servi+es Se+tor gre" in Pa-istan at =.% per+ent that is higher than the target

that is set by governments but this per+ent is less as +ompare to last year gro"th rate

per+ent.

2very mar-et +ondition sharpens +ompletely be+ause the number of +ompetitor

rising "hile at the same time the servi+es and produ+ts available in the mar-et are less

that s "hy +ustomer retention is de+reasing and +osts of do business in+reasing. 3RM

is emerging as an important tool and an innovative "ay to add their produ+ts and

servi+es for +ompanies in virtually every business se+tor so every 3ompany tries to

move +loser to their +ustomers4 by e/panding ne" "ays to +reate value for the ir

+ustomers and transforming the +ustomer relationship into one of solution finding.1

7 havami4 *&&68

:arious organi#ations have dis+overed and resear+h studies have sho"n that

retaining +urrent +ustomers is mu+h less e/pensive than att empting to at tra+t ne"

ones. So no" +ompanies have +ome to reali#e that if they "ant to develop su++essful

long$term4 relationship "ith +ustomers they should fo+us on the e+onomi+ally

valuable1 +ustomer.17 havami4 *&&68

Therefore4 the resear+h problem is study of impa+t of 3RM on +ustomer retention

for obtaining more effi+ien+y in +ustomer relat ionship.

I have studied some literature revie" li-e4 3RM strategies and pra+ti+es in sele+ted

ban-s of Pa-istan by hussain G sa,,id. Also in another study the impa+t of 3RM on

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+ustomer retention by Are#u ha vami 4 "here 3RM4 +ustomer satisfa+tion4 +ustomer

value4 and +ustomer retention variables are used4 3RM in ban-s "ith spe+ial referen+es

of angladesh by Mohammad Mahboob ali "ith results of less effort in maintaining

+ustomer relationship.

I have no seen any least resear+h on this topi+ in Pa-istan4 if any have done so it s not in

my +urrent -no"ledge. Some resear+hers have resear+h on 3RM in finan+ial institutions

of Pa-istan they not fo+us on su+h variables but they only fo+us to implementation

pro+ess of 3RM.

The importan+e of this resear+h is that this study fo+uses on the impa+t of 3RM on

+ustomer Retention4 along "ith the mediating variables su+h as +ustomer satisfa+tion4

+ustomer value and +ustomer -no"ledge. This study asses the needs of 3RM so that

they ma-e long term relationship "ith +ustomers be+ause ne" +ustomer a+quiring +ost is

6 time mu+h greater as +ompare to retain the e/isting +ustomer.

Therefore4 the purpose of this resear+h is to determine the impa+t of 3RM on 3ustomer

retention.

#.% purpose statement:

The purpose of this survey study "as to test the theory of the impa+t of +ustomer

relationship management on +ustomer retention that +ompares the +ustomer relationship

management to +ustomer retention +ontrolling for +ustomer satisfa+tion4 +ustomer value4

and +ustomer -no"ledge at ban-ing se+tor in Pa-istan. The +ustomer relationship

management "ill be generally defined as 7>ussain and sa,,id4 *&&?8 des+ribed the

+ustomer relationship management 73RM84 it is essential and vital fun+tion of +ustomer

oriented mar-eting to gather and a++umulate related information about +ustomers in

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order to provide effe+tive servi+es.4 and the +ontrol and intervening variable 7s84 li-e

+ustomer satisfa+tion4 +ustomer value4 and +ustomer -no"ledge "ill be statisti+ally

+ontrolled in the study.

#.( ob ecti'es:

To determines the impa+t of 3RM on +ustomer Retention in an-

To e/amines the impa+t of 3RM on +ustomer satisfa+tion in an-

To determines the impa+t of 3RM on +ustomer -no"ledge in an-

To e/amines the Impa+t of 3RM on +ustomer value in an-

To determines the impa+t of +ustomer satisfa+tion on +ustomer retention in an-

To e/amines the Impa+t of +ustomer -no"ledge on +ustomer retention in an-

To determines the impa+t of +ustomer value on +ustomer retention in an-

#.* significance of the study:

The present resear+h study is going to +ontribute in the follo"ing "aysussain and sa,,id4

*&&?8

This study also helpful for managers to improve relationship "ith +ustomers4 be+ause if

managers implement 3RM in their organi#ations then they re+eive more profits and long

term relationship "ith +ustomer s.

This study also helpful for poli+y ma-ers be+ause 3RM is most important strategy in

servi+e se+tor4 "here organi#ations depends on +ustomers4 this study provide the root to

poli+y ma-ers so that they establish poli+es regarding 3RM in best "ay.

#.+ Research /uestion)0ypothesis

1: "hat does the impa+t of 3ustomer Relationship Management on 3ustomer

Retention

0ypothesis:

0 #: There is relationship bet"een 3RM and +ustomer satisfa+tion

0 2: There is no relationship bet"een 3RM and +ustomer satisfa+tion

0 #: There is relationship bet"een 3RM and +ustomer value0 2: There is no relationship bet"een 3RM and +ustomer value

0 #: There is relationship bet"een 3RM and +ustomer -no"ledge

0 2: There is no relationship bet"een 3RM and +ustomer -no"ledge

0 #: There is relationship bet"een 3RM and +ustomer retention

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0 2: There is no relationship bet"een 3RM and +ustomer retention

0 #: There is relationship bet"een +ustomer satisfa+tion and +ustomer -no"ledge

0 2: There is no relationship bet"een +ustomer satisfa+tion and +ustomer -no"ledge

0 #: There is relationship bet"een +ustomer satisfa+tion and +ustomer value

0 2: There is no relationship bet"een +ustomer satisfa+tion and +ustomer value

0 #: There is relationship bet"een +ustomer satisfa+tion and +ustomer retention

0 2: There is no relationship bet"een +ustomer satisfa+tion and +ustomer retention

0 #: There is relationship bet"een +ustomer -no"ledge and +ustomer value

0 2: There is no relationship bet"een +ustomer -no"ledge and +ustomer value

0 #: There is relationship bet"een +ustomer -no"ledge and +ustomer retention

0 2: There is no relationship bet"een +ustomer -no"ledge and +ustomer retention

0 #: There is relationship bet"een +ustomer value and +ustomer retention

0 2: There is no relationship bet"een +ustomer value and +ustomer retention

#.3: Definitions:

>ussain and sa,,id4 7*&&?8 des+ribed the +ustomer relationship management 73RM84

essential and vital fun+tion of +ustomer oriented mar-eting is to gather and a++umulate

related information about +ustomers in order to provide effe+tive servi+es.

3ustomer satisfa+tion +learly arises from a +ognitive pro+ess +omparing per+eived performan+e against some +omparison standards. 7 havami4 *&&'8

3ustomer -no"ledge means that gaining4 sharing and e/panding -no"ledge inside the

+ustomers. 7 ilbert4 *&&*8

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7 havami4 *&&'8 argued that +ustomer value in+ludes not only the usual benefits but also

a +onsideration of the pri+e that the +ustomer pays.

The probability of +ustomers to do repeat pur+hasing from the firm is +alled +ustomer

retention. 7 upta4 *&&'8

Chapter - %

&iterature Re'iew

%.# &iterature re'iew:

3ustomer is the most important be+ause he visits on our premises. 3ustomers are

not depending on us but organi#ations are depending on him. 3ustomers are not an

outsider on our business but they are a part of our business. Crgani#ations are not doing

him a favor by serving +ustomers but +ustomers are doing us a favor by giving us an

opportunity to do transa+tions "ith them.1 For small and big +ompanies4 +ustomers

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be+ome -ey fa+tors4 no" +ompanies fo+using on the -ey +ustomers to survive in the

global mar-et. ;e all have -no"n that the +ost of a+quire a ne" +ustomer five times

more than an e/isting +ustomer to ma-e a ne" pur+hase. Se+ond aspe+t of 3RM is

that o r g a n i # a t i o n s m u s t -no" ab o u t their +ustomer problem and his

and easily fa+ilitat es targeted +ross$selling.1

3RM is part of the basi+ mar-eting belief that an organi#ation must -no" its

+ustomers li-e individuals. The +omponents of 3RM may in+lude data "arehouse

"here "e store all a +ompany s information4 +ustomer servi+e system4 +all

+enters4 e$+ommer+e4 "eb mar-eting4 operations system 7that handle order entry4

invoi+ing4 payments4 point of sale4 inventory system4 et+.8 and sales systems 7mobile

sales +ommuni+ation4 appointment ma-ing4 routine4 et+.8.1 7 ha vami 4 *&&'8

3RM system integrates strategy4 mar-eting and I T and its +apital investments not

e/penses. be+ause they +ut a+ross t raditional organi#ational stru+tures and for+e

the integration of a+tivities. Implementing 3RM system is no small tas- but it s a

huge tas-. There is no doubt that 3RM +an be ma,or fa+tor in a+hieving +ompetitive

advantages4 a++ording to Mal+olm M+Donald4 but if 3RM implementation "rong

then +ustomers leave and never to return.1 3RM is a -ey pro+ess in any

organi#ations. 3RM is a relatively ne" business term4 and the definition +an vary

a++ording to the individual thought. The F. D"yer and Tanner1 believe that 3RM

as those pro+ess that address all aspe+ts of identifying +ustomers4 +reating+ustomer -no"ledge4 building +ustomer relationship4 and shaping their per+eption

of the organi#ation and its produ+ts.1 7 ha vami 4 *&&'8

Many +ompanies are trying to re$establish their +onne+tions to ne" as "ell as e/isting

+ustomers so that they boost long$term +ustomer loyalty. 2ven some +ompanies are

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establish their +onne+tion effe+tively and "inning this +ompetition through the

implementation of relationship mar-eting prin+iples using strategi+ and te+hnology$

based +ustomer relationship management 73RM8 appli+ations. Relationship mar-eting is

be+oming important in finan+ial servi+e be+ause if any ban- develops and sustains a

solid relationship "ith its +ustomers4 then this relationship provides a sustained

+ompetitive advantage to the ban-. an-s +an in+rease their profits by ma/imi#ing the

profitability of the total +ustomer relationship over time4 instead of loo-ing for to get

more profit from any single transa+tion.

y relative novelty and e/ploding gro"th4 3RM be+ome an attra+tive area for resear+h.

3ompetition is in+reasing4 due to deregulation both from traditional players and ne"

entrants. 3hanging in +onsumer behavior and needs4 globali#ation4 deregulation4

disintermediation and the entran+e of ne" finan+ial servi+e models are all dynami+s in

the finan+ial servi+es industry. 2ven information te+hnology is also having its impa+t on

finan+ial servi+e industry. 7Aliyev4 *&&@8

As mu+h as mar-eting paradigm evolves4 +ustomers gain more importan+e be+ause of

long$term relationship. 3RM pursues long$term relationship "ith profitable +ustomers.

It s a starting point of relationship management to understand and measure the true value

of +ustomers. Crgani#ations su++ess depends on an organi#ation s ability to build and

maintain loyal and valued +ustomer relationships. Therefore4 it is essential to a+hieve

su++ess they build refined strategies for +ustomers based on their value. The motivatingfa+tors for +ompanies 3RM te+hnology provides is to improve +ustomer satisfa+tion

level4 to retain e/isting +ustomers and to improve +ustomer lifetime value. Providing

strategi+ information from the 3RM systems provides to improving satisfa+tion level

and +ustomer lifetime value. The fo+us of 3RM is to help +ompanies to understand their

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+ustomers +urrent needs4 "hat they have done in the past4 and "hat they plan to do in

the future to meet their o"n goals. 2ven +ompanies use of information intelligent about

their +ustomer needs4 "ill +reate long$term4 t"o "ay relationship "ith +ustomers.

7Aliyev4 *&&@8

3RM helps organi#ations to set up su+h strategies by "hi+h they managing individual

+ustomer relationships. 3ustomer satisfa+tion and retention is ensured by solving

+ustomer problems qui+-ly4 from the servi+e oriented industry perspe+tive. 3ustomer

satisfa+tion is made by allo+ating4 s+heduling and dispat+hing the right people4 "ith right

parts4 at the right time. 2very +ompany has de+ided ho" to enter in a mar-et and then

build and prote+t its +ompetitive position. In the beginning ban-s reali#e that no ban-

+an offer all produ+ts and be+omes the bestJleading ban- for all +ustomers. an-s are

required to find a ne" basis for +ompetition and they have to improve the quality of their

o"n produ+tsJservi+es. It is be+oming very diffi+ult for ban-s to survive in internet era4

"here the +ustomer is having a++ess to a variety of produ+ts and servi+es. In this

situation4 "hen +ustomer inquiries are not met easily4 the +ustomer "ill as- for ne"

levels of servi+es4 and +ustomers +hoose only those institutions "ho are ma-ing a real

effort to provide a high level of quality4 fast and effi+ient servi+e through all the ban-s

tou+h points4 +all +enters4 ATMs4 voi+e response systems4 internet and bran+hes.

Managers really need to loo- at those areas "here opportunities lie be+ause finan+ial

industry in+reasing4 and the ability to move money are mu+h easier at the +li+- of amouse for +ustomers. Cf +ourse4 te+hnologi+al +apabilities +an t ensure +ustomer

servi+e4 +ompanies also need to analy#e the business situation and understand the real

requirement for automation. an-ing has operated in a relatively stable environment for

long time. ut4 today the industry is fa+ing an aggressive +ompetition in a ne"

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The +ustomer relationship management 73RM84 it is essential and vital fun+tion of

+ustomer oriented mar-eting to gather and a++umulate related information about

+ustomers in order to provide effe+tive servi+es. 3RM involves +ustomer s -no"ledge in

order to sell goods and servi+es. The main reasons for 3RM e/isten+e are the

developments in mar-eting environment and te+hnology. Also believes that 3RM is

about attra+ting4 developing4 maintaining and retaining profitable +ustomers over a

period of time. A+ademi+s and pra+titioners are ta-ing -een interest as adoptability of

3RM professional sin+e %??&s. The best definition of 3RM is developed by Payne and

Fro" 7*&&68 by stating that K3RM is a strategi+ approa+h that is +on+erned "ith +reating

improved shareholder value through the development of appropriate relationships "ith

-ey +ustomers and +ustomer segments. 3RM unites mar-eting strategies and IT to +reate

profitable4 long$term relationships "ith +ustomers and other -ey sta-eholders. 3RM

provides opportunities to both understand +ustomers and +reate value. This requires a

+ross$fun+tional integration of pro+esses4 people4 operations4 and mar-eting +apabilities

that is enabled through information4 te+hnology4 and appli+ations .





its poli+ies and strategies to manage relationship "ith its +ustomers to survive in the+ompetitive environment. 7>ussain4 *&&?8

3ustomer relationships are be+oming more important for ban-s as mar-et +onditions

+hanging. 3ompetition is in+reasing4 margins are de+reasing4 +ustomers are be+oming

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more demanding and the life$+y+les of produ+ts and servi+es are shortening dramati+ally.

These for+es are ne+essary for ban-s to intensify the relationship "ith their +ustomers

and offer servi+es to them through the +hannels they prefer. 3RM helps ban-s to provide

lot of benefits to their +ustomersH some -ey benefits are as follo".

Eong$term relationship "ith profitable +lients4

Cptimi#ation of ban- resour+es4 li-e +hannels of distribution 7internet and home

ban-ing84

Redu+tion in operational +osts through system automation and standardi#ation4

De+rease maintenan+e and e/pansion +osts due to the use of modern

administration tools

3RM for+e to use information from their databases to a+hieve +ustomer retention

and to +ross$sell ne" produ+ts and servi+es to e/isting +ustomers.

Those +ompanies that implement 3RM they ma-e better relationships "ith their

+ustomers4 also a+hieve loyal +ustomers and a substantial payba+-4 in+reased

revenue and redu+ed +ost.

3RM "hen su++essfully deployed in+reased the bottom$line performan+e.

3RM4 proved high$quality attributes of the produ+t J servi+e to be the most

important

3RM helps the ban- to fo+us on profitable +lients through effi+ient segmentation

a++ording to individual behavior.

3RM helps the ban- to better satisfy and retain its +ustomers.

3RM provides results both in higher revenues and lo"er +osts4 that ma-e

+ompanies more effe+tive and effi+ient. 7>ussain4 *&&?8

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As ban-s attempt to re$design themselves around +ustomers4 then individual employees

"ill +ome "ith +hanging +ultural norms4 organi#ational stru+tures and the "ay that their

performan+e is measured and re"arded. The +ommitment of senior management is

+riti+al to su++ess. 3RM involves business pro+ess +hange and the introdu+tion of ne"

information te+hnology4 so effe+tive leadership is important for that. e+ause leaders

monitor the e/ternal environments of an organi#ation4 they set the vision or strategi+

dire+tion for 3RM pro,e+ts. In addition4 leaders are influential4 have authori#ation and

responsible to +ontrol the e/penditure4 the setting and monitoring of performan+e and the

empo"erment and motivation of -ey personnel. A++ording to 3hen and Popovi+h4 *&&5H

Pla-oyianna-i and T#o-as4 *&&*4 the relative su++ess of 3RM initiatives are strongly

influen+ed by the relationship bet"een three -ey organi#ational elements< people4

pro+ess and te+hnology. 7>ussain4 *&&?8

Additionally4 integration of a+tivities is the most +riti+al su++ess fa+tor 7;ilson et al.4

*&&*H 9ale4 *&&(4 Meyer and 9olbe4 *&&68. The +oordination of +ustomer relationship

a+tivities is ne+essary on various dimensions su+h as strategy4 pro+esses4 and

te+hnology4 to ensure su++ess.

3RM should be pla+ed in the organi#ation and a holisti+ approa+h should be adopted

be+ause 3RM rea+hes in every parts of the business. Cther su++ess fa+tors of 3RM areussain4 *&&?8

3ompanies +an gain many goals from

3RMigher +ust omer profit

ability

The +ustomer profitability "ill get higher sin+e the +ustomer "allet$share in+reases4

and more referrals +omes "ith higher +ustomer satisfa+tion among e/isting

+ustomers.

6. In+reased +ust omer ret ent ion and

loyalty

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The +ustomer retention in+reases only if +ustomers stay longer4 buy more and more

frequently. The +ustomer ta-es su+h initiatives4 "hi+h in+rease the bounding

relationship4 and as a result the +ustomer loyalty in+reases.

'. 2valuat ion of +ust omer profit ability

The +ompany "ill understand "hi+h +ustomers are profitable4 and the ones "ho never

might be+ome profitable4 and "hi+h ones might be profitable in the future. This is

very important -ey for su++ess in any business is to fo+us on a+quiring +ustomers

"ho generate profit4 and on+e you have found them4 never let them go.

7 ha vami 4 *&&'8

The 3RM pro+ess +onsists of four steps. 3RM steps are to segments and profile the

mar-et4 design +ommuni+ation strategy4 impenetrate4 and evaluate.

The first step is to Segment and Profile the Mar-et. 3reate segments m e a n s

grouping similar +ustomers together4 and t hese segments are +reated by mar-eters

for many different reasons. For e/ample4 "hen "e employed LFD program4 then "e

+erate a segment in the mar-et. Then for this segment "e design a produ+t to meet

that segments needs. ut even in that segment4 there are sub segments4 "here "e

intera+ts these buyers in different "ays. Some "ant to order over the "eb "hereas

others "ant salesperson for value added produ+ts. So "hen +ompanies ma-e segments

for 3RM purpose4 this means that this segmentation is based on ho" the +ustomer

"ants to intera+ts "ith us4 rather than on "hat needs the produ+t should meet.1

In the se+ond step4 +ompanies designed the +ommuni+ation strategy. Typi+ally4 in

+ommuni+ation strategy multiple +hannel of +ommuni+ation involves4 su+h as dire+t

mail4 email4 print advertising4 trade sho"s4 and even field sales efforts. Re+all that in

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retention on profits. 7;ilson4 %??68 estimate the impa+t of a 6 +hange in +ustomer

retention on profits for US businesses. For this purpose they +al+ulate and present

graphi+al solutions to assumed +ustomer retention situations "hi+h ma-e a strong

finan+ial argument for +ustomer retention. Payne and Ri+hard state4 Relationship

mar-eting fo+uses on -eeping +ustomers and building a relationship "ith them4 thus

enhan+ing +ustomer loyalty. It is no" a+hieve a great re+ognition that if the satisfa+tion

of +ustomer has greater "ith the firm and its produ+ts4 this means more long term

+ustomer retention and improved profitability.1 7;ilson4%??68

The t"in fo+uses of finan+ial impa+t and +ustomer satisfa+tion dominate the literature

7Rei+hheld and 9enny4 %??&4 DeSou#a4 %??*4 !aumann and Shannon4 %??*8. 7;ilson4

%??68 use demographi+ data in a +ustomer data base to predi+t +ustomer retention. ut

they did not do better than the +han+es in predi+ting insuran+e poli+y lapses. 7;ilson4

%??68 develop a4 mathemati+al frame"or- to improve +ustomer satisfa+tion by ma-ing

a++ountable resour+e allo+ation.1 7;ilson4 %??68 presents -ey assumption in their model

to lin- bet"een retention and satisfa+tion$dissatisfa+tion. They lin- the -ey loyalty

fa+tors to finan+ial program to manage these fa+tors. In a ban-ing environment this may

a reasonable approa+h but "e believe that it +an be improved using +on+epts from

business relationship theory. 7;ilson4 %??68 ta-e an e+onomi+ vie" of +ustomer

retention that all +ustomers do not generate value and suggest that finan+ial institutions

should fo+us retention strategies on the value produ+ing segment. 7;ilson4 %??68 use the+on+epts of relationship strength and relative per+eived performan+e as mediating

variables to predi+t future usage of ban- servi+esH ban- see-s the business and pri+e.

Results of this model are mi/ed but they +on+lude that4 in business$to$business settings4

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+ommitted long term relationships bet"een buyers and sellers are based on a strong4

e+onomi+ally rational foundation1. 7;ilson4 %??68

The finan+ial impli+ations of attra+ting ne" +ustomers may be five times mu+h more as

-eeping e/isting +ustomers. >o"ever4 maintaining high levels of satisfa+tion "ill not

ensure +ustomer loyalty. an-s lose satisfied +ustomers "ho have moved4 retired4 or no

longer need +ertain servi+es. As a +onsequen+e4 retaining +ustomers be+omes a priority.

Resear+her dra" tentative +on+lusions as to "hy +onsumers appear to remain loyal to the

same finan+ial provider4 they hold less favorable vie"s to"ard these servi+e providers.

3learly4 here are arguments for ban- management to +onsider the fa+tors that in+rease

+ustomer retention rates4 "ith resear+h providing suffi+ient ,ustifi+ation for +ustomer

retention efforts by ban-s 73hong and )ong4 *&&=8

3ustomer retention is in+reasingly seen as an important managerial issue4 espe+ially

in the +onte/t of saturated mar-et or "here the gro"th of ne" +ustomers is lo".

3ustomer retention is a -ey ob,e+t ive of relationship mar-et ing4 primarily be+ause its

deliver superior relationship e+onomi+s4 i.e. it +osts less to retain than to a+quire

ne" +ustomers. The assumption is that generali#ed theories4 "hi+h imply universal

appli+ability4 tend to ignore the individual impa+t of +on+eptuali#ed business

+onditions on effe+tive +ustomer retention strategies. The fa+t is that both

theoreti+ians and managers should +onsider in developing and implementing +ustomerretention strategies.1

Maintaining long$term relationships is an important mission for any businesses.

Multinational +ompanies and leading advo+ates of mass mar-eting approa+hes4 for

e/ample4 Eever rothers and 2lida ibbs 7Unilever84 also start to restru+ture their

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mar-eting departments and appoint spe+ial managers so that they give attention to

their e/isting +ustomers. They also have done "ith brand managers4 and set up

development teams that are responsible for maintaining relations "ith retailers

a+ross +ompanies brands1. The +ost of losing +ustomers in+reasingly every day4

but +ompanies +ontinually learn ne" "ays to a+quire4 retain and in+rease business.

3ustomer servi+e has been an important fa+tor in +ustomer retention4 and its role is

more +riti+al than ever and "ill +ontinue to gro" throughout the %??&s a++ording to

ne" resear+h.

It s also true that s p e+ ia l servi+e did not grant to +ustomers. Many organi#ations +an

differentiate themselves on the basis of the level of servi+e they provide to

+ustomers. uyers are very mu+h a"are of the seller s value th a t th ey add to

ma-ing a produ+t for them from the start4 along "ith delivering long$term servi+e

that maintains quality over time. Many 3ompanies must +on+entrate to lis tens

+ustomersO unique voi+es so that they define "hat e/+eptional servi+e means to them.1

7 ha vami 4 *&&'8

3ustomer retention is a primary goal in firms that pra+ti+e relationship mar-eting

7 ro nroos4 %??%H 3oviello et al.4 *&&*8. The meaning and measurement of +ustomer

retention +an vary bet"een industries and firms 7Aspinall et al.4 *&&%8 that fo+using on

+ustomer retention +an surrender several e+onomi+ benefits 7Da"-ins and Rei+hheld4

%??&H Rei+hheld4 %??'H uttle4 *&&(8. As +ustomer do transa+tion long times4 the

volumes pur+hased gro" and +ustomer referrals in+rease.

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3ustomer satisfa+tion have both vie" about transa+tion spe+ifi+ and +umulative

satisfa+tion4 transa+tion spe+ifi+ means post pur+hase evaluation bet"een e/pe+tations

and a+tual performan+e and +umulative satisfa+tion means refle+ts the overall

evaluation based on transa+tions over time and the total +ustomer e/perien+e "ith the

seller. Sin+e business mar-eting involves numerous transa+tions over time for see-ing to

redu+e un+ertainty about e/pe+tations of performan+e so that "e "ill use the overall

measure of satisfa+tion. 7;ilson4 %??68

The satisfa+tion is another important trait "hi+h must be ta-en in+lude in overall loyalty

of the +ustomers to"ards their servi+e providers. In ban-s4 the +ustomers as- themselves

about the level of the servi+es and de+ide about "hi+h servi+e is not important for him

and de+ide about repur+hase behavior after using the servi+es. The ban-ing industry

is in+reasingly gro"ing and some ban-s +onsider +ustomer satisfa+tion as a +hief

element of their mar-eting strategies. 3onsequently4 many finan+ial institutions

improving the quality of their servi+e by fo+using on in+reasing +ustomer

satisfa+tion and +ustomer retention so that the desired gro"th +an be se+ured

7Shah,ahan4 *&%&8.

The satisfa+tion level is al"ays high "hen the +ustomer gives minimum pri+e and

re+eive ma/imum of usage and profit. Dissatisfa+tion o++urs "hen the pri+ing issues arenot suiting the needs of the +ustomers. In ban-ing industry also4 the interest rates on

loans and +harges on the usage of online servi+es su+h as ATM ma+hines and the

pro+essing fee is a ma,or +onfli+t bet"een the ban- and its +ustomers.

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If the +ustomer thin-s that the +harges are more than the needs4 then +ustomer initially

tries to +ompromise "ith the ban- but at a +ertain point he de+ides to +lose transa+tion

"ith the ban-. !o"adays4 it has be+ome too easy to open an a++ount in any other ban-

so the s"it+hing +ost is also minimal. These all fa+tors help +ustomers to s"it+h from the

+urrent ban-. The response of +ustomer plays an important role in the overall satisfa+tion

graph of the servi+e provider institutions. If a +ustomer is satisfied4 the loyalty generates

automati+ally and the +ustomer remains "ith the +urrent providers for a longer and

longer period of time 7shah,ahan4 *&%&8.

In businesses4 the fundamental produ+ts have be+ome +ommodity li-eH quality of servi+e

depends heavily on the quality of its personnel. A study sho"s that appro/imately (&

per+ent of +ustomers s"it+hed ban-s be+ause of only poor servi+es. A++ording to Eeeds

that nearly three$quarters of the ban-ing +ustomers mentioned teller +ourtesy as a prime

+onsideration in +hoosing a ban-. This study also sho"ed that in+reased use of servi+e

qualityJsales and professional behaviors 7su+h as formal greetings8 improved +ustomer

satisfa+tion and redu+ed +ustomer attrition. 73hong and )ong4 *&&=8

3ustomer satisfa+tion is -eys to determining "hy +ustomers leave or stay "ith an

organi#ation for many years. Crgani#ations must try to -no" their +ustomers ho" to

-eep them4 satisfied. Rei+hheld 7%??'8 suggests that unsatisfied +ustomers may +hoosenot to defe+t4 be+ause they do not e/pe+t to re+eive better servi+e else"here but on the

other hand satisfied +ustomers may loo- for other servi+e providers be+ause they believe

that they might re+eive better servi+e else"here. >o"ever4 -eeping +ustomers is also

dependent on a number of other fa+tors.

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These fa+tors are +onsists on a "ider range of produ+t +hoi+es4 greater +onvenien+e4

better pri+es4 and enhan+ed in+ome4 the study of S"edish +onsumers4 sho"s that

+ustomer satisfa+tion and quality are important for all firms4 but satisfa+tion is more

important for loyalty in industries su+h as ban-s4 insuran+e4 mail order4 and automobiles.

Produ+t differentiation is impossible in a +ompetitive environment li-e the ban-ing

industry. an-s every"here are delivering the same produ+ts. For e/ample4 there is only

minimal variation in interest rates that ban- +harged or the range of produ+ts available to

+ustomers. an- pri+es are fi/ed and driven by the mar-etpla+e. Thus4 ban-

management start fo+us to differentiate their firm from +ompetitors through servi+e

quality. Servi+e quality is an essential element impa+ting +ustomers satisfa+tion level in

the ban-ing industry. In ban-ing4 quality is a multi$variable +on+ept4 "hi+h in+ludes

differing types of +onvenien+e4 reliability4 servi+es portfolio4 and +riti+ally4 the staff

delivering the servi+e. 73hong and )ong4 *&&=8

3ustomer satisfa+tion has been re+ogni#ed as an important +omponent of mar-eting

thought4 parti+ularly in the +ase of servi+e industries. It is generally stated that if

+ustomers are satisfied "ith the produ+t andJor servi+e after its use4 then it is probably

+han+e that they "ould engage in a repeat pur+hase and try line e/tension. In other

"ords4 it is the feeling or attitude of a +ustomer to"ard a produ+t andJor servi+e after

its usage. Also satisfied +ustomers "ill also +onvey positive messages about it toothers. Cn the other hand dissatisfied +ustomers4 must s"it+h to a substitute produ+t

andJor servi+e the ne/t time "hen heJshe feels the same need. The same +ustomer "ill

also generates in a negative "ord of mouth4 +ausing a serious damaging effe+t on

the business . This mar-et damage1 +an be slight but e/tensive4 also dis+ourage the

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best intentions and the strongest mar-eting +ampaigns. Therefore4 it is important that

+ompanies trying that their +ustomers are satisfied "ith the produ+tsJservi+es they

offer. This has led to an in+rease in the popularity of measuring +ustomer satisfa+tion

in re+ent years 7Saduman4 *&&68.

an-ing is su+h a se+tors in "hi+h +ustomer satisfa+tion has dra"n attention by many

resear+hers over the last period 7!aser et. al.4 %???H Meta"a and Almossa"i4 %??@H

oyd et. al.4 %??(HEevesque and M+Dougall4 %??'H >aron et.al.4 %??(H errard and

3unningham4 %??=H Cthman and C"en4 *&&5H Anderson et.al.4 %??=H

Athanassopoulos and Eabrou-os4 %???H 9ennington and Ra-o"s-a4 %??'H )ava

et. al.4 %??=H PolatoQlu and 2-in4 *&&%H amal and !aser *&&*H ounaris et. al.4

*&&5H )ava et. al.4 *&&(H iels-i4 *&&(8. Cne of the r e a s o n s for t h i s i s that

the ban-ing industry is in+reasingly gro"ing and some ban-s +onsider +ustomer

satisfa+tion as a +hief element of their mar-eting strategies. 3onsequently4 many

finan+ial institutions improving the quality of their servi+e by fo+using on

in+reasing +ustomer satisfa+tion and +ustomer retention so that the desired

gro"th +an be se+ured. 3ustomer satisfa+tion improves relationship b et "e en +ustomer

and organi#ation be+ause it is related to the basi+s of the relationship. Their servi+e

quality 7S2R:LUAE8 instrument to operationali#e +ustomer satisfa+tion "ith

servi+e quality as a five$fa+tor stru+ture +onstru+t4 +omprising tangibles4

responsiveness4 empathy4 reliability and assuran+e. This instrument has been used to+apture1 per+eived +ustomer satisfa+tion "ith fun+tional and te+hni+al quality .

In many other servi+e businesses4 the servi+es highlight the importan+e of +ustomer

relationship management. Furthermore4 the e+onomi+ benefits asso+iated "ith

+ustomer s a t i s f a + t i o n are h i g h . Thus4 it "as sho"n that +ustomers "ho



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have been doing transa+tions "ith their ban-s about five years are mu+h more

profitable than those in the first year of the relationship so longer +ustomer

relationships are more "orthy to the ban- than ne" ones< more established

+ustomers have higher a++ount balan+es4 relatively lo"er a++ount +osts and are

more li-ely to use other ban- produ+ts and servi+es 7Saduman4 *&&68.

The above dis+ussion highlights the importan+e of +ustomer satisfa+tion that t h e

+onstru+ting strategies for finan+ial institutions su+h as those that engage in

interest$ free finan+e. The study deals "ith the attitude of ordanian people

to"ards interest$free ban-ing so the authors designed nine questions that "ere

published in the appendi/ of their arti+le. They said in the study that religiosity "as

not the main determinant of ban- sele+tion but the level of profitability 7return from

investments8 "as one of the main fa+tors in ordan. In addition4 the authors ma-e the

follo"ing +omments< ordanian people belief that Islami+ ban-s "ere not offering

interest$free loans "hi+h +ould solve +ommunity problems in effi+ient manner

and the redu+tion of interest rates on loans "ould benefit borro"ers4 espe+ially

those are needy and the poor. Resear+hers required to establish and +ompare the

ban- sele+tion +riteria of +ustomers of +onventional and Islami+ ban-s in ordan. The

questionnaire survey +ontained t"enty items for ban- sele+tion +riteria. For those "ho

li-e Islami+ ban-s4 the three most important ban- sele+tion +riteria "ere< the fast andeffi+ient servi+e14 the ban-Ds reputation and image14 and +onfidentiality of the

ban-1. They investigated that ban - sele+tion +riteria lo+ated in 2gypt for both

Islami+ ban-s and +onventional ban-s. >e +on+luded that the sele+tion attributes

for the first respondents are different from the respondents "ho ans"er latter. For

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the Islami+ ban-s4 the most important fa+tor "as the advi+e and

re+ommendations made by relatives and friends. ut +onvenien+e of the lo+ation4

friendliness of personnel and the ban-Ds vision to serve the +ommunity apart from of

the e/pe+ted profitability4 timeliness and effi+ien+y also appeared to be important

drives. 7Saduman4 *&&68

The -ey role of satisfa+tion "ithin the mar-eting resear+h domain has re+ently been

question mar-. D i f f e r e n t resear+hers have "itnessed +onfli+ting survey results

t h a t high satisfa+tion s+ores +orrelating "ith de+lining mar-et share. 3riti+s have

argued that traditional +ustomer satisfa+tion models rate a +ompanyOs performan+e on

the basis of e/isting +ustomers4 t h is mo del do not integrate potential +ustomers4

non$+ustomers4 or +ompetition in the set of analysis4 but the +ustomerOs per+eption of

pri+e should be spe+ifi+ally ta-en into a++ount. >en+e4 +ustomer satisfa+tion

measurement has been +riti+i#ed be+ause it is limited to a ta+t i+al level4 on ly

providing simple produ+t improvement and provides a +han+e to +orre+t defe+ts and

e r r o r s of e/isting produ+ts and servi+es.1 7 ha vami 4 *&&'8

First4 most definitions present +ustomer per+eived value means e/+hange bet"een

benefit s and sa+rifi+es per+eived by the +ustomer in a supplierOs offering. Per+eived

benefit s are +onsists on the +ombination of physi+al att ributes4 servi+e att ributes and

te+hni+al support available in relation to a parti+ular use situation. ;e al sode s+ rib e per+eived sa+rifi+es in monetary terms. Cther definitions des+ribe

sa+rifi+es more broadly. In value per+eptions4 sa+rifi+es are prime important for

+ustomers and +ustomers value means a redu+tion in sa+rifi+es more than an in+rease

in benefits.1



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Se+ond4 value is a thing that our per+eptions +reate. Sin+e different +ustomer

segments per+eive different values "ithin the same produ+t. I n addition4 the

various members in the +ustomers organi#ation involved in the pur+hasing pro+ess so

they +an have different per+eptions of a supplierOs value delivery.

Finally4 value is relative to +ompetition. : a l u e i s t o delivering a better

e/+hange bet"een benefits and sa+rifi+es in a produ+t or servi+e4 i.e. offering

better value than +ompetition4 value "ill also help a +ompany to +reate sustainable

+ompetitive advantage.

7 ha vami 4 *&&'8

:alue is the result of a +ognitive +omparison pro+ess. This +on+ept has been

des+ribed as a +ognitive$based +onstru+t "hi+h +aptures any benefit that sa+rifi+e

bet"een e/pe+tations and per+eived performan+e In +ontrast to the +ognitive$

based value +onstru+t4 satisfa+tion is des+ribes by most resear+hers as an affe+tive

evaluative response 1.

As a +onsequen+e4 the assessment of +ustomer per+eived value is dire+ted to"ard

former4 present4 and potential +lients4 "hereas satisfa+tion resear+h is dire+ted to"ard

the supplierOs +urrent +ustomer base. Finally4 satisfa+tion resear+h means the

assessment of the suppliers mar-et offering to the +ustomers4 but not ne+essarily

integrating informat ion of the +ompetitorOs produ+t offerings. 3ustomer per+eived

value measurement means ben+hmar-s the supplierOs offering "ith +ompetition.1

7 ha vami 4 *&&'8

3ustomer relationship pra+ti+es "ere introdu+ed by servi+e organi#ations li-e to deal

"ith -ey +ustomers the ban-s established +ustomer relationship units separatelyH to

re"ard loyal +ustomers the airlines designed frequent programsH for heavy users the

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tele+om servi+e firms designed +ustomi#ed servi+e and for regular +ustomers the hotels

introdu+ed personal user servi+e. 7Assabil4 *&%%8

3ustomer retention affe+ted by +ustomer satisfa+tion multiple studies +on+lude. The

greater is their retention is more satisfied +ustomers and li-ely to be the loyal +ustomers.

7Albert4 *&&?8

Those +ustomers "ho +an deliver long$term profits has +hanged ho" mar-eters vie" the

"orld the need to better understand +ustomer behavior and fo+us on them. To a+quire

+ustomers ne" ones "ho have not bought the produ+t +ategory or those "ho are

+urrently +ompetitors +ustomers. 7;iner4 *&&%8

The probability of a +ustomer being alive or repeat buying from a firm is 3ustomer

retention. Firms +learly -no" "hen +ustomers terminate relationships in +ontra+tual

settings but firms must infer "hether a +ustomer is still a+tive4 in non +ontra+tual

settings. 7Neithaml4 *&&'8

3ustomer de+ision$ ma-ing is the first building blo+- be+ause all buying de+isions have

an emotional +omponent4 so for predi+ting and influen+ing their pur+hasing behavior the

understanding +ustomers emotional needs are vital. A differen+e e/ists bet"een-no"ing about +ustomers and -no"ing +ustomers. 7 o"en and !ie4 *&&(8

Those +ustomers "ho +an deliver long$term profits has +hanged ho" mar-eters vie" the

"orld the need to better understand +ustomer behavior and the interest of many

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managers to fo+us on. To a+quire ne" ones "ho have not bought the produ+t or those

"ho are +urrently +ompetitorsO +ustomers. 7;iner4 *&&%8

3RM performan+e evaluation metri+s are re+ommended the +ustomer relationship

strength4 sales effe+tiveness4 and mar-eting effi+ien+y as relevant that retailers a+hieved

after implementing 3RM te+hnology. 7Ali and !oor4 *&&?8

There is al"ays e/pensive to a+quiring a ne" +ustomer be+ause it +osts higher but in

retention +ustomers +ost al"ays falls be+ause +ustomers has repeatedly pur+hase the

produ+ts and servi+es and the pur+hases volume in+reases. To attra+ting the loyal

+ustomers to"ards their produ+ts and servi+es the firms did not invest mu+h on them.

usiness de+ision ma-ers and e/e+utive under these findings sear+h for ne" innovative

strategies to in+rease the base of loyal +ustomers and -eep their e/isting +ustomers loyal

to"ards their produ+ts and servi+es4 7Shah,ehan4 *&%&8

To support their sales4 mar-eting and servi+e a+tivities report several benefits managers

using 3RM soft"are4 for e/ample "hen +ustomer satisfa+tion are high4 so they enhan+ed

+ustomer retention4 and redu+ed +osts of +ustomer a+quisition. 7 uttle4 *&&*8

To build loyalty and supply relationships against +ompetitor appeals 3ustomer retention plays a vital role. 3ustomer retention is five types of variables4 four that des+ribes the

important pro+esses in business servi+es mar-eting and one that des+ribes buyer

+hara+teristi+s. 7 o"man4 %??=8

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Traditionally4 businesses employ a mar-eting stratagem to +at+h the attention of

+ustomers. Today s +ompetition re"ards businesses that prote+t produ+ts and servi+es

through +ustomer retention 7Roberts4 *&&6.8 3ustomer retention through quality servi+e4

produ+t4 pri+e and a++ess to a ban- s fa+ilities among others4 are +riti+al to +ustomer

satisfa+tion. Resear+h also sho"s that satisfied +ustomers ma-e repeat pur+hase 7or sti+-

to their servi+e providers8 and re+ommend to friends and families thereby in+reasing

mar-et share and profitability of the organi#ation. 7Arif and !aeem4 *&%%8

It is important to note that establishing and managing a good +ustomer relationship is a

strategi+ endeavor. >aving a 3RM soft"are installed by it does not ensure a su++essful

+ustomer relationship. For this to happen business pro+esses and +ompany +ulture have

to be redesigned to fo+us on the +ustomer. 3RM soft"are +an be only a tool to

implement a +ustomer strategy. 7 AUM2IST2R4 *&&*8

3RM and relationship mar-eting essentially motivate of mar-eting s+holars4 be+ause

the 3RM areas are e/tended into many fields4 from mar-eting to strategi+ de+isions.

In re+ent years 3RM is fa+ilitated other paradigms of mar-eting and by +orporate

initiatives that have developed around the +ooperation and the +ollaboration of

organi#ational units and their sta-eholders4 in+luding +ustomers. 7 ha vami 4 *&&'8

3RM is a management philosophy fo+using on +ustomer orientation. It emerged as an

ans"er to de+reasing +ustomer loyalty in +ompetitive mar-ets4 and "as enabled by ne"

te+hnologies. It entails measuring inputs li-e mar-eting4 sales4 and servi+e +osts as "ell

as outputs in terms of +ustomer revenue and it entails a+quiring4 +ontinuously updating

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The main part of 3RM is +ustomer retention be+ause the 3ustomer Retention is one of

the top targets of 3RM method.

The purpose of all dis+ussion4 in this +hapter4 is to respond resear+h ob,e+tivesH and to

find effe+tive elements for +ustomer retention so that "e enhan+e +ompanies profit

and in+rease their mar-et and +ustomer share simultaneously. 7 ha vami 4 *&&'8

Theoretical odel:

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Chapter - (

Data and ethodology

(.# Data

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3RM

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Primary data are +olle+ted from the +ustomer of all ban-s of Pa-istan and then put the

data in SPSS for generating results.

(.#.# Data collection:

A resear+h question is a questioning statement that see-s for the tentative relationship

among variables and +larifies "hat the resear+her "ants to ans"er.1

A questionnaire is an important tool in publi+ opinion resear+h. Luestionnaire +an use

"hen "e as- same question or questions for the large sample si#e.

Advantages of questionnaire Disadvantages of questionnaireLuestionnaires are very +ost

effe+tive

Luestionnaires are easy to analy#e

Luestionnaires redu+e bias

Luestionnaires are less disturbing

Luestionnaires are familiar to most

people

Response rates +an be lo"

There is little +ontrol over "ho

+ompletes a questionnaire

Luestionnaires are inappropriate for

people "ith reading diffi+ulties

Luestionnaires must be -ept

relatively short

Luestionnaires are time +onsuming

for respondents

An intervie" is a +onversation bet"een t"o people "here questions are as-ed by the

intervie"er to obtain information from the intervie"ee

There are many reasons to use intervie"s for +olle+ting data and using it as a resear+h

instrument. ray 7*&&(4 p. *%(8 has given the follo"ing reasonsariables ?ntered)Remo'ed b

Model :ariables 2ntered

:ariables

Removed Method

% +rma . 2nter

a. All requested variables entered.

b. Dependent :ariable< +ustomerYretentions

odel 4ummary

Model R R Square Ad,usted R Square

Std. 2rror of the

2stimate

% .5?@a .%6? .%65 .6?*(%

a. Predi+tors< 73onstant84 +rm

A@O>A b

Model Sum of Squares Df Mean Square F Sig.

% Regression ?.=@' % ?.=@' *=.@@5 .&&&a

Residual 6%.?(% %(@ .56%

Total '%.=*= %(?

a. Predi+tors< 73onstant84 +rm

b. Dependent :ariable< +ustomerYretentions

Coefficients a

Model

Unstandardi#ed 3oeffi+ients

Standardi#ed

3oeffi+ients

T Sig.Std. 2rror eta

% 73onstant8 %.*6& .*5% 6.(%6 .&&&

+rm .(6' .&@' .5?@ 6.*@& .&&&

a. Dependent :ariable< +ustomerYretentions

Regression e/uation is customer retention 6 #.%+ 7 .*+3 Bcustomer

relationship management

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$nterpretation:

Simple regression "as +ondu+ted to investigate ho" +ustomer relationship management

impa+t on +ustomer retentions. The results "ere statisti+ally signifi+ant as p[.&6. The

indentified equation to understand this relationship "as +ustomer retentions X %.*6 W .

(6'Z 7+ustomer relationship management8. The R * value "as .%6. This indi+ates that

%6 of the varian+e in +ustomer retention "as e/plained by the +ustomer relationship

management.

Chapter - +

Discussion

+.# Discussion:

3ustomer e/pe+tations are +hanging throughout the "orld. 3ustomer relationship

management 73RM8 strategies have be+ome important all over the "orld due to these

+hanges in e/pe+tations from +ustomers and nature of mar-ets. 3hanges are +oming

a+ross the "orld4 but they present 3RM strategies opportunities in South Afri+a andother developing +ountries. 7Rou/ and >erbst4 *&&68

For small and big +ompanies4 +ustomers be+ome -ey fa+tors4 no" +ompanies fo+using

on the -ey +ustomers to survive in the global mar-et . ;e all have -no"n that the +ost

of a+quire a ne" +ustomer five times more than an e/isting +ustomer to ma-e a ne"

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offered to +ustomers. It is also possible4 finan+ial institutions tailor their pa+-ages for

spe+ifi+ +ustomer. 7Rou/ and >erbst4 *&&68





its poli+ies and strategies to manage relationship "ith its +ustomers to survive in the

+ompetitive environment. 7>ussain4 *&&?8

The finan+ial impli+ations of attra+ting ne" +ustomers may be five times mu+h more as

-eeping e/isting +ustomers. >o"ever4 maintaining high levels of satisfa+tion "ill not

ensure +ustomer loyalty. an-s lose satisfied +ustomers "ho have moved4 retired4 or no

longer need +ertain servi+es. As a +onsequen+e4 retaining +ustomers be+omes a priority.

73hong and )ong4 *&&=8

The +ost of losing +ustomers in+reasingly every day4 but +ompanies +ontinually

learn ne" "ays to a+quire4 retain and in+rease business. 3us tomer servi+e has been an

important fa+tor in +ustomer retention4 and its role is more +riti+al than ever and "ill

+ontinue to gro" throughout the %??&s a++ording to ne" resear+h. 7 ha vami 4 *&&'8

The satisfa+tion is another important trait "hi+h must be ta-en in+lude in overall loyalty

of the +ustomers to"ards their servi+e providers. In ban-s4 the +ustomers as- themselves

about the level of the servi+es and de+ide about "hi+h servi+e is not important for himand de+ide about repur+hase behavior after using the servi+es. The ban-ing industry

is in+reasingly gro"ing and some ban-s +onsider +ustomer satisfa+tion as a +hief

element of their mar-eting strategies. 3onsequently4 many finan+ial institutions

improving the quality of their servi+e by fo+using on in+reasing +ustomer

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satisfa+tion and +ustomer retention so that the desired gro"th +an be se+ured

7Shah,ahan4 *&%&8.

Eimitations

The limitation of this resear+h study is that this resear+h is +ondu+ted in Eahore only

from the +ustomers of their different ban-s.

In this resear+h4 I use the survey resear+h method.

Future resear+h impli+ations

If anyone sele+ts this topi+ for resear+h in future so my first re+ommendation is heJshe

uses qualitative resear+h.

Se+ond re+ommendation is if heJshe uses quantitative resear+h then they must use

intervie" based survey method in resear+h

+.% Conclusion:

The goal of this resear+h is that to investigate the impa+t of +ustomer relationship

management on +ustomer retention in ban-s of Pa-istan. In re+ent years 3RM has been a

-ey element of mar-eting. ig and small +ompanies have been trying to use the 3RM

system to support their business. In this +ompetitive period a+quiring ne" +ustomers is

more diffi+ult as +ompare to maintain the e/isting +ustomers. During our resear+h "e

learned that the relationship bet"een 3RM and +ustomer retention is linear bet"een

them. The positive sign of the PearsonOs test value sho"s that there is positiverelationship4 "hi+h means that ban-s "ho have 3ustomer relationship management have

high +ustomer retentions and vi+e versa. Using 3ohen s 7%?@@8 guidelines the effe+t

si#e is medium relating that there is moderate relationship bet"een +ustomer relationship

management and +ustomer retention.

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References:

erndt4 >erbst4 and Rou/ 7*&&68 IMPE2M2!TI! A 3USTCM2R

R2EATIC!S>IP1< ournal of lobal usiness and Te+hnology4 :olume %.

Roberts$Eombard 7*&%%8 3ustomer retention through +ustomer relationship

management< The e/ploration of t"o$"ay +ommuni+ation1 < Afri+an ournal of

usiness Management :ol.6 7?84 pp. 5(@=$5(?'

3ohenZand anZZ4 >ua >"a Au )ongZZZ4 2sther 3hong 7*&&=8 3USTCM2R

R2T2!TIC! ) A!9S I! !2; N2AEA!D1 < an-s and an- Systems J

:olume *4 Issue %

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;ise and ali 7*&&?8 3USTCM2R R2EATIC!S>IP MA!A 2M2!T ;IT>

SP23IAE R2F2R2!32 I! A!9S CF A! EAD2S>1< south"est Revie"

of international business resear+h4 vol. *&. !o.%

Afsar4 Rehman4 Lureshi4 and Shah,ehan 7*&%&8 1Determinants of +ustomer

loyalty in the ban-ing se+tor< the +ase of Pa-istan1< Afri+an ournal of usiness

Management :ol.( 7'84 pp. %&(&$%&(=

>ussain4 >ussain4 >ussain and Sa,id 7*&&?813ustomer Relationship

Management< Strategies and Pra+ti+es in Sele+ted an-s of Pa-istan1IP MA!A 2M2!T I! FI!A!3IAE I!STITUTIC!S1 . saduman C-umus 7*&&6 8 A STUD) CF 3USTCM2R SATISFA3TIC!

A!D A!9 S2E23TIC! 3RIT2RIA1< ournal of 2+onomi+ 3ooperation4

6%$@'

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Cly aei4 and ha vami 7*&&'8 AT>2 IMPA3T CF 3USTCM2R R2EATIC!S>IP

MA!A 2M2!T C! 3USTCM2R R2T2!TIC! 1

A DAEEA> and Assabil 7*&%%8 3ustomer Relationship Management

Pra+ti+es< A 3ase of >otels in Ashanti Region of hana

Par-er4 !itse and Albert4 7*&&?8 The Impa+t of Ina++urate 3olor on 3ustomer

Retention and 3RM< Informing S+ien+e1 < the International ournal of an

2merging Transdis+ipline :olume %*4

Russell S. Winer, 7*&&%8 3ustomer Relationship Management< A Frame"or-4

Resear+h Dire+tions4 and the Future1ori#ons (=J6

Russell S. ;iner 7*&&%8 A Frame"or- for 3ustomer Relationship

Management1 < 3AUFCFysllA MA!A 2M2!T R2:I2; :CE(54!C.(

>ubert AUM2IST2R 7*&&*8 3ustomer Relationship Management for SM2s1

;ahab4 !oor4 and Ali 7*&&?8 Te+hnology Trust and 2$ an-ing Adoption< The

Mediating 2ffe+t of 3ustomer Relationship Management Performan+e1 < The

Asian ournal of Te+hnology Management :olume *4 !umber *4

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AfsarZ4 Rehman4 Lureshi and Shah,ehan 7*&%& 8 Determinants of +ustomer

loyalty in the ban-ing se+tor< The +ase of Pa-istan1 < Afri+an ournal of usiness

Management :ol.( 7'84 pp. %&(&$%&(=

Ang and A. uttle4 1RCI on 3RM< a +ustomer$,ourney approa+h1 < Ma+quarie

raduate S+hool of Management

Mali-4 !aeem4 and Arif4 7*&%%8 IMPA3T CF P2R32I:2D S2R:I32

LUAEIT) C! A!9I! 3USTCM2RS EC)AET)1 I!

USI!2SS4 :CE 54 !C @

Douglas o"man 7%??=8 13USTCM2R R2T2!TIC! I! USI!2SS

S2R:I32S< D2T2RMI!A!TS CF DURATIC! I! 3USTCM2R$SUPPEI2R

R2EATIC!S>IPS1< Institute for the Study of usiness Mar-ets

>oon Par- and ul 9im4 7*&&584 A frame"or- of dynami+ 3RM< lin-ing

mar-eting "ith information strategy1< usiness Pro+ess Management ournal

:ol. ? !o. 6

Pal Singh Toor4 7*&&?84 3reating +ompetitive edge through improved +ustomer

relationship management1< USI!2SS STRAT2 ) S2RI2S4 :CE. %& !C. %

Rasila4 7*&&?84 3ustomer relationship quality in landlord$tenant relationship1

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