CHAPTER ONE

INTRODUCTION

1.1. Background of the study

The role of retail banks in the financial sector has been changed because of increasingly
changing technological innovations and the changing customer behavior. This has resulted in
increased competition from different firms (TIWARI, 2012). Also, it has triggered a huge
change in the customer preference and demand that have impacted the banks relationship with
customers. Customers today are more willing to perform business via digital means. Traditional
banking has been conducted via face-to-face interactions. Technological advancement opens
up another door for banking which enable it provide service via digital channels as
supplementary to branch service (Capgemini & Efma, 2016). Digital means enable Banks offer
their product and services at any time anywhere more effectively. The use of digital
technologies keeps the customer engagement which in turn increases their loyalty (Ravi et al.,
2001). A digital bank is a bank that operates online and provides its customers the services that
were previously available only at a bank branch (Alex Malyshev,2023).

All Ethiopian Banks have a very basic understanding of the importance of digitalization.
However, strategic development towards digitalization has often been too narrowly focused,
which produce insignificant impact on the realization of digital transformation. This is
characterized by simple point of solution and narrowly defined projects which in turn resulted
in decreasing the perceived value of digitalization. The absence of clear vision of digitalization
underpinned by an organization’s lack of understanding about ‘what it means to be a digital
institution’ has made key decision makers to base their decision purely on cost/benefit analysis.
In the digitalization process cultural and business model change requirements are discouraged,
and inertia always has a seat at the table. The ability to deliver services in the way customer’s
need, including introduction of digital channels, is increasingly crucial to banks to end up with
establishing and maintaining long- term relationships (Laketa, 2015). Customers are key
players in any kind of business and banks in this digital era must always keep customer first.
If banks cannot be customer oriented, they will prove to be useless. Customers today want their
banks understand their aspirations and offer support to achieve their financial goals. Banks to
meet and exceed customer expectation it’s vital to have a well-established relation.

management mechanism. This will enable them to have the required and meaningful data at
hand which if utilized effectively can alter the way of conducting business to ensure
profitability.

All the point mentioned above shows it is mandatory for any business including banks to have
a close monitoring of information regarding their customer demand and preference. And also
it has been shown that it’s very important for business entities properly utilize such information
to ensure that it keep upon satisfying customer’s expectation. Technology is one of the major
ingredients in this process. Therefore, this study is in general about exploring the significance
of digitalization in the Ethiopian banking industry on customer’s relationship management. It’s
going to be a case study on a selected Bank called CBE. And it is limited to Addis Ababa head
office IT departments and some selected branch.

It is important to conduct this study because until now some studies have focused on the effects
that digital transformation has on organizations. Piccinini et al. (2015) concluded that the
limited digital transformation research so far has primarily focused on managerial issues.
Bhardwaj et al. (2013) and Granados and Gupta (2013) describe how organizations should use
digital technologies as part of their business strategy to compete in a digital world. There was
no study made on the significance of digitalization on customer’s relationship management
focusing on Ethiopian Banks. This is the reason why it’s vital conducting this study.

Furthermore, despite the fact that there is huge investment in technologies, the banking sector
in Ethiopia has not moved much. This is because of luck of the appropriate knowledge and
expertise to efficiently utilize such resources. Demonstrating this gap in way that can add
values to the banking sector service provisioning is the motivational factor for conducting this
study. Based on this purpose of this study is figuring out and presenting significance of
digitalization to Ethiopian Bank’s on customer relationship management (focusing on the case
bank). And it is to demonstrate its value in effectively managing customer service to gain long
term value.

1.2. Statement of the problem

Ensuring survival and business profitability becomes very challenging than it was before. This
is due to the ever-changing business environment and very high volatility of customer need.
Beside this the banking industry is highly commoditized where by everyone is providing
similar kind of product and service which leave a very little space to compete. With all these
challenges enhancing customer’s experience with the Bank is the best way of building
competitive advantage over another (Vaslow, 2018).

Satisfied customers are the main building blocks of profitability in any kind of business. Banks
should have to work day and night to ensure that their customers are being satisfied and
remained loyal. Where there is customer satisfaction it is easy for a business to expand its loyal
customer base. Dissatisfied customers always search for other options and can quit their
relationship at any time. Revenue can be generated only if there are customers conducting
business with the Bank. It is when the Bank fulfills its customer’s expectation that they will be
willing to establish long term relationship. Customer loyalty ensures business profitability and
its continuity. This in turn will open up other area of business since satisfied customers promote
the Bank wherever they go (Vaslow, 2018).

The means for Banks maintain relationship with its customers is by offering product and
service that met customers need. It is also by conducting a continuous need assessment and
adjusting the business accordingly. This is achieved via gathering information about the current
and future customer needs, analyzing it and by accommodating changes fast. The process of
gathering and analyzing customer data is called customer relationship management and it is
fundamental function of banking business (Laketa et al., 2015).

The banking landscape as we know is experiencing a dramatic shift on how banks interact with
their customers. A new wave of technology is revolutionizing the way customers engage with
banks. Customer is becoming accustomed to flood of digital content more than ever before.
This exposure helped customer to know exactly what they want when and from whom to get
it. From time-to-time customers are being more adaptive to immediate accessibility at any
time and any place. Banks are now required to quickly cope up with increasingly changing
customer preference to keep them satisfied. With number of alternative around it’s difficult to
retain unsatisfied customers (Singh, 2017).Banks required to be ahead of such challenges,
rebuild organization around customers, simplified and cost effective. They should keep on
learning to be responsive, innovative and adaptable to deal with future uncertainty.

Parvatiyar and Sheth (2001) states CRM as an ongoing process of engaging in cooperative and
collaborative activities and programs with immediate and end-user customers to create or
enhance mutual economic value at reduced cost. Ndubisi (2004) reported that more and more
firms are capitalizing on strong firm-customer relationship to gain invaluable information on
how best to serve customers and keep them from defecting to competing brands. Hence,
customer relationship building creates mutual rewards which benefit both the firm and the
customer. By building relationship with customers, an organization can also gain quality
sources of marketing intelligence for better planning of marketing strategy (Eisingerich and
Bell, 2006).

ICT tools are often called digital technologies and are shaping the way people live,
communicate, consume and work, breaking the barriers of time and space (McDonalds, M.
Russel-Jones, 2012). The past decade some organizations have successfully adapted these
digital technologies leading to a rise of companies such as Google, Netflix, Amazon and Apple
while other companies such as Borders, Blockbusters and Kodak failed to do so and became
obsolete. Many organizations nowadays feel pressured to change in order to meet customer
demands and face competitive pressure (Westerman, Calmejane, & Bonnet, 2011). In an
attempt to do so, they often undergo so- called digital transformation initiatives.

Studies made by Li (2015) Piccinini et al. (2015) and Westerman et al. (2011) majorly
concentrate on customer insight, customer relations and customer-organizations interactions.
Piccinini et al. (2015) focus on the relationship between customers and organizations due to
evolving digital technologies. The effects mentioned by Li (2015) Piccinini et al. (2015) and
Westerman et al. (2011) are described in a qualitative way making it difficult to pinpoint the
exact magnitude of an effect digital transformation Li (2015) specifically addresses the
elements of consumer insight; how organizations can identify profitable customer that want to
pay premiums, create products to their preferences resulting into increased market
segmentation. Li also states the benefits of digital channels usage for an increase in customer
experience, digital interaction and new revenue models.

Piccinini et al. (2015) explained through a meta-study that customer-organization interaction

is particularly changing due to new digital technologies and digital transformation. The study
also

identifies changes in customer being full of information and accessibility to products and
services. Westerman et al. (2011) emphasis more on the digital channels and platforms, the
effects those have on interactions between customers and partners; such as improved marketing
and sales, knowledge sharing through communities, and increasingly shared digital services.

The digitalization era has opened up a new door for Banks to enrich customer satisfaction and
loyalty, along with attaining long term relationship and profitability. Also, Banks were able to
develop potential required to meet customer’s expectation and make certain that customers
keep on doing business. Technology made it possible for Banks serve customers at their
convenience without visiting a Bank branch The exponential growth of internet, mobiles and
communication technology has brought a paradigm shift in how the banks function. At this
age technology is no longer enabler it is a core business driver (Sreelatha et al, 2012).
Technology helps Banks in improving productivity and efficiency. The result of this is not
only being cost effective but also being enabled to grasp the untapped market by switching the
unbanked population. Digitalization era has made it possible for Banks offer products and
services fulfilling the changing customer demand and preference which in turn has had a
significant effect on customer’s behavior. The growing technological innovations impacted
customer living style, increased demand for more simplicity of service and immediate
accessibility for the reason tendency of preferring more digital solutions in their banking
interactions is very high. This has made it very difficult for Banks keep on satisfying their
customers more than ever before.

The increasing technological innovation has made the world a smaller marketplace therefore
relationship with customers is a very important selling aspect (Strategic Directions,

2002). Walton& Xu (2005) stated that CRM is widely regarded as a method of retaining and
developing customers, through increased loyalty and satisfaction. Companies are also realizing
they can easily retain customers by understanding their need and competing with exceeded
expectation, something which CRM systems can help organize (Kale, H.2004).

According to Drucker (1996) knowledge is the only meaningful resource and real competitive
differentiator .Xu &Yen et al (2002) further states that successful companies will use customer
information system to build relationship to the levels customers want them and by organizing
such information a single view of all customers can be made easily.

Commercial Bank of Ethiopia has been working a lot to improve its customer service and to
provide reliable banking services. Customer service relationship management is handled at
different level of the Bank. CBE has given priority to digitalization in its strategic plan and do
its best to develop the potential required to meet its customer’s expectation. It has also worked
to make certain that customers keep on doing business by using mobile and internet technology
made at their convenience without visiting physical branches. It is obvious that the exponential
growth of internet, mobiles and communication technology has brought a paradigm shift in how
Ethiopian banks function. However, there is a challenge of effectively handling digitalization
task. Out of which the main problem is lack of properly established end to end process. There
is lack of the appropriate expertise and knowledge. In addition to these, the absence of the right
technology to assist critical tasks, the following are the overall challenge as a result of the
mentioned problem

Poor customer handling which resulted in increased customer dissatisfaction.

Poor product development, enhancement and implementation activities. As a result

there will be a higher cost of investment with unsatisfactory return.

Unable to gain the appropriate benefit out of digital channels. This makes it
difficult to realize return on investment

Based on this, the purpose of this research paper is to investigate the effect and significance of
digitalization in customer relationship management of the case Bank. Beside this it is to
investigate further how Banks view the role of digitalization process in their customer
relationship management. Accordingly the research question to be addressed is

1. How do IT strategies affect customer relationship management?

2. How does departmental activities increase the facility of the customer relationship
management?

3. How does the bank strategies handling improve customer relationship management?

4. How does technology adoption increase the service delivery of customer relationship
management?

1.3. Objective of the study

1.3.1. General Objective

The general objective of this research is to investigate the importance of digitalization in the
Ethiopian Banking sector on customer’s relationship management and it is specifically
focusing on Commercial Bank of Ethiopia.

1.3.2. Specific Objective

The specific objectives the research tries to materialize at the end of the study are

Examine the effect of IT strategies on customer relationship management.

To asses departmental activity facilities on customer relationship management.

 To demonstrate bank strategies handling on customer relationship management.

To examine the effect of technology adoption on customer relationship

management.

1.4. Significance of the study

The digitalization change has been around for decades. Now days however, its impact, the
speed of diffusion and change seem unprecedented. The demand for extraordinary convenience
and exciting new services dramatically increases in the future. Traditional banking enormously
challenged with this, and should adapt to growing customer needs, new competitors and
ceaseless technology innovation. Ethiopian Banks understand very well the growing customer
need for digital access and convenience. It has also recognized the need to expand digital
services and capabilities, and many are investing heavily to do so. However, the luck of well-
established strategic focus with a clear vision of digitalization has played its role in slow
moving towards digitalization change in the banking industry. This is, primarily, because of
the absence of proper knowledge and experience. Ethiopian Banks are highly immersed in
traditional Banking operations. The finding of this research will help the case Bank and players
in the Ethiopian Banking industry to deeply understand the importance of digitalization and
shape the way strategy is formulated incorporating the value of digitalization.

1.5. Scope of the Study

Although the subject under investigation is too broad and requires an extended investigation,
the study only focuses on assessing the significance of digitalization on customer relationship
management within only COMMERCIAL BANK OF ETHIOPIA – BRANCHES IN ADDISS
ABABA AND HEAD OFFICE IT DEPARTMENTS. The researcher used the following
variable in order to achieve its research objective CRM, IT strategy, Technology adoption, Bank
strategy and Departmental activity. And it was conducted during the month may, 2024.

1.6. Limitations of the study

The basic limitation of this study is that it only considers employees perspective of e-banking
and it does not take in to consideration what perspective do all the customer have on the
technology. Third it is also limited to banks departments of all it doesn’t fully cover those of
all department employees. At last Due to limited financial resources, timely and accessible
information, the paper have limitation on addressing other branches that located outside Addis
Ababa and all branches of CBE in Addis Ababa difficult to conduct all things within the given
time period. The study will cover the areas of service delivery within the branches in Addis
Ababa.

1.7. Organization of the Study

The study will be organized in five chapters. Chapter one consists of general introduction
about the study out of which back ground of the study, statement of the problem and objective
of the study will be properly addressed. Chapter Two outlines both the theoretical and empirical
literature review. Chapter three will be consisted of research design and methodology. Chapter
four outlines result and discussion. Chapter five consists of summary, conclusion and
recommendations.
 CHAPTER TWO

REVIEW OF RELATED LITRATURE

2.1. Introduction

This section of the proposal will present the literature reviews both on the theoretical and empirical
perspective focus on reviewing the significance of digitalization in the customer relationship
management.

2.2. Theoretical Literature

2.2.1. Definition of Digitalization

Digital transformation can be defined as the acceleration of business activities, processes,

competencies and models to fully leverage the changes and opportunities of digital technologies
and their impact in a strategic and prioritized way. It is driven by factors such as technology
innovations, customer behavior and external environment.

2.2.2. Why Digital Transformation

The high demand for anytime anywhere service access

Today’s customer, internal or external, expects the same kind of experience they have with
technology in their personal lives. But for a business, this can be challenging to achieve. There
have never been more choices, both in terms of how and where to deliver applications from, and
who to partner with in the delivery of services. There are new ways to engage with customers,
more innovation in the workforce and more opportunities to harness data insights as just a few of
the benefits that digital transformation brings (group discussion ideas, 2017).

Technological innovations key to ensure operational efficiency

Ensuring the appropriate employees’ engagement is the headache for every business. Organizations
are continually searching for new ways to increase productive. Digital technology plays a vital role
in accelerating efficiency and increasing productivity. Digital transformation provides a valuable
opportunity for core business functions, such as finance and HR, to move away from manual
processes and automate key areas like payroll, enabling leaders to focus on wider business
opportunities. A digitally transformed business has powerful technology oiling the machinery
behind internal operations, enabling teams to collaborate seamlessly across departments, and
streamline communications across a whole workforce and supply chain.

There are 3 types of CRM technologies which includes operational, analytical and collaborative
(Miriam et al.,2003). Operational CRM is the customer facing applications of CRM such as SFA
(sales force automation), EMA (enterprise marketing automation) and front office suites. The
analytical segment includes data marts or data warehouses that are used by applications that apply
algorithms to dissect the data and present it in a form that is useful to the user. The collaborative
CRM reaches across customer touch points, all the different communication means that a customer
might interact with, such as e-mail, phone call, fax, website pages etc.

2.2.3. Customer Relationship Management

In literature, many definitions were given to describe CRM. The main difference among these
definitions is technological and relationship aspects of CRM. Some authors from marketing
background emphasize technological side of CRM while the others consider IT perspective of.
From marketing aspect, CRM is defined by Melinda (2001) as “a combination of business process
and technology that seeks to understand a company’s customers from the perspective of who they
are, what they do, and what they are like”.

The origins of CRM are found in relationship marketing theory which is aimed at improving long
term profitability by shifting from transaction-based marketing, with its emphasis on winning new
customers, to customer retention through effective management of customer relationships
(Christopher et al., 1991). Reichheld and Teal (1996) found out those customers who have been
around long enough to get familiar with the company’s procedures, will create more valuable
business relationships, will acquire more products and will be less price sensitive on individual
offers. Customer relationship management (CRM) is philosophy with the concept enabling
organizations develop and manage relationship with their customers. CRM implementations assist
organizations such as Banks in identifying customers need and going ahead of their expectations.
Rapidly increasing technological advancement impacted the life of human beings which resulted
in a change in the everyday life this made it having CRM implemented very crucial for
organizations. This is because CRM provide the option for organizations creating value through
collaborative effort of internal processes, functions and external networks (Laketa et al, 2015).

The philosophical bases of CRM are a relationship orientation, customer retention and superior
customer value created through process management. IT is the ‘glue’ that holds these together and
enables the whole to be operationalized. In consequence, the successful implementation of CRM
requires Marketing and IT to work closely together to maximize the return customer information.
This will almost certainly require a degree of cross-functional reorganization.

CRM is a complex process based on continuous collection of information about changing customer
behavior. Good knowledge of customers habits and desire is the basic building block for successful
CRM. In the Banking sector building long term value out of customers is vital role in order to
survive in the stiff competing market place. Achieving this is not possible with out continually
assessing the marketing demand and properly utilizing information. To achieve this need CMR is
one of the tools which if utilized appropriately assured that Banks achieve their goal (Marko
Laketa,2015), CRM benefit Banks in many ways out of which

Retention of existing customers: this is possible because of CRM Banks will being able to
continual monitor their customer behavior from the massive data at their hand and adjusts their
business accordingly. When customer expectations are met it is a less likely to switch to other.

Acquiring of new customer base: When Banks succeed in buying the heart of existing
customers it is sure that this satisfied customer advocate the Bank to other customers which enable
the Bank to expand its customer base (Richards et al 2008).

2.2.4. CRM Strategy

In order to get the fruit out of CRM implementation organization first need to accurately define its
business and the reason for performing it. It is important to understand very well the environment
in which the business is conducted and develop the appropriate medium. Along with this a well-
established technological infrastructure is crucial important (Katre1, 2014).This is achieved by
developing a well-designed strategies that perfectly match internal strength with external
challenges. CRM is one of the business strategies based on the principle of relationship marketing
and its goal is to attract, retain and established long term relationship with customers in order to
create value. The strategy of CRM includes (Dyche,2001).

Analysis and collection of information related to adequacy of existing strategies, internal

environment, individual business processes, employee’s knowledge and indirect business
environment.

Development of CRM strategy, which includes definition of strategic objectives and

adequate definition of CRM strategies.

Implementation of CRM strategy that includes planning, implementation of all business

communication techniques, and control activities which are necessary for achievement of defined
objectives of building and improving relationships with customers.

Successful CRM involves definition of processes, adaptability of employees to new strategy and
support of top management, with adequate organizational structure. Successful implementation of
CRM concept needs support of top management. Success of bank in today`s competitive
environment, depends on ability of top management to adjust business environment where
employees manage business processes and implement business relationships with customers. Banks
often seek for employees who have appropriate leadership (Day, 2003).

2.3. Empirical Literature

Technological innovations redefined the way banking has been conducted in the past it is sure that
the future of banking will offer more sophisticated services to customers with the continuous
product and process innovations. Today, technology is not only changing the environment but also

the relationship with customers (TIWARI, 2012). Technology has not only broken many barriers
but has also brought about superior products and channels. This has brought customer relationship
into greater focus. It is also viewed as an instrument of cost reduction and effective communication
with people and institutions associated with the banking business.

As stated, (Oghojafor et al., 2011) when more technology is incorporated in the product and
services it has an intense impact on the standard of competition. Service firm like Bank are
rendering more and more IT based service option to their customers. Such move resulted in
improved product and service quality, improved customer satisfaction and higher productivity.
Jeffers (2003) find out that the potential contribution of IT in firms’ performance is its
complementarities with other resources in leveraging customer service performance which can be
a major factor in determining the viability and competitive edge of the firm.

Digital transformation has made it easier for financial companies to acquire new customers and
retain existing once. This in turn facilitates revenue generation. An increasing force of competition
coupled with the decrease on customer loyalty has made the customer relationship management a
very crucial assignment for the financial sector. In order to ensure long term profitability Bank
should have to earn highest level of trust of their customers which in turn help to retain existing
customers, acquire new once and increase customer loyalty (Ernst & Young, 2015).

According to Wu, (2008) “As more and more enterprises recognize the importance of becoming
customer focus in today’s competitive economy, they embrace CRM as an essential business
approach”. However, CRM is a method of “increasing a widespread picture of customer’s desires,
anticipation and conducts and managing those factors to affect business performance” (Hoots,

2005). Or it is “about managing customer knowledge to better understanding and serving them”
(Rahimi 2007). It also involves “continuous use of advanced information about current and
potential customers in order to anticipate and respond to their needs and draws on a combination
of business processes and information technology to discover knowledge about the customers.
With such effective use of information and communication technology, organization can offer their
customers a variety of products, lower prices and customized services, at the same time in order to
market effectively to the individual customers, companies gather information from both

internal and external sources and use it to provide a unified profile of customers for target

marketing devotions’’ (KaraKostas, et al., 2004).

Bank can establish a better customer relationship by minimizing the gap between customer
expectation and the actual service delivery. Customer today are in need of any time anywhere
access than ever before which could be achieved only through digital means. Digital channels are
far more likely to delight and less likely to upset than the branch or call center experiences. It is
leading to increased loyalty with higher customer retention, repeat purchases and referrals.
Customers increasingly expect to follow up with bank staffs through digital means (Japparova,

2017)

A customer service reformation is taking place. It’s radical, it’s far-reaching and it’s being driven
by customers. The digital age has transformed the way customers shop and share their experiences.
Today, customers are driving the buying process using websites, blogs, vlogs and social platforms.
By the time they enter a store or become visible in the sales funnel, they know what they want to
buy and how much they want to pay. It doesn’t stop there. Once the sale is closed, customers use
those same channels to join forces and name and shame those that disappoint.

On the face of it, it seems a concerning development for businesses. But there’s a bright side to
these changes. New channels and technologies open up fresh opportunities that can make a
company stand out from the rest of the crowd. Opportunities to build an ongoing dialogue with
customers (Katre1, 2014). Opportunities to learn from customers and to increase the relevance of
firm’s products and services. So, it’s time for every business to start seeking and fostering
continuous relationships with their customers – a relationship that goes far beyond the initial sale.
As stated in Abbott et al., (2001) CRM to be successfully having relevant and reliable customer
data source is mandatory. In order to achieve this technology has a vital role in CRM to
appropriately gather customer data and use it for the intended purpose (Boyle, 2004). Indeed, the
development and improvement of information technology provide the ability to gather, investigate,
and share customer information which will lead to a customer satisfaction, customer loyalty and
retaining customers (Bulter, 2000).

A Research was conducted on how information technology could enhance firm performance in the
organizations that are providing services for the customers and in order to enhance profitability in
the Nigerian insurance industries (Oghojafor et al, 2011).

Accordingly, a survey method has been employed to collect data among insurance Companies in
Nigeria. Also, the samples selected were from Lagos state, the Commercial center of the country.
The final result of the finding shows, even if it’s fact that almost all organizations have a widespread
data base of their customers, almost all could not make provisions for their customers to make
major businesses online because they have not fully incorporated their customer relationship
management with information technology.

2.3.1. Business Strategy

Business Jargons (2018) refer strategy as a form of decisions that determine the goals, produces
principal strategies, plans, and defines the range of business. Generally, the concept of strategy can
be stated as the corporate strategy; however, each business entities in big organizations have their
own business strategies related to their specific product-market situation (Porter, 1987). Since the
purpose of this study is to examine the significance of digitalization on the bank’s relationship with
customers, including the business strategy in the study is important as it is the strategy that sets the
goals for the business units to achieve (Porter, 1987).

When the different strategies within an organization are aligned with each other and working
towards the same goals it is said to have strategic alignment within the organization (Nilsson &
Rapp, 2005). Strategic alignment is one of the key elements in achieving a competitive advantage.
Nilsson& Rapp (2005) stated that business units are very important elements of a firm and it is
these entities that directly compete on the market. Each Business units of a firm has their own
strategic goals separate from the overall corporate goals that they use to compete on the market,
and it is this that the business strategy refers to. In order to create value for the firm as a whole, it
is important that the business strategy is in line with other strategies employed to prevent the
business units from working against the firm (Nilsson & Rapp, 2005). Porter (1980) has developed
a typology that can be used to describe generic business strategies.

Figure 1: Porter’s typology of business strategies

These three approaches are examples of "generic strategies," because they can be applied to
products or services in all industries, and to organizations of all sizes. Porter (1985a) called the
generic strategies "Cost Leadership", "Differentiation" and "Focus". He then subdivided the Focus
strategy into two parts: "Cost Focus" and "Differentiation Focus."
[Link]. Cost Leadership

As its name might imply, cost leadership allows a competitive edge by manipulating production
costs. As stated on Porter (1985a) it does this in two important ways:

By reconfiguring the value chain with the aim of achieving efficient ways of designing,

producing, marketing and distributing firm’s product and services.

By controlling factors that increase costs on different firms’ activity.

Cost leadership can be created if only if firms can achieve controlling these cost drivers better than
competitors. Technology has a big role in cost leadership strategy since almost all activities in an
organization in one or other way are being affected by technologies. New technologies enable firm
to simplify process flows in as efficient way this will have a great impact in driving down the
cost (Porter, 1985a). When an organization succeed in discovering and employing new technology
which will result in better performing activities before competitors it will gain cost leadership
advantage. Therefore, organizations information technology strategy can assist achieving cost
leadership by developing and implementing new technology for process flow efficiency.

[Link]. Differentiation

Price is an important consideration when attracting customers. However, the differentiation

method looks to develop product uniqueness and attractiveness to engage customers. It is when
organization provides unique product or service compared to competitors offering that it can
achieve differentiation. Competitive advantage is gained out of differentiation only if the
uniqueness in product or service has real value for the customer (Porter, 1985a). Uniqueness comes
with additional costs since there will be additional activity to achieve this. Therefore, for a
sustainable competitive advantage the increase prices have to exceed the added costs. Uniqueness
can be achieved either by differentiating the final product or service offered or in the activities
leading up to the final product (Porter, 1985a). If organization incorporates new technologies at
early stage, it will give them a chance of acquiring uniqueness faster than competitors (Porter,

1985b).
[Link]. Focus

Contrasting the above mentioned two strategies focus is aimed at a narrow segment within the
market. Porter (1985a) sated that this strategy developed because the other two focus on a broad
section of the market. It is divided into two different variants based on the previous competitive
advantages: cost focus and differentiation focus (Porter, 1985a). Advantage is that with focused
strategy companies will be able to satisfy the need of a small segment much better than if the firm
were to be using a broader strategy (Porter, 1985a). By combining it in the information technology
strategy reaching out more the technology friendly segment will be easier.

2.3.2. Customer Relationship Management

In a highly competitive bank industry, there are a lot of different options for the customers to choose
from, so in order to retain a customer, it is important that the customer also wishes to continue the
relationship with a specific bank. A relationship between a bank and a customer requires interplay

from both parties in order for it to function. Like many other relationships, it takes time and delicate
care to develop this relationship. Customers have a wider choice of often less distinguishable
products and they are much better informed. For many offerings the balance of power shifts
towards the customer which raises their expectations on how companies should care for them
(Recklies, 2006). In such situations, the development of a strong relationship between customers
and a company could likely prove to be a significant opportunity for competitive advantage
(Recklies, 2006). Customer Relationship Management (CRM) thus evolves and it involves the
interaction between the organization and its clients normally refer to as customers (Edelstein, n.d.).
In today ‘s business arena, customers are prime asset for an organization and managing the
customer relation is equally critical for the organizations

Customer Relationship Management (CRM) from financial institutions perspective is a sound

strategy to identify the bank ‘s most profitable customers and prospects, and devotes time and
attention to expanding account relationships with those customers. This is done through
individualized marketing and customizing service-all delivered through the various sales channels
that the bank uses (Semih& Ibrahim, n.d.). CRM helps companies to improve upon their
profitability with their customers while at the same time making the interactions appear friendly
through individualization.

Customer relationship management is a specialized model aimed at learning more about customers’
demands, preferences, and expectations. With this information, it is then possible to affect the
relationship with customers in various ways. Swift (2001) describes CRM as an approach with the
purpose to understand and influence customer behavior in order to improve customer loyalty,
profitability, and acquisition. While the pressure is on the banks to develop the customer
relationship, it is the customer that evaluates the relationship, and communication is, therefore,
necessary in order for the bank to assess the services used in the relationship (Swift, 2001). Due to
the purpose of the study, including CRM in the theoretical framework was important in order to
capture the bank’s relationship with its customers as it is through CRM that the interaction with
customers occur (Swift, 2001).

The major aim for any CRM strategy is to enable the organization acquire and retain profitable
customers. As stated by Peck, Payne, Christopher & Clark, (2004) this strategy developed mainly
around the three pillars called customer acquisition, retention and profitability.
2.3.3. Customer Acquisition

Kotler (1997) mentioned that it is estimated to be five times costlier to attract new customers than
keeping an existing customer happy. The cost of attracting a new customer is often higher than the
customer’s lifetime value with the organization. This clearly shows that emphasizing of customer
acquisition without focusing on the resulting value of the relationship is a waste of money for any
organization.

To succeed in this, it requires a good knowledge about the customers demand and preference. To
do so an aggressive strategy has to be employed targeting the segment of customer that any
organization looking to acquire (Peelen, 2005). This can be achieved by having a well-established
process in the organization that allows for gathering of data at each point of customer interaction
(Sawyer, 2002). Then the next step is carefully analyzing this information and change the customer
service accordingly (Sawyer, 2002).

By interacting with the consumers through either personal channels or less personal channels,
depending on their preferences, and offering the products and services that are in demand, the hope
is that the consumer will discover a satisfying experience and decide to become a customer
(Sawyer, 2002).

2.3.4. Customer Retention

Customer retention can be achieved by enhancing customer satisfaction and loyalty, improving
problem resolution, and creating the ability to identify and save vulnerable customers. As it is
stated by Kotler (1997) it is as much important to have a customer service satisfying existing
customer since it’s much costlier to acquire new customer. This can be achieved by continuously
gathering information about customer demand and preference so that to be aware of consumers
behaviors and to react accordingly (Sawyer, 2002). Peelen, (2005) explained that it is advantageous
for any company to have a specific process in place to gather information from customers leaving
the company since its gives a chance to learn weaknesses and work towards its improvement.

The major challenge of retaining current customers is that different customer segment does not
always have the same preferences. Information gathering which is the very important aspect of
CRM has made it possible finding some common denominators with the different customer
segment. This is achieved by analyzing the available information and focusing on main

denominators it’s possible to develop relationship with different segments (Sawyer, 2002).

2.3.5. Customer Profitability

Customer profitability tracks the financial performance of customers with respect to all the costs
associated with a transaction (Gordon, 1998). Profitability is determined in the light of the lifetime
value of the customer to the organization, taking into account the income and expenses associated
with each customer over time (Gordon, 1998). The tracking of profitability is made more accurate
through the use of technology.

The processes of gathering and analyzing information within CRM have the purpose of identifying
which preferences and demands of customer segments that are feasible for the bank to satisfy
(Gordon, 1998). By identifying this, it is possible for the bank to work on starting and improving
the relationship with customer segments that are profitable. In the perspective of CRM, customer
profitability is measured across the lifetime value of the customer. Therefore, it can be beneficial
to satisfy customer preferences and demands that have been identified as unprofitable in the short
term but with the possibility of being profitable in the long term (Gordon, 1998).

2.3.6. Information Technology Strategy

Information technology is changing the way companies operate. It is affecting the entire process
by which companies create their products. Furthermore, it is reshaping the product itself: the entire
package of physical goods, services, and information companies provide to create value for their
buyers. Information technology has become the central part of any business in this digital age; due
to this strategic planning of IT is the top priority agenda for any organization (Luftman, 2000).

Banks to be able to provide customized and unique products to customers modernizing their IT
infrastructure and become more digitalized is highly essential (Broeders & Khanna, 2015). All
these can be achieved by properly planning and formulating a suitable IT strategy for the process.

Information technology strategy is a strategic plan comprised of specifying the company’s digital
vision, goal, and opportunities, as well as allocating IT resources that are required to execute the
strategy (Zhu, 2015). Beside this the IT strategy assist the organization meet its objective in a more
effective and supportive way (Zhu, 2015). Bhardwaj et al. (2013) stated that the digital strategy
helps the organization create value both externally, for example through internet banking, and
internally, by automating processes. Because of this, including the IT strategy is important as it
through this strategy that digital developments are implemented in the organization (Bhardwaj et
al., 2013).

IT automations allow the organization to operate more efficiently and reduces the costs of
operational and management processes (Berman, 2012; Matt et al. 2015). By successfully
transforming the infrastructure and integrating digital technology throughout the value chain, the
organization can achieve automation and optimization of services and products, channels, and
processes (Brynjolfsson& Hit, 2000; Matt et al., 2015). From a bank perspective, banks can for
example transform their distribution channels for their products and services so that they are able
to meet their customer demands, gain valuable customer information, and reduce costs (Liu et al.,

2013; Matt et al. 2015)

Integrating digital technology into an organization structure is something quite challenging

because it need a great deal of investment and changes in the internal business process
(Brynjolfsson& Hit , 2000).Additionally it requires the organization to have the right culture ,
leadership and trust between all the organization members (Liu et al., 2013).Therefore, IT strategic
alignment with other operational and functional strategies is essential for its successful
implementation and to actually transform tqw910he internal processes (Liu et al., 2013; Matt et al.
2015)

2.4. Conceptual Model

Technology has a major impact on the way banking and financial services are delivered. A wide
range of alternative delivery mechanism becomes available, mobile, ATM… this Reduces the
dependence on the branch network as a core delivery mechanism. Shu, W. & Strassmann, P. A.
(2005) concludes that there is significant benefit from investment in Information Technology
especially in the Banking Industry. A central change has been that consumer preferences are
moving towards digital channels. As banks must face these changes, challenges are arising for them
to retain and acquire customers. Based on the above-mentioned points 4 factors has been identified
which will help to determine the significance of digitalization on customer relationship
management. These are IT strategy, technology adoption, Bank strategy, and departmental activity.
In order to demonstrate better how these 4 factors help to substantiate the research objective the
following model has been used.
Figure 2: Model of the relationship between Digitalization and customer relationship management
 CHAPTER TREE

RESEARCH METHODOLOGY

3.1 Research design

As it is stated C Williams · (2007) research can be conducted using three different ways. These are
quantitative, qualitative and mixed research approach. As per Kothari (2004) quantitative methods
emphasize objective measurements and the statistical, mathematical, or numerical analysis of data
collected through questionnaires, and surveys, or by manipulating pre-existing statistical data using
computational techniques. A qualitative method is used when it is required to have an in- depth
understanding of the subject matter.

This research is going to be conducted using a mixed research method; the rationale for quantitative
is to better understand the research problem by combining both numeric values from quantitative
research. This will help to neutralize limitations of applying any of a single approach (Halcomb,
2015).

Beside this since the purpose of this research is to demonstrate the significance of digitalization
on customer relationship management. A descriptive research design and was more appropriate to
provide detailed description about the existing phenomena and to justify current condition with the
intent of employing data and whenever possible to draw conclusion from the fact discovered
(Kothari, 2004). According to AECT, (2001) descriptive research allows for interpretations of the
answers given, it allowed us to describe how the factors interact with each other. Also explanatory
research, According to Robson (2002), Explanatory research aims at gaining an explanation of a
specific situation or problem, generally in the form of causal relationships, so the researcher
believes that using explanatory research is appropriate.

3.2 Target Population

According to CBE’s Oracle database (ERP system) maintained on and for employees, Commercial
Bank of Ethiopia has 1950 branches and 48,100 permanent employees throughout the country;
from these, 650 branches and 22,750 employees are located in Addis Ababa; organized under ten
districts and head office: gulele, merkato, yeka, Kirkos, bole, nifas silk, akaki kaliti pias a,
kolfe keranyo and kasanchis district. The type of branches ranged from newly open ones to
those graded as ‘Special’. For the purpose of this study branches operating in Addis Ababa with
Grade III, Grade IV and Special status (180 in number) were considered and each branch has a focal
person on e-payment in Customer Service Manager-service (CSM service) level. Therefore, these
180 parts of population is selected from 15 different branches and positions from kolfe keranyo of
Addis Ababa b/c they do have max number of customer and their most customers are a very busy
so they are business persons. They are zenebework, ayer tena adebabay, wolete, torhailoch, woyra,
bethel, alembank, anfo, girar, kara, keranyo,3kutir mazoria. anfo, 18 maziria and atena tera. And
from each 12 employees was targeted. While, the remaining 100 member of population are from e-
payment department from Commercial Bank of Ethiopia head office staffs working in the IT,
Strategic Planning & Performance Appraisal, Marketing & Corporate communications,
Corporate Customers & Relationship, Service Outlet & Standardizations Departments and the
target population has a total of 280 employees of the bank.

3.3 Sampling and sampling procedure

Sampling in research refers to the selection of individuals, units, and/or settings to be studied.
Quantitative researches tend to go for random sampling, while qualitative studies often use
purposeful or criterion-based sampling, that is, a sample that has the characteristics relevant to the
research question(s) (Lacey & Luff, 2001).When it comes to sample size determination for
qualitative researches, it is importance to remember that there is no one direct rule. However, proper
attention should be given to have a size reaches to saturation (Nastasi, 2004).

As stated above, this study was conducted with a mixed research method. Also it has been
explained that the target population of the study were Commercial Bank of Ethiopia head office
staffs working in the IT, Strategic Planning & Performance Appraisal, Marketing & Corporate
communications, Corporate Customers & Relationship, Service Outlet & Standardizations
Departments and from 15 different branches and positions of bank. The total number of staffs under
these departments is 280 selected.

The sampling technique mostly used is for qualitative study is purposive sampling to ensure that
the selected participant is going to yield the required data addressing the research question. Non
probability sampling is the appropriate technic to be employed in case study research design and
qualitative research. The proper attention should be given in selecting a sample based on a clear
rationale than focusing on representing the population.
As stated, (Maxwell, 1996) purposive or judgmental sampling is a type of non-probability sampling
technique in which respondent are selected deliberately assuming to provide important information that
cannot be obtained with others. It is where the researcher includes cases or participants in the sample
because they believe that they warrant inclusion.

Sampling technique

The sample size is calculated by using formula provided by Yamane (1967)

The formula is

𝒏 = 𝑵/( + 𝑵(𝒆))

Were,

n=sample size

N=population size

e=the level of precision, sampling error at 95% confidence level.

= 280/ (1+280(0.05)^2)

= 280/ (1+(280(0.0025))

= 280/ (1+0.7)

= 280/1.7

n= 164.706 ≈ 165

Hence, the sample size became 165.

4.4. Data source and collection methods

Primary source was used in this research. Primary sources of data collected through self- administered
questionnaires.

4.5. Variable measurement and instrument

A survey questionnaire developed after reviewing Likert scale is commonly used to gather large survey
data on attitude and behavior of people in a relatively short time period. Thus, a five-point Likert scale
questionnaire containing five response alternatives, namely: Strongly Agree, Agree, Neutral, Disagree
and Strongly Disagree were developed. The use of Likert’s scale is to make it easier for respondents
to answer the questions in a simple way; and also enables the research instrument permit an efficient
use of statistics for the interpretation of data. Moreover, the central issue to argue about Likert scale is
that, it can produce ordinal data. In statistical terms, the level of measurement of the Likert response
scale is ordinal rather than interval: that is, we can make assumptions about the order but not the spacing
of the response options. Thus, the permissible descriptive statistics that can perform on ordinal data is
mean (average response) and mode (more frequent responses).

3.6. Reliability and Validity

Reliability: - Reliability is the extent to which a measurement reproduces consistent results if the
process of measurement were to be repeated (Malhotra, N. K., & Birks, D. F., 2007) It is clear that when
we measure anything there is always a chance for errors. In fact, the goal of error free measurements
may not duplicate each other exactly even if we repeated the same study with the same sample

Reliability test was conducted using Cronbach-Alpha. Cronbach-alpha is widely used in educational
research when instrument for gathering data have items that are scored on a range of values, i.e.
different items have different scoring points or attitude scales in which the item responses are in
continuum (Oluwatayo, 2012). This coefficient varies from 0 to 1, and a value of

0.6 or less generally indicates unsatisfactory level of internal consistency (Malhotra & Birks,

2007). Accordingly, the result of the pilot test indicated that the items used in the instrument are

reliable with α=0.86 for "IT strategies", α=0.85 for "technology adoption", α=0.904 for "bank
strategies", α=0.85 for "departmental activities", and finally α=0.892 for "customer
relationship

management (CRM)".

Validity: - Pilot testing was done to check the validity and reliability of the instrument of data
collection before using it. Validity is concerned with the extent to which an instrument
measures what it is supposed to measure (Kothari, 2004). Reliability on the other hand is
concerned with consistency in measurement and can be examined through assessing the degree
of consistency between multiple measures of a latent variable (Hair et al, 2006). Content
validity was achieved by the procedures that are used to develop the research instrument
including conducting a thorough examination of the previous empirical and theoretical work of
the marketing strategy and financial performance, upon which the operational definition for
each variable was made, using multiple items to capture all its attributes; and conducting the
pilot study before starting the fieldwork.

3.7. Method of Data Analysis

The data from the survey was entered and all analyses were performed with the Statistical
Package for the Social Sciences (SPSS version 24). With regard to data analysis, the study
utilized descriptive statistical analysis. The SPSS computer program produced frequency and
percent tables, and the necessary measures of variances for interpretation. Descriptive
statistics enables the researcher to describe the aggregation of raw data in numerical terms
(Neumann

2006). Moreover, Pearson correlation analysis was conducted so as to see the relationship
between the independent variables and the dependent one. Descriptive statistics by use of
frequency and percentage was used to analyze data.
 CHAPTER FOUR

RESULT AND DISCUSSION

4.1. Introduction

In this chapter, the data collected through survey are analyzed using statistical tool of SPSS
Version 24. First, the survey response rate and the reliability of the scales used are discussed
followed by discussion on the respondent's profile, their perception on customer relationship
management, towards the IT strategies, Technology adoption, Bank strategies and their
departmental activities using descriptive statistical tools. Finally, the outcomes of the principal
component analyses were made.

4.2. Response Rate

The 165 questionnaires were administered and staff were intercepted at the main branches of
the selected banks at convenience as well as online by using Google form through. Email
address and telegram. So a total of 165 questionnaires were collected, of which 27 were
incomplete. Thus, 138 questionnaires were found to be usable and ready for analysis, which
is

83.64% response rate. According to Malhotra & Birks (2007), reliability is

the extent to which a measurement reproduces consistent results if the process of measurement
were to be repeated. Cronbach-alpha, a widely used measure of internal consistency, was run
using SPSS 24 version and all of the scales used for this study are found to be reliable as their
respective alpha values are higher than 0.6, and for most closer to 1.

4.3. Demographic Profile of Respondents

In this part, the basic demographic profiles of the respondents such as age, sex, education,
position and experiences are presented.

4.3.1. Age and Gender

Out of the total 138 respondents, the majority 67.4%) of the respondents were in the age range
between 35-45 years, which shows that most respondents are adult and are age group which
has position in management area.31of fall in the age category of 36-45(22.5%). 8 of them fall
in the age category of 20-25(5.8%) followed by those in the age category of with 31
respondents (22.5 %). Respondents with the age group of 45 and above were very small
constituting 6(4.3 %).
Table 4.3.1: Demographic Information of Age
AGE
Valid Cumulative
Frequency Percent Percent Percent
Valid 20-25 8 5.8 5.8 5.8
26-35 31 22.5 22.5 28.3
36-45 93 67.4 67.4 95.7
>45 6 4.3 4.3 100.0
Total 138 100.0 100.0
Source: Survey Result (June, 2024)

Table 4.3: Demographic Information of Educational Status

EDUCATION
Valid Cumulative
Frequency Percent Percent Percent
Valid Diploma 4 3.0 3.0 3.0
first degree 58 43.6 43.6 46.6
master's degree 80 51.1 51.1 97.7
above masters 3 2.3 2.3 100.0
Total 138 100.0 100.0
Source: Survey Result (June, 2024)

Table 4.3.2: Demographic Information of Gender

SEX
Valid Cumulative
Frequency Percent Percent Percent
Valid Male 73 54.9 54.9 54.9
Female 60 45.1 45.1 100.0
Total 138 100.0 100.0
Source: Survey Result (June,
2024)

Alternatively, looking at the distribution of the respondents in terms of gender, male

respondents (54.9%) are higher than the female respondents (45.1%). However, it can be said
that both male and female respondents are fairly represented in the study (see Appendix II).
4.3.2. Educational Status and Occupation

Table 4.3: Demographic Information of Educational Status

EDUCATION
Valid Cumulative
Frequency Percent Percent Percent
Valid Diploma 4 2.9 2.9 2.9
first degree 75 54.3 54.3 57.2
master's degree 56 40.6 40.6 97.8
above masters 3 2.2 2.2 100.0
Total 138 100.0 100.0

Source: Survey Result (June, 2024)

In terms of education, respondents with first degree and master’s degree have the highest share
comprising 54.3% and 40.6%, respectively. while respondents that have above masters and has
diploma constitute 2.2% and 2.9%, respectively.

Table 4.3.3: Demographic Information of Educational Status

POSTION
Valid Cumulative
Frequency Percent Percent Percent
Valid top management 54 39.1 39.1 39.1
middle 73 52.9 52.9 92
management
lower 11 8 8 100.0
management
Total 138 100.0 100.0
Source: Survey Result (June, 2024)
Table 4.5: demographic information of experience

EXPERIENCE

Valid Cumulative
Frequency Percent Percent Percent
Valid 1-5 35 25.4 25.4 25.4
6-10 48 34.8 34.8 60.2
>10 55 39.8 39.8 100.0
Total 138 100.0 100.0

In order to find out the major factors that affect the efficiency in customer relationship
management, a correlation analysis is conducted with the upper level of statistical significance
which was set at 5%.

The researcher collected data from records of office, and questionnaires that were filled by
employees. SPSS (Statistical Package for Social Sciences) version 20 of the software was used for
analysis of the study data. Out of a total of 138 respondents, 130 (94.2 %) filled and return the
questionnaires. 5.8 % respondent’s unreturned the questionnaires. Majority of the respondents
returned the questionnaire with answers. Therefore, the researcher considered all the
questionnaires return.

4.4. Data Analysis Related to Research Objectives Type

This section presents the findings from the main objective of the study which is about the
significance of digitalization on customer relationship management in the Ethiopian Banking
industry focusing on CBE. A descriptive analysis was conducted in order to analyze the
significance of digitalization for a better management of customer’s relationship in the Ethiopian
banking sector with the following objectives: to identify the benefit of digitalization in customer
relationship management and to demonstrate how digitalization assists Banks for an efficient
customer relationship management.
Table 4.6: Responses on Customer Relationship management

(CRM)

No. Strongly Disagree Neutral Agree Strongly

1Disagree 2 3 4 5Agree

1 The Bank does continuous customer 32 52 18 25 11

satisfaction survey
2 There is an automated system to 15 50 35 30 8

perform customer satisfaction survey

3 Products and service are designed 20 45 32 30 11

based on customers need

4 The Bank collects customer 30 58 20 20 10

feedbacks on its product and service.

5 There is an automated system to 28 48 40 15 7

collect customer’s feedback.

6 The Bank performs customer need 22 45 35 20 16

assessment on a periodic base.

 7 The Bank work on continuously 12 18 25 52 31

improving its internal process to

satisfy its customer need.
8 There is a dedicate Bank unit that 8 12 20 61 37

manage customers complaints.

9 All customer complaints responded 23 46 32 25 12

timely.
10 The Bank work strongly to improve 8 24 22 52 32

its customer relationships.

11 The Bank need to have a customer 1 2 5 40 90

relationship management system.

Source: Field survey, June-2024.

As shown in Table 4.6 above, respondents were asked to indicate their level of agreement or
disagreement with statement, ‘The Bank does continuous customer satisfaction survey.’
Accordingly, the majority 52(37.7%); disagreed followed by 31(23.2%) strongly disagreed, 18(13%),
neutral 25(18.1%) of the population agreed with the statement. In contrast, 11(8%) strongly agreed
with statement. The agreement level showed that, majority of respondents more than 52, disagreed
that the Bank does continuous customer satisfaction survey”. This shows that the bank not performs
continuous satisfaction survey and has not to keep on strengthening its survey on customer
satisfaction in a continuous and periodical manner.

In relation to the question, ‘There is an automated system to perform customer satisfaction survey.’
the majority of respondents 50(36.2) disagreed and whereas 30(21.7%) agreed with the statement.
Others 15 (10.9%) strongly disagreed, but 8(5.8%) strongly agreed with the statement. The rest of
the respondents which are 35(25.4%) remained neutral. As the majority 50(36.2%), of the
respondents disagreed with statement, it can be concluded that CBE has not to develop a suitable
IT system that enables it to perform customer satisfaction in an automated manner.

Concerning the statement, ‘products and services are designed based on customer needs”. The
majority 45(32.6%); disagreed, and 30(21.7%) of the respondents agreed and 35(25.5%) neutral
with
the statement. Only 8(5.8%) and 20(14.5%) of the respondents strongly agreed and strongly
disagreed with the statement. This implies that majority (32.6 %) of respondents replied that service
is not designed based on customers need. This can be considered as one of the weaknesses of the
company.

The above table, clearly shows that 30(21.7%) of the participants of this study have strongly
disagreed, 58(42%) disagree, 20 (14.5%) neutral and 20(14.5%) agreed and 10(7.3%) have strongly
agreed that “the Bank collects customer feedbacks on its product and service”. This indicates that
majority (42%) of respondents disagreed the bank conducts a periodical collection of customer
feedbacks on its product and service.

From the table above, it is also possible to observe that 28(20.3%) of the participants of this study
have strongly disagreed, 48(34.8%) disagree 40(29%) neutral and 15 (10.7%) agreed and 7 (5%)
have strongly agreed that, there is an automated system to collect customer’s feedback. As majority
disagreed (34.8%), it can be concluded that CBE has not to organize its IT system so as to collect
customer’s feedback on its product and service in an inefficient way.

With regard to the question about “The Bank performs customer need assessment on a periodic
base.” the summary of respondents showed that, 45(32.4%) of the respondents have disagreed,
22(15.9%) strongly disagreed 35(25.4%) neutral and 20(14.5%) agreed the rest 16 (11.6 %) have
strongly agreed that, the Bank performs customer need assessment on a periodic base. This implies
that majority (14.5 %) of respondents replied that the Bank performs customer need assessment on
a periodic base. This can be considered as a one of weakness the company.

With regard to the question about “The Bank work on continuously improving its internal process
to satisfy its customer need.” the summary of respondents showed that, the respondents have
12(8.7%) strongly disagreed,18(13%) disagreed, 25(18.1) neutral 52 (37.7 %) agreed and the rest
31(22.5%) have strongly agreed that, the Bank work on continuously improving its internal process
to satisfy its customer need. This implies that majority (37.7 %) of respondents replied that the
Bank work on continuously improving its internal process to satisfy its customer need.

According to the above table, regarding the level of agreement of the respondents to the statement
“There is a dedicate Bank unit that manage customers complaints” the summary of respondents
showed that, 8(5.8%) of the respondents have strongly disagreed, 12(8.7%) disagreed, 20(14.5%)
neutral 61 (44.2 %) agreed and the rest 37 (26.8 %) have agreed. We can infer that there is a dedicate
Bank unit that manage customers complaints this can also be considered as the other strength of
the company.

With regard to the question about “The Bank works strongly to improve its customer relationship”,

23(16.7%) of the respondents have strongly disagreed, 46(33.3%) disagree 32 (23.2%) neutral
and the rest

25(18.1%) agreed and 12(8.7%) have strongly agreed that, The Bank works partially to improve its
customer relationship. This implies that majority (60 %) of respondents replied that the Bank works
partially to improve its customer relationship.

According to table, regarding the level of agreement of the respondents to the statement “The Bank
need to have a customer relationship management system.” the summary of respondents showed
that, 1(0.7%) responds strongly disagreed 2(1.4%) disagreed, 5(3.6%) neutral, 40(29%) agreed and
90(65.2 %) have strongly agreed that, the Bank need to have a customer relationship management
system. This implies that majority (65.2 %) of respondents strongly believe on CRM as they replied
that the Bank need to have a customer relationship management system. This shows that majority
of the respondents believe that Bank customer relationship management process should be
digitalization.

Table 4.7: Responses on IT strategy

No. Strongly Disagree Neutral Agree Strongly

1 2 3 4 5
Disagre Agree
1 IT Applications integrate business 3e 5 15 78 37

processes and improve department

efficiency in your bank.
2 IT systems improve and enhance the 2 3 13 81 39

Decision-making capability in your

3 IT alignment with business strategy is
bank. 0 2 12 86 38

critical to success of your Bank

 4 IT leadership, such as the CIO (Chief 2 6 10 58 62

Information officer), is a key factor in

driving change, innovation and service
enhancements in your Bank.
5 Internet service in Your bank is fast 22 58 30 21 7

and easy to use.

6 Your bank collects customer 3 5 8 61 61

information using traditional methods

such as suggestion box, face to face
discussions and phones.
7 The Bank has readily available 18 32 12 48 28

information about its customers’ needs.

8 Decisions related to new product and 28 42 35 28 5

service are made based on result of

data analysis about the customer need

and preference
Source: Field survey, June-2024.

About their response on “IT Applications integrate business processes and improve department of
the respondents have strongly disagreed, efficiency in your bank, and the level of agreement of the
respondents showed that: 3(2.2%) strongly disagreed, 5 (3.6%) disagreed, 15(10.9%) neutral and
78(56.5%) agreed 37(26.8%) strongly agreed.

In relation to the question about “IT systems improve and enhance the Decision-making capability
in your bank.” the summary of respondents showed that, 2(1.4%) of the respondents have strongly
disagreed, 3(2.2%) of the respondents have disagreed, 13(9.4%) neutral and the rest 81 (58.7%)
agreed, 39(28.3%) have strongly agreed that, IT systems improve and enhance the Decision-
making capability in their bank. It can be concluded that IT systems improve and enhance the
Decision-making capability in their bank. The researcher also noted that since majority (98 %) of
respondents replied IT systems improve and enhance the decision-making capability in their bank,
it can be inferred that having the proper technology in place is a mandatory step in order to enhance
process efficiency. This is because decision making is the major building block in the Bank core
processes.
With regard to the question about “IT alignment with business strategy is critical to success of
your Bank”, the summary of respondents showed that, 2 (1.4%) of the respondents have disagreed,
12(8.7%) neutral and the rest 86(62.3%) have agreed and 38(27.5%) of the respondents have
strongly agreed that, IT alignment with business strategy is critical to success of your Bank.

The above table, clearly also shows that 2(1.4%) of the participants of this study have strongly
disagreed, 6(4.3%) of the respondent disagreed, 10 (7.2%) neutral and 58(42%) have agreed and
62 (44.9%) of the respondent strongly agreed that IT leadership, such as the CIO (Chief Information
officer), is a key factor in driving change, innovation and service enhancements in their Bank.

From the above table, it is also possible to observe that 20(15.9%) of the participants of this study
have strongly disagreed, 58 (42%) of the participants of this study have disagreed 30(21.7%)
neutral 21(15.2%) have agreed and 7(5.1%) of the respondent have strongly agreed that, Internet
service in their bank is

fast and easy to use. It can be concluded that most employees (57.9%) perceive that Internet service
in their bank is not fast and easy to use. The researcher also noted that this can be a potential area
the company needs to focus on improving Internet service as there are above 57.9% employees
who disagree Internet service in their bank is fast and easy to use.

The above table, clearly also shows that 3(2.2%) of the participants of this study have strongly
disagreed, 5(3.5%) of the respondent disagreed 8(5.8%) neutral 61(44.2%) have agreed and
strongly agreed, that their bank collects customer information using traditional methods such as
suggestion box, face to face discussions and phones b. This indicates that, majority of employees
agree that the company does not use automated/computerized system to collect customer
information. As this is in line with the above responses, and similarly majority agreed (88.4%), their
bank collects customer information using traditional methods, it can be concluded that CBE has to
organize its data base management system by automating its system so as to collect, analyses and
use customer’s information’s/ feedback to better manage its customer relationship.

According to the table above, regarding the level of agreement of the respondents to the statement
“The Bank has readily available information about its customers need” the summary of respondents
showed that, 18(12%) responds strongly disagreed, 32(23.2%) respondents disagreed 12(8.7%)
neutral 48(34.8%) agreed and the rest 28(20.3%) strongly agreed that , the Bank has readily
available information about its customers need. This implies that there are other more than 35.2%
disagreed the Bank has readily available information about its customers need. Therefore, the bank
needs to make further assessment on its customers need.

The above table, clearly also shows that 28(20.3%) of the participants of this study have strongly
disagreed,

42(34.8%) of the respondents disagreed 35(25.4%) neutral 28(20.3%) have agreed and 5(3.6%) of
participants strongly agreed that,” Decisions related to new product and service are partially made
based on result of data analysis about the customer need and preference”. This indicates that,
majority of employees disagree that the company make decisions related to new product and service
based on result of data analysis about the customer need and preference (55.1%). This can be
considered as one of the weaknesses of the company and improve on it.

Table 4.8: Responses on level of Technology Adoption

No. Strongl Disagre Neutral Agre Strongl

y e e y

1 2 3 4 5

1 The Bank pays much attention to The Disagre 35

15 18 46 Agree
24
e
customers’ needs & uses of technology to
improve customer satisfaction

2 The Bank tries to build the trust of 12 21 12 62 31

customers with respect to the services

render using 24hrs customer care

3 The Bank provide accurate 21 51 18 30 18

information to customers using

technologies.
4 Some departments in the Bank didn`t 30 45 21 35 7

adopt the use of information technology

5 The Bank disseminates information to 46 62 25 5 0

customers through e-mail to reduce

customer waiting time.
6 The Bank staffs give much attention 28 68 24 16 2

and prompts services to all customers

respective of their status using online media

7 Major transactions can be effective 23 48 23 32 12

online without physical contact with the

customer e.g., transfers, direct debit, etc. for
customer convenience.
8 The Bank, inform customers of any 3 12 15 88 20

transaction on their account within five

minute using text messages.

minutes using text messages (SMS

alert)
9 The cost of use of IT usually 1 5 10 50 72

outweighs its benefit in your organization.

10 Information technology has enhanced 2 3 8 80 45

service delivery in the Bank.

Source: Field survey, June-2021.

The level of agreement of the respondents to the statement “The Bank pays much attention to the
customers’ needs & uses of technology to improve customer satisfaction” is 15(10.9%) strongly
disagreed, 35 (25.4%) disagreed 18(13%) neutral 46 (33%) agreed and 24(17.4%) strongly agreed.
The agreement level of respondents has justified and showed that majority more than 50.4 % have
agreed that their Bank pays much attention to the customers’ needs & uses of technology to
improve customer satisfaction. This can be considered as the other strength of the company.

Regarding the question” The Bank tries to build the trust of customers with respect to the services
render using 24hrs customer care, 12(8.7%) of the respondents have strongly disagreed, 21 (15.2%)
disagreed 12(8.7%) neutral 62(44.9%) have agreed and 31(21.7%) strongly agreed that the Bank
tries to build the trust of customers with respect to the services render using 24hrs customer care.
This implies majority (66.6%) agreed that the company tries to build the trust of customers. This
can also be considered as the other strength of the company.

Regarding ,”The Some departments in the Bank didn`t adopt the use of information technology”
30 (21.7%) of the respondents have strongly disagreed, 45 (32.6%) disagreed 21(15.2%) neutral
35(25.4%) have agreed 7(5.1%) strongly agreed that some departments in the Bank didn`t adopt
the use of information technology .As majority(54.3%) responded disagreed so, that some
departments in the Bank didn`t adopt the use of information technology , it is recommended to
the company to adopt the use of information technology to all departments .

Regarding the question, “the Bank disseminates information to our customers through e-mail to
reduce customer waiting time” 46 (33.3%) of the respondents have strongly disagreed, 67 (44.9%)
disagreed 25(18.1%) neutral 5 (3.6%) have agreed that, the Bank disseminates information to our
customers through e-mail to reduce customer waiting time. Since the majority (78.2%) disagreed
that the Bank disseminates information to our customers through e-mail to reduce customer waiting
time, it is recommended to the company to device a mechanism or a provision disseminates
information to our customers through e-mail.

The above table, clearly shows that 96 (69.6%) of the participants of this study disagreed 24 (17.4%)
neutral and 21(13%) agreed that the Bank staff gives much attention and prompts services to all
customers respective of their status using online media. This indicates that the majority

disagreed and strongly disagreed with the statement ‘The Bank staff gives much attention and
prompts services to all customers respective of their status using online media. Though this can be
considered as the weakness of the organization, there are still a poor number 18(13%) of
respondents that agree with statement. Hence, this can be a potential area for improvement for the
company.

The above Table, clearly shows that 71(51.5%) of the participants of this study have disagreed, 23
(16.7%) neutral and 44(31.9%) have agreed. This indicates that more than 51.5 % disagreed that
Major transactions can be effective online without physical contact with the customer e.g., transfers,
direct debit, etc this can also be considered as the weakness in the organization. There are 31.9%,
respondents that agreed, but still have limitation, thus this can a potential for improvement area for
the company. From the table above, it clearly also shows that 15(10.9%) of the participants of this
study have
disagreed, 15 (10.9%) neutral and 108(78.3%) have agreed that, the Bank inform customers of any
transaction on their account within five minute using text messages. This indicates that, majority

78.3 % of employees agree that the Bank inform customers of any transaction on their account
within five minute using text messages.

The above table, also clearly shows that 6 (4.3%) of the participants of this study have disagreed,

10(7.3%) neutral and 122 (88.4%) have agreed that, the cost of use of IT usually outweighs its benefit
in your organization. This indicates that, majority (88.4%) of employees perceives that the cost of
use of IT usually outweighs its benefit in your organization. The company has to make cost benefit
analysis and utilize the most of its IT investment so as to correct such types of employee’s
perception. The Table above, clearly also shows that 5(3.6%) of the participants of this study have
disagreed,

8(5.8%) neutral and 124(90.6%) have agreed that Information technology has enhanced service
delivery in the bank. This indicates that more than 90 % agreed that Information technology has
enhanced service delivery in the bank.

Table 4.9: Responses on Bank Strategy

No. Strongl Disagre Neutral Agre Strongl

y e e y

1 2 3 4 5

1 Is strategy relevant to achieve the 1Disagre 3 14 59 Agree

61
e
goals of organization as well as is it
helpful for organizing business processes

2 Do you agree that you have enough 12 28 2 58 38

information about the Bank strategy

3 Do you agree that you understand very 28 42 25 32 11

well, the Bank strategy

4 Do you agree that your department 21 35 23 43 17

activity is properly aligned with the

Source:BField survey,
Source: FieldJune-2024.
survey, June-2024.

ank strategy
About the respondent’s opinion on the statement, “strategy is relevant to achieve the goals of
organization as well as, it is it helpful for organizing business processes showed that: 4(2.9%) of the
responded disagreed, 14(10.1%) neutral, 120 (86.9%) agreed. The agreement level showed that,
majority of respondents more than 86% understand and agree bank strategy is relevant to achieve the
goals of organization as well as it is it helpful for organizing business processes.

In relation to the question about “you agree that you have enough information about the Bank
strategy” the summary of respondents shoed that, 40 (29%) of the respondents have disagreed, 2
(1.4%) neutral and the 96 (69.5%) have agreed that, employees have enough information about the
Bank strategy. Since majority of respondents more than 69% agreed that employees have enough
information about the Bank strategy. Therefore, the researcher has concluded that employees have
better understanding and knowledge about bank strategy.

With regard to the question about “you agree that you understand very well the Bank strategy” the
summary of respondents showed that, 70(50.7%) of the respondents have disagreed, 25 (18.1%)
neutral and the 8043 (31%) have agreed that, agree that they understand poor about the Bank
strategy This can be considered as the weakness of the organization.

From the above table, it is also possible to observe that 32 (23%) of the participants of this study
have disagreed, 23(16.7%) neutral and 60(43.5%) have agreed that, their department activity is
properly aligned with the Bank strategy. This indicates that les employees agreed that (43.5%) that
their department activity is partially aligned with the Bank strategy.

Table 4.10: factors used to measure Bank’s departmental activity

No. Strongly Disagree Neutral Agree Strongly

1 2 3 4 5
Disagree Agree
1 Staff activity 1 5 8 78 46

2 Leadership and management 6 15 12 65 40

3 Information technology use 0 2 10 85 41

 4 Work Culture 0 3 15 86 34

5 Performance measurement 0 0 7 89 42

6 Communication 4 38 26 58 12

Source: Field survey, June-2024.

Regarding the question, “Each department staff engagement level”, the majority 78(56.5%) of the
respondents and 46(33.3) of them agreed and strongly agreed with statement. Only 3(2.1%) of the
respondents disagreed and 8(5.8%) remained neutral. Since the majority agreed and strongly agreed
with the statement, this can be considered as the strength of the company

The above table, regarding the question, “about team work, it clearly shows that 21(15%) of the
participants of this study have disagreed, 15(10.7%) neutral and 105(76.1%) have agreed. Since all
of them more than (76%) agreed, this implies that there is a good team building culture in the Bank.

From Table, regarding the question about, “information technology use, it clearly shows that 2
(1.4%) of the participants of this study have disagreed, 10 (10.2%) neutral and 126(91.3%) have
agreed. Since the majority (91%) agreed and there is a better usage level of information technology.
This can also be considered as strength of the company.

Regarding the question, “work culture” 3(3.3%) of the respondents have disagreed, 15 (10.7%)
neutral and 120(86.9%) have agreed. Since the majority more than (86%) agreed and this implies
that there is a good working culture. This is also the other strength of the company.

The above table regarding the question, “performance measurement, it clearly shows that none of
(0%) of the participants of this study have disagreed, 7(5.1%) neutral and 89(64.5%) have agreed.
42 (30.4%) strongly agreed. This implies that the departments’ performance management process
is good. This can also be considered as strength of the company.

This table portrays about, “communication” in the bank system. As clearly shown in the table, the
majority 58(42%) and 12(8.7%) of the respondents agreed and strongly agreed with the existence
of good communication. This can also be considered as strength of the company’s communication
system.
4.7. Results Analysis

This chapter exhibits an extensive data analysis and the results of the statistical test. Data Analysis
is done using Pearson correlation analysis and reliability analysis by using statistical software SPSS
version 24. This chapter focuses on the results and discussion, based on the tables generated by
SPSS.

4.8. Measurement Assessment of Correlation Analysis

The correlation analysis has been done using statistical software SPSS. The results are discussed
below. This section discusses the outputs of the measurement assessment of correlation.

In order to answer the general and specific objective of this study” that is, to investigate and analyze
the significance of digitalization in the Ethiopian Banking sector on customer’s relationship
management, Pearson correlation is conducted.

Though there are many types of factors/variables that could affect customer’s relationship
management, it is necessary to know which factor affects CRM more. Therefore, from the
researcher’s specific and general objectives, the following factors were identified: IT strategy,
Technology adoption, Bank Strategy and Departmental activity. So as to identify the major
factors/variables that could affect CRM, correlation analysis was conducted. According to Cohen
(2003), correlation values are interpreted as:

0 – 0.20 - very weak r/ship

0.21 - 0.4- week r/ship

0.41-.60 moderate r/ship

0.61-.80 strong r/ship

0.81-1 very strong r/ship

Table 4.4.2 1 shows that, departmental activities [r= 0.736, p< 0.05(0.00)] exhibited the major
effect that is higher in correlation value than any of the other variables. The Pearson’s coefficient
correlation value is 0.735, exhibited the strong effect on CRM and it has a higher significance since.
p- value = 0.000 that is below the expected value (P<0.05). In second place next to

departmental activities, Bank Strategy [r= 0.662, p<0.05(0.000)] exhibited the moderate effect on
Bank`s CRM. Next to Bank strategy, IT activities have a better significant relationship with CRM
[r= 0.633, p<0.05(0.001)] had a significant and moderate correlation with the Bank`s CRM. Though
technology Adoption has a significant relationship with CRM [r= 0.526, p<0.05(0.008)]. Thus,
from major independent variables that affect CRM in the Bank, IT strategy [r= 0.736, p<

0.05(0.00)] has the major effect that is higher in correlation value than any of the other variables.
 Table 4.11: result of correlation
Correlations
Technology Bank Departmental
CRM IT strategies adoption strategies Activities
Pearson Correlation CRM 1.000 .633 .526 .662 .736
IT strategies .633 1.000 .611 .749 .753
Technology adoption .526 .611 1.000 .664 .727
Bank strategies .662 .749 .664 1.000 .884
Departmental .736 .753 .727 .884 1.000
activities
Sig. (1-tailed) CRM . .000 .000 .000 .000
IT strategies .000 . .000 .000 .000
Technology adoption .000 .000 . .000 .000
Bank strategies .000 .000 .000 . .000
Departmental .000 .000 .000 .000 .
activities
CRM 138 138 138 138 138
IT strategies 138 138 138 138 138
Technology adoption 138 138 138 138 138
Bank strategies 138 138 138 138 138
Departmental 138 138 138 138 138
activities

4.8. Multiple Regression Analysis

Multiple regression analysis was conducted with the aim of classifying the relationship of the customer relationship
management its strategies, departmental activities, bank strategies handling, and technology adoption. The four
components extracted through factor analysis were used as independent variables whereas customer relationship
management was used as dependent variables, respectively. The necessary conditions required for the regression
analysis along with the outcome of the analysis is discussed in this section.

Requirements for Regression Analysis

The two most significant conditions to be fulfilled before conducting regression analysis are the adequacy of the
sample size and non –existence of correlation among the independent variables.
The size of the sample has a direct effect on the statistical power of the significance testing in multiple regressions,
which refers to the probability of detecting statistically significant R-square or a regression coefficient at a specified
significance level (Ho, 2006). Ho (2006) also suggested the sample size (the number of cases) to be at least 20 times
more than the number of independent variables, as a rule of thumb, in order to get the desired level of statistical
power. Given this rule of thumb, the number of cases used for this study (280 respondents) is well over the necessary
criteria.
The other important condition for regression analysis is that there should not be interrelationship between the
independent variables. The condition in which the independent/predictor variables are highly correlated is
known as Multicollinearity. When independent variables are multicollinear, there is “overlap” or sharing of
predictive power, which may lead to a situation where the regression model fits the data well, but none of the
predictor variables has a significant effect in predicting the dependent variable (Ho, 2006).
According to HO (2006), the existence of multicollinearity can be checked using the “Tolerance” and “Variance
Inflation Factor (VIF)” values for each predictor. The tolerance value is an indication of the percentage of
variance in one predictor that cannot be accounted for by the other predictors. The value of tolerance should be
above 0.10 and any value lower than this indicates the existence of multicollinearity. On the other hand, VIF is
computed as “1/tolerance,” and a VIF
value greater than 10 indicates the existence of multicollinearity (Saunders, Lewis, &Thornhill,
2009).
For this particular study, multicollinearity is not expected to be a problem since the independent variables used
are the components extracted from factor analysis and no correlation exist among the components extracted
through such analysis.
II. Results of the Regression Analysis
Two regression analyses were conducted to examine the effect of the independent variables (it strategies,
departmental activities, bank strategies handling, and technology adoption) on the dependent variable of
"customer relationship management ".
a) Effect of independent variables on customer relationship management
In regression analysis, the first thing to confirm is the strength of the relationship, which is measured by R
square and also known as coefficient of determination. The coefficient of determination measures the
proportion of the variation in a dependent variable that can be explained statistically by the independent
variables and it takes on any value between 0 and 1.
 Table 4.13: Model Summary and ANOVA - customer relationship
management

Model Summaryb
Change Statistics
Adjusted R Std. Error of R Square
Model R R Square Square the Estimate Change F Change df1 df2
a
1 .746 .557 .543 .29392 .557 40.197 4 128
a. Predictors: (Constant), departmental activities, technology adoption, IT
strategies, bank strategies.
b. Dependent Variable: CRM

ANOVAa
Sum of Mean
Model Squares df Square F Sig.
1 Regression 13.890 4 3.473 40.197 .000b
Residual 11.058 128 .086
Total 24.948 132
Source: Survey Result (June, 2024)

a. Dependent Variable: CRM

b. Predictors: (Constant), departmental activities, technology adoption, IT
strategies, bank strategies.
The R-square value of the model is given by 0.746and the adjusted R square is 0.557, which implies
that about 50% of the variation in the dependent variable is explained by the independent variables.
Analysis of Variance (ANOVA) is used to test the hypothesis of no linear relationship between the
independent and dependent variables (i.e. R-square = 0). As can see from the above table, the F
value, which serves to test how well the regression model fits the data, is given by

40.197with significance level of 0.000. Since the observed significant is less than 0.05, the
hypothesis that there is no linear relationship between the independent and dependent variables is
rejected.

The coefficients of the regression equation is presented in the following table, which demonstrates
that all the independent variables (it strategies, departmental activities, bank strategies handling,
and technology adoption) have positive relationship with the dependent variable (customer
relationship management).
 Table 4.14: Coefficient of relationship customer relationship management

Coefficients
Unstandardi
zed Standardized Collinearity
Coefficients Coefficients Statistics
Model B Beta Sig. Tolerance VIF
1 (Constant) .556 .000
IT strategies .160 .169 .025 .196 5.096
Tec adoption .058 .062 .305 .305 3.281
Bank strat .122 .154 .053 .176 5.679
Bank dep .538 .584 .000 .149 6.696
Source: Survey Result (June, 2020)
a. Dependent Variable: CRM
The prediction equation for “customer relationship management” is given as;

Y1 = 0.16X1 + 0.058X2 + 0.122X3 + 0.538X4 + 0.556

The prediction equation for “customer relationship management” is given as;

Y1 = 0.16X1 + 0.058X2 + 0.122X3 + 0.538X4 + 0.556

All the celebrity effectiveness measures have positive effect on consumers' attitude towards the
endorsed brands, among which departmental activities has the highest effect with coefficient
0.538, followed by, it strategies (0.16), bank strategies handling (0.122) and technology adoption
(0.058). The t-tests were used to test the significance of the coefficient of each independent variable.
The t-values of the variable are given by departmental activities (0.149), it strategies (0.196), bank
strategies handling (0.176), and technology adoption match (0.305), with significance level of 0.00,
0.025, 0.05 and .305 respectively which is less than 0.05. This implies that the regression
coefficients of the independent variables are statistically significant.
 CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

5. INTRODUCTION

This chapter presents the discussion of results; draw backs conclusions according to the findings
on each of the objective and gives recommendations as per research objective.

5.2 The Major Gaps Identified in The Current Customer Relationship Management

Process of The Bank.

According to Table 4.3-1 more than 51% disagreed that on the availability of an automated system
to perform customer satisfaction survey. This is one of the gaps identified in the research from the
literature review it has been found out that having a satisfied customer is the main building block
of any profitable business. The bank needs to ensure having satisfied customers at hand and to know
the status of customers feeling performing periodic survey is mandatory. And when having an
automated system in place such survey will be conducted efficiently. On the same the researcher
agreed that the Bank need to have a customer relationship management system but the data not that.
This shows that there is a gap of digitalizing the current customer relationship handling process.
The literature review points out the importance of CMR system since it provides the option for
organizations creating value through collaborative effort of internal processes, functions and
external networks (Laketa et al, 2015).

On table 4.7 The majority respondents agreed that some department in the Bank didn’t adopt the
use of information technology. This is another gap identified information technology is the basic
building blocked for digitalization. In the literature review it has been found out that the information
technology accelerates business activities, processes and competencies.
 5.2. Conclusions

Customer of the day are becoming more demanding for different relationship than ever before, as
a result managing such relationship is a central aspect of fulfilling any business goal. CRM is an
integration of technology and business process used by firms to manage relationships with
customers. Digital technologies play an important role in firm’s customer relationship management
process. This is, because it is through this technology that firm achieves appropriate understanding
of customer need and competes with exceeded expectation. The finding of the study revealed that
digitalization has a higher correlation with customer relationship management.

Beside this it can be concluded that the case bank employee agreed on the significance value of
digitalization for a better management of customer relationships. From the result it can be inferred
that information technologies improve operational efficiency. Additionally, it can be concluded
that the lack of the necessary digital technology in the Bank customer relationship management
process has created a lot of difficulties for the work of different Department.

On the other hand, from the study, it can be inferred that there are many benefits of using IT systems
one of which is improving decision making capabilities. Beside this it can be concluded that
digitalization will make it possible for the case Bank provide main service such as performing
major transaction and providing timely information to its customers. This is achieved with the use
of digital channels such as ATM and mobile banking. This digital means enable the Bank provide
service accessibility at anytime and anywhere. More over using the digital means the case Bank
were able to provide instant alert to its customers about any transaction on their accounts.

Furthermore, the study results draw a conclusion that digitalization assist the case Bank for a better
management of customers relationship. It has been evidenced that digital technologies assist the
case Bank achieve service delivery to the expect customer level. Also, it can be inferred that the
bank believes digitalization assist its customer relationship management process and its investing
a lot in these digital technologies. Building successful relationship requires use of the customer
information and builds the relationship on the level that the customer wants. This can be achieved
only when there is the right technology in place that acquire, analyze and present information about
each customer in a singular view throughout the company. Quality service delivery is the main
differentiator when it comes to service giving companies such as Bank.
5.3. Recommendations

The case Bank thus has to reevaluate its internal process and has to incorporate the necessary digital
technologies. The study reveals that the case Bank need to have a CRM system; this indeed help the
Bank achieve competition strategies by providing quality service. The study also discovered the
case Bank doesn’t have an automated system in place in order to gather customer feedback and
perform customer satisfaction survey. The current method used by the case Bank is a time taking
process and it will not be easy to properly utilize the gained information. At the first place
performing such surveys using paper is a time taking process. It takes a longer time for the Bank
to act upon the collected information. This again will result in taking longer time to stratify
customer expectations. Customer will not wait for a longer period since there are many options
around. Such operations are the main source of customer dissatisfaction and make it difficult for
the case Bank retains its customers. The researcher recommends that the Bank should have to
deploy the right technology to enhance its customer relationship management process. Beside this
it has been found out that there are still some departments those who didn’t adopt the use of
information technology. This creates a challenge on the day-to-day activity that are critical for
customer service delivery. Therefore, the Bank should increase technology adoption level between
its departments. And the bank should build its capacity further by acquiring up-to-date e-payment
technologies and conducting sufficient staff training in order to have well trained manpower in
dealing with e-payment services. This maximizes the staff’s technical know-how, managerial and
executive skills that helps to enroll more customers which will in turn leads to build customers
confidence in the usage, availability of customer support and simplify the handling of e-payment
service encountered problems. On the other hand, it has been seen the bank has different area of
strength which result from use of technology such as

Developing product and service based on customer need

Continuously working on improving its internal process

Responding customer request timely

Bank tries to build the trust of customers with respect to the services render using
24hrs customer care

Are some of the areas which the Bank should keep up on its good strength and work towards better
improvement?
5.3.1. Limitation of the Study

There is limitation with look upon to sampling technique used. As the convenience sampling was
used, bias may exist. The study is conducted at single point in time. In order to have more reliable
responses from employees regarding IT strategies, technology adoption, bank strategies,
departmental activities so with regard to determine CRM series data would better. Additionally, the
study focused only on CRM of banking industry, consequently the result of the study is limited to
the industry and it may not apply for others sector.

5.3.2. Future Research

For digital technologies to be successful in any organization, it needs to be part of every step of
the organization. It needs to have the right balance between the technology in use and the people
who are using it. Having these technologies without the proper strategies and the right skill human
resource bring no result for any company. The lack of proper alignment between the Bank
information technology and factors that are not part of the scope of this study resulted in
disintegration of work. Mostly likely these factors are related to digital capabilities and capacity,
IT structure and resource. For future research it would be good to include IT factors and its
relationship on digital technology implementation. Furthermore the study limited to assessing the
significance on digitalization on customer relationship management in the Banking sector it would
be good the same has been made in other service providing sectors.
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 Appendix I: Questionnaire

Dear respondent,

I would like to express my deep appreciation for your generous time, honest and prompt
responses.

The purpose of this survey is to investigate the significance of digitalization on customer

relationship management in the Ethiopian Banking industry focusing on Commercial Bank
of Ethiopia. The information that you offer me with this questionnaire used as a primary data
in my case study which I am conducting as a partial fulfillment of the requirements for the
degree of Masters of project management (MPM) at select college. The finding of this
research will help the case Bank and players in the Ethiopian Banking industry to deeply
understand the importance of digitalization and shape the way strategy is formulated
incorporating its value. Please note that there is no need to write your name on the
questionnaire.

If you have any request on this questionnaire, please feel free to call me at my mobile
0910577065.
Section One: General Information

Please enter letter (X) for your choice

1. What is your age?

A) 20 – 25 B) 26 – 35 C) 36 – 45 D) above 45

2. Sex: A) Male B) Female

3. Educational level:
Diploma holder

First degree holder

Master’s degree

Above Masters
4. What is your position in the Bank?
Top management
Middle management
Lower management

5. How long have you worked in the bank?

A) 1 – 3 Years B) 3 – 6 Years C) 6 – 9 Years

D) above 9 years
Section Two: Questions related to digitalization and customer relationship
management

Instruction: Below are lists of statements concerning the significance of digitalization on

Customer relationship management. Please indicate whether you agree or disagree with
each statement by enter letter (X) on the spaces that specify your choice from the options
that range from “strongly agree” to "strongly disagree”. Each choice was identified by
numbers ranged from 1to 5.

No Item Strongly Disagree Neutral Agree Strongly

Disagree Agree

1 2 3 4 5

Questions related to CRM (Customer Relationship management)

1 The Bank does continuous customer

satisfaction survey

2 There is an automated system to

perform customer satisfaction survey

3 Products and service are designed

based on customers need

4 The Bank collects customer feedbacks

on its product and service.

5 There is an automated system to

collect customer’s feedback.

6 The Bank performs customer need

assessment on a periodic base.

7 The Bank work on continuously

improving its internal process to
satisfy its customer need.
8 There is a dedicate Bank unit that
manage customers complaints.

9 All customer complaints responded

timely.

10 The Bank work strongly to improve

its customer relationships.

11 The Bank need to have a customer

relationship management system.

Question focusing on IT strategy

1 IT Applications integrate business

processes and improve department
efficiency in your bank.

2 IT systems improve and enhance the

Decision-making capability in your

bank.

3 IT alignment with business strategy is

critical to success of your Bank

4 IT leadership, such as the CIO (Chief

Information officer), is a key factor in
driving change, innovation and
service enhancements in your Bank.

5 Internet service in Your bank is fast

and easy to use.

8 Your bank collects customer

information using traditional methods
such as suggestion box, face to face
discussions and phones.

8 The Bank has readily available

information about its customers need
9 Decisions related to new product and
service are made based on result of
data analysis about the customer need
and preference

Question focusing on level of Technology Adoption

1 The Bank pays much attention to The

customers’ needs & uses of
technology to improve customer
satisfaction

2 The Bank tries to build the trust of

customers with respect to the services
render using 24hrs customer care

3 The Bank provide accurate

information to customers using
technologies.

4 Some departments in the Bank didn`t

adopt the use of information
technology

5 The Bank disseminates information to

our customers through e-mail to
reduce customer waiting time.

6 The Bank staffs gives much attention

and prompts services to all customers
irrespective of their status using online
media

7 Major transactions can be effected

online without physical contact with
the customer e.g., transfers, direct
debit, etc for customer convenience.

8 The Bank, inform customers of any

transaction on their account within
five minute using text messages.
 minutes using text messages (SMS
alert)

9 The cost of use of IT usually

outweighs its benefit in your
organization.

10 Information technology has enhanced

service delivery in the Bank.

Question focusing on Bank Strategy

1 Is strategy relevant to achieve the

goals of organization as well as is it
helpful for organizing business
processes

2 Do you agree that you have enough

information about the Bank strategy

3 Do you agree that you understand

very well the Bank strategy

4 Do you agree that your department

activity is properly aligned with the
Bank strategy

The following factors are used to measure Bank’s departmental activity

1 Staff activity

2 Leadership and management

3 Information technology use

4 Work Culture

5 Performance measurement

6 Communication