SAMARA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

THE EFFECT OF CUSTOMER RELATIONSHIP MANAGMENT ON CUSTOMER LOYALTY

AND RETENTION (CASE OF COMMERCIAL BANKS IN WOLDIA)

Prepared by:
BiredawYidersal

Supervised by:
Dr M.S. Chakravarthy
Mr .Daniel Amare

The thesis submitted to management department in partial fulfillment of the Requirements for
master’s Degree in Business Administration

June2018

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 DECLARATION

This research project is my original work and has not been presented for a degree in any other
University or any other award

Signature: ………………………………… Date …………..

Biredaw Yidersal

This research project has been submitted for examination with our approval as the University
supervisors
1, Signature: ………………………………… Date: ……………………………………..
Mr Daniel Amare
2, signature ……………………………………. Date ………………………………………
Dr M.S. Chakravarthy

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 Acknowledgements
My great appreciation goes to Samara University, college of Business and economics for
giving me the chance to be a student in department of business administration. The next sincere
appreciation and special thanks go to the respondents for their kind assistance and support
throughout the data collection process of this research. I would like to thanks commercial banks
found in Woldia town for allowing me to conduct this research and for providing assistance in
contacting the customers. Great appreciation is also extended to my friend Kumlachew Alebachew
and advisors who always gave a great support during this research.

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ABSTRACT

Customer relationship management (CRM) is a combination of organizational strategy,

information systems, and technology that is focused on providing better customer service. The
main objective of CRM is to acquire new customers, retain the current customers, and nurture a
favorable relationship with the existing customers. CRM as a methodology of creating and
evolving an organization in the marketplace while at the same time influencing positively the
perception of the organization in individual customers. Today, consumers are more educated,
better informed, more technological, have more purchasing power and hence, more demanding
in the products and services they buy. Therefore, companies should use CRM as a strategy that
goes beyond simply making the customer feel important and strives to make the customer an
extension of the research and development team, the marketing team, the advertising team, and
any other line of business that can benefit from direct contribution by the ultimate consumer.
Commercial Bank in Woldia has managed to weather this competition to stand out as one of the
successful Ethiopian businesses today. This study sought to analyze the Customer Relationship
Management strategies that are being used by Ethiopia Commercial Bank to retain and attract
new customers. The variables include customer recognition practices, conflict handling,
customer referrals, trust, empathy, charity, brand visibility, outdoor branding and technological
systems and how they affect customer retention. To achieve this objective, the researcher used
structured questionnaires. The target respondents were employees of commercial banks who
were picked using stratified random sampling technique from 12 commercial banks in 16
branches in Woldia town. The data was analyzed using both descriptive and regression analyses.
The main importance of the findings was to assess the influence of Customer Relationship
Management on customer retention and loyalty as a strategy for maintaining competitive edge in
the banking industry. The study found out that all independent variables like customer
recognition practices, conflict handling, customer referrals, trust, empathy, charity, brand
visibility, outdoor branding and technological systems were extensively used which had led to
increased customer retention and loyalty.

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List of table page

Table [Link]: Target population……………………………………………………………….…29

Table [Link]: Sample size………………………………………………………………………..30
Table [Link]: Gender of the respondent…………………………………………………………35
Table [Link]: Respondent’s age………………………………………………………………. …36
Table [Link]: Work experience of the respondent………………………………………………...37
Table [Link]: Position of the respondent………………………………………………………….38
Table [Link]: Correlation between customer referrals and customer retention& loyalty…………………….39-
40
Table [Link]: Correlation between technology and customer retention& loyalty…………………………...41
Table [Link]: Correlation between outdoor branding and customer retention& loyalty…………………….42
Table [Link]: Correlation between brand visibility and customer retention& loyalty…………......................43
Table [Link]: Correlation between charity and customer retention& loyalty….................................................44
Table [Link]: Correlation between trust and customer retention& loyalty…………………….......................45
Table [Link]: Correlation between empathy and customer retention& loyalty……………………...............46
Table [Link]: Correlation between customer handling and customer retention& loyalty…………………...47
Table [Link]: Correlation between customer recognition and customer retention& loyalty….........................48
Table [Link]: Regression analysis result for customer referrals and customer retention and loyalty…………………..48-49
Table [Link]: Coefficients of CRM dimensions………………………………………………….................50
Table [Link]: Regression analysis for technology and customer retention and loyalty………………….......51
Table [Link]: Regression analysis for outdoor branding and customer retention and loyalty……………….52
Table [Link]: Regression analysis for brand visibility and customer retention and loyalty…………………53
Table [Link]: Regression analysis for charity and customer retention and loyalty………………………….54
Table [Link]: Regression analysis for trust and customer retention and loyalty…………………………….55
Table [Link]: Regression analysis for conflict handling and customer retention and loyalty……………….56
Table [Link]: Regression analysis for empathy and customer retention and loyalty………………………..56-57
Table [Link]: Regression analysis for customer recognition and customer retention and loyalty…………...58

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 Acronyms

CRM=CUSTOMER RELATIONSHIP MANAGEMENT

CSM = CUASTOMER SERVICE MANAGER

BOA = BANK OF ABYSSINYA

KYC = KNOW YOUR CUSTOMER ANALYSIS

SSC = STRATEGICALLY SIGNIFICANT CUSTOMER

LTV=LIFE TIME VALUE

JIT =JUST IN TIME SERVICE

ROI = RETURN ON INVESTMENT

Ho = NULL HYPOTHESIS

Ha = ALTERNATIVE HYPOTHESIS

ANOVA =ANALYSIS OF VARIANCE

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CHAPTER ONE
INTRODUCTION
1.1 Background of the study
The survival of organizations depends on its customers. Customers are the source of profits to be
earned by a profit making organization and the primary reason for being in the operation for not for-
profit organizations. Thus, customers are the backbone and lifeline of organizations. Often it is said
that without customers there is no business.
All company revenue is achieved from two groups of customers-new and repeat customers. It is
substantially more cost-effective to retain existing customers than attract new ones. Existing
customers have known and identified needs that have been satisfied by the organizations
products or services in the past. By focusing the organizations marketing strategy on the
profitable segments of their customer base an organization will normally produce most of the
required revenue and increase their market share without investing in acquiring new customers
which is much more expensive than retaining old ones. Loyal customers not only repurchase, but
also advocate products and services to their friends pay less attention to competitive brands and
often buy product and service line extensions (Baumeister, 2002). To develop effective retention
strategies an organization has to have an in depth knowledge of customers behavior and needs.
Loyalty is a physical and emotional commitment given by customers in exchange for their needs
being met (Stone, et al 2002). Customer loyalty that leads to retention will develop over time if
the parameters for the relationship are planned and implemented correctly. In a democratized
market it is the quality and depth of the customers' relationships-physically and psychologically
that ultimately differentiates between brands (Burnett, 2004).
Customer retention refers to keeping a client’s business rather than have the client use
competitors' services or products. Repeat customers are people who buy from you again and
again. Customer retention embodies repeated behavior and reflects relationship continuation.
Customer retention is an essential part of customer relationship management and organizations
must take this into account (Watkins, 1999) .The longer a customer stays with an organization
the more utility the customer generates to the organization. Maintaining high levels of
satisfaction will not, by itself, ensure customer loyalty. Organizations lose satisfied customers
who have relocated, retired, or no longer need certain services. As a consequence, retaining

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customers becomes a priority. Companies that have a monopoly or exclusive product of some
sort easily retain customers. A customer may not be thrilled by an organization but the rational
experience (convenience) outweighs the emotional experience (the fact that you dislike them). In
this case, customer retention numbers may appear high, but it's built on a false premise. As soon
as an alternative is available, many customers will disappear. The emotions evoked by a
customer experience act as a chief mediator for customer retention (Chen &Popovich, 2003).
When combined with an organization's strong reputation and recognized expertise, customer
emotions are the chief determinant of customer retention. Without the emotional bond necessary
to retain customers, customer loyalty is impossible. Interactions that evoke negative feelings,
stress or manipulative tactics negate trust. And while there are a few notable exceptions, most
companies do not intend to negate trust. Failure to craft a deliberate customer experience puts
organizations at risk for doing just that.
The advantage of customer retention to the organization is that it provides for cost savings, risk
taking -comfort with a company and trust in their expertise leads people to try new things,
preferential shopping- most people tend to go to one or two organizations over and over again 3
For a reason: They know what is going to be there, where to find it, etc. Evangelism-customers
who like your products and feel like you have treated them well will sell your product for you.
They may not sell it hard, but they will recommend it to friends, tailoring Your Wares -when you
know a customer, you can make informed recommendations or ensure that you carry a certain
item that you know they are going to want. The most lasting way of retaining customers,
however, is through conscientious service that includes following up on any issues or
complaints. If a consumer has a negative shopping experience with a company, he or she may
deal with that business less often or not at all. If the firm sincerely apologizes and takes the time
to have a polite representative telephone the customer occasionally to see how they can meet his
or her needs, the consumer may reconsider and keep dealing with that company despite any past
unpleasantness. In this light, this research uses a case study to examine CRM has influenced its
processes and outcomes, especially in regard to customer retention, in commercial banks found
in Woldia town . Customers have always been the main concern for businesses all over the
world. This chapter offers a background of the study and outlines the objectives that the paper
seeks to accomplish.

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1.2 Statement of the problem
As the competitive environment becomes more turbulent, the most important issue the sellers
face is no longer to provide excellent, good quality products or services, but also to keep loyal
customers who will contribute long-term profit to organizations. To compute in such swarming
and interactive environment, Managers should create good relationship with their [Link]
importance of customers has been highlighted by lots of researchers and academicians all around
the world. Top performing financial institutions believe that customers are the purpose of what
they do and they very much depend on them; customers are not the source of a problem and they
should never make a wish that customers „should go away‟ because their future and security will
put in jeopardy. That is the main reason why financial institutions of today are focusing much
attention on customer satisfaction, loyalty and retention (Zairi, 2000). Satisfaction is an overall
customer attitude or behavior towards a service provider, or an emotional reaction towards the
difference between what customers expect and what they receive, regarding the fulfillment of
some desire, need or goal (Hansemark, &Albinsson, 2004; Kotler, 2000; Hoyer, &MacInnis,
2001). Customer loyalty, on the other hand, is the result of an organization’s creating a benefit
for customers so that they will maintain and increasingly repeat business with the organization
(Anderson, & Jacobsen, 2000). Equally well, dissatisfied customers are more likely to tell 10
another ten people about their unfortunate experiences with a particular organization. In order to
achieve customer satisfaction, organizations must be able to build and maintain long lasting
relationships with customers through satisfying various customer needs and demands which
resultantly motivates them to continue to do business with the organization on on-going basis (La
Barbera&Mazursky, 1983). Although, previous research has attempted to examine the link
between (a) customer satisfaction and customer loyalty and (b) customer satisfaction and
customer retentions to switch in various industries but there are still lack of research in banking
sector to investigate whether customer relationship management influences customer retention in
commercial banks. It is evident that there was need to carry out further studies to establish
whether customer relationship management influences customer retention in commercial banks.
This study therefore intended to establish the effects of customer relationship management on
customer loyalty and retention in commercial banks using the case of Commercial banks in
Woldia town.

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So, the main reason that initiated the researcher to conduct this research is that there are little
researches which are conducted on this topic independently and in detail before to indicate the
effect of customer relationship management on customer loyalty and retention in Ethiopia,
specifically in commercial banks found at Woldia town. The aim of this research is to
investigate the customer relationship management on customer loyalty and retention dimensions
such as trust, commitment, conflict handling, and empathy of commercial bank in Woldia town,
in order to discover whether these dimensions will the intended strengthening effect on customer
loyalty and retention.
1.3 Significance of the study

The study is important to the researchers as it equips the student with research and analytical
skills that are important in enhancing the student’s capability to understand real life business
management issues and enabled them be in a better position to comprehend and solve
organizational problems in a professional manner. The study is also useful to consumers of
financial products because it highlighted the necessity to integrate customer centric management
methods that placed strategic significance on satisfying specific consumer needs.

This research can provide current information on customer relationship management and its impact
on customer loyalty and retention in Ethiopian context. Besides, the findings of the study can be
used for other similar studies in the future. So, it is expected that this research can contribute a
lot to the efforts made by commercial banks at Woldia town for the improvement of customer
loyalty and retention through provision of appropriate service to the respected customers. It also
benefits both academicians and other practitioners as a documented study in this area. Therefore,
the findings of this study can contribute a lot to banking service providers on how to
implement strategies that will meet their customers’ needs and ultimately win their loyalty.

1.3 Research question

1. Do customer recognition practices affect customer retention and loyalty to their bank?
2. How brand visibilities affect customer retention and loyalty?
3. How outdoor branding affect customer retention at banks Woldia town?
4. How technological systems affect customer retention at banks at Woldia town?
5. Does trust influence customers loyalty towards banks at Woldia town?
6. Does conflict handling influence customers retention and loyalty towardstheirbanks?

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 7. Does empathy influence customer’s retention and loyalty towards banks in Woldia town?
8. Does charity influence customers retention and loyalty towards their banks
9. Does new customer referrals influences customer retention and loyalty towards their bank?

1.4 Objective of the study

1.4.1 General objective
The general objective of this study is to explore the impact of relationship management on
customer loyalty and retention within commercial banks at Woldia town, by analyzing the
relationship of every construct in the theoretical framework.

1.4.2 Specific objectives

In assuring that the above general objectives can be achieved, there are few specific objectives
that need to be accomplished in the case of commercial banks found at Woldia town. These
specific objectives are the following.
 To determine whether trust influence the extent to which customer’s loyalty and
retention towards their bank.
 To find out whether outdoor branding influence the extent to which customer’s
loyalty and retention towards their bank.
 To determine whether empathy influence the extent to which customer’s loyalty and
retention towards their bank.
 To identify whether conflict handlings influence the extent to which customer’s loyalty
and retention towards their bank.
 To determine the effect of customer recognition practices on customer retention
 To determine the influence of banks brand visibility on customer retention
 To determine the effect of outdoor branding on customer retention
 To establish the influence of technological systems on customer retention

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1.5 Scope of the study
The study is specific to staffs of Commercial banks in Woldia like CBE(commercial bank of
Ethiopia),Dashen bank, BOA(bank of Abyssinia),United bank, Abay bank, Nib bank,
Birhanbank ,Lion international bank, Oromia international bank, Awash bank, Wegagen bank
and Buna bank. All of these banks are found in Woldia town. The target groups of staffs are
senior team who include branch managers and CSM (customer service managers), KYC
(knowing your customer analysts, accountants and junior and senior officers. The junior and
senior customer service officers are the majority.
1.6 Organization of the paper
The study is organized into five chapters, chapter one discloses background of the study,
statement of the problem, research objectives, significance of the study, research questions and
scope of the study,
Chapter two provides a literature review informing the reader of what is already known in this
area of study. Chapter three discusses the methodology including research design; sample size
and sampling technique, data source and collection method, procedure of data collection and
method of data analysis. Chapter four shows that data analysis and discussion and the last
chapter disclose conclusion and recommendation part of the thesis.

CHAPTER TWO
2.0 LITERATURE REVIEW
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2.1 Introduction
This chapter presents a review of the related literature on the subject under study presented by
various researchers, scholars, analysts, authors and theoretical orientation on the same area of
study. The materials are drawn from several sources which are closely related to the theme and
the objectives of the study.
2.2 Theoretical Review
2.2.1 Relationship Marketing Theory
The challenge for most companies today is to thrive in a relationship economy (Cap Gemini
Ernst & Young, 2005). Competition for the most profitable customer relationships is extremely
tough and companies need to know who their customers are. This includes aspects like their
preferences, their habits, and their experiences with companies and very importantly, their value.
Customers have become very demanding and their expectations have increased to new heights.
The environment has evolved in to a complex landscape, which has resulted in the high value
placed on relationship marketing today. Relationship marketing has evolved from a primary
focus on consumer goods in the 1950s, industrial marketing in the 1960s, non-profit and societal
marketing in the 1970s, services marketing in the 1980s and finally, relationship marketing in the
1990s (Christopher M, Payne &Ballantyne, 1991).
Grönroos(1994a) states that a paradigm shift is evolving in marketing from the focus on the four
P‟s of marketing, product, price, place and promotion – to a new approach based on building and
management of relationships. Relationship marketing, as part of marketing, involves the
relationships and interactions between customers, suppliers, competitors, and others. This
however, does not mean that the four P‟s are less valuable, but that the focus has moved to a new
paradigm where a more market-oriented drive and the customer as focal point are suggested as
the marketing concept.
Relationship marketing has focused on customer retention, service, and product benefits, a long-
term scale, service emphasis, high customer commitment, customer contact, quality, and finally
customer loyalty (Cheese, 1994; Gummesson, 1998; Abratt& Russell, 1999). Relationship
marketing’s focus is to move customers up the ladder of loyalty (Voss & Voss, 1997). The
relationship marketing strategy also seeks to change the market demands in favor of a particular
company by providing unique value, which must be sustainable over time. Relationship
marketing is seen as a combination of quality, customer service, and marketing. The key

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relationship is based on the relationship between the supplier and the customer. All of this
reflects the notion that the
Center of the relationship marketing philosophy is to make the most of existing customers
(retention) to enable the company to make long-term profits. Relationship marketing is similar to
the concept of one-to-one marketing. One-to-one marketing means “to be willing and able to
change your behavior toward an individual customer based on what the customer tells you and
what else you know about that customer” (Peppers, Rogers &Dorf, 1999: 3).
It is grounded in the principle of establishing a learning relationship with each customer, with
the focus on your most valuable ones. The marketing concept sees customer satisfaction as the
highway to profits (Perreault& McCarthy, 2002). However, although it seems logical, it is not
automatic, as satisfaction does not by itself lead to profits (Gummesson, 1998). The customer
relationship must be maintained to sustain repurchase loyalty and retention, which will lead to
profitability. Customer value reflects benefits and costs, or the difference between the benefits
from the market offering and the costs of obtaining the benefits. Providing continuous value to
customers underpins the relationship (Cram, 2001).
Banks that embrace the marketing concept see relationship banking as the way to build loyal and
profitable long-term relationships with each customer. Relationship based marketing can result in
long-term retention, which leads to improved financial and market performance, and an
increased competitive edge. It is further concerned with the building of bonds with customers to
ensure long-term relationships of mutual advantage. For relationship marketing to be successful
two-way relationships must exist between the three parties which is bank, customer and
employee.(Bennett & Durkin,2002).
Part of the wide field of marketing is concerned with the exchange relationships between a
company and its customers. Companies should be market-oriented, customer-focused and
customer-orientated (Christopher et al, 1991). Relationship marketing has been addressing the
importance of getting customers, but also, more importantly, keeping customers and building an
ongoing relationship (Rayner, 1996). It is no longer sufficient to merely provide the customer
with technical solutions to be competitive. To create customer loyalty, various value-added
services, which start long before the transaction and continue far beyond it, must be delivered
(Wetzels, de Ruyter& van Birgelen, 1998). The concept of relationship marketing is embedded
in services marketing and incorporates service delivery processes. The relational exchange can

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provide a competitive advantage and create barriers to switching. To be effective and successful
the relationship marketing philosophy needs the support of the people in the other departments
and business functions on an integrated basis. However, it is not always possible for companies
with large customer bases to have close relationships with all their customers (Bennett & Durkin,
2002). Not all relationships also need to be at the same level of intimacy. An appropriate
relationship marketing strategy will ensure that customers are managed by market or segment
level. According to Gummesson (1998) and Abratt&Russell (1999) there are certain themes
emerging in the relationship marketing literature: Placing emphasis on the relationship rather
than on a transaction approach to relationship marketing. The focus is to increase customer
loyalty and customer retention. Banks need to know their customers, what their needs are and
cross-sell throughout the banking group. The relationship is also based on equal and respectful
terms; Companies must understand the economics of customer retention. They need to ensure the
appropriate allocation of marketing resources to existing customers. The increased retention will
lower costs and can lead to increased productivity; Customer segmentation is critical for an
effective relationship marketing strategy. This involves targeting certain profitable customers
and maximizing the lifetime value of desirable customers and customer segments. The
relationship is based on a win-win scenario where all parties involved receive increased and
mutual value; Marketing and quality customer service needs to be integrated. The extent to
which the client perceives the relationship banker to be acting ethically will influence
relationship quality. This will lead to the establishment of trust and will build commitment
throughout the length of the relationship; Companies need to care for existing customers and
increase their share of spending; The four P‟s (marketing mix – product, price, promotion and
place) do not adequately explain the key issues of building a sustained long-term relationship;
There is a growing awareness of the importance of operational issues such as organizational
structure and training for banks. As knowledge about the customer builds up, the bank moves
into a position to better satisfy individual customer needs; Relationship marketing can be applied
to various market domains and not just consumer markets. Relationship marketing can
differentiate a company and lead to competitive advantage. An example is customers who
become less sensitive to price over time.
2.2.2 Relationship-based selling

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Relationship-based selling represents a structured and scientific customer relationship
management system to optimize customer value (Council on Financial Competition, 2002). The
focus is no longer only based on volume driven cross-sales and winning new customers.
York (2001) points out that companies must become outward looking and achieve their
objectives through customer satisfaction and developing customer loyalty. Selling must be based
on the needs of the customer and must be a dimension of service (Ferreira, 2004). A key
dependent of relationship selling is the development of a culture of employee empowerment
(Bennett & Durkin, 2002). Competition in the retail banking environment has become more
complex and dynamic. To achieve retention and loyalty, banks have to pay more attention to the
relationships with their clients. A higher level of commitment in the relationship will result in
more durable loyalty (Reichheld, 1994; Iniesta& Sánchez, 2002). Commitment is the highest
level of relational union (Wetzels, De Ruyter& van Birgelen, 1998), and will invariably lead to
sales to satisfy needs. Bennett & Durkin (2002) state the importance of a relationship-based sales
culture, which is based on the following three sets of relationships: internal relationships within
the bank; relationships between staff and customers; and the relationship between the bank and
the environment. The successful application of this model should lead to high levels of employee
commitment and an integrated and focused customer relationship management strategy.
2.3 Customer Relationship Management (CRM) concepts
Perreault& McCarthy (2002: 84) define CRM as an approach where “the seller fine-tunes the
marketing effort with information from a detailed customer database”. String fellow et al (2004:
45) defines CRM as “understanding customer needs and leveraging that knowledge to improve a
company’s long-term profitability”. CRM is a customer-centric approach and focuses on the
long-term relationship with customers (Gray &Byun, 2003). CRM aims to provide the
customers‟ benefits and values from their point of view and not based on what the company
wants to sell. The main principles of CRM implementation include personalization, loyalty, and
life time value. Customers need to be treated individually; customer loyalty needs to be acquired
and retained through a personal relationship; and they need to be selected based on lifetime value
(select “good” customers, not “bad” customers).
The four basic roles or goals of CRM include the following: Customer identification. The
company builds up information about its customers over time through transactions, interactions
and other marketing channels. They need to know who their customers are and what their needs

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are to enable them to provide a value offering service or products: Customer differentiation.
Customers are different based on lifetime value, unique demands and requirements and
Customer interaction. The company continuously needs to learn about the customers as their
demands change. In addition, it is important that the company keeps track of customer behavior
and needs; Customization/personalization. The motto of CRM is that customers need to be
treated in a unique manner. Customer loyalty can be increased through a personalization process.
The main benefits of CRM include the following: Improved retention and acquisition ability of
the company; to maximize the customer’s lifetime value; improving customer service, without an
increase in costs. A CRM program that is successful will help a company to create wealth and
sustain growth by linking with customers and receiving value through the relationship (Cap
Gemini Ernst & Young, 2005). Companies cannot generate sustainable growth without growing
the value of its customer base. A disciplined CRM program can assist the company to realize
relationship value and growth through either effective targeting or acquiring customers, cross-
selling, cultivating existing relationships and by improving customer loyalty.
2.3.1 Customer relationship management systems
Being close to your customers has undoubtedly been one of the key successes of relationship
management. Konusuke Matsushita, the legendary founder of the Matsushita electronics group,
counseled his sales team to take the customer’s skin temperature every day (Bhote, 1996). The
bonds of trust that build up between a company and its core customers are based mainly on the
close and personal relationship between the relationship banker and customers.
This close relationship does not refer to any kind of friendship or favoritism, but rather to a
partnership or relationship that brings mutual benefit. The success of the relationship also
depends on the partners understanding each other (Cheese, 1994). Part of this process is building
up data on customers as well as storing the data, which again should be easily available for usage
at any point in time. Due to the volume of customer information it should be stored on a
computer database or customer relationship management system. The data usually includes data
on customers‟ past purchases as well as additional segmenting information. Customer
relationship management is an approach where the company improves the marketing effort with
information from a detailed customer database (Perreault&McCarthy, 2002). The underlying
purpose of CRM is to unlock the value of the relationship assets in a company to enable
acceleration in revenue and profit growth (Ellis, 2004; Kennedy, 2004).

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Utilizing CRM in meeting the customer’s immediate and long-term needs enables companies to
build customer loyalty and long-term relationships to the benefit of both parties. The
implementation of CRM systems in the banking sector provides the means to conduct interactive,
relevant and personalized communications with customers (Grigoroudis et al, 2002). An
integrated CRM system will also deliver a seamless and consistent customer experience (Cap
Gemini Ernst &Young, 2005).
CRM systems can be used by the relationship bankers in providing them with a detailed profile
of each customer or a single view of the customer (Stoneman, 1999). These powerful customer–
information systems have become a critical strategic focus for banks around the world.
Relationship banking builds on the current trend of CRM or data driven optimization of customer
relationships (Cram, 2001). The CRM system does not create customer loyalty by itself, but
assists in identifying critical information about customers and who the most valuable customers
are. It supports the process of relationship banking in moving closer to the customer (Jarrar&
Neely, 2002, Barnes &Howlett, 1998). CRM techniques are also used to support communication
and to promote consistent messages throughout a business to both customers and staff (Lovewell,
2005). The CRM system is also a tool to firstly store and secondly share customer information
held by relationship bankers (Murray, 2004).
It is however very important that banks use the confidential information sensitively and with
utmost respect (Fournier et al, 1998). Customers experience a level of discomfort when banks
continuously request similar information from them, but from different business units. The
collection of data must be coordinated from a single point of contact, and distributed to other
units or product divisions as required. A further irritation for customers is if the information is
not utilized effectively.
2.3.2 CRM and customer loyalty
Customer relationship management is all about building relationships with the most valuable
customers of companies (Rigby, Reichheld& Dawson, 2003). The aim is to know customers well
enough and determine the kind of relationship those customers want. CRM is a strategy and tool
that can assist companies with increasing customer loyalty by tracking satisfaction levels,
defection and retention. To start with companies need a customer-centric strategy, they need to
realign the organization and processes to fit this strategy and then choose the most suitable CRM
system to support this strategy. The CRM efforts will assist companies to grow, nurture and

18
protect their most valuable asset, which is their customer relationships (Cap Gemini Ernst &
Young, 2005).
2.3.3 Measuring Customer Retention
Dawkins &Reichheld’s (1990) seminal paper on customer retention implied that a relatively
small percentage increase in the retention rate can lead to a large increase in the net present value
of customers. This suggests that customer retention may be measured in terms of absolute
number of those staying as a percentage of the original number over a period, for example 1
year. DeSouza (1992) referred to this form of measure as a crude rate. However, this method
poses a further question. How do we determine 'a period'? Some products, such as cars, clearly
have longer purchasing cycles than others. The appropriate Interval, at which a retention rate
should be measured, therefore, need not necessarily be 1 year but, as Stewart (1996) argued,
depends on the nature of the business and, more specifically, on the repurchase cycle appropriate
in the industry. It would be misleading to suggest that 'A' has defected if 'A' has not purchased a
new car in year 2 when the usual repurchase cycle of a new car is 3 years. It is therefore more
meaningful for car dealers to measure customer retention every 3 years instead of every 12
months.
A much more complex computation arises when customers have multiple suppliers, a few
customers have a disproportionate spend relative to other customers and individual customers
have several accounts with a single supplier. A building contractor may buy bricks from several
different sources depending on their proximity to its building sites. A newsprint paper company,
which needs to import pulp, may buy 70 percent from a main supplier and the remaining 30
percent from three separate suppliers. A bank customer may have several accounts with a single
bank. It is essential for a supplier to recognize the relative importance of a particular customer
with other customers (Dawkins, 1990). DeSouza (1992) suggested a measure of a weighted
retention rate rather than a crude retention rate. A weighted retention rate refers to the rate that
recognizes the relative importance of the buyers in terms of the volume of sales. If a defected
customer had unit purchases that were double the average of all customers, his/her weighted
retention rate should also be doubled or counted as equivalent to two customers. In addition,
suppliers may also have to account for customers' relative importance in terms of potential
growth in their demand. This may be measured in terms of the growth in their spending relative
to the growth in the market (Berger& Nasr, 1998).

19
In the third scenario, capturing a targeted proportion of the total spend of an individual customer
is a much more useful measure than merely ensuring that accounts are not closed.
Using the same illustration, the bank may aim to capture the largest proportion of its
customer's 'lifetime value' (LTV) in terms of needs for banking products and services (Wang
&Splegel, 1994). The LTV of a customer refers to the customer’s net present value to a seller. If
the cost of attracting a customer is considered as a 'sunk cost' then the focus can be directed at
achieving a surplus of revenue on the costs of selling and servicing the customer. If the period of
relationship and future revenues and costs can be projected then the net value can be calculated
and discounted at a chosen discount rate (usually a rate that takes into account the company's
cost of capital and risk) in order to arrive at the LTV of a particular customer.
According to Dwyer (1989), customer LTV is an important construct in designing and planning a
customer acquisition program. Many researchers have studied its managerial implications in
direct marketing (Dwyer, 1989) and broader managerial applications (Wayland & Cole,
1997). Berger & Nasr (1998) discussed LTV in the context of positive scenarios, i.e. with
different combinations of assumptions such as discrete cash, continuous cash and historical
purchasing behavior. (Wayland & Cole (1997) discussed a general application based on
their consulting experience. According to (Keane &Wang, 1995), although in theory LTV is a
useful form of measure, in practice it is difficult to implement. The difficulty lies in the lifetime
construct. How do we determine the span of a lifetime? For a consumer, should it be his/her
nominal age or working life? It would be expected life of the products to sells which is a suitable
measure of customer lifetime? Clearly, the important consideration that a supplier should
examine is the ability of a particular customer to continue to purchase or consume its products or
use its services. The second difficulty lies in the process of building value information (Magson,
1998).

2.4 Technology
Technology refers to computing capabilities that allow a company to collect, organize, save and
use data about its customer. Technology is the enabler for CRM systems to achieve their
objective of collecting, classifying and saving valuable data on customers. Integration
technologies allow organizations to develop a better relationship with customers by providing a
wider view of customer behavior (Thompson, 2006). Thus, organizations are required to

20
integrate information technology to improve the capabilities of understanding customer
behavior, develop predictive models, build effective communications with customers and
respond to those customers in real time and with accurate information (Chen &Popovich, 2003).
With advanced technologies, tasks are done faster and more accurately thus customers get better
service. The onset, growth and availability of technologies in the financial services market in
Ethiopia has allowed for one branch banking within even the region (CBE customers for
example can access their accounts in all the countries in which it is present), mobile money
transfers, transfers between banks take a day for completion of the transaction, depositing
or withdrawing money into ones bank account using their mobile phones and establishing call
centers among others. The essence of the information technology revolution and, in particular,
the World Wide Web is the opportunity to build better relationships with customers that has been
previously impossible in the offline world. By combining the abilities to respond directly to
customer requests and to provide the customer with a highly interactive, customized
experience, companies have a greater ability today to establish, nurture, and sustain long-term
customer relationships than ever before. The ultimate goal is to transform these relationships
into greater profitability by increasing repeat purchase rates and reducing customer acquisition
costs. Indeed, this revolution in customer relationship management or CRM as it is called has
been referred to as the new "mantra" of marketing (Iconocast, 2001). Companies like Siebel,
[Link], Oracle, Broad vision, Net Perceptions, Kana and others have filled this CRM space
with products that do everything from track customer behavior on the Web to predicting their
future moves to send direct e-mail communications.
2.5 Brand Visibility
A brand is a name, term, design, symbol, or any other feature that identifies one seller's good or
service as distinct from those of other sellers (Kotler, 2003). Brands are a company's most
valuable assets adding both economic and strategic value to its proprietors. Brand awareness
refers to customers' ability to recall and recognize the brand under different conditions and link
to the brand name, logo and jingles among others to certain associations in memory or the
extent to which a brand is recognized by potential customers, and is correctly associated
with a particular product (Kotler& Keller, 2006). It is usually as a percentage of target market
brand awareness is the primary goal of advertising.

21
Brand visibility consists of both brand recognition and brand recall. It helps the customers to
understand to which product or service category the particular brand belongs and what
products and services are sold under the brand name. It also ensures that customers know which
of their needs are satisfied by the brand through its products (Kotler& Keller, 2006).
Brand awareness is of critical importance since customers will not consider your brand if they
are not aware of it (Kotler& Keller, 2006). Brands do not exist without consumers and
consumers do not exist without brands (Kotler, 2003). Brands serve as a temptation that utilizes
other intermediaries to lure customers from whom value is extracted. Customers serve as a
profit-medium for brands to cash their brand value (Watkins, 1999). Greater brand visibility will
lead to recognition by customers who if attracted to the brand can then lead to brand loyalty.
High loyalty levels lead to less marketing expenditure because the brand loyal customers
promote the brand positively (Reichheld, 1996). Brand loyalty acts as a means of launching and
introducing more products that are targeted at the same customers at less expenditure. It also
restrains new competitors in the market. Brand visibility can be developed through various
measures such as quick and efficient service, just in time, quality products, continuous
improvement, wide distribution network, good corporate practice, sponsorships, corporate social
responsibility etc. These measures will attract customers in different ways and their levels of
loyalty will be different as well. When consumers are brand loyal they will minutely consider
any other alternative brand as a replacement. As brand loyalty increases, customers will respond
less to competitive moves and actions. Brand loyal customers remain committed to the brand, are
willing to pay higher price for that brand, and will promote their brand most of the time
(Lindstrom, 2005).
2.6 The Concept of Promotion Mix
Consumers stand in the middle of all the marketing activities. The main objective of marketing is
to establish a strong and profitable customer base to accelerate sale of the company. For this
mission, the company sets a marketing strategy whereby it segments the total market into certain
groups, targets the group it wants to serve and lastly focuses how to satisfy the target customers.
Thus marketing strategy comprises of three elements segmentation, targeting and positioning.
Under this market strategy, a company detects a marketing mix consists of product, price, place
& promotion. According to Kotler and

22
Armstrong (2006), Promotion means activities that communicate the merits of the product and
persuade the target customers to buy it. Usually under promotion mix a company adopts six
tools.
2.6.1 Advertising
It is a non-personal form of communication through which a company presents and promotes
ideas, goods or services to persuade the audience to purchase or take some action. It includes the
name of a product or service and how that product or service could benefit the consumer, to
persuade a target market to purchase or to consume that particular brand. A number of media can
be used for advertisement, like- TV, Radio, Newspaper, Website etc. Meidan(1996) states that
due to the impression of banks as impersonal institutions with no interest in their customers as
people and of financial services as abstract and quite similar, the institutional advertising has
become more and more important. Brand advertising follows closely in the footsteps of
institutional advertising. Its purpose is to create awareness the bank’s name and to advertise the
different services it is offering.
2.6.2 Sales Promotion
Through sales promotion a company offers different short term incentives to customers to
motivate the purchase or sell of a product. The incentives may come in different forms, like
discount on price, free gifts, buy one get one free etc. Coupons, special offers and other forms of
price manipulation are the dominant forms of sales promotion (Peatti&Peatti (1994). Meidan
(1996)states that sales promotion within financial services appears to be the most effectively
used in combination with advertising.
2.6.3 Personal Selling
Sometimes companies build up an efficient sales team who with personal interaction try to
motivate potential customers to purchase from the company. The personal selling may focus
initially on developing a relationship with the potential buyer, but will always ultimately end
with an attempt to "close the sale". According to Julian &Ramaseshan (1994) the relationship
between the salesperson and the customer is perceived as being of great importance for the
marketing of a bank. Verhallen et al. (1997) indicate that banks should see the selling as a
problem solving process in which the sales force engages and co-operates towards the customer,
trying to find a solution to the customer’s problem, rather than only persuading him to purchase

23
the products or services. Lee (2002) state that personal selling can be performed either face-to-
face or through technological aids such as the Internet.
2.6.4 Public Relations
To establish a good relationship with the different parties of a company, PR covers a range of
activities, like creation & maintenance of corporate identity and image; charitable involvement,
media relation for the spreading of good news etc. (Grankvist, Kollberg and Persson,
2004),Meidan (1996) claims that the importance of public relation is being increasingly attended
and financial services often have public affairs officers, working actively to generate publicity.
2.6.5 Direct Marketing
According to Kotler (2006) direct marketing indicate direct connections with carefully targeted
individual customers to both obtain an immediate response and cultivate lasting customer
relationships. The use of telephone, mail, fax, e-mail, the Internet etc. is the different tools of
direct marketing. Lee (2002) states that the fast advances in technology over the past years have
reshaped how consumers today interact with their financial institutions. The financial sector has
extended its face-to-face selling towards direct marketing of products and services in the form of
phone, mail or computer transactions.
2.6.6 Event & Experience
The last component of promotion, i.e. event and experience is a new dimension in promotion
activities of companies. By participating in different events like trade fair, export fair, seminar
etc. companies try to make people aware about themselves. Commercial banks now a day are
participating in different events and thus try to promote their products. Banks sometimes arrange
training programs, seminars, conferences as a part of their promotion.
2.7 Customer Recognition
According to Buttle (2004) a company should build long-term mutually-beneficial
relationships with its strategically-significant customers. Some customers are merely
expensive to acquire and serve. Buttle (2004) has identified four types of strategically
significant customer (SSC) such as the high life-time value (LTV) customer that is a key SSC
and the present day of all margins that might be earned in a relationship. Tempting as it may be
to believe, not all high volume customers have high LTV. If they demand just in time service
(JIT), customized delivery, or are in other ways costly to serve, their value may be significantly
reduced. The second group of SSC is "benchmarks" who are customers that other customer's

24
copy. The third groups of SSCs are customers who are 'inspirations'. They are the ones that find
new applications, come up with new product ideas, and find ways of improving quality or
reducing cost. They may be the most demanding of customers or frequent complainers, and
though their own LTV potential low, they offer other significant sources of value. The fourth
groups deals with what (Buttle, 2004) calls "cost magnets" relating to those that absorb a
disproportionately high volume of fixed cost, thus enabling other, smaller customers to become
profitable. Organizations need to segment their customers in order to determine which of
customers are most profitable. The result the companies should seek is realizing their target
customer base. They should rate and segment their clients into groups that are most desirable to
do business with, and then they meet their criteria for what a desirable customer is. This is
called the Customer Portfolio Analysis (Stevenson, 2007). The organization then needs to
deal with the customer intimacy. Having found the segments the firms want to pursue, they
need to get to know the ones in that segment very well and better than their competition
knows them. They would want to appear that they know their customers intimately by, for
example, in knowing their birthdays, the number of children they have and their respective
birthdays, their preferred tastes among others. The third stage relates to Value Proposition
Definition. Thus having understood as much as they can about the customers they have
chosen to serve, companies are
Then in a position to create a specific and tailored value proposition for them. The organization
then engages itself in developing, with the network's compliance, propositions which
make value jointly to the customer and the company. At this stage so far, the network has to
work together to create and deliver the chosen value(s) to selected customers, Great value
is found more effective and more efficient solutions of customers problems (Buttle, 2000).
Finally the organization needs to seriously manage its customer relationships as well.
Companies need to manage each customer through their lifecyc1e. To enable the management
of the customer lifecyc1e and the stages within of portfolio analysis, intimacy, and
value proposition development, automated data systems are necessary.

2.8 Summary and gaps to be filled by the study

25
There are three obstacles that companies face in the process of adopting the CRM
concept. These are: Organization resistance - that is, some departments view the CRM strategy
as a threat to their powers in the organization. Slow learning companies take a long time to
grasp the necessary principles required to organize and run CRM functions in
organizations. Fast forgetting that is, even after strong strategies have been installed in the
organization management must fight a strong tendency to forget basic CRM principles. Many
traditional businesses view the attempt to provide maximum customer satisfaction as a stumbling
block to their achievement of satisfactory returns on investment (ROI). This assumption on
customer satisfaction has led the researcher to go ahead and study the subject. In conclusion
CRM systems remain a key strategy that organizations have to adopt in order to counter
competition, and remain relevant in the industry. CRM being relatively new in the industry needs
to be given a chance by being adopted both at the system level and also as a long term practice
for any service offering organization. Corporate culture must also grow to embrace CRM and its
principles.
Leadership of any organization must drive CRM’s acceptance through their use of the system
and their public commitment to its success.
2.9 Conceptual Framework
The conceptual framework shows the interconnectedness between the research questions
stated in the first chapter and the conceptualized theories in this chapter. The research
questions proposed in this study are focused on the topic of customer relationship
management and its influence on customer retention and loyalty.

 Customer

26
 referrals
 Technology
 Outdoor
branding
 Brand visibility
 Charity
 Trust
Customer retention &loyalty
 Empathy
 Customer acquisition
 Conflict
 Customer incentives
handling
 Customer
recognition

Results dependent variable

Independent Variables

Source: (Researcher, 2018)

Figure 1: Conceptual Framework

CHAPTER THREE
27
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter sets out various stages and phases that would follow in completing the study. It
shall involve a blueprint for the collection, measurement and analysis of data. This stage presents
decisions about how research can be executed and how respondents’ approach seems like, as
well as when, where and how the research is completed. Therefore in this section the research
would identify the procedures and techniques that were used in the collection, processing and
analysis of data. Specifically the following subsections could be included; research design, target
population, sampling design, data collection instruments, data collection procedures and finally
data analysis.
3.2 Research Design
Research design refers to the method used to carry out a research. The study would use
descriptive survey. A descriptive study attempts to describe or define a subject, often by creating
a profile of a group of problems, people, or events, through the collection of data and tabulation
of the frequencies on research variables or their interaction, (Cooper and Schindler, 2006). In this
case, the research problem would examine the effect of Customer Relationship Management on
customer retention and loyalty in commercial banks Woldia town.
The research shall aim at understanding the effect of CRM on customer retention and loyalty in
Commercial Banks in Woldia. Descriptive research is more rigid than other research designs and
seeks to describe uses of a product, determine the proportion of the population that uses a
product, or predict future demand for a product. A descriptive research should define
questions, people surveyed, and the method of analysis prior to beginning data collection.

3.2.1 Population

As the study is about assessing the effect of customer relationship management on customer
loyalty and retention, the population includes mainly management bodies and employees of
twelve (12) commercial banks in 16 branches which are found in Woldia town.

28
3.2.2 Target Population

The research would target on the management bodies like branch managers and CSM (customer
service managers), promoted staffs like cash supervisors, accountants, KYC (know your
customer analysis and Unionize staff of the selected commercial banks which are opened in
Woldia to get sufficient information for the thesis. The target population (i.e employees and
management of the banks) are 383(three hundred eighty three) in number from which sample
could be selected.
Table [Link]: Target population
Categories Frequency Percentage %
Branch managers and CSM 22 5.75
Promoted staffs 39 10.18
Unionize staffs 322 84.07
Total 383 100

Source; census from 12 commercial banks in Woldia on their attendance sheet.2018

3.2.3 Location of Study

The study would be conducted in Amhara regional state north Wollo zone at the town of Woldia
and focus on 12 (twelve) commercial banks in 16 (sixteen) branches to assess the effect of CRM
on customer loyalty and retention.
3.2.4 Sample frame and sampling procedures

Organizational structure of all commercial banks in Ethiopia is relatively similar. As the

population is not homogeneous, the researcher would use this organizational structure as a
sampling frame and sample will be selected from this list of items by using stratified random
sampling technique.

3.2.5. Sample Size and Sample Technique

29
The sample size is expected to be selected from the given population with expected population
standard devotion of 0.2 and a desire of 95% confidence level with the expected margin of error
of 5%. Thus the sample size could be computed by the following formula.

 N1 =Z*Z(P(1-P))/C*C for infinite population size

 N2 = N1/(1+(N1-1)/N) for finite population size

Where: Z –The Z value from the t- table (95% = 1.96 from table)

P - Expected population standard devotion (0.2)

C – Margin of error/ confidence interval / (5% = 0.05)

N- Total number of population size

 N1 = (1.96*1.96) (0.2(1-0.2)/(0.05*0.05) = 245.86 =246

 N2 = 246/(1+(246-1)/383) = 150.028 = 150
Therefore, the researcher could select 150 (one hundred fifty) sample to truly represent the total
population. By using stratified random sampling, the researcher would use three strata
(organizational hierarchy) like branch managers and CSM who are 22in number, promoted staffs
which constitute cash supervisors, accountants, KYC, controllers, and unionize staffs (junior and
senior customer service officers).in other word a sample of 39% from within each group will
be taken using stratified random sampling which gave each item in the population an equal
probability chance of being selected.

Table [Link] Sample size

Categories Frequency Sampling ratio sample

Branch managers and CSM 22 0.39 9
Promoted staffs 39 0.39 15
Unionize staffs 322 0.39 126
Total 383 0.39 150

3.2.6 Data Source and Collection Method

30
For the proper achievement of the study, the researcher would use primary data source through
questionnaires due to the fact that primary data are those which are collected afresh and for the
first time, and thus happen to be original in character.

3.2.7 Data Collection Procedures

The researcher used primary data which is collected using questionnaires to carry out the study.
The questionnaires consists of structured questions and it was administered through drop and
pick method to respondents who were branch managers, customer service managers, promoted
staffs and unionized staffs.

The structured questions were used in an effort to conserve time and money as well as to
facilitate easier analysis as they were in immediate usable form. At the same time, with the use
of structured questions, the researcher was after information that he found easier for
administration purposes, he used this method since the questionnaires were followed by
alternative answers.

3.3 Hypothesis

3.3.1 Hypothesis formulation

To make the thesis reliable, the researcher used hypothesis testing through one sample t- test. the
researcher would focus on testing independent variables whether they have effect on dependent
variable or not. In our case does customer referrals, technology, outdoor branding, trust,
empathy, conflict handling, customer recognition, brand visibility and charity have effect on
dependent variable customer retention and loyalty? Null hypothesis (Ho) and alternative
hypothesis (Ha) could be used in forecasting.

a) Hypothesis on customer referrals

Null Hypothesis H0: There is no significant effect of customer referrals on customer

retention & loyalty.
Alternate Hypothesis H1: There is significant effect of customer referrals on customer
retention & loyalty.
b) Hypothesis on technology

31
 Null Hypothesis H0: There is no significant effect of technology on customer retention &
loyalty.
Alternate Hypothesis H1: There is significant effect of technology on customer retention
& loyalty.
c) Hypothesis on outdoor branding
Null Hypothesis H0: There is no significant effect of outdoor branding on customer
retention & loyalty.
Alternate Hypothesis H1: There is significant effect of outdoor branding on customer
retention & loyalty.
d) Hypothesis on brand visibility
Null Hypothesis H0: There is no significant effect of brand visibility on customer
retention & loyalty.
Alternate Hypothesis H1: There is significant effect of brand visibility on customer
retention & loyalty.
e) Hypothesis on charity
Null Hypothesis H0: There is no significant effect of charity on customer retention &
loyalty.
Alternate Hypothesis H1: There is significant effect of charity on customer retention &
loyalty.
f) Hypothesis on trust
Null Hypothesis H0: There is no significant effect of trust on customer retention &
loyalty.
Alternate Hypothesis H1: There is significant effect of trust on customer retention &
loyalty.
g) Hypothesis on empathy
Null Hypothesis H0: There is no significant effect of empathy on customer retention &
loyalty.
Alternate Hypothesis H1: There is significant effect of empathy on customer retention &
loyalty.
h) Hypothesis on conflict handling

32
 Null Hypothesis H0: There is no significant effect of conflict handling on customer
retention & loyalty.
Alternate Hypothesis H1: There is significant effect of conflict handling on customer
retention & loyalty.
i) Hypothesis on customer recognition
Null Hypothesis H0: There is no significant effect of customer recognition on customer
retention & loyalty.
Alternate Hypothesis H1: There is significant effect of customer recognition on customer
retention & loyalty.

3.3.2 Hypothesis testing

The researcher tries to analyze forecasted hypothesis using one sample t- test though whether
null hypothesis is accepted or rejected.
Rules
If P-value > 0.05, then Null hypothesis is accepted at 5% level of significance, i.e. not significant
(NS). If, P-value < 0.05, then Null hypothesis is rejected at 5% level of significance, i.e. data is
significant (S) and if P-value < 0.01, then Null hypothesis is rejected at 1% level of significance,
i.e. data is highly significant (HS).

CHAPTER IV
DATA ANALYSIS, FINDINGS, AND DISCUSSION

33
To analyses the collected data in line with the overall objective of the research undertaking,
statistical procedures were carried using SPSS 16.00. In this part to identify the major issues and
to provide workable recommendations for the problems concerning customer relationship
management and customer’s retention and loyalty, the researcher has collected data through self-
administered questionnaire. In this chapter the findings of the study are presented. During the
survey a total of 150 questionnaires were distributed to employees. All 150 distributed
questionnaires were returned. So the analysis was made based on 150 responded questionnaires.
The questionnaire were developed in five scales ranging from five to one; where 5 represents
strongly agree, 4 agree, 3 neutral, 2 disagree, and 1 strongly disagree. All questionnaires were
filled by the employees of commercial Banks in Woldia town. Employees were selected based
on stratified random sampling and efforts have been made to have representative sample and the
results are considered as representative of the population. Descriptive statistics were used for
demographic factors and correlation and regression analysis were conducted for scale typed
questionnaires. The entire questionnaires used are attached at the back. You can refer from
appendix A.

4.1 Descriptive analysis

This descriptive analysis is used to look at the data collected and to describe that information. It
is used to describe the demographic factors for more clarification. It is mainly important to make
some general observations about the data gathered for general or demographics questions. The
demographics factors used in this research are gender, age, experience, department (position).
For the scale typed questionnaires for all variables mean or average response of respondents was
used. The mean response for all independent variables and dependent variable is 4 and above
which was stated as agree.
This average response shows that most of the respondents agreed that the banks’ relationship
management activities are good which results customers to become loyal for the banks.

4.1.1 Gender of respondents

34
The gender of the respondents is shown in table [Link] .From a total sample size of 150 (one
hundred fifty) respondents 82% are male while 18% are female. In other word there are 27
(twenty seven) female and 123(one hundred twenty three) male respondents.

Gender Table [Link] Gender of the respondent

Valid Cumulative
Frequency Percent Percent Percent

Valid Male 123 82.0 82.0 82.0

Female 27 18.0 18.0 100.0

Total 150 100.0 100.0

Figure 2; respondents’ gender

Source .research’s primary data

4.1.2 Age of respondents

The respondent’s age is shown in the following table. The table shows that 64.7% of the
respondents are between age of 24-27 years old, followed by respondent at the age between 28-
35 years old with 24.6% and 10.7% were at the age between 36-50 years old. This shows that
most of the respondents are youngster.

Table [Link] respondent’s age

35
Age

Cumulative
Frequency Percent Valid Percent Percent

Valid 24 20 13.3 13.3 13.3

25 20 13.3 13.3 26.7

26 15 10.0 10.0 36.7

27 42 28.0 28.0 64.7

28 22 14.7 14.7 79.3

33 13 8.7 8.7 88.0

35 2 1.3 1.3 89.3

36 2 1.3 1.3 90.7

37 8 5.3 5.3 96.0

41 5 3.3 3.3 99.3

50 1 .7 .7 100.0

Total 150 100.0 100.0

Source; Research’s primary data

Figure 3; respondents’ age

4.1.3 Work experience of the respondent

36
Work experience of the respondents (employees) is ranges from one year to thirty three years. in
other word the minimum year of work experience in the bank is one year and maximum year of
experience is thirty three years. 94 % of the respondents have five (5) years and less work
experience. The rest 6% of the respondent have seven (7) years and above work experience.
From this point of view we can conclude that most of the respondents are less work experienced.

Experience Table [Link] work experience of the respondent

Cumulative
Frequency Percent Valid Percent Percent

Valid 1 49 32.7 32.7 32.7

2 23 15.3 15.3 48.0

3 18 12.0 12.0 60.0

4 45 30.0 30.0 90.0

5 6 4.0 4.0 94.0

7 1 .7 .7 94.7

8 1 .7 .7 95.3

9 1 .7 .7 96.0

10 2 1.3 1.3 97.3

11 1 .7 .7 98.0

12 1 .7 .7 98.7

15 1 .7 .7 99.3

33 1 .7 .7 100.0

Total 150 100.0 100.0

37
 Figure 4; respondents’ work experience
Source; research primary data
4.1.4 Department (position) of the respondent
From table [Link] we can conclude that 126 respondents or 84% of the respondents are
unionized staffs who are junior and senior customer service officers and also 6 respondents or
4% of the respondents are branch managers with three (3) customer service managers and the
rest 15 respondents or 10% of the respondents are promoted staffs like senior customer service
accounts and cash, senior branch controller, cash supervisors and the like.

Department Table [Link] position of the respondent

Valid Cumulative
Frequency Percent Percent Percent

Valid branch manager 6 4.0 4.0 4.0

Customer service
3 2.0 2.0 6.0
manager

promoted staff 15 10.0 10.0 16.0

unionized staff 126 84.0 84.0 100.0

Total 150 100.0 100.0

38
 Figure 5; respondents’ position
Source; research primary data
4.2 Correlation analysis
Like the demographic factors, the scale typed questionnaire was entered to the SPSS software
version 16.00, to process correlation analysis. Based on the questionnaire which was filled by the
employees of commercial banks in Woldia town, the following correlation analysis was made.
The researcher tries to compute the relationship between customer relationships management
dimensions like customer referrals, technology, trust, empathy, charity, brand visibility, outdoor
branding, conflict handling, customer recognition and dependent variable customer retention and
loyalty.
4.2.1 Correlation analysis between customer referrals and customer retention and loyalty

Table [Link] correlation between customer referrals and customer retention and loyalty

39
 Correlations customer retention customer
and loyalty referrals

customer retention Pearson Correlation 1 .919**

and loyalty Sig. (2-tailed) .001

N 150 150

customer referrals Pearson Correlation .919** 1

Sig. (2-tailed) .001

N 150 150

**. Correlation is significant at the 0.01 level (2-tailed).

Source; research’s primary data

Above Table [Link] reveals that correlation p-value is < 0.01. That is Null Hypothesis has been
rejected. Hence, alternate hypothesis H1 is accepted at 1% level of significance showing that
there is significant effect of customer referrals on customer retention & loyalty. The correlation
value is 0.919 indicates that Customer referrals and customer retention & loyalty are correlated
with high degree positive correlation.

4.2.2 Correlation between technology and customer retention and customer loyalty
Table [Link] shows that correlation between these two variables is positively correlated.
Increase in using advanced technology will result increase in customer retention and loyalty.

40
 Table [Link] correlation between technology and customer retention and customer loyalty
Correlations

customer
Technolog retention and
y loyalty

Technology Pearson
1 .944**
Correlation

Sig. (2-tailed) .000

N 150 150

customer retention and Pearson

.944** 1
loyalty Correlation

Sig. (2-tailed) .000

N 150 150

**. Correlation is significant at the 0.01 level (2-tailed).

Source; research’s primary data

Above Table [Link] reveals that correlation p-value is < 0.01. That is Null Hypothesis has been
rejected. Hence, alternate hypothesis H1 is accepted at 1% level of significance showing that
there is significant effect of technologyon customer retention & loyalty. The correlation value is
0.944 indicates that technology and customer retention & loyalty are correlated with high degree
positive correlation.

41
4.2.3 Correlation between outdoor branding and customer retention and loyalty
Table [Link] correlation between customer retention and loyalty and outdoor branding
Correlations

customer
outdoor retention and
branding loyalty

outdoor branding Pearson

1 .979**
Correlation

Sig. (2-tailed) .000

N 150 150

customer retention and Pearson

.979** 1
loyalty Correlation

Sig. (2-tailed) .000

N 150 150

**. Correlation is significant at the 0.01 level (2-tailed).

Source; research’s primary data
Above Table [Link] reveals that correlation p-value is < 0.01. That is Null Hypothesis has been
rejected. Hence, alternate hypothesis H1 is accepted at 1% level of significance showing that
there is significant effect of outdoor branding on customer retention & loyalty. The correlation
value is 0.979 indicates that outdoor branding and customer retention & loyalty are correlated
with high degree positive correlation.

42
4.2.4 Correlation between brand visibility and customer retention and loyalty
Table 4.2.4.1Correlation between brand visibility and customer retention and loyalty
Correlations

customer
brand retention and
visibility loyalty

brand visibility Pearson

1 .797**
Correlation

Sig. (2-tailed) .000

N 150 150

customer retention and Pearson

.797** 1
loyalty Correlation

Sig. (2-tailed) .000

N 150 150

**. Correlation is significant at the 0.01 level (2-tailed).

Source; research’s primary data

Above Table [Link] reveals that correlation p-value is < 0.01. That is Null Hypothesis has been
rejected. Hence, alternate hypothesis H1 is accepted at 1% level of significance showing that
there is significant effect of brand visibilityon customer retention & loyalty. The correlation
value is 0.797 indicates that brand visibility and customer retention & loyalty are correlated with
high degree positive correlation.

43
4.2.5 Correlation between charity and customer retention and loyalty
Table [Link]:-Correlation between charity and customer retention &loyalty.
Correlations

customer
retention and
Charity loyalty

Charity Pearson
1 .983**
Correlation

Sig. (2-tailed) .000

N 150 150

customer retention and Pearson

.983** 1
loyalty Correlation

Sig. (2-tailed) .000

N 150 150

**. Correlation is significant at the 0.01 level (2-

tailed).
Source; research’s primary data
Above Table [Link] reveals that correlation p-value is < 0.01. That is Null Hypothesis has been
rejected. Hence, alternate hypothesis H1 is accepted at 1% level of significance showing that
there is significant effect of charityon customer retention & loyalty. The correlation value is
0.983 indicates that charity and customer retention & loyalty are correlated with high degree
positive correlation.

44
4.2.6 Correlation between trust and customer retention and loyalty
Table 4.2.6.1correlation between trust and customer retention and loyalty
Correlations

customer
retention and
Trust loyalty

Trust Pearson
1 .725**
Correlation

Sig. (2-tailed) .000

N 150 150

customer retention and Pearson

.725** 1
loyalty Correlation

Sig. (2-tailed) .000

N 150 150

**. Correlation is significant at the 0.01 level (2-

tailed).

Source; research’s primary data

Above Table [Link] reveals that correlation p-value is < 0.01. That is Null Hypothesis has been
rejected. Hence, alternate hypothesis H1 is accepted at 1% level of significance showing that
there is significant effect of truston customer retention & loyalty. The correlation value is 0.725
indicates that trust and customer retention & loyalty are correlated with high degree positive
correlation.

45
4.2.7 Correlation between empathy and customer retention and loyalty
Table 4.2.7.1Correlation between empathy and customer retention and loyalty

Correlations

customer
retention and
Empathy loyalty

Empathy Pearson
1 .762**
Correlation

Sig. (2-tailed) .000

N 150 150

customer retention and Pearson

.762** 1
loyalty Correlation

Sig. (2-tailed) .000

N 150 150

**. Correlation is significant at the 0.01 level (2-

tailed).

Source; research’s primary data

Above Table [Link] reveals that correlation p-value is < 0.01. That is Null Hypothesis has been
rejected. Hence, alternate hypothesis H1 is accepted at 1% level of significance showing that
there is significant effect of empathyon customer retention & loyalty. The correlation value is
0.762 indicates that empathy and customer retention & loyalty are correlated with high degree
positive correlation.

46
4.2.8 Correlation between conflict handling and customer retention and loyalty
Table [Link] Correlation between conflict handling and customer retention and loyalty
Correlations

customer
Conflict retention and
handling loyalty

Conflict handling Pearson

1 .942**
Correlation

Sig. (2-tailed) .000

N 150 150

customer retention and Pearson

.942** 1
loyalty Correlation

Sig. (2-tailed) .000

N 150 150

**. Correlation is significant at the 0.01 level (2-tailed).

Source; research’s primary data

Above Table [Link] reveals that correlation p-value is < 0.01. That is Null Hypothesis has been
rejected. Hence, alternate hypothesis H1 is accepted at 1% level of significance showing that
there is significant effect of conflict handlingon customer retention & loyalty. The correlation
value is 0.942 indicates that conflict handling and customer retention & loyalty are correlated
with high degree positive correlation.

47
4.2.9 Correlation between customer recognition and customer retention and loyalty
Table [Link] Correlation between customer recognition and customer retention and loyalty

Correlations

customer
customer retention and
recognition loyalty

customer recognition Pearson

1 .781**
Correlation

Sig. (2-tailed) .000

N 150 150

Pearson
.781** 1
customer retention and Correlation
loyalty

Sig. (2-tailed) .000

N 150 150

**. Correlation is significant at the 0.01 level (2-tailed).

Source: research’s primary data

Above Table [Link] reveals that correlation p-value is < 0.01. That is Null Hypothesis has been
rejected. Hence, alternate hypothesis H1 is accepted at 1% level of significance showing that
there is significant effect of customer recognitionon customer retention & loyalty. The
correlation value is 0.781 indicates that customer recognition and customer retention & loyalty
are correlated with high degree positive correlation

48
4.3 Regression analysis
This regression analysis was conducted to know by how much the independent variable explains
the dependent variable. It is also used to understand by how much each independent variable
(customer referrals technology, outdoor branding, brand visibility, charity, trust, conflict
handling, customer recognition and empathy) explains the dependent variable that is customers’
retention and loyalty. The results of the regression analysis are the following.
4.3 Regression analysis of customer retention and loyalty on customer relationship
management dimensions
4.3.1 Regression analysis of customer retention and loyalty on customer referrals
The Results of regression analysis against customers’ retention and loyalty can be seen in table
[Link]. The result shows that customer referral has the power to explain customer retention and
loyalty. In this case the results of correlation of customer referral and customer’s retention
&loyalty and R Square (0.845) are taken into consideration. The regression analysis model
summary indicates that customer referrals which is entered into the regression model on SPSS
has relationship with customers’ retention and loyalty with correlation coefficient of (0.904).
The R square is the explained variance and it is actually the square of the multiple R (0.904) 2.
Therefore, it is pointed out that 84.5 percent of customer referrals can explain the dependent
variable that is customers’ retention and loyalty. As it is indicated in table 4.3,1.1 total customers
referrals was considered as predictors of customers’ retention and loyalty and reported high
level of significance p<0.01.

Table 4.3.1.1Regression analysis result for customer referrals and customers’ retention & loyalty
Model Summary

Adjusted R Std. Error of

Model R R Square Square the Estimate

1 .919a .845 .844 .353

a. Predictors: (Constant), customer referrals

49
ANOVA result for customer referral and customer retention and loyalty

Sum of
Model Squares Df Mean Square F Sig.

1 Regression 100.487 1 100.487 805.967 .000a

Residual 18.453 148 .125

Total 118.940 149

a. Predictors: (Constant), customer referrals

b. Dependent Variable: customer retention and loyalty

Table [Link]: Coefficients of customer relationship management dimensions

Model Alph Beta T Significance
a
Customer 0.43 0.904 28.39 0.000
referrals 2
Technology 0.1 0.975 34.816 0.000
Outdoor branding 0.11 0.974 42.547 0.000
0
Brand visibility 0.22 0.911 19.566 0.000
3
Charity 0.06 0.983 65.225 0.000
8
Trust 0.13 0.931 12.820 0.000
0
Conflict handling 0.21 0.964 34.183 0.000
0
Empathy 0.98 0.750 14.302 0.000
7
Customer 1.20 0.709 15.224 0.000
recognition 7
4.3.2 Regression analysis of customer retention and loyalty on technology.

50
As it is indicated in the model summary of table [Link], technology explains customers’
retention and loyalty. In this case, the results of correlation of customer relationship management
dimensions and customers’ retention and loyalty and R Square (0.891) are taken into
consideration. This R square is the explained variance and it is actually the square of the multiple
R (0.944)2 which is 0.891. Therefore, it is pointed out that 89.10% of customers’ retention and
loyalty is explained by technology. As it is indicated in table [Link], technology was considered
as predictors of customers’ retention and loyalty and reported high level of significance p<0.01.
And also the R square value of 0.891 confirming that, 89.1% of the variation in customer loyalty
is explained by technology.
Table [Link] Regression analysis result for technology and customers’ retention and loyalty
Model Summary

Adjusted R Std. Error of

Model R R Square Square the Estimate

1 .944a .891 .890 .307

a. Predictors: (Constant), technology

ANOVA result for customer referral and customer retention and loyalty

Sum of
Model Squares Df Mean Square F Sig.

1 Regression 114.048 1 114.048 1.212E3 .000a

Residual 13.925 148 .094

Total 127.973 149

a. Predictors: (Constant), technology

b. Dependent Variable: customer retention and loyalty
4.3.3 Regression analysis of customer retention and loyalty on outdoor branding
Table [Link] shows the results of regression analysis for outdoor branding and customers’
retention & loyalty. In this case, the results of correlation of these two variables and R Square
(0.924) are taken into consideration. Here the R square is the explained variance and it is actually
the square of the multiple R (0.961) 2 which is [Link], it is possible to state that 92.4%

51
of customers’ retention &loyalty is explained by outdoor branding. As it is indicated in table
[Link], outdoor branding was considered as predictors of customers’ retention & loyalty and
reported high level of significance p<0.01.

Table [Link] regression analysis result for outdoor banding and customers’ referrals & loyalty

Model Summary

Adjusted R Std. Error of

Model R R Square Square the Estimate

1 .961a .924 .924 .245

a. Predictors: (Constant), outdoor branding

ANOVA result for outdoor branding and customer retention and loyalty

Sum of
Model Squares Df Mean Square F Sig.

1 Regression 109.057 1 109.057 1.810E3 .000a

Residual 8.916 148 .060

Total 117.973 149

a. Predictors: (Constant), outdoor branding

b. Dependent Variable: customer retention and loyalty

4.3.4 Regression analysis of customer retention and loyalty on brand visibility.

Table [Link] shows the results of regression analysis for brand visibility and customers’
retention & loyalty. In this case, the results of correlation of these two variables and R Square
(0.636) are taken into consideration. Here the R square is the explained variance and it is actually
the square of the multiple R (0.797) 2 which is [Link], it is possible to state that 63.6 %
of customers’ retention & loyalty is explained by brand visibility. As it is indicated in table
[Link], brand visibility was considered as predictors of customers’ retention & loyalty and
reported high level of significance p<0.01.

52
Table [Link] regression result for customer retention and loyalty on brand visibility
Model Summary

Adjusted R Std. Error of

Model R R Square Square the Estimate

1 .797a .636 .633 .635

a. Predictors: (Constant), brand visibility

ANOVA result for brand visibility and customer retention and loyalty

Sum of
Model Squares Df Mean Square F Sig.

1 Regression 104.399 1 104.399 258.548 .000a

Residual 59.761 148 .404

Total 164.160 149

a. Predictors: (Constant), brand visibility

b. Dependent Variable: customer retention and loyalty

4.3.5 Regression analysis of customer retention and loyalty on charity.

Table [Link] shows the results of regression analysis for charity and customers’ retention &
loyalty. In this case, the results of correlation of these two variables and R Square (0.966) are
taken into consideration. Here the R square is the explained variance and it is actually the square
of the multiple R (0.983)2 which is [Link], it is possible to state that 96.6 % of
customers’ retention & loyalty is explained by charity. As it is indicated in table [Link], charity
was considered as predictors of customers’ retention & loyalty and reported high level of
significance p<0.01.

53
 Table [Link] Regression result for customer retention and loyalty on charity
Model Summary

Adjusted R Std. Error of

Model R R Square Square the Estimate

1 .983a .966 .966 .164

a. Predictors: (Constant), charity

ANOVA result for charity and customer retention and loyalty

Sum of
Model Squares Df Mean Square F Sig.

1 Regression 114.007 1 114.007 4.254E3 .000a

Residual 3.966 148 .027

Total 117.973 149

a. Predictors: (Constant), charity

b. Dependent Variable: customer retention and loyalty

4.3.6 Regression analysis of customer retention and loyalty on trust.

Table [Link] shows the results of regression analysis for trust and customers’ retention &
loyalty. In this case, the results of correlation of these two variables and R Square (0.526) are
taken into consideration. Here the R square is the explained variance and it is actually the square
of the multiple R (0.725)2 which is [Link], it is possible to state that 52.6 % of
customers’ retention & loyalty is explained by trust. As it is indicated in table [Link], trust was
considered as predictors of customers’ retention & loyalty and reported high level of significance
p<0.01.

54
Table [Link] Regression result for customer retention and loyalty on trust
Model Summary

Adjusted R Std. Error of

Model R R Square Square the Estimate

1 .725a .526 .523 .755

a. Predictors: (Constant), trust

ANOVA result for trust and customer retention and loyalty

Sum of
Model Squares Df Mean Square F Sig.

1 Regression 93.576 1 93.576 164.356 .000a

Residual 84.264 148 .569

Total 177.840 149

a. Predictors: (Constant), trust

b. Dependent Variable: customer retention and loyalty

4.3.7 Regression analysis of customer retention and loyalty on conflict handling.

Table [Link] shows the results of regression analysis for conflict handling and customers’
retention & loyalty. In this case, the results of correlation of these two variables and R Square
(0.888) are taken into consideration. Here the R square is the explained variance and it is actually
the square of the multiple R (0.942) 2 which is [Link], it is possible to state that 88.8%
of customers’ retention & loyalty is explained by conflict handling. As it is indicated in table
[Link], conflict handling was considered as predictors of customers’ retention & loyalty and
reported high level of significance p<0.01.

Table [Link] Regression result for customer retention and loyalty on conflict handling

55
Model Summary

Adjusted R Std. Error of

Model R R Square Square the Estimate

1 .942a .888 .887 .299

a. Predictors: (Constant), Conflict handling

ANOVA result for conflict handling and customer retention and loyalty

Sum of
Model Squares df Mean Square F Sig.

1 Regression 104.143 1 104.143 1.169E3 .000a

Residual 13.190 148 .089

Total 117.333 149

a. Predictors: (Constant), Conflict handling

b. Dependent Variable: customer retention and loyalty
4.3.8 Regression analysis of customer retention and loyalty on empathy
Table [Link] shows the results of regression analysis for conflict empathy and customers’
retention & loyalty. In this case, the results of correlation of these two variables and R Square
(0.580) are taken into consideration. Here the R square is the explained variance and it is actually
the square of the multiple R (0.762) 2 which is 0. 580. Therefore, it is possible to state that 58 %
of customers’ retention & loyalty is explained by empathy. As it is indicated in table [Link],
empathy was considered as predictors of customers’ retention & loyalty and reported high level
of significance p<0.01.

Table [Link] Regression result for customer retention and loyalty on empathy

56
Model Summary

Adjusted R Std. Error of

Model R R Square Square the Estimate

1 .762a .580 .577 .602

a. Predictors: (Constant), Empathy

ANOVA result for empathy and customer retention and loyalty

Sum of
Model Squares df Mean Square F Sig.

1 Regression 74.250 1 74.250 204.548 .000a

Residual 53.723 148 .363

Total 127.973 149

a. Predictors: (Constant), Empathy

b. Dependent Variable: customer retention and loyalty

4.3.9 Regression analysis of customer retention and loyalty on customer recognition.

Table [Link] shows the results of regression analysis for customer recognition and customers’
retention & loyalty. In this case, the results of correlation of these two variables and R Square
(0.610) are taken into consideration. Here the R square is the explained variance and it is actually
the square of the multiple R (0.781)2which is 0.610. Therefore, it is possible to state that 61% of
customers’ retention & loyalty is explained by customer recognition. As it is indicated in table
[Link], customer recognition was considered as predictors of customers’ retention & loyalty and
reported high level of significance p<0.01.

57
Table [Link] Regression result for customer retention and loyalty on customer recognition
Model Summary

Adjusted R Std. Error of

Model R R Square Square the Estimate

1 .781a .610 .608 .510

a. Predictors: (Constant), customer recognition

ANOVA result for empathy and customer retention and loyalty

Sum of
Model Squares Df Mean Square F Sig.

1 Regression 60.316 1 60.316 231.762 .000a

Residual 38.517 148 .260

Total 98.833 149

a. Predictors: (Constant), customer recognition

b. Dependent Variable: customer retention and loyalty

Generally, the research questions which are proposed earlier were answered by using a sample of

150 respondents. From the analysis it is clearly indicated that customer relationship management
and customer retention & loyalty are related and the measure of correlation between these
variables as it is indicated in the correlation analysis is positive. And also it is noticed that the
independent variables which are included in the elements of customer relationship management
have the power to explain the dependent variable as it is indicated in the regression analysis.
Therefore, all the research questions are answered based on the test conducted and customer
relationship management as the power to explain customer loyalty in banking industry,
particularly in Banks found in Woldia town.

58
4.4 Results Discussion
This discussion is very important to provide more clarification on the above results. This
research is related with the elements of customer relationship management towards customers
’retention & loyalty in banking industry, specifically in commercial Banks in town of Woldia.
The objective of this study is to explore the effect of customer relationship management on
customer retention & loyalty within commercial banks in Woldia town, by analyzing the
relationship of every construct in the theoretical framework. Demographic factors such as
gender, age, experience and department (position) to know the general characteristics of the
respondents. Based on the results from this research, customer relationship management is
correlated with
customers’ retention & loyalty. Customer relationship management elements particularly charity
and technology have greater impact on customers’ retention and loyalty and it is more important
in shaping what customers prefer about the banks.

The research used 82 % male and 18.8% of female as respondents. In terms of age, the majority
of respondents are in between 24-27years old which was accounted 64.7% followed by 28-35
years old which constituted 24.6%and the rest 10.7% lies in 36-50 years old. When we look at
the length of time employees’ work in the bank, 94% of the employees have work experience
less than five years.

In today’s competitive environment, banks should build and maintain good relationship with the
target customers in order to succeed and survive. To maintain good relationship with customers,
customer relationship management is an important tool. In this case, the banks must prepare
invaluable information to build strong relationship with the customers for the purpose of gaining
their loyalty and preventing customers from switching to other banks. Customers can be
remaining loyal towards a bank for a number of reasons. This research have identified nine
elements of customer relation relationship management that will have effect on customers
loyalty in banking industry.

The findings of Ndubisi (2007) suggested that the greater the trust in the bank, the higher the
level of the bank’s commitment, the more reliable and timely its communications and the more

59
satisfactorily it handles conflicts, the more loyal its customers will tend to be. Therefore, the
result of this research is consistent with the findings of Ndubisi (2007). The findings of Foster
&Cadogan (2000) showed that the quality of the relationship customers have built with their
organization positively influences their assessment of their relationship with the organization.
Again the result of this research is also similar with the findings of Foster &Cadogan (2000).
Another study which is conducted by Gee et al., (2008) suggested that the need for businesses to
retain customers is an important issue in today’s global marketplace.

Based on the Pearson correlation test of correlation results, customer referrals dimension
positively correlated with customers’ retention & loyalty (r=0.919). In other words customers of
the bank can pull other customers through telling services providing by the banks and this results
they will be loyal to their banks otherwise they will not be loyal to their banks. Because of this
result the bank should be able to satisfy the existing customers otherwise the reverse will be true.

The second customer relationship management dimension is technology. Based on Pearson

correlation technology is positively correlated with customer retention & loyalty(r=0.944).this
result shows that the banks that have advanced technologies like e-payment system are more
preferable and customers can be loyal and easily remember it.

The third customer relationship dimension is outdoor branding. Based on Pearson correlation test
of correlation result shows, outdoor branding is positively correlated with customer retention &
loyalty (r=0.979).customer may remember and be loyal to the bank they used, when advertising
is adverted outside.

The fourth customer relationship management element is brand visibility. Based on Pearson
correlation test of correlation result shows brand visibility is positively correlated with customer
retention and loyalty(r=0.797). This shows that the banks which have more visible brand can
easily remember by customers and results loyalty.

The fifth customer relationship management dimension is charity. Based on Pearson correlation
test of correlation result demonstrates that charity is positively correlated with customer retention
and loyalty (r=0.983) which means that banks participation in charitable activities results to

60
assure welfare of the society and in return force customers to become loyal to the bank. The six
customer relationship management dimension is trust. Based on Pearson correlation test of
correlation result demonstrates that trust is positively correlated with customer retention and
loyalty (r=0.725). In other words if customers trust the bank, they will be loyal
to their banks otherwise they will not be loyal to their banks. Because of this result the bank
should be able to promise and deliver what it promised is important to encourage repeat purchase
by the customers and to establish strong relationship. In addition, trust only will exist if

Customers have confidence in a bank’s ability to perform satisfactorily. Therefore, trust has
power to determine the loyalty of customers. With regard to trust dimension, a bank can be
perceived by its customers as honest in its performance if the bank has strong and lasting
relationship with customers. Customer trust has a significant role in building long-term
relationship and achieving customer loyalty (Berry, 1983). So, the finding of Berry (1983) is
similar with the results of this research. When customers trust the bank, they will leave all the
activities to be performed by the bank and they will talk freely about the banks strengths and
weaknesses. Because of this reason, all customers feel that they are responsible for the banks
operation. So, it is best for the banks to be trusted by the entire customers.

The regression analysis of trust dimension and customer loyalty indicates that 72.5% of the
variance R square in customers loyalty has been significantly explained by trust. The finding of
Ndubisi (2007) showed that trust is an important ingredient in firm-customer relationships and
ultimately in the development of loyalty. And also the finding of Morgan and Hunt (1994)
concluded that customers with trusts in service providers’ capability would probably be willing
to commit to a service relationship for meeting their expectations. Therefore, the result of this
study on trust dimension is similar with the above findings that trust has the power to increase
customers’ loyalty.
The seventh factor that is included in the dimensions of customer relationship management is
empathy. It has positive relationship with customer’s retention and loyalty. The correlation
coefficient between these variables is 0.762. Empathy is one of the important tools to create long
term relationship with customers in service provider organizations. Nearly high number of
customers wanted to be treated as they want to be treated by the banks employees. If this is the

61
case, banks have the responsibility to treat customers as they want to be treated to have loyal
customers. When the customers are treated in a good way they become satisfied and loyal to
their banks. As a result, empathy has power to create lasting relationship with customers and
shaping the minds of the existed customers to talk favorably about the banks to other customers.
Therefore, banks need to understand their customers’ needs and wants and continuously evaluate
their services to satisfy and attract customers in the better way.

With regard to the regression analysis of empathy and customers’ retention & loyalty, 76.2% of
the variance R square in customers loyalty is significantly explained by empathy. The finding of
Zeithaml and Bitner (2003) showed that it is difficult to imagine an organization would deliver
caring, individualized attention to customers independent of its employees. As it is mentioned by

Parasuraman et al., (1988) empathy is one of the important elements to measure the service
quality in service industries area. So, the result of this research on empathy dimension of
customer relationship management supports the above findings that empathy has power to make
customers’ loyal.

The eighth factor included in the customer relationship management dimensions is conflict
handling. As it is indicated in the correlation analysis, conflict handling dimension has positive
and high relationship with customers’ loyalty. The correlation coefficient between conflict
handling and customers’ loyalty is 0.942. It is the fourth highest of all correlation results of
customer relationship management elements. When banks have good conflict handling
procedures and solving the manifested problems successfully, the customers express their
complaints or any feelings they have freely and will become loyal customers. In order to
encourage customers to complain when there is problem, banks are responsible to aware and
inform in advance how and where to complain. Generally, appropriate and acceptable conflict
handling procedure will create strong relationship with customers. The above result is supported
by Tax (1998). The results indicate that investments in complaint handling can improve
evaluations of service quality, strengthen customer relationships, and build customer
commitment.

62
The correlation analysis result for conflict handling and customers’ loyalty shows that 94.2% of
the variance R square in customers loyalty has been significantly explained by conflict handling.
It is the fourth highest of all the independent variables in explaining customers’ retention &
loyalty. The result of Ndubusi (2007) indicated that customers tend to be loyal to banks that
handle customer complaints which will always happen and other conflicts satisfactorily. Ndubisi
and Wah (2005) found a significant relationship between conflict handling and customer loyalty.
And also the result of YekunoamlakHailu (2004) proved that to maintain good relationship with
customers, the way customers are handled such as proper acts of frontline employees and proper
customer service are significantly important for customer loyalty. Therefore, the result of this
research on conflict handling dimension is similar with the above results in indicating that proper
conflict handling can increase customers’ retention & loyalty.

The last but not the least dimension of customer relationship management is customer
recognition. The correlation analysis result for customer recognition and customers’ retention &
loyalty shows that 78.1% of the variance R square in customers’ retention & loyalty has been
significantly explained by customer recognition. Banks that can announce and recognizes their
customer in different ceremonies could build long term relationship. Therefore the result of this
research on customer recognition indicates that proper customer recognition can increase
customer retention and loyalty.

63
CHAPTER V
CONCLUSION AND RECOMMENDATIONS
5.1 Conclusion
The main purpose of the study was to examine the effect of customer relationship management
on customers’ retention & loyalty in banking industry, particularly commercial banks in woldia
town. The major goal of customer relationship management is to create lasting relationship with
customers. Lasting relationship with customers is the first requirement to survive in a
competitive environment and to generate profit. The customer relationship management
dimensions that were included in this research are customer referrals, technology, outdoor
branding, Brand visibility, charity, trust, empathy, conflict handling and customer recognition.
Based on previous theories and researches regarding customer relationship management and its
outcomes, this study shows clear links between customer relationship management and
customer’ retention & loyalty, which helps to deeply understand the relationship and
interaction between customer relationship management and customers’ retention & loyalty.

The findings support the view points that customer relationship management dimensions can
enhance the quality of a buyer-seller relationship and in turn increase customers’ retention
&loyalty.
With regard to the Pearson correlation analysis, it can be clearly seen as that the nine customer
relationship management dimensions namely, customer referrals, technology, outdoor branding,
Brand visibility, charity, trust, empathy, conflict handling and customer recognition are
positively related to customer retention & loyalty in commercial banks in Woldia town. The
relationship looks like the following.
 Customer referrals and customers’ retention & loyalty have high positive relationship.
 Technology and customers’ retention & loyalty have high positive relationship.
 Outdoor branding and customers’ retention & loyalty have high positive relationship.
 Conflict handling and customers’ retention & loyalty have high positive relationship.
 Brand visibility and customers’ retention & loyalty have high positive relationship.

64
  Charity and customers’ retention & loyalty have high positive relationship.
 Trust and customers’ retention & loyalty have high positive relationship.
 Empathy and customers’ retention & loyalty have high positive relationship
 Customer recognition and customers’ retention & loyalty have high relationship

 Although many customer relationship management dimensions have potential for

developing customer retention and loyalty, some dimensions like charity and outdoor
branding are more sensitive than others in this research.
On the regression analysis part, it is clearly shown that customer relationship management
explains customer’s retention and loyalty. Each independent variable is also regressed against
customers’ retention & loyalty and the result shows that all the independent variables can explain
the dependent variable i.e. customers’ retention & loyalty. The regression analysis result looks
like the following.
 90.4% of customers’ retention & loyalty is significantly explained by customer referrals.
 97.5% of customers’ retention & loyalty is significantly explained by technology.
 97.4% of customers’ retention & loyalty is significantly explained by outdoor branding.
 91.1% of customers’ retention & loyalty is significantly explained by brand visibility.
 98.3% of customers’ retention & loyalty is significantly explained by charity.
 93.1% of customers’ retention & loyalty is significantly explained by trust.
 96.4% of customers’ retention & loyalty is significantly explained by empathy.
 75 % of customers’ retention & loyalty is significantly explained by conflict handling.
 70.9 % of customers’ retention & loyalty is significantly explained by customer
recognition.

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5.2 Recommendations
The findings of this research also important evidence for managers who take
charge of customer relationship management. It is helpful for bankers to
understand the effectiveness of relationship management from consumers’
perspective. In light of the findings and conclusions made above, the following
possible recommendations are suggested as being valuable to commercial banks
for improving relationship management activities to assure customer loyalty and
retention.

 Commercial banks must develop customer relationship program that will help
them build and support positive customer relationships. Since the bank is
providing services to customers, it is must to give high value for good relationship.
Relationship with customers can be improved by explaining to employees,
especially in the frontline and knowing how much each customer is worth to the
business. The more employees work together to keep existing customers satisfied,
the lesser customer attrition will be.

 To retain and develop loyal customers, the bank should be trustworthy

and show commitment, providing individualized attention to customers and must
resolve conflicts in a manner that will eliminate unimportant loss and
inconvenience to their customers. In Ethiopia, the growing number of banks led
to the increase in the competition of banking industry. Therefore, the bank must
be well aware of the want and needs of the customers. Nowadays customers are
demanding more not only based on the service but they demand the way they are
treated. Once they are satisfied with the services that were provided by the
banks, they will communicate about the bank or services to the other customers.

 Commercial banks should put more effort to attract more customers

especially in dimensions related to technology, conflict handling, trust, brand
visibility, customer recognition, charity and empathy. In order to create and

66
maintain loyalty, the bank must recognize that many of the core product attributes
are necessary, but not sufficient for loyalty. On the other hand, it is a must to
have a strong connection with its customers in order to create and maintain
customer loyalty. By having strong relationship with customers it is possible to
keep customer from switching to other competitor.

Commercial banks should invest in its employees, especially on the frontline, to motivate them
to serve customers best. Frontline employees should be trained to act in a manner that recognizes
customers as a valuable asset. To motivate employees and get their commitment, the bank should
offer them a challenging work, attractive salary that recognizes the contribution of their effort
towards the overall success of the business. Besides these, actions to make them participate in
decision making activities, to provide an opportunity to learn and advance, and reward for their
contribution have a lot to play in employees’ motivation.
 Commercial banks should establish more efficient and effective ways of complaint handling
procedures and communicate those procedures to customers. It is also advisable to management
to keep customers informed about changes that take place in the company well in advance
instead of leaving them to know by chance.

 Commercial banks should give greater attention to both getting new customers and retaining
the existing ones in the advertisement and other promotional activities by using relationship
management as strategy. It is also recommended that the bank should have the system to ask
customers to comment about the service either verbally or on phone or in writing about their
satisfaction. Collecting feedback is not an end by itself; the bank should analyze the feedback
periodically and must use them as a means of problem identification.

 when hiring employees, commercial banks should look at the ability and interest of an
employee to establish and maintain strong relationship with the customers and other employees
of the organization. Potential candidates who are strong in trusting behavior, conflict resolution
ability, strong commitment to the assigned tasks and adding with empathy should be considered.

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 Managers should put their efforts into implementing relationship management in
an effective way, in order to enhance customer perceived trust, conflict handling and empathy. It
is also essential for the bank to realize the importance of relationship quality and customers
loyalty for practical business. A higher quality of a relationship might lead to a higher level of
customer loyalty, which makes banks profit more. The bank should assign responsible body for
following up relationship management activities and providing solutions with short period of time
if problems arise.
In general, commercial banks should make the whole system on work with customers, not in
opposite of customers. As it is known, customers are the reason for the survival of the bank. So,
the banks are expected to invest more on attracting new customers and retaining the existed ones.
The banks should recognize the importance of relationship management in creating loyal
customers and implement appropriately.
This study directly focuses on relationship management dimensions and its effect on customer
retention and loyalty in banking sector, particularly commercial banks in Woldia town. This
research can be further explored by adding more relationship marketing dimensions like value,
commitment, communication, cooperation, and others which could influence customer loyalty.
Future research studies might fruitfully investigate such moderating influences. Future
researches also can survey by applying longitudinal design and increasing the sample size.

68
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Appendix A
70
 Samara University
College of business and economics
Department of management
Master in business administration

Dear participants:

The questionnaire is prepared by Master of Business Administration (MBA) graduate

student for the purpose of writing thesis on the impact of relationship marketing on
customers’ retention & loyalty. Your honest response is very much important input
to my thesis. I want assure you that your privacy for responding to this questionnaire
is completely kept in secret.

Questionnaire

The following questionnaires are designed to get valuable data for the effect of customer
relationship management on customer loyalty and retention in partial fulfillment of master in
business administration in Samara University.
PART one (back ground of the respondent) (tick)

1. Gender: Male ( ) Female ( )

2. Age of the respondent (put exact figure)

18 – 30 [ ]

31 – 40 [ ]

41 – 50 [ ]

Above 50 years [ ]

3 salaries (put exact figure)

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  <2000 [ ]
 2000 <5000 [ ]
 5000 < 8000 [ ]
 >8000 [ ]

4. How long have you worked in the bank? (Put exact figure)

One year or less ( )

One to three years ( )

Three - five years ( )

Five to ten years ( )

Over ten years ()

5. Respondent Category/Department

Branch Manager ( )

Customer service Manager ( )

Supervisor, Accountant, KYC, Controller ( )

Unionize staff ( )

72
PART B
6. Is the banks adoption of Mobile banking likely to influence customer retention?

Strongly agree ( )

Agree ( )

Neutral ( )

Disagree ( )

Strongly disagree ( )

7. Is the banks expansion of ATMs likely to influence customer retention?

Strongly agree ( )

Agree ( )

Neutral ( )

Disagree ( )

Strongly disagree ( )

8. Do commercial banks in Woldia town perform outdoor branding to influence customer

retention?

Strongly agree ( )

Agree ( )

Neutral ( )

Disagree ( )

73
Strongly disagree ( )

9. Is brand visibility likely influence customer retention at commercial banks in Woldia?

Strongly agree ( )

Agree ( )

Neutral ( )

Disagree ( )

Strongly disagree ( )

10. Is commercial banks involvement in charitable activities likely influence customer retention?

Strongly agree ( )

Agree ( )

Neutral ( )

Disagree ( )

Strongly disagree ( )

11. Do new customers‟ referrals influence customer retention at commercial banks in Woldia?

Strongly agree ( )

Agree ( )

Neutral ( )

Disagree ( )

74
Strongly disagree ( )

12. Does trust influence customer retention and loyalty at commercial banks in Woldia town?

Strongly agree ( )

Agree ( )

Neutral ( )

Disagree ( )

Strongly disagree ( )

13. Does empathy influence customer retention and loyalty at commercial banks in Woldia town?

Strongly agree ( )

Agree ( )

Neutral ( )

Disagree ( )

Strongly disagree ( )

14. Does conflict handling influence customer retention and loyalty at commercial banks in
Woldia town?
Strongly agree ( )

Agree ( )

Neutral ( )

75
Disagree ( )

Strongly disagree ( )

15. Does customer recognition practice affect customer retention and loyalty at commercial
banks in Woldia town?
Strongly agree ( )

Agree ( )

Neutral ( )

Disagree ( )

76