silcon Valley collage

Department of Business Administration

Effect of customer relationship management on profit performance: a case

study of Development bank of Ethiopia

By: Birhanu Biresaw

June, 2023
Addis Ababa, Ethiopia
 Effect of customer relationship management on profit performance: a case
study of development bank of Ethiopia

By: Birhanu Biresaw

Advisor: Messeret Assefa (PHD)

A Master’s Thesis Submitted to silcon valley college, Department of Business

Administration In Partial Fulfillment of the Requirements for MA in Business
Administration (MBA)
 silcon valley college

School of Graduate Studies

Department of Business Administration

Effect of customer relationship management on profit performance: a case study

of development bank of Ethiopia

By: Birhanu Biresaw

Approve By Board of Examiners:

Advisor Signature Date

Internal Examiner Signature Dat

External Examiner Signature Date

STATEMENT OF DECLb ARATION

I, undersigned declare that this thesis is my original work. Furthermore, all sources of materials
used for the thesis had been duly acknowledged.

Name: Birhanu Biresaw

Signature: Date:

Silcon Valley College

Acknowledgement

First and foremost, I would like to let my sincere gratitude flow to the Almighty God for guiding
and enabling me to work on this research project and gain academic insight.

Secondly, I thank Messeret Assefa (Phd) my advisor for his enthusiastic support, advice, patience
for knowledge sharing throughout my research work

Finally, I present my respect for all the staffs of the bank that assisted me in data collection with
patience, commitment and dedication. Their cooperation was not on the basis of their material
benefit but is really their own commitment to help me.

i
Abstract

Customer relationship management is an issue that every company, large or small, must tackle.
Customers are the life-line of every business and the growth of every business depends on the
relationship that the company has with its customers. This study examined the effect of customer
relationship management (CRM) on profit performance of Development Bank of Ethiopia. The
research was a blend of descriptive and causal research in design. A probabilistic sampling
technique was employed to determine number of respondents. Hence, the data was collected from
245 employees of 10 districts offices and head office selected randomly by using a questionnaire.
Both primary and secondary sources like annual report of the bank and magazine of the bank
were also used. Statistical package for social sciences was used in running the outcomes of the
study. After checking the normality of the data, inferences were later drawn from results of
Pearson’s Correlation analysis to assess the relationship between independent and dependent
variables. Furthermore, multiple regression analysis was employed to assess the relative
influence of each CRM dimensions on profit performance. The responses of employees showed
that the practice of CRM in the bank is poor. According to the finding a strong, positive and
significant relationship was observed between all CRM dimensions and profit performance.
Among the four dimensions (key customer focus, CRM organization, customer knowledge
management and CRM based technology), CRM based technology was identified and concluded
as the dimension with the highest influence on profit performance. Therefore, since the perception
of the employees regarding CRM practice and the profit performance of the bank is not good the
bank should focus on CRM dimension practice to increase its profit.

Key words: - Customer Relationship Management (CRM), profit performance

ii
Table of Contents
STATEMENT OF DECLb ARATION....................................................................................................4
Acknowledgement.........................................................................................................................................5
Abstract..........................................................................................................................................................6
List of Tables.................................................................................................................................................7
List of Figures...............................................................................................................................................9
List of Acronyms.........................................................................................................................................10
CHAPTER ONE............................................................................................................................................1
1. INTRODUCTION.................................................................................................................................1
1.1. Background of the study....................................................................................................................1
1.2. Background of the Organization.......................................................................................................3
1.3. Statement of the Problem.................................................................................................................5
1.4. Research Questions.............................................................................................................................6
1.5. Research Objectives...........................................................................................................................7
1.5.1 General objectives........................................................................................................................7
1.5.2 Specific objectives.........................................................................................................................7
1.6. Significance of the Study...................................................................................................................7
1.7. Scope of the Study..............................................................................................................................7
1.8. Organization of the Study..................................................................................................................8
CHAPTER TWO...........................................................................................................................................9
2. REVIEW OF RELATED LITERATURE..............................................................................................9
2.1. Definitions of Customer Relationship Management........................................................................9
2.2. Views about Customer Relationship Management.........................................................................9
2.4. CRM and the Bank Industry..........................................................................................................12
2.5. Relationship between CRM and employees of the Bank..............................................................12
2.5.1. Sales Growth..............................................................................................................................13
2.5.2. Customer Retention...................................................................................................................13
2.5.3. Customer Satisfaction...............................................................................................................14
2.5.4. Effect of CRM on Profitability.................................................................................................14
2.6. Dimension of Customer Relationship Management......................................................................15
2.6.1. Key Customers Focus................................................................................................................15

vi
i
 2.6.2. Customer Relationship Management Organization...............................................................16
2.6.3. Knowledge Management..........................................................................................................17
2.6.4. Technology based-CRM............................................................................................................17
2.7. Conceptual M o d e l of t h e influence of C R M Dimensions on p r o f i t performance....18
CHAPTER THREE....................................................................................................................................21
3. RESEARCH METHODOLOGY.........................................................................................................21
3.1. Research Design and Approach......................................................................................................21
3.2. Study Population..............................................................................................................................21
3.3. Sampling method and Sample size.................................................................................................22
3.4. Data Type and Source.....................................................................................................................22
3.5. Data Collection Instruments...........................................................................................................23
3.6. Data Collection Procedure..............................................................................................................23
3.7. Data Processing and Analysis.........................................................................................................23
3.7.1. Data Processing.........................................................................................................................23
3.7.2. Data Analysis.............................................................................................................................23
3.7.3. Ethical consideration................................................................................................................24
CHAPTER FOUR.......................................................................................................................................25
4. DATA ANALYSIS, PERESENTATION AND INTERPRETATION.............................................25
4.1. Introduction...................................................................................................................................25
4.2 Response rate on Questionnaire.......................................................................................................25
4.3 Descriptive Statistics Analysis of CRM Dimensions.......................................................................27
4.3.1. Perception Level of Employees on CRM Dimensions and Profit Performance...................27
4.3.2. Employees’ Perception on Key Customer Focuses Dimension........................................28
4.3.3 Employees’ Perception on CRM Organization Dimension.....................................................29
4.3.4 Employees’ Perception on Customer Knowledge Management Dimension..........................30
4.3.5. Employees’ Perception on CRM based technology Dimension.............................................32
4.3.6. Employees’ Perception on Profit performance of the bank...................................................33
4.4. Results and Discussion of Inferential Statistics.........................................................................34
4.4.1. Discussion of the Correlation Results and Hypothesis Testing Results.......................................35
4.4.2. Regression Analysis and Hypothesis Testing Results.......................................................37
CHAPTER FIVE.........................................................................................................................................42
5. SUMMARY, CONCLUSION AND RECOMMENDATION..............................................................42

vi
ii
 5.1 Introduction.......................................................................................................................................42
5.2. Summary of Major Findings............................................................................................................42
5.3. Conclusion.........................................................................................................................................43
5.4. Recommendation and Future Research Implications......................................................................44
Reference.....................................................................................................................................................45

ix
x
List of Acronyms

BPR Business Process Re-engineering

BSC Balanced Score Card

CRM Customer Relationship Management

DBE Development Bank of Ethiopia

ERP Enterprise Resource Planning

SPSS Statistical package for social scienc

xi
CHAPTER ONE

1. INTRODUCTION

1.1. Background of the study

Banking industry has a growing impact on all other sectors of the economy and it is known to be
highly human intensive and customer interactive industry where customer relationship
management (CRM) is realized and more applicable (Winer, 2001).
Today, organizations like banks are operating in a customer oriented environment in which
customer is the real ruler of market. This critical issue is forcing them to consider customer as an
asset requiring management Ghalandari (2012). From this ground in today’s competitive
economy, enterprises are realizing the importance of becoming customer centric, and they are
adopting Customer Relationship Management (CRM) as a core business strategy (Wu, J. 2008).
Customer relationship management as a strategy is becoming more useful to manage customers
because it focuses on understanding customers as individuals instead of as part of a group. The
effective relationship between customers and banks depends on the understanding of the different
needs of customers at different stages. The ability of banks to respond towards the customers’
needs make the customer feel like a valuable individual rather than just part of a large number of
customers (Lambert, 2010).

Recently, Customer relationship management is becoming progressively significant to firms in

their effort to improve their profitability performance through customer retention, customer
acquisition, market share, and sales volume throughout long-term relationships with customers.
This condition has been forcing business firms to invest heavily in information technology assets
for better management of their collaborations with customers before, during and after purchase
(Bohling et al., 2006).

According to Dowling (2002), Customer Relationship Management (CRM) is premised on the

belief that developing a relationship with customers is the best way to get them to become loyal,
and that loyal customers are more profitable than non-loyal customers. The overall goals are to

1
find, attract, and win new clients, nurture and retain those the company already has, attract former
clients to return, and reduce the costs of marketing and client service.

It is a proven fact that the multi- dimensions concept of CRM can be considered relatively new,
because of few studies made on the CRM dimensions of some service sectors such as banking.
Thus, the range of information on this concept is quite limited. (Akroush et al., 2011). Although
the concept is new, there are also evident facts about the effect of CRM on profit performance in
financial institutions. For instance, CRM showed significant positive impact on marketing
outcomes; customers’ satisfaction, loyalty, and eventually on the company profitability (Akroush
et al., 2011; Coltman, 2007).

Fox and stead (2001), developed a model with proven reliability test in financial sector and
reached at a conclusion that the dimensions of CRM must work systematically in an organization
to guarantee its improved performance. In the same scenario to investigate the effect of CRM on
profit performance Sayed (2011), proposed CRM model for financial institutions. According to
his model, CRM consists of four broad behavioral dimensions .These behavioral dimensions are:
key customer focus, CRM organizations, Knowledge management and CRM based technology.
Therefore this study bears on the conclusion made by Fox and stead and employed Sayad’s model.

In Ethiopia, according to Shifera (2011), banking sector is considered as main recipient in recent
economic growth .The birth of modern banking trace back to the imperial era, Bank of Abyssina
being the first modern bank in Ethiopia. To summarize the history of modern banking in different
era; during the imperial era different banks were allowed to function in the country i.e. both
domestic and foreign banks, but after the socialist took over the power in 1974 it nationalized all
private banks and restricted the entry of any banks by policies. During the socialist regime only
three governments owned banks; the National bank of Ethiopia, the Commercial bank of Ethiopia
and Agricultural and Industrial Development bank were running in the banking sector
(Alemayehu, 2007).

A new era began after 1991, when EPRDF came in to power and allowed private ownership
through licensing and supervision of banking business proclamation No. 84/1994. Immediately
after the enactment of the proclamation, private banks began to thrive highly. Currently, after
entry of private banks in Ethiopia, banks are fighting with each other to gain the maximum
2
possible slice of the market share. From this practical situation, banks are discovering their
strengths and weaknesses to satisfy their customers need and want through customer relationship
management (Gashaw & Zemzem, 2014).
Beside the full implementation of Business Process Re-engineering (BPR), Balanced Score Card
(BSC) and the practice of customer relationship management (CRM), to bring about institutional
transformation and stay in the market.
Development Bank of Ethiopia (DBE) has been working on automation of redesigned business
processes through implementation of core banking software to change the stand alone system to
networked one. From reviewed literatures, the effect of CRM on profit performance is justified in
few banks. However, the effect of CRM on profit performance of Development Bank of Ethiopia
is not yet addressed. For this reason, the researcher is motivated to investigate the effect of
customer relationship management on profit performance with reference to the bank under
consideration.

1.2. Background of the Organization

The development bank of Ethiopia (DBE) is one of the financial institutions engaged in providing
short, medium and long term development credits. DBE’s distinguishes feature is its “project”
based lending tradition. Projects financed by the Bank are carefully selected and prepared through
appraised, closely supervised and systematically evaluated. Since its establishment in 1909, the
bank has been playing a significant role in promoting overall economic development of the
country.
The history of Development Bank of Ethiopia goes back to 1909 when the first attempts of its
kind known as The Societe Narionale d' Ethiopia Pour le Development de l' agriculture et de
Commerce (The Society for the promotion of Agriculture and Trade) was established in the
Menelik II era. Since then the Bank has taken different names at different times although its
mission and business purpose has not undergone significant changes except for occasional
adjustment that were necessitated by change in economic development policies of the country.

3
The under listed names and periods are its predecessors since initial establishment: -
 A g r i c u l t u r a l Bank of Ethiopia from 1945-1949

 A g r i c u l t u r a l and Commercial Bank of Ethiopia from 1949-1951

 D e v e l o p m e n t Bank of Ethiopia Share Company from 1951-1970

 I n v e s t m e n t Bank of Ethiopia from 1964-1970

 A g r i c u l t u r a l and Industrial Development Bank Share Company from 1970-1979

 A g r i c u l t u r a l and Industrial Development Bank from 1979-1994

 D e v e l o p m e n t Bank of Ethiopia since 1994- till now

In long years of existence, DBE has established recognition at national and international levels.
Nationally, it is the sole Bank with reputable experience in long term investment financing.
Internationally, and it is recognized as an important on leading channel for development program
financed by bilateral and/or multilateral sources.

Vision of DBE
100% Success for All Financed Projects by 2020
Mission of DBE
The Development Bank of Ethiopia is a specialized financial institution established to promote the
national development agenda through development finance and close technical support to viable
projects from the priority areas of the government by mobilizing fund from domestic and foreign
sources while ensuring its sustainability. The Bank earnestly believes that these highly valued
objectives can best be served through continuous capacity building, customer focus and concern to
the wider environment”.

Values of DBE

 Commitment to mission

 Customer focus

 Integrity

4
  Team work

 High value to employees

 Learning organization

 Concern to the environment

Source: Company profile

1.3. Statement of the Problem

Until recently, the banking sector had operated like a monopoly within few numbers of banks in
Ethiopia. Before the current era of the industry banks saw their existence and service as privilege to
their customers. Still it is also observed that most Ethiopian banks traditionally laid more emphasis on
attracting and prospecting for new customers than striving to retain old ones. Today’s customers are
becoming more price conscious, more demanding of great service and are being approached by many
more competitors with equal or even better offers at cheaper prices. The challenge therefore, is not to
provide satisfied customers, but to produce delighted and loyal customers (Kolter and Armstrong,
2010).

Currently due to the competitive pressure and globalization, the banking sector in Ethiopia has
shifted to the emphasis towards customer loyalty and retention to get high profit and continuous
growth every time. The industry is therefore in urgent need to reposition itself towards the customer
oriented doctrine in order to achieve growth. Consequently, the industries are now strategizing to
meet current customers’ expectations and where possible exceed such expectations through robust
customer relationship management (CRM) policies and programs to remain in business and make
profit. In this specific area, literatures show studies have been made in most developed and in some
developing countries. However, little has been made in our context. The reviewed researches in these
context have reported a positive and direct relationship between CRM dimensions (key customer
focus, customer, CRM organization, knowledge management and CRM based technology) and market
performance which increase profit (Namjoyan, 2013; Boateng, 2014; Sayed (2011).

In Ethiopia context Gebeyehu (2014), analyzed the effect of CRM on profit and market performance
by considering branches of Commercial bank of Ethiopia, Awash International bank

5
& Wegagen bank located in Mekele city. The finding of the study showed that the existence of a
positive and significant relationship between CRM dimensions and profit performance. Although the
study has made a great contribution for empirical documentation of CRM in Ethiopia, the study has
been restricted to those commercial banks which are mainly participating in commercial
activities through mobilizing deposit and transaction. This is to mean that the study overlooked
Development bank of Ethiopia which is uniquely engaged in financing investment projects which are
prioritized and expected to answer the growth and development agenda of the country where in the
issue of customer relationship management is more relevant.
The profit performance of the case bank was increasing and decreasing trend from 2012-2016, but in
general the trend show that the profit performance of the bank increasing at decreasing rate for the
first four years and decrease in the fifth year. The profit performance of the bank was decreased in
2016 by 39.25 % from preceding years and also Non-Performing Loans (NPLs) ratio of the Bank
increased from 16pc to 25pc as of June, 2016/17. The state policy financier registered a profit that is
three times lower than the target set to be achieved in the current fiscal year DBE has come up with a
significant drop in profit performance in a year when other commercial banks are showered with a
massive increase in profits.
Hence, conducting this research on the case bank is to assess and really know the effect of Customer
Relationship Management (CRM) on profit performance of the bank and fill the existing empirical
literature gap for the next significant researches.

1.4. Research Questions

Based on the above research problems, the following questions are for further investigation of the
topic:
1. How are customer relationship management dimensions perceived by employees of the bank?
2. What is the impact of perception of employees regarding the current status of banks
performance?
3. What is the relationship between CRM dimensions and bank profit performance?
4. Which dimension(s) of CRM significantly affect the profit performance of the bank?

6
1.5. Research Objectives

1.5.1 General objectives

The general objective of this study is to examine the effect of customer relationship management on
profit performance of the case development bank of Ethiopia

1.5.2 Specific objectives

 T o examine the perceptions of employees towards CRM practice in the case bank.
 To examine the perception of employees regarding the current status of the bank's profit
performance.
 To test whether CRM dimensions (key customer focus, CRM organization, customer knowledge
management and CRM based technology) and bank profit performance have relationship or not.
 To identify the relative influence of CRM dimensions (key customer focus, knowledge
management, CRM based technology and CRM organizations) on bank profit performance of the
case bank.

1.6. Significance of the Study

Implementation of CRM in the banks will be the stage for building a good partnership with customers
which consequently leads to services development and improvement. Therefore, conducting this study
on public bank like the case bank is important, because the finding of this study will be significant to
the bank in supporting decisions on using its resources to maintain the existing customers and attract
the new ones by adopting effective customer relationship management in light of its competitors. The
result of this study will offer valuable inputs and directions for the bank to consolidate its
organizational productivity and customer knowledge management in order to increase its profitability.
The result of this study will also assist the responsible bodies by providing knowledge on how to
identify the needs of their customers in delivering advanced technologies to improve the quality of
their services and increase their profit. Furthermore, the study is believed to benefit both academicians
and other practitioners as a documented study in this area.

1.7. Scope of the Study

This study mainly focused on examining the effect of CRM on Profit performance. Even though the
concept of customer relationship management is very crucial and need to be seen at industry level, to
7
conduct the study in depth with limited time, and budget constraint, the scope of this study is limited to
investigation of effect of customer relationship management on profit performance on selected districts
and head office of Development Bank of Ethiopia found in different geographical area of the country.
The districts are found in Bahirdar, Jimma, Hawassa, Mekelle, Dessie, Gonder, Diredawa, Adama,
Nekemete and Addis Ababa.

1.8. Organization of the Study

The study consists of five chapters in which each will be discussed in depth later. Chapter one is
apprehensive in terms of preparing the whole research by concerning the various important aspects
such as problem statement, an illustration of the general and specific objectives of the study.
Background of the company being studied is also briefly discussed. Chapter two consists of review of
related literatures and empirical researches related to the problem being investigated and theoretical
framework of the study. Chapter three includes the methodology and procedure applied for the study
in detail. Analysis and presentation of the findings emerging from the study are presented in Chapter
four. The fifth chapter contains a summary of the study and findings, discussions, conclusions and
recommendations for further research.

8
CHAPTER TWO

2. REVIEW OF RELATED LITERATURE

2.1. Definitions of Customer Relationship Management

Various definitions have been provided for customer relationship management (CRM) by
scholars. It is defined as a management approach which consists of methodologies, processes and
software which help in establishment of an organized relationship with customers Bohling et al
(2006). CRM means to create and maintain a specified relationship with profitable customers
through using appropriate information and communication technology (Payne & Frow, 2005).

Furthermore, in a narrow sense, customer relationship management could be defined as

"managing detailed information about individual customers and carefully managing customer
touch points maximize customer loyalty and if it is seen in a browed sense, it is also defined as
the overall process of building and maintaining profitable customer relationship by delivering
superior customer value and satisfaction"(Kotler& Armstrong, 2010).

2.2. Views about Customer Relationship Management

Based on an extensive review of CRM definitions, Zablah et al. (2004), concluded that CRM
conceptualizations take one or a combination of five complementary perspectives: CRM as a
strategy, as a philosophy, as a process, as an information technology application, and as an
organizational capability. CRM as a philosophy considers customer loyalty key to business
profitability. To achieve loyalty, firm must shift their focus from getting customers to retaining
customers (Reichheld, 2006). When CRM is seen as strategy, attention is directed to maximizing
the use of organizational resources towards a favorable market position. Under this perspective,
researchers emphasize that not all relationships are good, and that customers who contribute the
highest value to the firm deserve more attention from managers (Ryals, 2005).

9
Many researchers see CRM as a processor a collection of tasks or activities that help organization
achieve desired business outcomes (Reinartz et al., 2004), and others look at the customer
knowledge management processes (Sin, et al., 2005).

CRM is also seen as an information technology solution or an enterprise application system that
supports the building of profitable customer relationships (Torggle, 2008; Ang & Buttle, 2006).
Although the importance of technologies such as the internet, sales force automation, call centers,
and data mining in CRM is well acknowledged, many researchers agree that CRM is more than a
technology, especially with poor to moderate empirical evidence on a direct link between
technology and organizational performance (Minami & Dawson, 2008; Day & Van den Butle,
2002; Reinartz et al., 2004).
Recently more attention was directed to CRM as an organizational capability that contributes to
the creation of a competitive advantage (Campbell, 2003; Day & Bulte, 2002; Day, 2000). A
capability is defined as the capacity of a team of resources bundled together to perform a task or
an activity. While resources are the source of capabilities, capabilities are the main source of a
firm's competitive advantage (Grant, 1991). Capabilities have four sources; employees' knowledge
and skills, technical systems which include information systems and formal procedures for dealing
with problems, the management system, and the unifying values and norms (Day, 1994).
According to the capability view, firms need to acquire and integrate resources that increase their
responsiveness to the changing needs of individual customers (Peppers & Rogers, 2004).
One can argue that CRM as a capability is the most comprehensive view of CRM, because it
combines CRM processes with other complementary tangible and intangible assets deemed
necessary to carry out such processes. In reviewing the aforementioned facts, the definition used
by Swift (2001), with slight modification can be used for the purpose of this study. “CRM is the
enterprise approach to understanding and influencing customer behavior through meaningful
communications in order to improve customer satisfaction, customer acquisition, customer
retention and increase profitability by efficient integration of key customers focus, knowledge
management, CRM technology, and CRM organization ”.Modified definition of CRM by the
researcher.
A considerable quantity of prescriptive literature is available to explain the importance of
customer relationship management in different organization particularly in financial institution
like banks.

10
Swaminathan (2004) conducted a research in Hong Kong China. The sample included a number
of different organizations such as banks, investment companies, insurance companies and other
institutions characterized by good relationships with customers. Data was collected from senior
managers in these organizations by means of questionnaire. Accordingly, the study concluded that
there are four dimensions of CRM. Three of these four dimensions, (Key customers focus,
organizing around CRM, and managing knowledge) directly and indirectly affected the
performance (customer's satisfaction- customer retention- the growth of sales). However, the
fourth dimension (technology) did not lead to increasing the customer's satisfaction and loyalty in
the long run.
In the developing countries case, Boateng (2014) examined the effect of customer relationship
management (CRM) dimensions on some selected banks‟ performance in Accra, Ghana. Factors
used were based on the dimensions of CRM and how each of them affects the performance and
retention of customers to the selected banks. Through a random sampling technique, a sample of
nine banks (private, public and international banks) was considered for data collection and as a
quantitative study; close and opened questions in the form of questionnaires were used as the main
instrument for gathering data. From the finding of the research a positive relationship was
established among most of the dimensions with some having effect on the performance of the
selected banks. In the same scenario, among the four dimensions considered, (Customer
orientation, Knowledge management, Technology Based CRM and CRM organization), customer
orientation was identified as the dimension with the highest association with banks‟ performance
and customer loyalty. Ramezanpour et al. (2013), also conducted a research to assess the impact
of customer relationship management (CRM) dimensions on the financial performance of banks
(Case Study: Mellat Bank, City of Rasht, Iran.) In the research, customers‟ relationship
management dimensions, their impacts on the financial performance of banking services were
studied. To achieve the research objectives, information technology, knowledge management,
customer response and customer.
Interaction management as the customer relationship management dimensions were identified and
four hypotheses were established to test the impact of these dimensions on Mellat bank's financial
performance in Rasht. In order to collect data, a standard questionnaire containing 18 questions
was used. The questionnaires were distributed among 203 bank employees as the statistical
samples. To test the hypotheses, the Pearson Correlation Coefficient Method, Simple Linear
Regression and Multiple Regression Analysis were used. Test results showed that there is a
11
positive significant relationship between the dimensions of customer relationship management and
the financial performance. The impact coefficient of all the hypotheses through regression tests
was positive in which information technology has had the greatest effect.

In Ethiopian context Gebeyehu, 2014 conducted a research to investigate effects of Customer

Relationship Management on profit and Market Performance. A descriptive research design was
used to investigate the influence of CRM (key customer focus, customer knowledge management,
CRM organization and technology based CRM) on profit and market performance in banking
industry with reference to Wegagen bank, Dashen bank and Commercial Bank of Ethiopia (CBE).
The findings confirmed that all the independent variables (key customer focus, knowledge
management, CRM organization and technology based CRM) have a positive and significant
relationship with profit and market performance in selected commercial banks. Based on the
results of the descriptive statistics, the research conclude that the higher the level of key customer
focus, customer knowledge management, CRM organization and technology based CRM
perceived by employees, the higher level of profit performance can be achieved by selected
Commercial banks.

2.4. CRM and the Bank Industry

As a strategic approach, CRM incorporating a process of maintaining valuable long term

relationships with clients by providing the firm with an enhanced opportunity to understand its
clients (Christopher, Payne & Ballantyne, and 1991). The fundamental motivation why firms
should build relationships with clients and successfully manage these relationships is of an
economic nature (Buttle, 2004).It is a key objective of CRM strategies that firms should generate
better results when managing clients by identifying, satisfying and retaining the most profitable
clients.
CRM helps to accelerate the revenue and profit growth of firms. Many owners and/or managers
have stabilized or grown their firms by viewing their investment in CRM as a main priority
(Kennedy, 2004). According to Liyunet al (2008) the emphasis of CRM is to focuses on keeping
and maintaining long-term relationship with customers, leading to customer satisfaction and hence
creating business performance in the banking industry.

2.5. Relationship between CRM and employees of the Bank

12
Employees in any organizations are directly involved in strategies that an organization set.
According to Ang, L. &Buttle (2006), CRM can be applied on three levels within an organization,
leading to strategic, operational and analytical CRM. Strategic CRM is focused on the
development of a customer-centric business culture and involve executive management.
Operational CRM is focused on the automation of the customer-facing activities of an
organization and involve middle-level management, for example a branch manager of a bank.
Operational CRM may lead to marketing-, sales- and service automation. Analytical CRM
is concerned with exploiting customer data with the application of data mining tools. It is evident
that all employees are involved with CRM, either through their direct interactions with clients or
their involvement in and application of processes, tools and methods used to enhance client value.
As described by different scholars, profit performance consists of the following components.

2.5.1. Sales Growth

It is testified by many researchers that reducing customer defections by 5 % can boost profits by
25 % to 85 % (Reichheld and Sasser, 1990 as cited by, Ampoful, 2012). This impressive finding
has been advocated as a strong justification for increased investments in CRM systems (Pfeifer
and Farris, 2004). As to Ang, L., &Buttle, improving profitability at the customer level is an
indicator of effort within the marketing discipline towards a less comprehensive view of markets.
On the other way, the single customer rather than segments of customers is increasingly stressed
as the unit of analysis. This occurrences has given birth to labels such as one-to-one marketing
and micro marketing. Understood from this viewpoint, customer profitability is rising as an
important measurement in which each customer can be defined. An emphasis on customer-level
profitability can also be considered as a mirror image of marketing’s changing role within the
firm. A significant aspect of the new role is that marketing is too important to be left to the
marketing department. For that reason, in any case in marketing literature, other departments
are encouraged to deal with marketing issues.

2.5.2. Customer Retention

According to the research made by Ghavami (2006), customer retention has a significant relation
on firm profitability and concludes that “1% improvement in retention can increase firm value by
5%”. In this case firms are interested in maximizing their lifetime value in order to understand that
customer retention is a key to increasing long run firm profitability. An understanding of forces

13
for customer’s defection can help companies in designing customer relationship management
strategies and interventions aimed towards increasing customer retention and prolonging the
lifetime of customers to increase profit performance better than before. Customer retention is the
safeguarding of continuous trading relationships with customers over the long term.

According to Buttle, (2009) positive retention strategies are strategies that lock the customer in by
rewarding a customer for remaining in a relationship. These positive retention strategies include
the following:

 Customer delights, when customer expectation exceeding, this is going further than what
would usually satisfy the customer. It means being responsive of what it usually takes to
satisfy the customer and what it might take to pleasure or pleasantly surprise the customer.
 Adding customer perceived value: - companies can explore ways to create additional value
without creating additional costs. If cost is suffered accordingly the value-added may be
expected to recover those costs. Value can be added through programs such as, loyalty
schemes, customer clubs and sales promotions.

2.5.3. Customer Satisfaction

Kotler and Armstrong (2010), defined satisfaction as a person feeling of pleasure or

disappointment resulting from comparing a product perceived performance or outcome in relation
to his or her expectation. According to Hair, et al (2003), customer satisfaction is defined as”
customer’s response to a product or service in terms of the extent to which consumption meets
expectations”. In implementing customer relationship management, a firm pursues to establish and
retain a long-term relationship with customers based on increasing full customer satisfaction as
opposed to transaction-specific customer satisfaction. According to Nelson (2012, as cited in
Thuita and Muturi, 2014), the level of customer satisfaction on the service provided has a
tremendous effect on profitability of an organization. His study revealed that, a totally satisfied
customer contributes.

2.5.4. Effect of CRM on Profitability

In financial services due to intense competition relationship strategies plays an important role in
profit generation process. Peppers and Rogers, (2000), conducted a research and find out about the

14
effect of CRM on the return on investment (ROI) of an organization in financial services. They
found that firms with high CRM practices generate more profits than others with low CRM
practices.
As it is observed in table 2.1 below, only 1% of customers from high CRM providers are likely to
swift away one or more products in next 12 months as compared to others with medium 10% and
low 26%. Hence, CRM has a strong effect on the profitability of an organization. If implemented
properly it produces positive results on the other side improper management of CRM solutions
results in downfall of an organization. Management of individual customer relations results in
enhanced customer loyalty, thus increasing the profitability of an organization (Peppers and

TABLE 2.1: RELATIONSHIP BETWEEN CRM AND PROFITABILITY 1

CRM % Likely to add % Likely to swift

Low CRM 15% 26%
Medium CRM 21% 10%
High CRM 31% 1%
Source: Peppers and Rogers (2022)

2.6. Dimension of Customer Relationship Management.

According to the research conducted up to now it seems that CRM is a multi-dimensional concept
consisting of four parts of strategy, people, technology and processes (Fox and stead, 2001). To
drive the point to the study, it can be said that CRM consists of four broad behavioral dimensions
(Sin et al., 2005). These behavioral dimensions are: key customer focus, CRM organizations,
Knowledge management and technology -based CRM. Here under each of they are explained

2.6.1. Key Customers Focus

Focusing on key and main customers includes intensive attention of organization to customers,
providing excellent and creating added-value for customers through providing customized services
which in turn consists of such parts as customer oriented marketing, customer life cycle value,
customization and interactive marketing (Lee J, Chow R, Sin L and Tse A (2000) Customer-
oriented marketing means to exert efforts to understand and meet demands of a particular group
of customers. CRM intensively emphasizes on choosing key customers of organization. Key
15
customers are ones who are of more importance for organization from strategically viewpoint and

16
are more profitable (Ryals L, Knox S, 2001). Customer life cycle value consists of net income
from customer minus costs of attraction, sales and providing services to customers with respect to
value of money at that time.
According to Armstrong and Kotler, (2002), in today’s business environments the ultimate goal of
any key customer focus is to achieve a deep customer relationship that makes an organization a
necessary partner to its most profitable customers. The overall company understanding and
support for key customer focus encourage sales force to foster long-term customer relationships
by offering more personalized services. In summary, key customer focus can be considered as a
function of customer relationship management of a retailer’s integrity as well as firms‟ ability to
perform their services, to keep its promises and commitment and in general to do the right things‟
consistently.

2.6.2. Customer Relationship Management Organization

Based on the customer relationship management, main dimensions of successful organizational

organizing include organizational structure, organizational resources commitment, and human
resources management commitment. Contacting the individuals is the most difficult stage in
customer relationship management process. Internal marketing plays the most important role of
customer-oriented and customer services delivery in every organization. Internal marketing is
resulted from interaction between human resource management and marketing (Akroushetal,
2011). CRM organizing is defined as the supporting organization structure, incentives, resources
allocation, and management controls that enables building and sustaining customer relationships
(Day and VandenBulte 2002; Jayachandran et al., 2005; Sin et al., 2005). Organizational
structures that support cross functional communication and coordination, as well as rewards and
training programs designed around customers‟ needs resulted in higher relationship quality, which
in turn positively influenced organizational performance (Chang, 2007).

For a better CRM implementation and total quality assurance of those strategies, there is a need to
employ total participation from all levels of the organization. The organizational structure is
supposed to be redesigned to include proper and effective lines of communication (Liu, 2007).
Mechinda and Patterson (2011) and Dutu and Halmajan ( 2011) stated that for service employees

17
to display customer-oriented behavior, organizations must develop a climate for service in the work
which includes providing staff with modern tools and technology, customer satisfaction tracking
and complaint management systems, inspiring service leadership, and an appropriate reward
system.

2.6.3. Knowledge Management

In today’s competitive world, knowledge is considered as one of the competitive factors in global
economy. It is necessary to consider the customer as another important factor in order to enter
today’s dynamic market successfully which is the means to generate profit. Customer knowledge
management refers to acquiring, sharing, and developing the customer knowledge among
employees for making profit to the organization and customers. Therefore, it can be concluded that
knowledge management is an integrative part of customer relationship management (Salomoun et
al, 2005).
Currently business environment firms are encouraging towards the implement of customer
relationship management applications to trail customer behavior to gain understanding into
customer tastes, preferences and evolving needs (Mithaset al., 2005). CRM applications help firms
to gather and use customer knowledge through CRM applications in order to facilitate customer
employees to record relevant information about each customer transaction. Later information is
taken from employees can be administered and converted into customer knowledge on the basis of
information processing rules and organizational policies and businesses organizations can segment
their stored customer knowledge with customers to allow those customers to serve themselves by
defining the service and its delivery to suits their needs.

2.6.4. Technology based-CRM

According to Jayachandranet al. (2005), CRM technology includes all the information systems used
to support front office functions (sales, customer service, and marketing) and back office
applications that deal with data integration and analysis. CRM involves gathering a lot of data about
the customer. The data is, then, used to facilitate customer service and transactions in order to meet
customers’‟ needs. This results in more satisfied customers, a more profitable business and more
resources available to the support staff. According to Kotler (2010), customer relationship
management helps companies to provide excellent real- time and customer service by developing a

18
relationship with each valued customer through the effective use of individual account information
based on what they know about each customer. It leads to Information integration and sharing that
influences smooth and efficient firm-customer interactions, appropriate analysis of customer data
and customization of response (Mukerjee& Singh, 2009).

2.7. Conceptual M o d e l of t h e influence of C R M Dimensions on p r o f i t

performance

To monitor the progress of CRM, organizations need to have a set of CRM Metrics such as:
employee’s participation in CRM, consolidation, retention, defection rates, brand impact, customer
satisfaction ratings & loyalty levels, customer knowledge, customer entanglement and learning
relationships. These metrics should be linked to business metrics such as revenue, cost efficiency,
and cross-sell, up sell rate, market share, mind share, customer share, and profitability.
, Rogers & Peppers (2000).
Recently, CRM researchers acknowledged the view of CRM as a capability, and have adopted the
resource based view as the most appropriate theoretical framework to assess its impact on
organizational performance (Keramati, Mehrabi, &Mojir, 2010; Kim & Kim, 2009; Rapp, Trainor,
&, Agnihotri, 2010 as cited by Elkordy, 2014). For example, Wang and Feng (2012) proposed that

Customer orientation, customer centric management systems, and CRM technology influence
organizational performance through three CRM capabilities (interaction management, relationship
upgrading, and win-back). Sin et al. (2005) developed a model of CRM dimensions consisting of:
key customer focus, CRM organization, knowledge management, and technology-based CRM. To
conclude, most of the aforementioned models agree on the significance of four dimensions of
CRM, namely; key customer focus, CRM organization, customer knowledge management and
CRM technology. Sayed H. (2011), considered CRM as a multidimensional construct of four
broad behavioral components consisting of key customer focus, CRM organization, knowledge
management, and technology-based CRM and investigated the effect of these four CRM
behavioral dimensions on profit performance of financial institutions in maintaining current
customers, attracting new customers, increasing market share, enhancing the standard of sales
growth and adding the net profit standard to sales. Kotler and Armstrong (2004), described that
the greater customer relationship capability will be achieved when the four dimensions of CRM
work in coordination with this ground the study used sayads model to analyze the effect of CRM

19
dimensions on profit performance of the bank.

FIGURE 2.1: CONCEPTUAL FRAMEWORK OF CRM AND ITS RELATIONSHIP TO

PROFIT

PERFORMANCE 1

Key customer focus

CRM organization
Profit
performance

Knowledge Management

CRM based Technology

Source: Researcher construct

20
CHAPTER THREE

3. RESEARCH METHODOLOGY

3.1. Research Design and Approach

In order to answer the research questions and achieve the stated objectives, the study was used a
combination of descriptive and casual research designs. As it is clearly indicated in chapter one
the first two research questions are all about examining the CRM practices and profit
performance. Therefore, in order to analyze the existing situation under consideration, descriptive
research design was employed. On the other hand, since the remaining research questions are
designs to deal with the effect of CRM on profit performance, the type of research employed was
casual in type. Causal research is designed to collect raw data and create data structures and
information that can allow the decision maker or researcher to model cause-and effect
relationships between two or more decision variables (Hair et al., 1998).

The study employed both qualitative and quantitative data. The quantitative data was collected
to find out the practice of CRM and the effect it would have on profit performance of the bank.
The qualitative data was collected and analyzed in order to elaborate the quantitative results
obtained in the analysis. The qualitative data was collected through interview whereas quantitative
data are the objective items which were collected through questionnaires. The research also used
a cross sectional survey because the data was collected at one point in a time to compare the
effect of customer relationship management on profit performance of the case bank. Cross
sectional design is a study in which various segments of population are sampled at a single point
in a time (Zikmend, 2003).

3.2. Study Population

Development bank of Ethiopia currently has110 branches in Ethiopia including districts and head
office. All branches of the bank are not on the same level in all aspects of the bank operation. On
the bases of loan limitation, type of bank services and number of employees from higher level to
lower level; the bank is classified as head office (corporate level), Districts and under each
districts
21
there are different branches of the bank which are graded as A, B and C branches. Thus, in the
current study the populations include employees of ten district offices and head office. This is
done from the fact that district and corporate levels workers have relevant information related to
the research input. Therefore, the total populations of the bank in the study area (10 districts and
head office) are 670 employees.

3.3. Sampling method and Sample size

The total populations of t h e study areas or head office and districts of the bank are 670
employees. But since it is very expensive in terms of money and time to collect data from all these
employees
In order to calculate the necessary minimum sample size, enabling valid assessments of the
population, the following formula is used: - n = t2 x p (1-p)/m2
Description:

n = required sample size

t = confidence level at 95% (standard value of 1.96)

p = estimated prevalence of malnutrition in the project area

m = margin of error at 5% (standard value of 0.05)

Based on this calculation the required minimum recommended sample size is 245 respondents.
The following paragraphs will give insight in the data collection instruments that were used to
gather data from the respondents.

3.4. Data Type and Source

Regarding the source of data, the study was used both primary and secondary source. Primary
sources were the sampled employees in the bank working at head office and ten districts. Here,
the relevance of the primary source in the study is to measure their perception level regarding the

Practice of CRM and its effect on profit performance of the bank. Secondary data was collected
from the organization’s brochures, documents and annual report of the bank to get the necessary
input for the study.

22
3.5. Data Collection Instruments

The main tool used for data collection was the questionnaire. A questionnaire is a formalized set
of questions for obtaining information from respondents that translate the researcher’s information
needs into a set of specific questions that respondents are willing and able to answer. In this study
with a certain modification the popular five scale standard questionnaires prepared by
Swaminathan (2004) was used For the purpose of data collection; the researcher was used closed-
ended questionnaires and structured interviews. Closed-ended questionnaires were prepared by
considering customer relationship management dimensions and banks profit performance.

3.6. Data Collection Procedure

A self-administered was used to gather data from employees. The researcher was formally
requested permission from the bank for the study. Then after getting permission, the researcher
was conducted distribution and collection of questionnaires and interviewing of the sampled
population per the schedule. The tools used to collect the data from the respondents were
questionnaires. Since the district offices are geographically dispersed, except for Addis Ababa
district and Head office, both the distribution and collection of questionnaires were conducted
through the bank internal network.

3.7. Data Processing and Analysis

3.7.1. Data Processing

After collecting data from primary sources it was appropriately checked. In addition to that in-
house editing was made by the researcher to detect errors committed by respondents during
completing the questionnaires. Then the edited data was coded to enable for analysis using
Statistical Packages for the Social Science (SPSS) version 21.

3.7.2. Data Analysis

In the study both qualitative and quantitative methods of data analysis techniques were employed.
Analysis of data in this research was done by using statistical tools like frequency, mean, standard
deviation, correlation and multiple regressions. A descriptive analysis was also suggested for
23
demographic factors such as gender, age, marital status, educational level, and for how long has
been the employees served in the bank.

3.7.3. Ethical consideration

In this research participants of the research deserve to be safe, respect and dignity, volunteer to
respond, protection of privacy and full consent of data should be obtained. In other way, adequate
level of research data should be ensured, deception and exaggeration about aims and objectives of
the research should be avoided. Any type of communication related to research should be done
honestly and transparency.

24
 CHAPTER FOUR

4. DATA ANALYSIS, PERESENTATION AND INTERPRETATION

4.1. Introduction

The chapter deals with presentation and discussion of the statistical result of both the descriptive
and inferential statistics.

Descriptive statistics stand for the conversion of raw data into useful information, which can be
interpreted to explain a group of dimensions. They represent one of the most important early
stages of statistical data analysis. This form of statistical analysis can include a number of outputs,
including frequencies, %ages, means and standard deviation (Pallant, 2007).

Inferential statistics is a part of statistics that is concerned with the analysis, interpretation and
drawing conclusion about the source of the data (Dejene, 2011).

4.2 Response rate on Questionnaire

For this study a questionnaire with 35 close-ended items were used to collect information from
employees of the bank regarding the independent variables (Key Customer Focus, CRM
organization, Customer Knowledge Management and CRM based Technology) and the dependent
variable Profit performance.
TABLE 4.1: NUMBER OF DISTRIBUTED, NUMBER OF COLLECTED AND RESPONSE RATE

Sr. No. Districts Number of distributed Questionnaire Number of retrieved and Response Rate in (%)
sound lists
1 Head office 50 49 98%
2 Bahirdar 20 20 100%
3 Jimma 20 20 95%
4 Hawassa 20 20 100%
5 Addis Abba 20 20 100%
6 Mekelle 20 20 100%
7 Dessie 20 19 95%
8 Gonder 20 19 95%

25
9 Diredawa 20 19 95%
10 Adama 20 19 95%
11 Nekemete 20 20 100%
Total 250 245 98%
Source: Own Survey (June, 2022) n=245

26
As shown in the Table 4.1 below, a total of 24 questionnaires were distributed to employees of the
ten districts and head office level. Of the total dispatched questionnaires, 245(98%) were filled up
and returned. This clearly indicated that employees of all branches were very cooperative to fill
the questionnaires.
4.2.1 Demographic Characteristics of the Respondent

TABLE 4.2: FREQUENCY AND %AGE OF RESPONDENTS’ DEMOGRAPHIC

CHARACTERISTICS 1

No Demographic Classification Frequency %age

N=(245)
1 Sex Male 210 85.7%
Female 35 14.3%
2 Age 25 years or less 54 22%
Between 26-30 years 125 51%
Between 31 -40 years 55 22.5%
Between 41-50 years 5 2%
Above 50 years 6 2.5%
3 Marital status Single 160 65%
Married 85 35%
Divorced - -
Widow - -
4 Education level Certificate - -
Diploma - -
Degree 190 77%
Masters and above 55 23%
5 Experience 5 years or less 135 55%
From 6-10 years 92 38%
From 11-15 years 10 4%
16 years & more 8 3%

Source: own survey (July 2022) n=245

27
Table 4.2 above shows the gender of the respondents. As we can see from the table, 210(85.7%)
of the respondents were male and the remaining 35 (13.3%) of them were females this shows
gender distribution in the sample branches were not equal. Regarding the age of the respondents,
Most of the age groups 125 (51%) was found between 26– 30 years. The age range of 25 years or
less 54 (22%) of the total respondents while 55 (22.5%), 5 (2%) and 6 (2.5%) of the
respondents found under the age range of 31– 40 years, 41-50 years and 51 and above,
respectively. From this we can observe that in the sampled branches employees found in their
productive age.
In relation to marital status, from the total respondents 160 (65%) were not engaged in marriage.
Whereas 85 (35%) of them were engaged in marriage. As far as the educational qualification of
employees is concerned, the above Table 4.2 shows that from the total respondents majority, 190
(77%) of the respondents were BA degree holders and 55(23%) of the respondents were masters
holder. The last demographic variable was work experience. Again table 4.2 indicates that the
majority, 135(55%) of the respondents had been working in the bank for the last 5 or less years.
Similarly, 92 (38%) and 10 (4%) of them are working in the bank for the year between 6 - 10
and 11 to 15 years, respectively. In the same situation, 8(3%) individuals indicated they have
been working in the bank more than 16 years. This indicates the employees of the bank are
young in the organization.

4.3 Descriptive Statistics Analysis of CRM Dimensions

4.3.1. Perception Level of Employees on CRM Dimensions and Profit Performance

In this section of the analysis, the employees response were used to assess their perception level
on CRM dimension and profit performance of the head office and districts of DBE. From the
collected data, mean scores and standard deviations were calculated for all Five-Point Likert Scale
items. Then to assess the employees perception level of on each CRM dimensions and profit
performance descriptive statistics, mean and standard deviation were considered. According to Al-
Sayaad, Rabea, and Samrah (2006) the calculated mean score of an item were classified in ranges
to fit the five-scaled Likert’s measure of responses (strongly disagree, disagree, neutral, agree, and
strongly agree) as shown in the Table 4.3 below. Hence, in this study the perceptions of
employees on each item for all variables were labeled according to its calculated mean score result

28
and the classification presented in the following table
TABLE 4.3: MEAN SCORE RANGE FOR FIVE-SCALE LIKERT’S RESPONSE 1

Mean Response

From 1.00 to less than 1.80 Strongly Disagree

From 1.80 to less than 2.60 Disagree
Neutral
From 2.60 to less than 3.40
From 3.40 to less than 4.20 Agree
From 4.20 to less than 5.00 Strongly Agree

Source: Al-Sayaad et al. (2022)

4.3.2. Employees’ Perception on Key Customer Focuses Dimension

Key customers are the identified customers that provide more values for company through
providing more profits, active long-term relationships, and powerful leadership for the bank
(Akroush et al., 2011).
TABLE 4.4: MEAN AND STANDARD DEVIATION RESULTS OF KEY CUSTOMER FOCUSES DIMENSION 1
Questionnaires’ Items N Mean Std. Over all
Deviation Response
Our organization works with key 245 2.6475 1.4902 Neutral
customers to customize its
The bank Sets clear objectives and 245 3.0124 1.07036 Neutral
strategies for key customers
The bank makes coordinated efforts to 245 2.7303 .96495 Neutral
modify a service for key customers
The bank is Continuously delivering 245 2.5477 1.05614 Disagree
superior and added value for key
customers
The bank is meeting and ensuring key 245 2.2905 1.24443 Disagree
customer needs
All employees in our bank treat 245 2.1245 1.22179 Disagree
customers with special care.
Valid N (listwise) 245
Source: Own Survey (June, 2022) n=245

29
As shown in Table 4.4 above, key customer focus dimension was assessed by six measurement
items. According to the mean score of the items that describes key customer focus dimension of
CRM, the highest mean score was attained by the item included to determine the level how the
bank Sets clear objectives and strategies for key customers with (mean = 3.0124& standard
deviation = 1.07036) and the least mean was scored by an item stated to analyze the all
employees in the bank treat customers with special care with (mean = 2.1245, standard deviation
=1.22179). As the statistical results on Table 4.4 above depicts, employees disagree with three
items of key customer focus (Continuously delivering superior and added value for key
customers, meeting and ensuring key customer needs and treating customers with special care)
whereas neutral with the reaming three items of key customer focus. This indicates that even
though, Key customer focus is one of the most important dimensions of customer relationship
management that involves an overall customer-centric focus and continuously delivering
superior and added value through customized offers to the key customers, the practice of the
bank in this regard is not well organized to meet needs of its customers. On the other side,
information collected from interviewing team managers and directors of the corporate levels of
the bank has relaxed the situation related to key customers. According to them, since issue of
development is top agendas of the government, for this particular case Ethiopian government by
itself has its own strategy to let both foreign and domestic investors to be engaged in the
investment activities by setting priority areas of investment. However, their response accepted
the existence of some weakness from the bank side in addressing customers request related to
loan and other related facilities.

4.3.3 Employees’ Perception on CRM Organization Dimension.

Organizational structures that support cross functional communication and coordination, as well
as rewards and training programs designed around customers‟ needs resulted in higher
relationship quality, which in turn positively influenced organizational performance (Chang,
2007). If the organization around CRM is well structured, organizations can ensure the required
customer - oriented behaviors of their employees by providing staff with the modern tools and
technology, customer-satisfaction tracking and complaints management systems, inspirational
leadership, and appropriate rewards systems (Mechinda & Patterson, 2011).

30
TABLE 4.5: MEAN AND STANDARD DEVIATION RESULTS OF CRM ORGANIZATION DIMENSION 1

N Mean Std. Deviation Over all

Response
The bank has Good organizational structure that attract 245 2.3402 .95764 Disagree
customers
The bank is committed to utilize wide organizational 245 3.2324 .99370 Neutral
resources
The bank adopted flexible organizational structure and 245 2.7344 .95089 Neutral
arrangement
There is a coordination for focused customer services 245 2.3195 .97553 Disagree
Our Bank structure is carefully designed around our 245 2.2863 1.12035 Disagree
customers.
There is a cross-functional team organized to coordinate 245 2.9793 1.10848 Neutral
its services
The bank has good organizational image 245 2.2656 1.15290 Disagree
Valid N (listwise) 245
Source:-own survey (June 2022)
As the statistical results on Table 4.5 above depicts, the mean results indicates employee’s
Perception on CRM Organization. The employees‟ highest agreement level was attached to the
Item stated as" the bank Committed to utilize wide organizational resources" with (mean =
3.2324& standard deviation = .99370). The lowest agreement was revealed for the item the bank
has good organizational image (mean = 2.2656, standard deviation = 1.15290). However, the
level of agreement in all of the items falls under "Disagree and neutral". Information obtained
while interviewing team managers and directors indicates that, the bank started its reformation by
targeting an extensive branch expansion program to change the overall organizational setup of the
bank.

4.3.4 Employees’ Perception on Customer Knowledge Management Dimension.

Regarding Knowledge management, in order to develop highly personalized offerings, business

organizations have to take into account that the success of relationship management is heavily
dependent on collecting and analyzing customers‟ information.

31
 TABLE 4.6: MEAN & STANDARD DEVIATION RESULTS OF CUSTOMER KNOWLEDGE
MANAGEMENT DIMENSION 1

Questionnaires’ Items N Mean Std. Over all

Deviation Response
The bank enables ongoing and two-way 245 3.4606 1.02444 Agree
communication
There is good management practice that would 245 1.8340 .96902 Disagree
create customers to have good
expectation
Customer-centric functions are staffed with well- 245 3.1701 .94874 Neutral
Trained and motivated employees.
The bank manages all customer communications 245 2.1950 1.00381 Disagree
so that they are

customer.
There is a successful dissemination of 245 2.8672 1.01191 Neutral
knowledge management system
The management has the ability to transform 245 2.0954 1.26294 Disagree
locally acquired new Knowledge into
organization-level
The management has knowledge.
the ability to trial customer 245 1.9461 92713 Disagree
behavior
Workers in the bank have detail knowledge of 245 3.5477 1.01592 Agree
every procedure
The staff members of the bank have the ability to 245 3.6183 78761 Agree
interact with others
Workers have the ability to handle customers 245 2.3610 1.17543 Disagree
and to solve their complaints
Valid N (listwise) 245

Source: Own Survey (June, 2022) N =245

As it is shown in the Table 4.6 above, in this section of the questionnaire the mean result indicates
employee’s perception on Customer knowledge management. From the perception of employees,
the highest agreement level was related to the item stated as “The staff members of the bank have
the ability to interact and work well with others” with (mean = 3.6183& standard deviation =
32
 .78761). The lowest agreement was also revealed from the item which was stated as there is good
management practice that would create customers to have good expectation (mean = 1.8340&
standard deviation = .96902). However, the level of agreement in majority of the items falls
under "Disagree and neutral". This implies that, the practice of customer knowledge management
was found low in the bank. On the other hand information gathered through interview indicates
that, recently the bank has been making a considerable improvement in collecting and analyzing
customer information to evaluate competitiveness of the services that the bank delivers to its
customers by mentioning the currently effort that the bank made to facilitate knowledge
management by adopting ERP (Enterprise Resource Planning) System.

4.3.5. Employees’ Perception on CRM based technology Dimension

In the current globalized world sophisticated technologies are simplifying the process undertaken
to establish one-to-one communications, analyze customer-value, integrate customer information
system, automate processes and customize services (Ghodeswar, 2001).

TABLE 4.7: MEAN AND STANDARD DEVIATION RESULTS OF CRM BASED

TECHNOLOGY 1

Questionnaires’ Items N Mean Std. Over all Response

Deviation
My Bank maintains a comprehensive database 245 2.5145 .88081 Disagree
of our customers.
My Bank has the right hardware and software 244 3.0792 1.12688 Neutral
to serve our customers.
The bank has assigned the right technical 245 2.7884 1.30736 Neutral
Personnel to provide technical support for the
utilization of computer technology in building
The bank provides Information Technology 245 3.5062 1.14426 Agree
facilities, like computer aided design for
managing customer
The bank has relationships
employed a system of 245 1.3527 .84907 Strongly
Disseminating information to customers through Disagree
e-mail to reduce customer waiting time.
Our staffs give much attention and prompt 245 1.4274 .76643 Strongly
Services to our customers irrespective of their status Disagree
using online media. 33
Data warehousing and data mining have 245 3.0083 .94424 Neutral
Already been implemented.
We communicate with our customers with 245 3.4938 1.03731 Agree
Telephones to meet their urgent requests and needs.
Valid N (list wise) 244

Source: Own Survey (June, 2022) n=245

As it can be seen in the Table 4.7 above, for CRM based technology aspect of customer
relationship management the highest mean value from employees perception was attached to the
item to addressed. The bank provides Information Technology facilities, like computer aided
design for

Managing customer relationships (mean=3.5062and standard deviation =1.14426). An item with

the least mean value was related to the question referring to the bank has employed a system of
disseminating information to customers through e-mail to reduce customer waiting time
(mean=1.3527and standard deviation=.84907). But majority of the items were falls under
"Strongly Disagree, Disagree and neutral"

Similarly, information was gathered from an interview conducted with managers. Basically they
expressed their perception in this regard by pointing the strong effort that the bank has made to
change the old system to the current new technology that connected each branches throughout the
country like T-24 system.

4.3.6. Employees’ Perception on Profit performance of the bank

The purpose of CRM is to efficiently and effectively increase the acquisition and retention of
profitable customers by selectively initiating building and maintaining appropriate relationships
with them.

TABLE 4.8 MEAN AND STANDARD DEVIATION RESULTS OF PROFIT PERFORMANCE 1

Std. Over all

Questionnaires’ Items N Mean Deviation Response
The practice of giving customized service for 245 2.5643 .83480 Disagree
its customers contributed a lot for the bank’s
profitability.
34
The bank's districts and branches are 245 2.1826 .89435 Disagree
appropriately located around ideal or
convenient places for its customer to sustaining
In line with its objective, the bank is becoming 245 1.7593 1.11811 Strongly
highly profitable in the industry Disagree
The technology which is applied in the bank is 245 3.0830 .94503 Neutral
appropriate so that the bank is improving its
profit performance.
Valid N (listwise) 245

Source: Own Survey (June, 2022)) n=245

As the statistical results on Table 4.8 above depicts, the highest mean of items in this section was
attached to the item that the technology which is applied in the bank is appropriate so that the bank
is improving its profit performance (mean=3.0830and standard deviation =.94503). On the other
hand the least mean was attached to an item “In line with its objective, the bank is becoming
highly profitable in the industry with (mean=1.7593and has a standard deviation =1.11811). On
the other hand all items employees‟ perception level revealed that they disagree. With the banks
bank profit. From this ground it is possible to put the situation as the bank's profit performance is
low.

In this regard information obtained from interview showed that the bank didn’t run only for profit
rather it follow the government policy to finance the project categorized as priority by the
government. Thus, the banks profit performance was not an excellent one.

4.4. Results and Discussion of Inferential Statistics

In this study, to process the correlation analysis, data from the scale typed questionnaires were
entered in to the SPSS software version 21. Pearson correlation coefficient is used to specify the
strength and the direction of the relationship between the independent variable (Key Customer
Focus, CRM Organization, Customer Knowledge management and CRM based technology) and
the dependent variable i.e. profit Performance. The results of the correlation between these
variables are shown in Table 4.9 below.

35
 TABLE 4.9: CORRELATIONS BETWEEN CUSTOMER RELATIONSHIP MANAGEMENT AND
PROFIT PERFORMANCE 1

Profit Performance
No. Items Degree of the Level of Significance
correlation significance
1. Key customer focus .0.730** 0.000 Significant
2. CRM organization .0.840** 0.000 Significant
3. Customer knowledge .724** 0.000 Significant
4. CRM based Technology
management .803** 0.000 Significant

Correlation is significant at the 0.00 level (2-tailed)

Source: Own Survey (J3.8une, 2022) n=245

As it is indicated in the Table 4.9 below, generally there is a positive, strong and statistically
significant correlation between CRM dimensions and profit performance at 1% level of
significance (P<0.000) which signifies the effect of CRM on the profit performance of DBE.

To be specific for each dimension, from presented correlation matrix table again we can observe
that there is a positive, strong and statistically significant correlation between CRM dimensions

(Key customer focus, CRM organization, knowledge management and CRM based technology)
and profit performance, as the correlation coefficient between each dimensions and profit
performance described as 0.730, 0.840, 0.724 and 0.803 respectively and in all cases at 1%
significance level (p < 0.000).

4.4.1. Discussion of the Correlation Results and Hypothesis Testing Results

The findings of this research supported the earlier works on this subject matter. The hypothesis
was to check for a significant relationship between all the dimensions of CRM and bank’s profit
performance. The correlation results presented in Table 4.9 above indicates that all of the CRM
dimensions are correlated with bank’s profit performance at 1 % level of significance. The result
of correlation analysis of this study was consistent with the findings of (Sayed, 2011;
Ramezanpour et.al., 2013; Namjoyan ,2013; Mohammed et al.,2013; and Gebeyehu, 2014) in
which all CRM dimensions significantly and positively related to market and Profit performance.
36
By taking the strength of their relationship, the finding further indicates that the CRM
organization dimension has highest correlation with profit performance, followed by CRM
technology and Key customer focus. Comparatively the least relationship was found between
Customer knowledge management and profit performance.

The correlation coefficient between CRM organization dimension and profit performance is
placed first from all correlation results of CRM dimensions with (r=0.840; p<0.000). This means
if the bank improves the overall situation of its CRM organization dimension, the bank’s profit
performance will be improved. From this it is possible to say that the extent of CRM organization
dimension can determine the profit performance of the banks.
According to Namjoyan (2013), development of every organization in information technology
area improves its capability in collecting, saving, analyzing, and sharing knowledge about
customer. This leads to increase the organization’s capability in responding the customers‟ needs
and maintaining them. In line with this, Mukerjee & Singh (2009), also said that technology-based
CRM leads to information integration and sharing that influences smooth and efficient firm-
customer interactions, appropriate analysis of customer data and customization of response.
Having said this, the correlation coefficient (r=0.803, P< 0.000) of CRM based technology shows
that if the bank make an improvement in the technologies that customers in the industry need,
there would occur a Significant improvement in the profit performance of the bank through its
effect in customer acquisition, attraction, and retention. Therefore, the result of this finding is
consistent with the finding of (Namjoyan, 2013 and Mukerjee& Singh, 2009).
It is pretty clear that key customers are ones who are more importance for organization from
strategically viewpoint and are more profitable (Ryals & Knox, 2001).The third dimension of
CRM which has a correlation result (r= 0.730 , p<0.000) is Key customer focus. In this regard the
correlation result shows that there are strong positive relationships between key customers focus
and profit performance at 1 % level of significance .i.e. if the banks change its strategies to
manage its key customers, the change will bring a change in profit performance of the bank.
Finally CRM organization refers to acquiring, sharing, and developing the customer knowledge
among employees for making profit to the organization and customers. In order to improve the
organizational efficiency and effectiveness, insure from delivering desirable products and services
to the customers and acquire their satisfaction, it is necessary to manage the Customer knowledge
management. The relatively least correlation result (r=0.724, p<0.000) was realized between
37
Customer knowledge management and profit performance. In this case, although relatively it is
weak to the other correlation results, the result shows that there is a positive, strong and significant
relationship between Customer knowledge management and profit performance. This is to mean
that if the bank adopted a mechanism to handle Customer knowledge management, it is definite
that its profit performance also changes in the same direction. The following table 4.10 shows the
hypotheses summary of the CRM dimension (Key Customer Focus, CRM Organization, Customer

Knowledge management and CRM based technology) has a correlation with profit performance.
TABLE 4.10.SUMMARY OF HYPOTHESIS TESTING OF CORRELATION 1

Hypothesis Tool Outcome

H1: Key customer focus has correlation with
Correlated
profit performance
Correlation
H2: CRM organization has correlation with profit Correlation Correlated
performance

H3: Customer knowledge management has

Correlation Correlated
correlation with profit performance
H4: Technology based CRM has correlation Correlation Correlated
with profit performance

Source: Own Survey (June, 2022) n=245

4.4.2. Regression Analysis and Hypothesis Testing Results

The regression analysis was conducted to know by how much the independent variable explains
the dependent variable. In this study, regression was employed to examine the effect of the
independent CRM dimensions such as key customer focus, CRM organization, Customer
Knowledge management and CRM based technology on dependent variable profit performance.
To have good results, the independent variables should not be highly correlated with each other.
In multiple regression analysis, co linearity refers to the correlation among the independent
variables (Pallant, 2007).

38
 Therefore, to make sure that there is low co linearity, the values of Tolerance and VIF (Variance
Inflation Factor) should be checked. According to Pall ant (2007), tolerance indicates to what
extent the independent variables do not explain much of the variability of a specified independent
variable and the value should not be small (more than 0.10) to indicate the absence of co linearity.
In addition to that, VIF, the inverse of tolerance value, should have a value of less than 10 to avoid
any concerns of co linearity (Pallant, 2007). Hence, the values in the Table 4.11 below indicate
low co linearity because all Tolerance values are above 0.1 and all VIF values are less than 10.
Therefore, these tests reflect that the variables used in the study are free from multi collinearity.
TABLE 4 . 1 1 : MULTIPLE R E G R E S S I O N ANALYSIS R E S U L T OF CRM AND P R O F I T
PERFORMANCE 1

Mode R R Adjusted Std. Change Statistics

l Square R Error of
R F df1 df2 Sig. F
Square the
Square Chang Change
Estimate
e

1 0.906 0.821 0.818 0.28015 0.821 270.74 4 236 .000

1

A. Predictors: (Constant), Crm Technology, Key Customer focus, Knowledge Management,

Crm organization
Source: Own Survey (June, 2020) N=245

The results of regression analysis presented in Table 4.12, indicate positive and significant
relationship between the CRM dimensions and profit performance. This means the predictive
variables (independent variables) such as key customer focus, CRM organization, Knowledge
management and CRM based technology jointly determine the dependent variable profit
performance. The adjusted R-Square (R2 = 0.818) shows the explanatory power of all variables
involved in the study. Hence key customer focus, CRM organization, Knowledge management
and CRM based technology jointly determine (explain) 81.8% of the variance in profit
performance.
Whereas 18.2% of the profit performance of DBE was explained by the variables which were
not included in the study.

39
 TABLE 4.12: BETA WEIGHTS OF PREDICTOR VARIABLES IN THE TEST 1

Unstandardized Standar t Sig. 95.0%

Coefficients dized Confidence
Coeffic Interval for B

B Std. Error ients

Beta Lower Upper
Bound Bound
(Constant) .-672 .107 -6.294 .000 -.883 .462

Key Customer Focus .197 .029 .275 6.711 .000 .139 .255
CRM Organization .317 .062 .282 5.119 .000 .195 .438
Customer Knowledge .216 .046 .191 4.665 .000 .125 .307
Management
CRM Based Technology .437 .072 .305 6.076 .000 .295 .578

A. Dependent Variable: Profit Performance

The values of the unstandardized Beta Coefficients (β) indicate the effects of each independent
variable on dependent variable. Furthermore, the values of the unstandardized Beta Coefficients
in the Beta column of the Table 4.13 above indicate which independent variable (CRM
dimensions) makes the strongest contribution to explain the dependent variable (Profit
Performance), when the variance explained by all other independent variables in the model is
controlled. The t value and the sig (p) value indicate whether the independent variable is
significantly contributing to the prediction of the dependent variable.

The study’s hypothesis testing was made based on β, t, and P values. Hence using those
coefficient results, the proposed hypotheses for this study were tested as follows.
Hypothesis 1: Key c u s t o m e r f o c u s h a s positive and significant influence on
profit performance. The results of multiple regressions, as presented in Table 4.13 above,
revealed that key customer focus had a positive and significant effect on profit performance of the
bank with (β = 0.197, t = 6.711 & p <0.000 ). Thus, the proposed hypothesis was accepted. The
results of multiple regressions, as presented in Table 4.13 above, revealed that CRM
organization had a positive and significant effect on customer satisfaction with values (β=0.317, t
= 5.119, p < 0 .000). Thus, the proposed hypothesis was accepted. Here also the beta coefficient
implies that if the bank changes its CRM organization by one %, by keeping the other variables
40
constant its profit performance would increase by 31.7%. Therefore, CRM organization had a
positive and significant effect on profit performance.
Hypothesis 3: Customer knowledge management has positive and significant influence on
profit performance.
The results of multiple regressions, as presented in Table 4.13 above, revealed that Knowledge
management had a positive and significant effect on market performance with values ( β = 0.216,
t = 4.665, p =0.000). The results clearly indicated that the proposed hypothesis was accepted. This
implies that assuming other variables constant, a one % change in the customer knowledge
management practice of the bank results in a 21.6% increase in the profit performance of the bank.
Therefore, customer knowledge management had a positive and significant effect on profit
performance.
Hypothesis 4: Technology based CRM has positive and significant influence on profit
Performance
The results of multiple regressions, as presented in Table 4.13 above, revealed that CRM based
technology had a positive and significant effect on profit performance with values (β = 0. 437, t =
6.076, p <0.000). Thus, proposed hypothesis was accepted. In this case the beta coefficient
describe that keeping the other variables constant , in this model a one % change in the overall
CRM technology, the consequence would be an increase in profit performance by 43.7 %.
Generally the results of multiple regression analysis supported the four hypotheses
constructed to test a positive and significant influence that each CRM dimensions have on
profit performance. This finding is also supported findings of by (Gebeyehu, 2014;
Namjoyan, 2013; Ramezanpour et.al, 2013; Sayed, 2011) in which CRM dimensions have
a positive and significant influence on profit and market performance in the banks.
TABLE 4.13.SUMMARY OF HYPOTHESIS TESTING 1

Hypothesis Tool Outcome

H1 : Key customer focus has positive and significant Multiple Regression Accepted
influence on profit performance
H 2 CRM organization has positive and significant Multiple Regression Accepted
Influence on profit performance.
H3: Customer knowledge management has positive and Multiple Regression Accepted
significant influence on profit performance

41
H4: Technology based CRM has positive and significant Multiple Regression Accepted
influence on profit performance
Source: from data

42
CHAPTER FIVE

5. SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Introduction

This chapter deals with the summary of major findings of the study and conclusions drawn from
the analysis made. Furthermore, based on the findings of the study possible recommendations are
made.

5.2. Summary of Major Findings

The main purpose of this study is to investigate the effect of customer relationship management
on profit performance in the selected districts and head office level of Development Bank of
Ethiopia. To examine the effect of CRM on profit performance, the specific objectives were :
examining the perceptions of employees towards CRM in the case bank; assessing the firm's profit
performance; analyzing the relationship between dimensions of CRM (key customer focus,
knowledge management, technology based CRM and CRM organizations) and profit performance
and to identify the relative influence of CRM dimensions (key customer focus, knowledge
management, CRM based technology and CRM organizations) on profit performance of the case
bank. Before going to the main analysis of the study, a reliability test was administered to check
whether the questionnaire is reliable or not. In this regard all the quaternaries were reliable and
acceptable with Cronbach's Alpha result of 0.913 values. Regarding employee’s perception
towards CRM dimensions, generally in the bank the practice of customer relationship
management was low. Moreover, the perception of employees towards the bank's profit
performance was not satisfied.

In addition the result of correlation analysis was made. In this regard all the independent variables
(key customer focus, CRM organization, customer knowledge management and CRM based
technology) are positively and significantly correlated with the dependent variable (profit

43
Performance) (P <0.000). The highest correlation is attached to CRM organization (r= 0.840),
followed by CRM based technology (r=0.803), key customer focus (r=0. 730) and customer
knowledge management (r=0.724).

Finally, a multiple regression analysis was conducted to test the hypothesis. In this regard the result
shows that the model tested is significant (p<0.000) with the adjusted R square 0.818. This value
indicates that 81.8 % of variance in profit performance is attributed to the four independent variables
entered into the regression. The remaining 18.2 % of the variance in profit performance may attribute
to other factors. Regarding the hypothesis all the beta coefficients were found significant to all
hypotheses in the study are accepted. Moreover, the finding revealed that, CRM based technology is
found being the most dominant dimension in determining the variation in profit performance of the
bank.

5.3. Conclusion

Prior empirical work on CRM implies that in building profitable relationship, customer relationship
management plays a key role. The present research seeks to investigate the effects of CRM on profit
performance of Development Bank of Ethiopia. Thus, on the base of the finding the following
conclusions were made. The perception of employees towards CRM practice and profit performance
of the bank, the findings of the study practically showed that the practices of each CRM dimensions
(key customer focus, CRM organization, customer knowledge management and CRM based
technology) and the bank's profit performance in terms of increasing profitability was perceived as
low. As the finding of correlation analyses confirmed, there is also a strong, positive and significant
relationship between customer relationship management dimensions (key customer focus, CRM
organization, customer knowledge management and CRM based technology) and profit performance.
Similarly, from multiple regression analysis result that variability in profit performance is resulted
from the variability in CRM dimensions (key customer focus, CRM organization, customer
knowledge management and CRM based Technology). Hence, from this the study concludes that the
bank's profit performance is determined by the emphasis that the bank gives to each dimensions of
customer relationship management.
Also the relative influence of an individual component of customer relationship management on profit
performance, the result of multiple regression coefficient shows that CRM based technology is the
most dominant dimension in determining the profit performance of the bank.

44
Finally, the results of this study revealed that customer relationship management implementation
influences profit performance. Hence, it can be concluded that profit performance in the sampled
district was reduced due to low practice of customer relationship management.

5.4. Recommendation and Future Research Implications

Based on the research findings the following recommendations are provided in order to upgrade level
of customer relationship management practice and improve profit performance of the bank. These
include:

 The bank need to identify, differentiate and interact customers who are more important to the bank
and should start providing customized service for those identified key customers.
 The bank's management need to examine the existing organizational structure, processes and
methods in which service is offered and where necessary changes should made which can improve
the service for customers and build long term relationship.
 In order to improve the level of customer knowledge management, the management of the bank
needs to incorporate CRM concepts in all the bank's policies and plans.
 The bank need to improve the level of its CRM based technologies to continuous interaction with
its customer. This may require adopting new methods and techniques in communication such as
the use of email, SMS and other communication devises.
 In addition, to improving CRM practices, the bank is recommended to update itself to dynamic
changes in the demand and expectation of customers in the industry.
 As it has been mentioned earlier, it is not possible to generalize this finding for all branches of the
bank as the samples of this study cannot represent all. Hence, further studies which consider all
branches of the bank, the banking industry, and other industries are recommended for generalizing
the findings.

45
 Reference

Akroush, N., Dahiyat, E., Gharaibeh, S., & Abu-Lail, N. (2011), Customer relationship management
implementation. International Journal of Commerce and Management, 21(2), 158-191.

Alemayehu, G. (2007). The Structure and Performance of Ethiopia‟s Financial Sector in the pre- and
post-reform period with a special focus on banking. World institute of development economics
research, Research. No 2006/112

Al-Sayaad, J., Rabea, A., Samrah, A. (2006). Statistics for Economics and Administration Studies.
Jeddah: Dar Hafez.

Ampoful, A.(2012).The Effect of Customer Relationship Management (CRM) on the Profitability of

Financial, Institutions - A Case Study of Barclays Bank Limited, Takoradi Branches.

Ang, L., &Buttle, F. (2006). CRM software applications and business performance. Journal of
Database Marketing & Customer Strategy Management, 14 (1), 4-16.

Boateng, I.,(2014). Effect of Customer Relationship Management on the Performance of Banking.

Journal of Contemporary Integrative Ideas, 2(1), 13-25

Bohling, T.,Ramani, G., et al. (2006). CRM Implementation: Effectiveness issues and insights.
Journal of Service Research, 9(2),184-194.

Campbell, A. (2003). Creating customer knowledge competence: Managing customer relationship

management programs strategically. Industrial Marketing Management, 32,375–383.

Chang, H.(2007). Critical factors and benefits in the implementation of customer relationship
management. Total Quality Management, 18 (5), 483–508.

Coltman, T. (2007). Can superior CRM capabilities improve performance in banking, Journal of
Financial Services Marketing, 12(2), 102-114.

Day, G. &Bulte C. (2002). Superiority in customer relationship management: consequences for

competitive advantage and performance. Report No. 02-123.

Dejene, K.(2011). Principle and Practices of Academic Writing. Addis Ababa, Ethiopia: Mega
Publishing and Distribution.
46
Dowling, G. (2002), Customer Relationship Management In B2c Markets, Often Less Is More,
EBSCO Publishing, Volume 44.

Dutu, C. &Halmajan, H. (2011). The effect of organizational readiness on CRM and business
performance. International Journal of Computers, 1(2), 106-114.

Elkordy, M. (2014).The Impact of CRM Capability Dimensions On Organizational Performance,

European Journal of Business and Social Sciences, 2 (10), 128-146.

Fubara, B., Mguni, B. (2005). Research Methods in Management Port Harcourt, Pear Publishers
50-92.

Gashaw. D., Zemzem,A.(2014). Structure competition of Banking Industry in Ethiopia, Biritu,

177, 18-31

Gebeyehu,J. (2014) .The effect of customer relationship management on market and profit
performance, Mekele university.

Ghalandari, K.,(2012). Investigation of the Effect of Focusing on customers, Knowledge

management, organizing business processes and up-to-date technologies on establishment of
Customer Relationship Management. International Journal of Advances in Management and
Economics,2278-3369

Hair, J. F., Anderson, R. E., Tatham, R. L. & Black, W. C. (2003). Multivariate Data Analysis,
5thEd., Upper Saddle River, New Jersey: Prentice-Hall.

Kitchenham, B., &Pfleeger, S. (2002). Principles of Survey Research, Part 5: Populations and
Samples, Software Engineering Notes, 27(5) 17-20.

Kotler, P. &Armstrong, G. (2002). Principles of Marketing (9th ed.). Taipei: Tung-Hwa.

Kotler, P. and Armstrong, G. (2010) Principles of Marketing 13th edition Pearson Education, Inc.
Upper Saddle River New Jersey USA. ISBN-13:978-0-13- 700669-4/10987654321.

Mechinda, P., Patterson, P.(2011).The impact of service climate and service provider personality on
employees' customer-oriented behavior in a high-contact setting. Journal of Services Marketing,
25(2), 101 – 113.
47
Mithas, S., Krishnan, M.S., &Fornell, C. (2005). Why do customer relationship management
applications affect customer satisfaction? Journal of Marketing, 69, 20-209.

Mukerjee, K. & Singh, K. (2009), “CRM: a strategic approach”, Journal of Management Research,8 (
2), 65-82.

Namjoyan, M.,( 2013). Studying the Effects of Customer Relationship Management on the
Marketing Performance. International Journal of Academic Research in Business and Social Sciences.

Pallant, J. (2007). SPSS Survival manual: A Step by Step Guide to Data Analysis using SPSS for
Windows (3rd ed.). England: McGraw Hill.

Payne, A. and Frow, P, (2005). A Strategic Framework for Customer Relationship Management.
Journal of Marketing, (69 )167-176.
Peppers, D., Rogers, M. (2000). Managing Customer Relationships, NJ:John Wiley & Sons.

Piccoli, G., Connor, P., Capaccioli, C. & Alvarez R. (2003). Customer relationship management- a
driver for change in the structure of the U.S. lodging industry. Cornell Hotel and Restaurant
Administration Quarterly, 44(4), 61-73.

Ramezanpour, E., Nopasand,S., Sharifi, F.(2012). The Assessment of the Impact of Customer
Relationship Management (CRM) Dimensions on the Financial Performance of Banks.Technical
Journal of Engineering and Applied Sciences, 3 (S): 3799-3806, 2013

Reichheld, F., Sasser,W. (2006). Zero defections: Quality comes to services. Harvard Business
Review, 68, 105–113

Reinartz, W., Krafft, M., & Hoyer, W. D. (2004). The customer relationship management process: Its
measurement and impact on performance. Journal of Marketing Research, 41(3), 293-305.

Ryals, L. (2005). Making customers relationship management work: The measurement and
profitable management of customer relationships. Journal of Marketing.

Sayed, H.,(2011).Customer relationship management and its relationship to the marketing

Performance: International Journal of Business and Social Science 2 ,(10) 235-.

Shifera, B. (2011). The Impact of Relationship Marketing on Customer Loyalty: The Case of Bank of

48
Abyssinia, Master‟s Thesis, Addis Abeba University, Addis Abeba.

Swaminathan,S.,(2004) Customer relationship Management: its dimensions and effect on

Customer outcomes, Journal of Personal Selling & Sales Management. 24(4) 263-278.

Swift, Ronald. S (2001). Accelerating Customer Relationships Using CRM and Relationship
technologies. Upper Saddle River, NJ Prnitc Hall.

Torggle, M. (2008). The Functionality and Usage of CRM Systems. Proceedings of

WorldAcademy of Science, Engineering and Technology, 31(7), 301-309.

Uma Sekaran, (2003), Research methods for business fourth edition.

Wang,Y.&Feng,H.(2012). Customer relationship management capabilities: Measurement

antecedents and consequences. Management Decision, 50(1), 115 – 129.

Winer, R. S. (2001). A framework for customer relationship management. California Management

Review, 43(4), 89-105.

Wu, J. (2008). Customer relationship management in Practice: A case study of Hi-tech Company from
China: Service Systems and Service Management, International Conference, Sch. of Econ & Manage,
Beijing Univ. of Posts & Telecommunication., Beijing.

Zahay, D., Griffin, A. (2004).Customer learning processes, strategy selection, and Performance in
Business-to-Business service Firms. Decision Sciences, 35(2), 169-203.

49
 Appendix

Questionnaire to be filled by Employees

Part I Demographic Information

1. Sex: Male Female

2. Age: 25 years or less between 26-30 years

Between 31-40 years between 41-50 years

50 and above years

3. Marital Status:

Married single Divorced Widowed

4. Educational Level:-

Certificate Diploma Degree Masters and Above

5. Experience:-

5 years or less from 6-10 years

50
From 11-15 years 16 and above years

51
 Part. II. Please state your Level of Opinion for each given statement using the following
scale;

1=strongly disagree 2.Disagree 3.Neutral 4.Agree 5.strongly Agree

No Perception of Respondents towards the effects of Agreement scale

CRM on Profit Performance
Item 1 2 3 45
Key Customer focus
1 Our organization works with key customers to customize its offerings
2 The bank Sets clear objectives and strategies for key customers.
3 The bank makes coordinated efforts to modify a service for key
customers
4 The bank is Continuously delivering superior and added
value for key customers
5 The bank is meeting and ensuring key customer needs
6 All employees in our bank treat customers with special care.

Customer relationship management organization

7 The bank has Good organizational structure that attract customers
8 The bank is committed to utilize wide organizational resources
9 The bank adopted flexible organizational structure and arrangement
10 There is a coordination for focused customer services
11 Our Bank structure is carefully designed around our customers.
12 There is a cross-functional team organized to coordinate its services

52
13 The bank has good organizational image
Customer knowledge management
14 The bank enables ongoing and two-way communication
15 There is good management practice that would create
customers to have good expectation
16 Customer-centric functions are staffed with well-trained
and motivated employees
17 The bank manages all customer communications so that
they are consistently superior and relevant to the
customer.
18 There is a successful dissemination of knowledge
management system
19 The management has the ability to transform locally
acquired new knowledge into organization-level
knowledge
20 The management has the ability to trial customer
behavior
21 Workers in the bank have detail knowledge of every
procedure as per their duty
22 The staff members of the bank have the ability to interact
and work well with others
23 Workers have the ability to handle customers and to
solve their complaints
Customer Relation Ship management based
technology
24 My Bank maintains a comprehensive database of our
Customers.
25 My Bank has the right hardware and software to serve
our customers.

55
26 The bank has assigned the right technical personnel to
provide technical support for the utilization of computer
technology in building customer relationships
27 The bank provides Information Technology facilities,
like computer aided design for managing customer
relationships
28 The bank has employed a system of disseminating
information to customers through e-mail to reduce
customer waiting time.
29 Our staffs give much attention and prompt services to
our customers irrespective of their status using online
media.
30 Data warehousing and data mining have already been
implemented
31 We communicate with our customers with telephones to
meet their urgent requests and needs.
Profit performance in the Bank
32 The practice of giving customized service for its
customers contributed a lot for the bank’s profitability
33 The bank's districts and branches are appropriately
located around ideal or convenient places for its
customer to sustaining them and improve bank profit
34 In line with its objective, the bank is becoming highly
profitable in the industry
35 The technology which is applied in the bank is
appropriate so that the bank is improving its profit
performance.

56
PART III: Interview Questions
1. Do you think that, the bank gives more emphasizes on key customers and provides
customized services for them?

2. In your opinion, do you think that customer-centric performance standards are

established and monitored at all customer touch points to increase profit performance?

3. Do you think that, in your opinion your organization provides channels to enable
ongoing two-way communication between key customers?

4. Do you think that, customer relationship management practices helped your bank in
profit performance in terms of increasing number of customers, increasing customer
satisfaction, market share, and sales growth than before?

5. Are there any special efforts that the bank makes in relation to customers handling
and enhancing satisfaction as well as to increase its profit performance?

Thank You Again For Your Cooperation!!

57
 Appendix II
Mean Standard Deviation and level of agreement results of key customer focus
Descriptive Statistics

N Mean Std. Deviation

Our organization works with key customers to 245 2.7593 1.28134

customize its offerings 245

The bank Sets clear objectives and strategies for 3.0124 1.07036

key customers
245
The bank makes coordinated efforts to modify a 2.7303 .96495

service for key customers

245
The bank is Continuously delivering superior and 2.5477 1.05614

added value for key customers

245
The bank is meeting and ensuring key customer 2.2905 1.24443

needs 245
All employees in our bank treat customers with 2.1245 1.22179

special care. 245

Valid N (listwise)
Mean and Standard Deviation Results of CRM organization Dimension
Descriptive Statistics

N Mean Std. Deviation

The bank has Good organizational structure that 245
2.3402 .95764
attract customers
The bank is committed to utilize wide 245
3.2324 .99370
organizational resources
The bank adopted flexible organizational 245
2.7344 .95089
structure and arrangement
There is a coordination for focused customer 245
2.3195 .97553
services
Our Bank structure is carefully designed around 245
2.2863 1.12035
our customers.
There is a cross-functional team organized to 245
2.9793 1.10848
coordinate its services
The bank has good organizational image 245
2.2656 1.15290
Valid N (listwise) 245

58
 Mean and Standard Deviation Results of Customer knowledge Management
Descriptive Statistics

N Mean Std. Deviation

The bank enables ongoing and two- way 245
3.4606 1.02444
communication
There is good management practice 245 1.8340 .96902

that would create customers to have good

expectation
Customer-centric functions are staffed with 245
3.1701 .94874
well-trained and motivated
Employees.
The bank manages all customer 245
2.1950 1.00381
communications so that they are consistently
superior and relevant to

There is a successful dissemination of 245

2.8672 1.01191
knowledge management system
The management has the ability to transform 245
2.0954 1.26294
locally acquired new knowledge into
organization-level knowledge.

The management has the ability to trial 245 1.9461 .92713

customer behavior
Workers in the bank have detail knowledge of 245
3.5477 1.01592
every procedure as per their duties.

The staff members of the bank have the 245

3.6183 .78761
ability to interact and work well with others

Workers have the ability to handle customers 245

2.3610 1.17543
and to solve their complaints

Valid N (listwise) 245

59
 Mean and Standard Deviation Results of CRM based technology
Descriptive Statistics

N Mean Std. Deviation

My Bank maintains a comprehensive database of 245 2.5145 .88081

our customers.
My Bank has the right hardware and software to 244 3.0792 1.12688

serve our customers.

The bank has assigned the right technical personnel 245 2.7884 1.30736

to provide technical support for the utilization of

computer technology in building customer
relationships.
The bank provides Information Technology 245 3.5062 1.14426

facilities, like computer aided design for managing

customer
The bank has employed a system of disseminating 245 1.3527 .84907

information to customers through e-mail to reduce

customer waiting time.

Our staffs give much attention and prompt services 245 1.4274 .76643

to our customers irrespective of their status using

online

Data warehousing and data mining have already 245 3.0083 .94424

been implemented.
We communicate with our customers with 245 3.4938 1.03731

telephone s to meet their urgent requests and needs.

Valid N (listwise) 244

60
 Sample response rate of respondents on the profit performance questionnaire

1 = Strongly Disagree 2 = Disagree 3 = Neutral 4 = Agree 5 = Strongly

Agree

no Perceptions of respondents towards profit performance in the Agreement scale

bank
1 The practice of giving customized service for its customers 381 922 653 114 395
contributed a lot for the bank’s profitability.
2 The bank's districts and branches are appropriately 40 160 40 3 2
located around ideal or convenient places for its customer to
3 sustaining
In line withthem and improve
its objective, bank is
the bank profit
becoming highly 129 86 9 14 7
profitable in the industry
4 The technology which is applied in the bank is appropriate so 30 13 129 63 10
that the bank is
Mean and Standard Deviation Results of profit performance
Descriptive Statistics

N Mean Std. Deviation

The practice of giving customized service for its 245 2.5643 .83480
Customers contributed a lot for the bank’s profitability.

The bank's districts and branches are appropriately located 245 2.1826 .89435
around ideal or convenient places for its customer to
sustaining them and improve bank profit
In line with its objective, the bank is becoming highly 245 1.7593 1.11811
profitable in the industry
The technology which is applied in the bank is appropriate 245 3.0830 .94503
so that the bank is improving its profit
Performance.
Valid N (list wise) 245

61
 Correlations between customer relationship management and profit performance
Correlations

KCF CRMO CKM CRMTB PP

KCF Pearson Correlation 1 .733** .482** .512** .730**
Sig. (2-tailed) .000 .000 .000 .000
N 245 245 245 245 245
** ** **
CRMO Pearson Correlation .733 1 .633 .772 .840**
Sig. (2-tailed) .000 .000 .000 .000
N 245 245 245 245 245
CKM Pearson Correlation .482** .633** 1 .727** .724**
Sig. (2-tailed) .000 .000 .000 .000
N 245 245 245 245 245
CRMTB Pearson Correlation .512** .772** .727** 1 .803**
Sig. (2-tailed) .000 .000 .000 .000
N 245 245 245 245 245
PP Pearson Correlation ** ** ** ** 1
.730 .840 .724 .803
Sig. (2-tailed) .000 .000 .000 .000
N 245 245 245 245 245

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

Multiple Regression analysis

Descriptive Statistics

Mean Std. Deviation N

PP 2.3973 .65676 245
KCF 2.5775 .91805 245
CRMO 2.5940 .58598 245
CKM 2.7095 .58033 245
CRMTB 2.6462 .45839 245

Correlations
PP KCF CRMO CKM CRMTB
Pearson PP 1.000 .730 .840 .724 .803
Correlation KCF .730 1.000 .733 .482 .512
CRMO .840 .733 1.000 .633 .772
CKM .724 .482 .633 1.000 .727
CRMTB .803 .512 .772 .727 1.000
Sig. (1-tailed) PP . .000 .000 .000 .000
KCF .000 . .000 .000 .000

62
 CRMO .000 .000 . .000 .000
CKM .000 .000 .000 . .000
CRMTB .000 .000 .000 .000 .
N PP 245 245 245 245 245
KCF 245 245 245 245 245
CRMO 245 245 245 245 245
CKM 245 245 245 245 245
CRMTB 245 245 245 245 245

Model R R Square Cha nge Stat

Adjuste d R Std. Error of
Squar e the Estimate Change istic s
R Square

F Change df df Sig. F
1 2 Change
1 .906a .821 .818 .28 .821 270.74 4 236 .000

a. Predictors: (Constant), CRMTB, KCF, CKM, CRMO

ANOVAa

Model Sum of D Mean F Sig.

1 Regression 84.998 4 21.249 270.7 .000b

Residual 18.523 236 .078

Total 103.521 240

a. Dependent Variable: PP

b. Predictors: (Constant), CRMTB, KCF, CKM, CRMO

63
 Standar T
dized
Unstandard ized Coefficient s 95.0% Confidence Co linearity Statistics
Coeffic ig.
Interval for B
ients
Mod B Std. B et a Lower Upper Tolerance VI
el Error Bound Boun d F

1 (Constant) -.672 .107 -6.294 .000 -.883 -.462

KCF .197 .029 .275 6.711 .000 .139 .255 .451 2.218
CRMO .317 .062 .282 5.119 .000 .195 .438 .249 4.014
CKM .216 .046 .191 4.665 .000 .125 .307 .453 2.209
CRMTB .437 .072 .305 6.076 .000 .295 .578 .301 3.320

a. Dependent Variable: PP

ANOVA
Mo Sum of D Mean F Sig.
del Squares f Square
1 Regression 84.998 4 21.249 270.741 .000b
Residual 18.523 236 .078
Total 103.521 240
a. Dependent Variable: PP
b. Predictors: (Constant), CRMTB, KCF, CKM, CRMO

Standardi zed
Coeffici
Unstandardize d 95.0% Confidence Co linearity Statistics
ents
Coefficients Interval for B
S
Mo B Std. Error Bet a Lower Upper Toleranc e VI F
del
1 (Constant) -.672 .107 -6.294 .000 -.883 -.462
KCF .197 .029 .275 6.711 .000 .139 .255 .451 2.218
CRMO .317 .062 .282 5.119 .000 .195 .438 .249 4.014
CKM .216 .046 .191 4.665 .000 .125 .307 .453 2.209
CRMTB .437 .072 .305 6.076 .000 .295 .578 .301 3.320
a. Dependent Variable: PP

64