CUSTOMER RELATIONSHIP MANAGEMENT AND THE PERFORMANCE OF NIGERIAN COMMERCIAL BANKS: A CASE STUDY OF FIRST BANK PLC
This study was conducted to examine the effects of customer relationship management on the performance of Nigerian commercial banks using First Bank Plc. as a case study. In order to achieve this broad objective, three (3) research questions were raised and three (3) hypotheses were formulated. Using a survey design method of research and a self-structured questionnaire, 300 staff from the bank and 300 bank customers were randomly selected to make the sample for the study. The study used both descriptive and inferential statistics to analyse the data obtained in the course of the study. The findings of the study revealed that there is no significant relationship between customer relationship management and bank performance, that there is a significant relationship between customer relationship management and customer loyalty and that there is a significant relationship between customers’ satisfaction and bank profitability. Based on the findings of the study, it was recommended among others that First Bank Plc., must understand the importance of customer relationship management in improving the organizational performance of the banks and should ensure customer satisfaction at all time.
1.1 Background to the Study
The market condition and business environment of the 21st century is witnessing rapid change and the banking sector is becoming increasingly competitive around the world. Business often must respond to this rapidly changing environment. Environmental change has been a business focus for decades. Now, a well-established new comer is changing the traditional business environment even more: information technology; the internet and the electronic commerce are the new players disrupting the business environment. Even more critical is the development of entirely new business (Ogbadu & Usman, 2012). Given these changes, businesses have rediscovered that, more than ever, in the face of increased competition, matured market, and ever demanding customers, treating existing customers well is the best source of profitability and sustained growth (Hair et al, 2006).
Today, companies have realized that customers are the life blood of the business; business survival is largely depended on the customers. The realization of this fact has made it possible for companies to have a better chance to outperform competition. Customers are therefore, better satisfied through a competitive superior product and services beyond their expectation. Satisfying the customer eventually graduate into a relationship where the company sees the customer as part of the business and business decision making by continuously seeking customers opinion. According to Kotler and Keller (2006:139) as cited by Ogbadu & Usman (2012), marketers must connect with customers, informing, engaging, and may be even energizing them in the process.
Having every detail of organization’s customers gave birth to the marketing concept known as customer relationship management (CRM). Customer relationship management as an improvement upon the data base marketing of 1980’s, which was simply a catch phrase to define the practice of setting up customer service groups to speak individually to all of a company’s customers. The 1990’s was the advances in customer relationship management (CRM), which also became popular at this period. At this time, instead of gathering data alone, it was used to give back to the customers not only in terms of improving customers’ services, but in terms of incentives, gifts and perks for customer loyalty. This saw the beginning of the flyer programmes, bonus and hosts of other resources that are based on CRM tracking of customer activity and spending patterns. CRM is being used as a way to increase sales passively as well as through active improvement of customer service aided by technology. The key to building lasting customer relationships is to create superior customer value and satisfaction. In their view, Kotler and Armstrong (2008) state that satisfied customers are more likely to be loyal customers and to give the company a larger share of their business. Targeting, acquiring, and retaining the right customer is at the core of many successful business firms. Once a firm has won customer it sees as desirable, the challenge shift to building relationship and turning them into loyal customers who will generate growing revenue for the firm in future. Customer Relationship Management (CRM) is concerned with customer data management that is, managing detail information about individual customers, and carefully managing customer touch points in order to maximize customer loyalty, is now being focused on the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.
Onut et al, (2007) saw CRM as a business strategy to identify the banks most profitable customers and prospects, and devotes time and attention to expanding account relationships with those customers through individualized marketing, reprising, discretionary decision making, and customized service all delivered through the various sales channels that the bank uses. Nigerian banks are often making efforts to satisfying big premium services. While small saver with low balances are considered unprofitable, and are left to get cold. Accounts average balance, account activity, service usage, branch visits and other variables are being used to assess profitable and non-profitable customers (Ogbadu & Usman, 2012).
Having realized the importance of customer relationship management, and its potential to help acquiring new customer, retain existing ones and maximize their lifetime value, Onut et al (2007) suggest that, IT and marketing should have a proper coordination to provide a long term retention and selection of customers. Ojiri (2016) observed that the growth in the number and variety of financial institution as well as the financial instrument and operative during this period attest to the grave relevance of the sector in the National Economy Development. The structural readjustment in the financial sector which commenced in 1986 was directed towards enhancing the Banks efficiency through increased competition, strengthened the supervisory role of the Regulatory authorities and streamlined public sector relationship with the financial sector. Thus, since the early ‘90s’, the phenomenal growth of the Banking industry in Nigeria following the Deregulation of the industry has generated interest and enthusiasm amongst top notch stakeholders and institutions in the industry stressing the urgent need for strategic decisions.
Significantly in the year 2002, the central Bank of Nigeria dismantled the divide between commercial and investment banking a culmination of a process commenced 7 years earlier with the Government’s approval of the conversion of the merchant to commercial Banks. Thus, Banks with a view of survival can no longer rely on their “efficient personal” solely but must synchronize personnel capabilities with appropriate systems and structures in order to wade the storm of competition, survive the tide of changing emerging technology, shifting several old economy business practices towards organizing by customers segments rather than by-products, focusing on customers lifetime value, instead of transactions alone, focusing on stakeholders and not through advertising alone, focusing on customer acquisition, retention and satisfaction.
The Nigerian banking industry is at the threshold of change as to completely alter the fabric of business and indeed lives, this change being rooted in the competitive nature of the industry which incidentally is expected to intensify as new players of local and Global scope permeate the market and as the competitive terrain becomes more challenging to navigate due to the ever-changing customers’ expectations and preferences , the challenges being churned up in the operating environment, and expectations of the regulatory bodies, competitors In the industry will indeed need to adopt new technologies redesign processes and excellently manage their manpower in order to secure a competitive advantage.
Banking industry is an important sector in the business world which has a growing impact on all other sectors of the economy because of financial services provisions. In this volatile situation financial institutions were not left out as they are seriously affected by the level of competition both locally and internationally. The banking industry environment today is highly volatile; Nigerian banks therefore needs to develop effective technique to enhance the interaction of customers and the bank staff. The complexity in the banking industry has made bank managers to focus on how to create close affiliation with their customers. No wonder Nigeria banks now create a separate department in the bank known as customers care unit to address customer issues and complaint in order to ensure that customers get value for their money thereby enhancing customer loyalty, building and maintaining customer’s cordial relationship in order to achieve an advantage that can lead to customer retention and increase profitability.
Furthermore, loyal customers can provide the foundation for growth which leads to competitiveness in the industry. Also, the belief that relationship marketing (RM) investment builds stronger, more trusting customers relationship (Morgan and Hunt 1994) and improves financial performance (Schroder and Lacobulli 2001) has led to massive spending on customer relationship programme. Sheth (2005) also opines that customer relationship marketing would result into customers’ retention which has to do with creating relationship, Customers loyalty which has to do with developing relationship, and customer interaction may lead to customer retention.
Considering the above arguments, Olawale, Folarin & Yusuph (014) argued that Nigeria banks now adopt relationship marketing principles and design strategies to achieve and maintain close and long lasting relationship with the customers. This study is therefore aimed to examine the effect of customer relationship management on the performance of Nigerian Commercial Banks.
1.2 Statement of the Problem
As a result of complexity in the Banking industry today, Bank managers in a particular Bank see other Banks as competitors, this has made them focus on how to be in a close contact with their customers In order not to lose active customers to other competitors.
Customers on their own part have experienced challenges ranging from non-availability of staff at the service point, poor standard of records or improper information, failed promises among others .in the words of Ogunnaike and Ogbari (2008) almost every Nigerian Bank encounters similar problems in meeting customers expectation of services and customer satisfaction.
Other issues include delayed money transfer fund, unnecessary deductions without prior information, short staffed, Automatic Teller Machine (ATM) issues, long queues and huge crowds in the banking halls can be highly devastating and discourage most times, especially during weekends.
The long queues are as a result of the breakdown of the computers used by cashiers or cashiers pushing duty to one another as to who is to attend to the customer. These and more destabilizes customers, thereby forcing them to open more than one account across the banks in order to satisfy their financial needs. It is on the basis of these inabilities in the banking industry that this study is carried out to examine the effect of customer relationship management on the performance of Nigerian commercial banks.
1.3 Research Objectives
The objective of the study is to examine the effect of customer relationship management on the banking industry. Specifically, the study will:
- examine the relationship between customer Relationship Management and Bank performance
- determine the contribution of effective customer Relationship Management to customer loyalty.
- ascertain whether customers satisfaction can increase Bank profitability
1.4 Research Questions
- Is customer relationship management a useful tool in determining bank performance?
- What are the contributions of effective customer relationship management to customer loyalty?
- Does customer satisfaction lead to increase in Bank Profitability?
1.5 Research Hypotheses
- There is no significant relationship between customer relationship management and bank performance.
- There is no significant relationship between customer relationship management and customer loyalty.
- There is no significant relationship between customers’ satisfaction and bank profitability.
1.6 Significance of the Study
Customers’ relationship management is an important business approach because it can enhance a company’s ability to achieve the ultimate goals of retaining profitable customers and gain a competitive advantage over its competitors. In principle, customers’ relationship management focuses on building long-term and sustainable customers’ relationship that add value for both customers and the company. It is regarded as a process of computerizing a staff’s knowledge about his or her customers because customers’ relation staff would normally need to remember their client’s requirements, behaviours, tastes and preferences in a usual business process
This research work will examine ways of improving and enhancing customer relationship management in Nigeria Banking sector. Customers are viewed as an important element in organizational performance and productivity of Banks. When the relationship with customers is poorly managed. This can lead to competitive advantage for the bank. This study is important for customers, employees, banks, academia and even government. Customers will have access to better and qualitative services from the banks. Employees can also have improved conditions of services due to better organizational performance. Banks can gain in terms of superior performances. This research can also benefit the academia in terms of adding to knowledge.
1.7 Scope of the Study
This study focused on the effect of customer relationship management on the performance of Nigerian commercial banks. The study is limited to FIRST BANK Branches across Delta State.
1.8 Definition of Terms
Automation: The act or process of converting, controlling a machine or device to a more automatic system, such as computer or electronic controls
Customer: One who purchases or receives a product or service from a business (bank) or intends to do so.
CRM: A system for managing a company’s interactions with current or future customers, it often involved using technology to organize, automate and synchronize sales, marketing, customer service and technical support.
Management: The process or practice of managing, it’s a judicious use of means to accomplish an end.
Productivity: The state of being productive or efficient.
Profitability: The capacity to make profit
Relationship: Connection or association, the condition of being related toward achieving a goal.
Satisfaction: The fulfillment of a need or desire, the pleasure obtained by such fulfillment.
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