The Impact Of Customer Relationship Marketing On Customer Retention

Project and Seminar Material for Marketing

The Impact Of Customer Relationship Marketing On Customer Retention


Abstract


The subject of Customer Relationship marketing, Customer Satisfaction and Customer Retention has become a global issue. The study sought to examine the effect of customer relationship marketing on customer retention, with customer satisfaction playing the mediation role. Questionnaire was the main data collection tool used to gather data from 450 customers of the fifteen Non-life selected Financial organisation in Asaba delta state. The estimation tool used to test the study hypothesis was Structural Equation Model and STATA 12.0 software was used for analyses. Findings revealed that customer relationship marketing has a significant positive effect on customer retention. Also, there is a positive and significant correlation between customer satisfaction and customer retention. This shows that the more satisfied customers are the more likely they will stay or stick to a particular policy. Thus, the study result declares that, partial mediation is achieved. The study concluded that both customer relationship marketing and customer satisfaction are antecedents to customer retention. Customer relationship marketing is also a significant driver of customer satisfaction in the Banking Industry. The study recommended that, the Bank practitioners should invest resources and capacity to intensify the management of customer relationships as this has been shown to impact on profitability. The researcher recommends there should be a further study on the effects of CRM on Customer retention in the life sector of the Banking Industry. Another research can be conducted to assess the impact of CRM practices in the Banking Industry in Nigeria.


Chapter One


Introduction

Background of the Study

Several organizations including Financial companies spend a significant part of their time, energy and resources chasing new business. Even though it is important to replace lost business, grow the business and expand into new markets, one of the primary goals is to keep existing customers and enhance customer relationships (Weinstein, 2002). Thus, the cost of acquiring new customers can be up to 10 times the cost of retaining existing ones, and even a small increase in retention rates can add thousands of cedis to premium revenue.

Experience shows that a customer holding two policies with the same company is much more likely to renew than a customer holding a single policy and – it is impossible to determine which types of customers are profitable and should try to retain. Although finding new customer is very important, the emphasis is shifting towards retaining profitable customers and building lasting relationship with them. Companies have also discovered that losing a customer means losing not just a single sale but also a life time‟s worth of purchase and referrals. In effect, the double goal of marketing is to attract new customers by promising superior value and retain current customers by delivering satisfaction (Kotler & Armstrong, 2011).

Most Bank product developments are easy to increase and when Financial organisation provide nearly similar services, they can only distinguish themselves based on effective customer relationship marketing (CRM) and customer satisfaction practice. Customer retention is the central concern for CRM. Customer satisfaction, which refers to the comparison of customers‟ expectations with his or her perception of being satisfied, is the essential condition for retaining customers (Kracklauer et al., 2004). Therefore, customer retention is an effective and importance tool that Financial organisation can use to gain a strategic advantage and survive in today‟s ever increasing Bank competitive environment.

CRM represents an activity to developed full-knowledge about customer behavior and preferences in order to initiate programs and strategies that encourages customers to continually enhance their business relationship with the company (Parvatiyar A & J. N. Sheth, 2001). The strategies of customer relationship marketing are anticipated to curtail occurrence of service failures that motivate customer to switch in the Banking Industry (Crosby et al., 1990; Jones & Farquhar, 2003; Best, 2002; Mithas et al., 2005; Uppal, 2008 and Sharma et al., 2011). Furthermore Verhoef (2003), study demonstrates that, CRM positively affect customer retention. Verhoef & Donkers (2001), confirm that CRM allows Financial organisation to employ strategies with the help of customer databases in administrating personal customer relationships effectively towards retention. Customer relationship marketing has typically been viewed as an important determinant affecting customer retention. The connection between customer relationship marketing and customer retention is worth studying in the competitive Nigeriaian Bank market.


Statement of Problem

There is keen competition among first bank geographical area of this study as a result of environmental changes [especially, technological changes and the first bank induced consolidation]. The bank are in strong contention to outwit one another in the market place. In this business warfare, most of the banks. Claimed to have adopted and deployed various strategies to have competition advantage one of such strategy is customer relationship marketing and customer retention.

Very little attention have unit recent time been paid to the concept of C∙R∙M in the banking industry in Nigeria this may be due to fact the concept is gradually trickling towards this parts of the globe and especially the banking industry therefore, importance question such as how does empathy parctised in the banking sector in Nigeria? How does bonding impact customer retention? How does trust lead to customer relationship? Or how does promise result to competitive advantage. These unanswered question have left a huge gap in interative concerning customer relationship marketing in the banking sector.

In practical sense, the study see a problem in relation to how customer are served in the banking sector. Does guarantee trust bank adequately relate with its customers in order to increase market share? What extral effort does the bank make to retain its customer? This study is undertaken to verify whether C∙R∙M strategy increase customer relation of bank in the banking industry within the area of the study.


Research Objectives

The main aim of the study is to explore the effect of customer relationship marketing on customer retention on the Banking Industry in Nigeria with customer satisfaction playing the mediating role. The specific objectives would be as follows:

  1. To examine the relationship between customer relationship marketing and customer retention in the Banking Industry in Nigeria
  2. To examine the relationship between customer satisfaction and customer retention in the Banking Industry in Nigeria
  3. To examine the mediating role of customer satisfaction in the relationship between customer relationship marketing and customer retention in the Banking Industry in Nigeria.

Research Questions

Based on the objectives set above, the study seeks to answer the following questions:

  1. What are the relationship between customer relationship marketing and customer retention in the Banking Industry in Nigeria?
  2. What are the relationship between customer satisfaction and customer retention in the Banking Industry in Nigeria?
  3. What is the mediating role of customer satisfaction in the relationship between customer relationship marketing and customer retention in the Banking Industry in Nigeria?

Significance of the Study

The benefit to study a sound C∙R∙M in the banking industry of developing countries like Nigeria cannot be over. Emphasize C∙R∙M has been seen to be the most importance competitive weapon to boost market retention of organization. This study is aimed at adding to the existing body of knowledge in the area of C∙R∙M, and also aid fellow student and researcher, teacher and principal persons in the area of marketing in future research work also this research work would improve the knowledge of the managers, supervisors as well as the respondent as it has potential of widerning their horizon in modern business operation for profitability and continuity.

  • To general public, this research work would restore credibility and confidence in banking activities and in banking with banks.
  • To company′s management, it will assist them in their formulation and implementation of strategies aimed at satisfying customer.

Scope of the Study

This study is carried out within Asaba metropolis this is where the organization selected for the study is situated. The study forcus on the banking industry in general and guarantee trust bank (GTB) in particular. The sampling object or population element used in the study are employees, manager, customer and other stakeholder these categories are able to identify and ascertain the impact of customer relationship on customer retention the adoption indicators in the study include trust, empathy, promise fulfillment and bonding others ones can be used in other studies but these would make for easy measurement of customer retention.


Chapter Five


Summary of Findings, Conclusions and Recommendations

Introduction

This chapter presents the summary of key findings, conclusions and recommendations to improve practice in the Banking Industry in Nigeria.


Summary of Key Findings

This section summarizes the key findings of the study. The key findings are presented according to the research objectives. The purpose of this study was to examine the effects of customer relationship marketing and customer satisfaction on customer retention in the Banking Industry in Nigeria. To achieve this purpose, three research objectives were formulated. They include: (1) to estimate the relationship between customer relationship marketing on customer retention in the Banking Industry; (2) to investigate the relationship between customer satisfactions on customer retention in the Banking Industry; and lastly, (3) to ascertain the mediating effect of customer satisfaction on the customer relationship marketing versus customer retention. Data was collected from a sample of 450 customers from 15 Bank was selected in Nigeria. The structural equation model was used to analyze the data.

The Relationship between Customer Relationship marketing and Customer Retention
It was realized customer relationship marketing has a significant positive effect on customer retention. This suggests that a potential remedy for the Bank to reduce customer turnover or switching tendencies in the sector is through setting up a strong customer relationship marketing in the company. The descriptive analysis demonstrated that the levels of customer relationship marketing and customer retention on their own were moderate and requires further improvement.

The relationship between customer satisfactions on customer retention

At the end of the study, it was evident that there is a positive and significant correlation between customer satisfaction and customer retention. This shows that the more satisfied customers are the more likely they will stay or stick to a particular policy. Descriptive summary however illustrated that the level of customer satisfaction was moderate. The need for the Bank to be more customer-oriented or focused is shown by the evidence produced.

The indirect effect of customer relationship marketing on customer retention through customer satisfaction
It was observed that apart from the direct effect of customer relationship marketing on customer retention, there is an indirect relationship between customer relationship marketing and customer retention through customer satisfaction. Thus it was observed that customer satisfaction plays a mediating role in the relationship between customer relationship marketing and customer retention. The reasons for this assertion are that the evidence shows that CRM was positively and significantly related to customer satisfaction which in turn had a strong positive impact on customer retention. Further, CRM on its own had a positive impact on customer retention. This reveals that customer relationship marketing has two paths to influencing customer retention; either on its own path or through customer satisfaction. According to literature, this shows that customer satisfaction is mediating the relationship between customer relationship marketing and customer retention. However, since CRM has two paths, one denoting its own path; then customer satisfaction is partially moderating the relationship.


Conclusions

From the study results, it can be concluded that both customer relationship marketing and customer satisfaction are antecedents to customer retention. Customer relationship marketing is also a significant driver of customer satisfaction in the Banking Industry. An empirical study on the importance of CRM and customer satisfaction on customer retention in the Banking Industry in Nigeria has been largely unexplored in literature. However this study shows that improving CRM practices has the potential of enhancing customers‟ satisfaction and customer retention.


Recommendation

It is recommended that the Bank practitioners should invest resources and capacity to intensify the management of customer relationships as this has been shown to impact on profitability. Specifically the improvement of CRM has a double-line path both of which has the potential of increasing the customer base and thereby profit levels. There is no necessary need for bearing extra cost in marketing and advertising when strong CRM practices are implemented. Therefore managers are advised to use CRM as their major business strategy. The importance of using CRM as business strategy is that it does not lead to additional cost to reach customers and gaining competitive advantage. This is because it is an activity that considers the functionary departments in the organisation and how to strengthen or tweak them towards service quality. Lastly, there is the need for the Bank to identify customer retention challenges, customer purchasing, and buying behaviour as the first step to building strong customer relationship marketing practices. The researcher recommends there should be a further study on the effects of CRM on Customer retention in the life sector of the Banking Industry. Another research can be conducted to assess the impact of CRM practises in the Banking Industry in Nigeria.


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