Ayda Elias

The Effect of CRM on customer loyalty
ADDIS ABABA UNIVERSITY COLLEGE OF COMMERCE
POSTGRADUATE STUDIES DEPARTMENT OF MARKETING
THE EFFECT OF CUSTOMER RELATIONSHIP

MANAGEMENT ON CUSTOMER LOTALTY
In The Case of Selected Banks in Ethiopia
By: - AYDA ELIAS SEID
ADDIS ABABA UNIVERSITY, SCHOOL OF COMMERCE DEPARTMENT OF

MARKETINGMANAGEMENT POST GRADUATE PROGRAM
JUNE, 2017
Analysis of the effect of CRM on customer loyalty; In The

Case of Selected Banks in Ethiopia
By: - Ayda Elias Seid
(GSE/0627/07)
Advisor: Mulugeta G/Medhin (PhD)
A Research Thesis Submitted to Addis Ababa University College of Commerc

Partial Fulfillment of the Requirement for Degree of Master of Arts in Marketing
Management
JUNE, 2017
ADDIS ABABA, ETHIOPIA

Analysis of the Effect of customer relationship management on
Customer Loyalty: The Case of Selected Banks in Ethiopia
By: - AYDA ELIAS SEID
APPROVED BY BOARD OF EXAMINERS
_____________ _____________ ___________

Advisor Signature Date
_____________ _____________ ___________

Examiner Signature Date
_____________ _____________ ___________

Examiner Signature Date
DECLARATION
I, Ayda Elias, hereby declare that this Master Thesis titled “The effectiveness of CRM on
Customer loyalty: The Case of Selected Banks in Ethiopia” is my original work and this study
has not been submitted for the award of any program or any other institution in Addis Ababa
university or elsewhere. I have carried out this work independently with the guidance and
support of the research advisor, Mulugeta G/Medhin (PhD). Accordingly, all sources of materials
that have been utilized in the research work have been duly acknowledged.
Declared by: Ayda Elias Seid
(MA Student researcher)
Signature: ____________________
Date: ____________________
STATEMENT OF CERTIFICATION
This is to certify that Ayda Elias Seid has carried out this thesis work title “THE
EFFECTVNESS OF CRM ON CUSTOMER LOYALTY; IN THE CASE OF SELECTED
COMMERCIAL BANKS IN ETHIOPIA” The work is original in nature and is suitable for
submission for the award of the Master of Art Degree in Marketing Management.
Signature: …………………………………………
Name of the Advisor: Mulugeta G/Medhin (PhD).

Table of Contents
ACKNOWLEDGEMENTS ............................................................................................................................................i
LIST OF ABBREVIATIONS...................................................................................... Error! Bookmark not defined.
LIST OF FIGURES ..................................................................................................................................................... iii
LIST OF TABLES........................................................................................................................................................iv
ABSTRACT ..................................................................................................................................................................v
INTRODUCTION .........................................................................................................................................................1
1.1. Back ground of the study....................................................................................................................................1
1.2 Background of the companies ............................................................................................................................. 4
1.3 Statement of the problem ....................................................................................................................................5
1.4 Research question ................................................................................................................................................6
1.5 Objective of the Study .........................................................................................................................................7
1.6 Significance of the Study ....................................................................................................................................8
1.7 Scope of the study ...............................................................................................................................................8
1.8 Definition of Terms .............................................................................................................................................9
1.9. Organization of the Study................................................................................................................................. 10
Chapter two ................................................................................................................................................................. 11
Review of related literatures ........................................................................................................................................ 11
2.1 Introduction ....................................................................................................................................................... 11
2.2 Theoretical review ............................................................................................................................................. 11
2.3 Empirical review ............................................................................................................................................... 28

2.4 Research Conceptual Model .............................................................................................................................. 31
2.5 Hypotheses ........................................................................................................................................................ 32
CHAPTER THREE ..................................................................................................................................................... 33
RESEARCH DESIGN AND METHODOLOGY ....................................................................................................... 33
3.1 Introduction ....................................................................................................................................................... 33
3.2 Research Approach ........................................................................................................................................... 33
3.3 Research Design ................................................................................................................................................ 34
3.4 Population and Sampling Techniques ............................................................................................................... 35
3.5 Data collection instruments and variables/data collection method .................................................................... 37
3.5 Methods of Presentation .................................................................................................................................... 41
3.6 Reliability and Validity ..................................................................................................................................... 41
3.7 Ethical Considerations ....................................................................................................................................... 42
CHAPTER FOUR ....................................................................................................................................................... 43
DATA PRESENTATION, ANALYSIS AND INTERPRITAION ............................................................................. 43
4.1 Introduction ....................................................................................................................................................... 43
4.2 Data screening and data clearing ....................................................................................................................... 44
4.3 Reliability test result .......................................................................................................................................... 44
4.3 Descriptive analysis........................................................................................................................................... 45
4.4 Descriptive Statistics of variables ..................................................................................................................... 50
4.5 Correlation Analysis .......................................................................................................................................... 53
4.6 Multiple Regression Analysis ........................................................................................................................... 55

4.6.1 Multi collinearity test ..................................................................................................................................... 55
4.6.2 Normality statistics .................................................................................................................................... 57
4.6.3 Regression Analysis between Independent and Dependent Variable ........................................................ 58
4.6.4 Regression for Customer Loyalty .............................................................................................................. 59
4.7 Hypothesis Tests ............................................................................................................................................... 60
CHAPTER FIVE ......................................................................................................................................................... 64
SUMMARY, CONCLUSION AND RECOMMENDATIONS .................................................................................. 64
5.1. Introduction ...................................................................................................................................................... 64
5.2. Summary of the major findings ............................................................................................................................ 64
5.3 Conclusion......................................................................................................................................................... 66
5.4. Recommendations ............................................................................................................................................ 68
5.5 Directions for Further Studies ........................................................................................................................... 69
Appendix I ....................................................................................................................................................................vi
Reference ....................................................................................................................................... vi
Appendix II Questioner................................................................................................................. xv
Appendix III .................................................................................................................................. xx
SPSS results .................................................................................................................................. xx

ACKNOWLEDGEMENTS
I would like to acknowledge everyone starting from the almighty God I say
ALLHAMDULILAH for everything and next to that, my extraordinary parents and siblings, who
has been through my every day struggle, supporting and guiding me. It is also an honor for me to
thank my advisor Mulugeta G/Medhin (PhD) for his support, great efforts, guidance and
knowledge as well as his unending patience starting from day one to the end, without such kind
of support and supervision, having this thesis in this image would have been very difficult. A
sincere appreciation and special thanks go to the respondents involved, for their kind assistance
and support throughout the data collection process of this research. A special thanks goes to the
marketing officers of Zemen bank S.c & Customer service officers in commercial bank of
Ethiopia for their time to discuss the issue with me, showing the stepping stones to the whole
research facilitate necessary data, and allowing me to conduct this research and for providing
assistance in contacting the customers especially CIB director Ato Kassahun Ayalew, for his
spared time, willingness and sincere support. Great appreciation is also extended to Eyerusalem
Ketema, who always gave a great support, care and concern in every step, supporting me
throughout the three years and especially during this thesis work.
i
LIST OF ABBREVIATIONS
ANOVA - Analysis of Variance
CBE: - Commercial Bank of Ethiopia
NBE - National Bank of Ethiopia
SPSS - Statistical Package for Social Science
VIF - Variance Inflation Factor
ZB - Zemen Bank S.c
CRM- Customer relationship management
ii
LIST OF FIGURES
Figure Conceptual Model………………………………………….31
iii
LIST OF TABLES
Table 1: Definition of Customer relationship management
Table 4.1 Reliability test for the questionnaire
Table 4.2 Summary of respondents’ gender
Table 4.3 Summary of age of respondents
Table 4.4 Educational level of the respondents
Table 4.5 Summary of occupational status of respondents
Table 4.6 Summary of Monthly income of Respondents
Table 4.7 Summary of respondents’ time length as customer of the bank
Table 4.8 Interval of Means Perception
Table 4.9 Summary of descriptive statistics between variables
Table 4.10 Correlation between independent and dependent variables
Table 4.11 Multi colinearity statistics
Table 4.12 Descriptive Statistics
Table 4.13 Model summary
Table 4.14 ANOVA of Customer Loyalty
Table 4.15Coefficients
Table 4.16 Summary of Hypothesis
iv
ABSTRACT
Globalization and technology improvements have exposed companies to a situation with tough
competition; Banking is one of the service industries characterized by high customer contact
with individually customized service solutions where customer satisfaction has been an
increasing focus of research (Molina et al., 2007). Customer loyalty is the top 10 most valuable
performance measures (Davidson 1999) and is also considered as one of the 15 most commonly
used measures according to Ambler and Puntoni (2003).Only few studies have investigated and
measured CRM effect despite the practical relevance of operational zing and measuring CRM
effect for business performance variables (Padmavathy et al., 2012).The general objective of
the study was to investigate the possible relationship between Customer relationship
management and customer loyalty in the banking industry in Ethiopia. More specifically,
the study tried to see the relationship of CRM with Trust, Commitment, conflict handling,
and Communication & Primary data was obtained through structured questionnaire from
customers selected banks i.e. CBE and ZB. A convince non probability sampling technique
was used to sample between banking firms. The researcher proportionally distributed 294
questionnaires to customers of the two selected banks and 267 of them were good for
further analysis. The questionnaires were analyzed using SPSS version 20. Pearson
Correlation and multiple regressions were used to establish the relationship between the
independent and dependent constructs of the research. The findings revealed that the two
independent variables (Conflict handling and Competence) are statistically important
determinants of customer loyalty in the banking industry of Ethiopia whereas
Commitment, Trust and Communication had positive relation with customer loyalty but
not predictor of customer loyalty since they were not supported by the findings. A
conclusion was drawn to the effect that since factor influencing customer loyalty have been
established, banks should give appropriate focus to significant dimensions of CRM.
Keywords: Customer loyalty, Trust, Commitment, Communication, Conflict handling and

Competence
v
CHAPTER ONE
INTRODUCTION
1.1. Back ground of the study
The survival of any business depends on its customers, and the most important goal of an
organization is to maintain customer loyalty and focus on customer centric approach in their
organizational and marketing strategies (Jain & Singh, 2002). In today’s business many
companies are required to build long-term profitable relationship with customers and to achieve
customer loyalty. Bowen and Chen (2001) argue that having a satisfied customer is not
sufficient, because customer satisfaction needs to have direct impact to customer loyalty.
There is significant pressure on the financial sectors in all over the world; the market place
is very dynamic, vibrant and competitive. The customers are smarter, more informed, and have
an access to many channels and choices which they take little time to exercise. Customer can
easily defect to competitors who promise better offerings at lower prices (Bhardwaj, 2007).
Technological advancement has contributed a great deal in empowering customers by equipping
them with the information they want at their fingertips. This has given customers the liberty to
demand better services, reduced loan rates, higher deposit rates, timely and special customer
service and many more financial offerings possible. Therefore, it’s a challenge to have good
customers let alone having loyal ones to our brand.
Customer relationship management (CRM) is a concept for managing a company’s

interactions with customers, clients, and sales prospects. It involves using technology to
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organize, automate, and synchronize business processes in order to enhance profitability,

income, and customer satisfaction and finally loyal customers to the specific brand.
Customer loyalty is one of the most important customer metrics in marketing due to the
profit impact of maintaining a loyal customer base (Oliver, 1997), When a consumer develops
loyalty towards a brand develops a favorable attitude towards the brand resulting in commitment.
When the customer becomes emotionally rather than merely intellectually vested in a brand,
loyalty to the brand becomes cemented.
According to Robert Winter (2003), the advantages of Customer Relationship

Management from the company’s stand point include those with technical biases like data
integration and automation of marketing or sales process and those with a business bias like
extension and consolidation of profitable customer relationship. Customer Relationship
Management enables prospective new customers to be targeted with individualized and attractive
offers, thus increasing the effect of sales development (Schulze, 2000). Customer Relationship
Management makes profitable customer relationships even more profitable
CRM gives a company new opportunities to gain a competitive edge by moving customers
up a loyalty hierarchy from new customers to regular purchasers, then to loyal supporters of the
firm’s goods and services, and finally to advocates who not only buy its products but re
commend them to others (Smith, 2003).
Banking is one of the service industries characterized by high customer contact with
individually customized service solutions where customer satisfaction has been an increasing
focus of research (Molina et al., 2007). The implementation of CRM is widespread (Peppard,
2000) and more advanced (Ryals and Payne, 2001) in the financial services industry than in other
industries.
2
Handful of scholars showed that CRM components have direct effect on customer
loyalty, each were mentioned in different studies as a significant element. They have suggested
that customers’ Trust has a significant role in building long-term relationship and achieving
customer loyalty (Berry, 1983; Kotler & Armstrong, 2010). The ability of the product or service
provider to handle conflict well will also directly influence customer loyalty. Clow & Kurtz
(2003) Commitment is another important determinant of the strength of a customer relationship
management, and a useful construct for measuring the likelihood of customer loyalty and
predicting future purchase frequency (Morgan and Hunt, 1994). The findings of Ndubisi (2007)
suggested that the greater the trust in the bank, the higher the level of the bank’s commitment,
the more reliable and timely its communications and the more satisfactorily it handles conflicts,
the more loyal its customers will tend to be. Effective communication affects customers to stay
with a provider of banking services. Loyalty can be nurtured by providing timely and reliable
information.
The study selected one publicly owned bank: The commercial bank of Ethiopia, operated
in a relatively stable environment for decades, leading in the sector from both government and
private owned in terms of market share, branch network, volume of asset and profitability,
currently spreading its branches all over the country aggressively to reach the unbanked
society and also adopted CRM and customizing its service to satisfy the customers (Wubayehu,
2012).
The other selected bank is Zemen Bank S.C, the bank is a pioneer in introducing innovative
banking products which are tailored to the needs of customer and the bank also prides itself in
being superior in its service of excellence.
As I said above in a highly dynamic and competitive market environment plus with regulations
getting tighter and governments involving here and there, a very small window is open for
financial organizations to exercise market competition, and CRM can be one strategy that is
proved effective by previous studies mentioned in the literature review of this study even
3
though, most of the banks in Ethiopia adopt the strategy they fail to follow its effect and which
element of the CRM have more effect to the result needed regarding Customer loyalty, and
which one won’t affect customers loyalty if it got cut out of the strategy, close review of long
term customer relationship management and loyalty is paramount to study. Therefore, paper
aims at looking at the effeteness of customer relationship management virtues on customer
loyalty to see if efforts on building long turn relationship with customers impacts or
contributes to customers’ loyalty.
1.2 Background of the companies
Ethiopian financial sector includes both government owned banks and shared companies
owned privately by individuals, currently there are three government owned and sixteen Private
Banks operating in Ethiopia.
The Commercial Bank of Ethiopia (CBE) has been established in 1942, and merged to
Addis Bank and form the sole commercial bank in the country until the establishment of private
commercial banks in 1994. CBE has more than4 million account holders (www.combanketh.et.).
CBE is spreading its branches all over the country aggressively to reach the unbanked society
and also adopted CRM and customizing its service to satisfy the customers (Wubayehu, 2012).
This bank is considered as the leading commercial bank in Ethiopia and the pioneer in
introducing modern banking to the country (www.combanketh.et.).
However, the industry is facing an aggressive competition since emerging private banks
joined the industry. As the result, customers have now more options and are shifting to the
competitors, one of the Private Banks, emerged and aggressively executing customer focused
business strategy is Zemen Bank S.C.
4
Zemen Bank is a privately owned commercial bank established in 2008 in accordance

with the “licensing and supervision of banking business proclamation No. 84/1994” of Ethiopia
to undertake commercial banking activities. The bank was founded by Ato Ermias Amelga a
prominent banker in Wallsteet New York and Ato Tekle Alemneh who had more than 30 years’
experience in the Ethiopian Banking Industry. The bank obtained its license from the National
Bank of Ethiopia (NBE) on 17 June 2008 and started its business activities on 2 October 2008, in
accordance with the NBE’s letter of 29 September 2008
CBE and Zemen bank has a different business Strategy than other Banks, the former one is
focused on customer coverage, by spreading its branches all over the country, and offering
service tailored to specific region, the establishment of Zemen Bank has awakened the banking
industry, others have tried to copy the Bank in areas of customer service and also adjusted their
operating hour, add their focus on technology, efficiency and customer service, this were the
main reasons to pick this two banks.
1.3 Statement of the problem
CRM in banking industry entirely different from other sectors, because banking industry purely
related to financial services, which needs to create the trust among the people, that results in
customer loyalty. It is an industry that has a huge opportunity to engage people in experiences
that build lasting and mutually rewarding relationships (Doherty, 2012)
A clear and positive relationship exists between CRM and customer satisfaction, (Yao &Khong,
2011). But, Having CRM software installed or introducing the strategy does not ensure a
successful result. To be successful in implementation of CRM practices, the financial and
banking organizations must define and develop a business strategy as well as a supporting
infrastructure for that strategy (Kwamena, 2013). One of the most important studies conducted in
this field is by Reichheld and Sasser (1990), cited on Ali study (2007:16), which showed the large
impact on profitability of small increases in customer retention rates, which made the marketing
5
community more conscious of the need to manage customer relationships in the long term as well as
prior to the first sale.
The emergence of new banks in the banking industry makes competition intense. However, in
the Ethiopian banking industry, there appears to be limited effort to engage to CRM practices for
securing long-term growth and profitability. For any given service sector, the growth and
survival of companies is highly dependent on how loyal their customers are. Customer loyalty
has been found in the literature to be a competitive tool for many companies; here application of
CRM practices comes as a solution. This is even much more pronounced in today’s highly
globalised, industrialized and competitive markets. Loyalty has been widely researched in the
domain of marketing (Bose & Rao 2011). A relative handful study of Ndubisi (2006) has
specifically examined that CRM such as trust; commitment and conflict handling have a direct
effect on customer retention. The evidence is almost uniformly consistent in indicating that
customers are loyal when the banks relationship marketing is good.
Accordingly, this study seeks to empirically examine the effect of customer relationship
management on customer loyalty within the context of the Ethiopian banking system. By
addressing the question of whether there is a link between higher application of CRM practices
and higher customer loyalty, considering the absence of in depth study, specific to the practices
exercised, this study can provide a valuable information and knowledge base for banks as they
seek to acquire and retain the loyal customers needed for their long-term success.
1.4 Research question
In accordance to the research purpose and objective, below are questions that were
addressed in this research.
6
1.4.1Main Research Question
To what extent does customer relationship management practices influence customer

loyalty in the banking sector in Ethiopia?
1.4.2 Sub Research Questions
1. To what extent does trust influence customer’s loyalty in the banking sector in
Ethiopia?
2. To what level does commitment influence customer loyalty in the banking sector
in Ethiopia?
3. To what level does communication influence customer loyalty in the banking
sector in Ethiopia?
4. What is the level that conflict handling influence customer loyalty in the banking
sector in Ethiopia?
5. What is the level of competence influence customer loyalty in the banking sector
in Ethiopia?
1.5 Objective of the Study
1.5.1 Main objective
The main objective of this study is to examine the effect of customer relationship
management on customer loyalty in the banking sector in Ethiopia.
1.5.2 Specific objectives
The research has the following specific objectives focusing on components of CRM.
 To find out the level of effect, trust has on customer loyalty in the banking sector in
Ethiopia.
 To determine the level of effect, commitment has customer loyalty in the banking sector
in Ethiopia.
7
 To examine the effect of communication on customer loyalty in the banking sector in

Ethiopia.
 To investigate the effect of conflict handling on customer loyalty in the banking sector in
Ethiopia.
 To determine the effect level competence has customer loyalty in the banking sector in
Ethiopia.
1.6 Significance of the Study
Once a company develop a loyal customer base, marketing is easier, sales rate and profit
margin are higher, premium pricing were exercised, overall it’s a key to long term success. To
get all done one needs to know what affects customer loyalty and the level of impact CRM has
on customer loyalty and to what extent the CRM components determine its existence.
Therefore, this study focuses on such relation in the case of selected commercial banks in
Ethiopia.
The research also provides managers insights into development and implementation of
CRM activities based on customers’ evaluation and enables the organization to identify the
dimension that have impact on customer satisfaction and those which needs further
enhancement. By doing so, this research will have implication on bank managers and will
contribute to the CRM literatures
1.7 Scope of the study
This study focuses on commercial banks operating in Ethiopia, by evaluating CRM

dimensions. The study covered two banks, one government and another private banks in
Ethiopia within Addis Ababa territory selected by using convince sampling techniques, that the
researcher believes the sample were representative of the population considering; wide customer
range, technological advancement and adopting CRM activities. The study gives emphasis on
customer relationship management along with its components’ level of effects on customer
8
loyalty, taking four CRM components i.e. Trust, commitment, conflict handling, competence and
communication as independent variables by applying all on the dependent variable i.e.
customers’ loyalty.
1.8 Definition of Terms
 Customer - operationally customer refers to organizations individuals and businesses

that patronize bank products and services
 Customer Relation Management (CRM); can be defined as the establishment and
maintenance of long-term relationships between an organization and its customers
(Torres & Kline, 2006:293; Reinartz & Kumar, 2003:77; Christopher, Payne &
Ballantyne, 2002:4).
 CRM software; consolidates customer information and documents into a single CRM
database so business users can more easily access and manage it
 Customer Satisfaction; is the degree to which business’s product or service
performance matches up to the expectation of the customer (Roberts-Lombard, 2009).
 Trust; as existing when one party has confidence in an exchange partner's reliability
and integrity (Morgan and Hunt (1994) )
 Commitment; refers to the efforts by a bank and its employees to serve customers with
the desired levels of performance. It also reflects the bank’s values, attitudes and beliefs
in terms of the customer orientation and CRM efforts (Padmavathy et al.,2012, p. 260)).
 Loyalty: The seller's perception of the consumer's positive attitude to the product
manifested by re buying. (Hougaard and Bjerre 2009: 67).
 Communication; Communication, especially timely communication, means helping to
resolve the disputes and aligning the conceptions and expectations in order to enhance
mutual trust in a relationship Sin et al. (2002)
 Competence; Competence has been defined by perceptions of customers on the
amount of skills, abilities and knowledge needed by the opposite party to effective
function/service. Smith and Barclay, (1996)
9
 Customer service; Customer’s service is the process of ensuring customer satisfaction

with a product or service. Often, customer service takes place while performing a
transaction to the customer, such as money transfer. It is an extremely important part of
maintain ongoing client relationship, a courteous and empathetic interaction with a
trained customer service representative can mean the difference between losing or
retaining a customer.
 Customers’ Loyalty; refers to customers’ commitment to repeat past purchases of a
preferred service over time (Peelen, 2005:32), even if other more convenient or
suitable alternatives exist (McMullan & Gilmore, 2003:231).
 Brand loyalty; Brand loyalty has been the center of attention among academicians and
practitioners for many decades Jan Møller & Torben Hansen (2006).
1.9. Organization of the Study
The study was organized into five major chapters in order to make presentable to
readers. The first chapter is dedicated to an introductory part composed of background of the
study, research problem and questions. The second chapter presented the literature reviewed.
In the third chapter the research methodology that includes research design, population and
samples of the study, data collection and analysis tools were presented. The fourth chapter
covered the data analysis and presentation part. The last chapter is dedicated to the research
finding and conclusion part.
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Chapter two
Review of related literatures
2.1 Introduction
This part of the paper tries to cover the relevant literatures resulted from various scholars on the
topic that customer relationship management and its important factor in building customer
loyalty. Covering theoretical, empirical and conceptual models & issues associated with the issue
such as; definitions, terms, perspectives, and empirical studies, components namely (Trust,
commitment, conflict handling, and communication and competence) and their impact on
customer’s loyalty in the case of commercial banks in Ethiopia.
2.2 Theoretical review
2.2.1 Customer Relationship Management (CRM)
Customer Relationship Management (CRM) “is the core business strategy that integrates
internal processes and functions, and external networks, to create and deliver value to targeted
customers at a profit. It is grounded on high-quality customer data and enabled by IT” (Buttle,
2004). CRM is a business strategy to identify, cultivate, and maintain long-term profitable
customer relationships. It requires developing a method to select your most profitable
customer relationships (or those with the most potential) and working to provide those
customers with service quality that exceeds their expectations (McDonald, 2002).
11
Keeping in mind the above definition, the term CRM is not clear. There is confusion about
what it stands for and how to implement it. As a result, CRM has different meanings depending
on who you ask (Payne & Frow, 2005). There are various opinions about CRM and from which
aspects one can see it.
Among the several definitions that have been developed so far, the following are some of the
popular ones;
• ‘CRM is the core business strategy that integrates internal processes and functions, and
external networks, to create and deliver value to targeted customers at a profit. It is
grounded on high-quality customer data and enabled by information technology’
(Buttle, 2004:29).
• ‘CRM is a process designed to collect data related to customers, to grasp features of

customers, and to apply those qualities in specific marketing activities’ (Swift, 2001:33).
• ‘CRM is an integration of technologies and business processes used to satisfy the needs of
a customer during any given interaction’ (Bose, 2002:89).
• “CRM is a strategy to identify and attract profitable customers, tying them to the company
or product by efficient relationship marketing to guarantee profitable growth. CRM
offers a great platform for the acquisition of new customers in addition to gaining
customer satisfaction and loyalty. Additionally, existing customer relationships can be
used to drive sales via up or cross-selling. The most “valuable” customers especially
need to be identified, attracted and retained” (Kracklauer, 2001:44).
• “CRM is a strategic approach that is concerned with creating improved shareholder value
through the development of appropriate relationships with the key customers and
customer segments. CRM unites the potential of relationship marketing strategies and
12
IT to create profitable, long-term relationships with customers and other key

stakeholders. CRM provides enhanced opportunities to use data and information to
both understand customers and co-create value with them. This requires a cross-
functional integration of processes, people, operations, and marketing capabilities that
is enabled through information, technology, and applications.” (Payne and Frow,
2005:63).
Furthermore, based on Imhoff (2001) some variations on the meaning of CRM, Ali (2007)
provided a representative set of these definitions which are summarized in the following list:
• CRM is the set of systems, processes and organizations that profitably drive customer
loyalty.
• CRM is the strategic view that integrates how we want the business to relate to the
customers, specifically seen through technologies available to support that view and
make it come alive by integrating people, processes, culture and attitude.
• CRM is the management of the relationship so that the partnership with the customer
grows, flourishes and remains healthy over time.
• CRM is building customer loyalty, not merely relationship management, using a 360-
degree view of the customer.
• CRM is the set of business processes and practices that directly addresses the
relationships between key customers and the principal organization.
• CRM is the 360-degree view of the customers and their transactional activity with the
company.
13
An analysis of the above different definitions shows that they all have common concepts of:
Customer focus (customer satisfaction, loyalty and retention), technology, knowledge
management, change management and leadership.
Acknowledging many Marketing practitioners and scholar’s strong recommendations for

close relationships with customers, it is apparent that the beliefs of existing customers are
more profitable as the acquiring and attracting of new customers is expensive, and that it is less
costly to up-sell or cross-sell products or services to current customers (Berry, 1995; Peppard,
2000; Sheth and Paravatiyar, 1995). One of the most important studies conducted in this field
is Reichheld and Sasser (1990), cited on Ali (2007:16), which showed the large impact on
profitability of small increases in customer retention rates, which made the marketing
community more conscious of the need to manage customer relationships in the long term as
well as prior to the first sale.
2.2.2 CRM dimensions
Mahshid Tofigh, Hossein Salimian, and Mahmood Nasrollahi have defined the components of
Relationship management as given on below table:
Table 2.1: Definition of Customer relationship management
CRM Definition Researchers

components
Trust Trust is your tendency towards a transaction company which you Moorman et al.,
trust. Trust has been defined as one of the aspects of a business (1992)
relationship which is the level at which each party feels that he can
trust the promises of the other. High level of customer trust in the
service provider leads to long term and more constant relationships.
Trust has been defined as understanding the good reputation,
credibility and support provided by the other party. In fact, the
success of a relationship to a large extent depends on the amount of
trust between the customer and the service provider.
14
Commitment Commitment is the constant tendency to maintain a valuable Moorman et al.,

Relationship. (1992)
Commitment is one of the significant variables for understanding
marketing strength, and also a useful tool for measuring the
probability of loyalty and predicting customer’s future purchases. Vasudevan et
al., (2006)
Commitment Commitment is the constant tendency to maintain a valuable Moorman et al.,
Relationship. Commitment is one of the significant variables for (1992)
understanding marketing strength, and also a useful tool for
measuring the probability of loyalty and predicting customer’s
future purchases.
Communication Communication, especially timely communication, means helping to Sin et al. (2002)
resolve the disputes and aligning the conceptions and expectations
in order to enhance mutual trust in a relationship.
Regarding the relationship between the customer and the provider,
communication means providing information that is trustable
Ndubisi (2007)
Dwyer et al.,
Conflict Conflict handling refers to the ability to minimize the negative and
(1987)
handling obvious consequences of potential conflicts of course prior to their
leading to any problems.
Conflict in relationships is predictable and its consequence is wrong

conceptions of the parties about their aims and roles in the
relationship. Conflict handling is the ability of the provider to avoid Aydin et al.,
potential conflicts (2005)
Smith and
Competence Competence has been defined by perceptions of customers on the
Barclay,(1996)
amount of skills, abilities and knowledge needed by the opposite
party to effective function/service
15
2.2.3 Elements of CRM
CRM is a combination of people, process and technology that seeks to understand a

company’s customer. It is an integrated approach to managing relationships by focusing on
customer retention and relationship development. CRM has evolved from advanced in
information technology and organizational changes in customer – centric process. Companies
that successfully implement CRM will reap the reward in customer loyalty and long run
profitability. However, successful implementation is elusive to many companies mostly
because they do not understand that CRM requires company-wide, cross-functional, customer
focused-business process re-engineering. Although a large portion of CRM is technology,
viewing CRM as technology – only solution is likely to fail. Managing a successful CRM
implementation requires an integrated and balanced approach to technology, process and
people. (Chen & Povich 2003:21)
People
People are involved in developing CRM strategy, choosing and implementing the IT strategy,
hence people must be able to work cross functionally to ensure CRM meets its goals of
customer satisfaction and retention by creating and maintain customer database to design
appropriate marketing programs for the appropriate segments of customers (Buttle, 2009:87).
Process
Process is how operations are completed within an organization which leads to the importance
of developing processes and implementing it across all functions so as to create value for the
customer and meet the CRM goals and objectives. Processes includes the front office where
customer communications happen and back of the house where all department work together
to deliver excellent services to customers.
16
Optimizing customer relationships requires a complete understanding of all customers;

profitable as well as non-profitable, and then to organize business processes to treat customers
individually based on their needs and their values (Renner, 2000:62).
Technology
Information technology (IT) has long been recognized as an enabler to radically redesign
business processes in order to achieve dramatic improvements in organizational performance
(Davenport and Short, 1990; Porter, 1987). Information is critical for product tailoring, service
innovation, consolidated views of customers and calculating customer lifetime value. Among
others, data warehouses, enterprise resource planning (ERP) systems, and the Internet are
central infrastructures to CRM applications. (Chen & Popovich 2003:49)
2.2.4 Perspectives of CRM
As presented in the above section, several researches have made attempts to define CRM,
and these definitions of CRM adopted from different sources refer to the different perspectives
of CRM which ranges from narrowing IT enabling solutions to a broadly and strategically
approach to managing customer relationship. Consequently, Payne and Frow (2005:68) use a
continuum to define CRM from three perspectives
The first perspective takes a narrow and tactical outlook where CRM is accomplished
through a defined technology initiative project. CRM is described as using data to drive
marketing activities (Kutner & Cripps, 1997). CRM is also look upon as a marketing
promotional activities linked to marketing database (Bickert, 1992; Winer, 2001).
The second perspective view CRM as implementing a combination of customer focused

technology solutions. CRM is defined as using ecommerce to drive relationships with customer
(Stone & Woodcock, 2001) and web-based methods and internet technology to drive
organization to become more customer-centric (Gosney & Boehm, 2000).
17
The third and last perspective takes a broader and strategic approach where CRM applies a
holistic or wholesome approach to customer relationships management and to develop value
for shareholder. CRM applies 1-to1 relationship marketing to respond to customer
requirement supported by what the customer says they prefer and other known information
related to the customer (Peppers, Rogers, & Dorf, 1999). It employs process oriented view by
combining all the functions of an organization (Parvitiyar & Sheth, 2001) and uses an organized
process by managing customer relationship touching on all customer touch points to develop
value for the customer and profitability for the organization (Reinartz et al., 2004).
2.2.5 Types of CRM
Regarding the types of CRM, to help in compiling an extensive picture of the CRM
business model, many authors including Buttle (2009:91) divide CRM into four main types,
namely Strategic CRM, Operational CRM, Analytical CRM, and Collaborative CRM. The
researcher acknowledges the literature that Analytical CRM has become an essential part of
many CRM implementations, and base for Operational CRM difficulties to reach its full effect
depending on analytical information about customers, this study were conducted mainly
focusing on the operational and analytical CRM related activities in the commercial banks of
Ethiopia.
Strategic CRM; is a core customer-centric business strategy that aims in winning and
retaining profitable customers. Basically it is about creating customer-centric business culture.
Customer centric business approach requires changing behavior from regular business models
such as product-orientation, production-orientation or selling-orientation. (Buttle, 2009:91)
In a customer-centric organization resources should be allocated where they increase

customer value, for example in reward programs to promote employee behavior that have
positive impact on customer satisfaction and retention, as well as capturing, sharing and
applying customer information across the organization. (Buttle 2009) This is the approach,
which should be examined in very early stage of CRM strategy development.
18
Operational CRM; Operational CRM focuses on customer-involving processes such as selling,

marketing and customer service. It is about automating some of the marketing, selling and
service functions of an organization. (Buttle, 2009:92)
Analytical CRM; Analytical CRM focuses on collecting, processing, interpreting and exploiting
of the customer-related data for strategic or tactical purposes. It is highly involved with the
customer-related data (Buttle, 2009). It enables the value creation to both, the customer and
the organization, by capturing, storing, extracting, processing, interpreting and reporting the
data. Customer-related data may include information about purchasing history, payment
history, credit score, marketing campaign response, loyalty scheme data and service data. In
addition to internal data, organizations may gather and analyze demographic and lifestyle data
from external sources as well (Buttle, 2009:95).
Collaborative CRM; Collaborative CRM applies technology across organizational boundaries

aiming to optimize company, partner and customer value. It is concerned with enabling better
customer value delivery within entire value chain by improving cooperation and customer-
related data sharing across organizational boundaries. Some vendors have developed own
applications for partner relationship management (PRM) for managing complex value chains. In
some organizations collaborative CRM is used to describe information systems designed to
enhance communication just internally. (Buttle, 2009:95)
Acknowledging the literature that Analytical CRM has become an essential part of many
CRM implementations, in addition to the fact that Operational CRM difficulties to reach its full
effect without analytical information about customers, this section will discuss operational and
analytical CRM further.
Operational CRM; refers to services that provide support for various ‘front office’
business processes in helping organization to take care of their customers. Focus on customers’
value is important for a successful operational CRM strategy (Buttle, 2009:92). On the other
19
hand, analytical CRM supports organizational back-office operations and analysis. It deals with
all the operations and processes that do not directly deal with customers. Hence, there is a key
difference between operational CRM and Analytical CRM. Unlike from operational CRM, where
automation of marketing, sales-force and services are done by direct interaction with
customers and determining customer’s needs, analytical CRM is designed to analyze deeply the
customer’s information and data and unwrap or disclose the essential convention and
intension of behavior of customers on which capitalization can be done by the organization
(Buttle, 2009:95). Analytical CRM is a solid and consistent platform which provides analytical
applications to help predict, scale and optimize customer relations (Buttle 2009:95).
Advantages of implementing and using an analytical CRM are described below.
2.2.6 The effect of Customer Satisfaction on Customer Loyalty
Customer satisfaction is a judgment of the service brand’s capability to provide “a

pleasurable level of consumption related fulfillment, including levels of under or over
fulfillment” (Oliver, 1997, p. 13). Customers are satisfied if the performance meets or exceeds
their expectations prior to consumption. Likewise, they are dissatisfied if the brand does not meet
their expectations. According to Garbarino & Johnson, 1999, customer satisfaction is considered
as one of the most important factors contributing for customer loyalty. If customers evaluate the
brand as being one that meets and even exceeds their expectation, it is presumed they are
satisfied with the brand. Once they are satisfied with the brand, they will prefer it for their
subsequent travel.
Customer satisfaction is further assumed to positively influence customers’ commitment to their

relationship with the airline brand. A high level of satisfaction resulting from the interaction with
the airline brand provides repeated positive reinforcement, thereby creating positive emotional
commitment bonds with the brand (Hennig-Thurau & Klee, 1997, p. 753).
2.2.7 CRM Effect and Evaluation Dimensions
20
Only few studies have investigated and measured CRM effect despite the practical
relevance of operational and measuring CRM effect for business performance variables
(Padmavathy et al., 2012). Mithas, Krishnana & Fornell (2005) argued that marketing has
moved from a brand-centered focus to a customer-centered approach. Hence, managing
customer relationships is important and valuable to businesses. The effective implementation
of CRM requires a cross-functional integration of marketing, sales, customer service and supply
chain to enhance value delivered to customers (Parvatiyar and Sheth, 2001, p.5). As noted by
Das (2012) the effective relationship between customers and banks depends on the
understanding of different needs of customers at different stages.
2.2.8 Customer loyalty
Customer loyalty has been defined and measured in many various ways over the past
decades. Oliver (1997) defines customer loyalty as “a deeply held commitment to re-buy or re-
patronize a preferred product or service consistently in the future, despite situation influences
and marketing efforts having the potential to cause switching behaviors”.
According to the literature on loyalty, customer loyalty has several distinct dimensions. The two
most important dimensions are the behavioral and attitudinal components (Day 1969; Yi 1991).
Earlier research conceptualized customer loyalty as a behavior (Dick and Basu 1994). Behavioral
loyalty signifies actual repeat purchasing behavior, or the likelihood of repeat product/service
purchases from the same supplier. Yet, recent research seems to measure loyalty attitudinally
(including cognitive and/or affective components). Using this perspective, customer loyalty is
perceived as future intention-to-repurchase or commitment that reflects the cognitive and
emotional attachment associated with customer loyalty.
Each of these dimensions has pros and cons. Academics find fault with the behavior-based
loyalty measure, so far as it can fail to distinguish between true and spurious loyalty. Dick and
Basu (1994) assert that if behaviorally loyal customers with spurious loyalty locate a superior
alternative, they will probably switch to the alternative.
21
Day (1969) blames behavior loyalty by stating, “These spuriously loyal buyers lack any
attachment to brand attributes, and they can be immediately captured by another brand that offers
a better deal,” which means that actual repurchase behavior is not always due to a psychological
and/or emotional commitment with respect to a product or service (i.e., true loyalty). Bowen and
Chen (2001) state that an individual may reside at a hotel because it has the most convenient
location, Nevertheless, an individual may also change to a new hotel when it is located across the
street and provides better deals. As this example illustrates, repeat purchase behavior does not
always indicate commitment; rather, it may signify a random actual repeat purchase, or spurious
loyalty. Yet, this spurious loyalty can be disregarded when attitudinal loyalty is the construct of
interest.
Shankar and his colleagues (2003) also maintain that attitudinally loyal customers are not likely
to change to an incrementally more attractive alternative, in that they have a certain degree of
attachment or commitment to the product or service.
Interaction of attitude and behavior such that the behavior (loyalty) is determined by the
strength of relationship between relative attitude and repeat patronage. Extending this, the
loyalty dimensions or concepts are to include behavioral, attitudinal and cognitive processes.
The attitudinal dimensions of loyalty were to include attributes such as word-or-mouth,
complaining behavior and purchase intention. The behavioral loyalty measures include
attributes such as brand allegiance, price elasticity, share of category (number of times a brand
is purchased in a given period) and price until switching. The cognitive loyalty component
includes attributes like preference to the service organization, the belief that the service
organization provides best offer and suiting customer needs.
Dick and Basu (1994) Customer loyalty is one of the most important customer metrics in
marketing due to the profit impact of maintaining a loyal customer base (Oliver 1997). The
literature points out that customer loyalty leads to firm profitability because customer loyalty
positively influences firm product-marketplace performance and financial performance and
creates shareholder wealth.
22
2.1.9 Customer loyalty in the service provider organizations
Customers remain loyal, not because of promotions and marketing programs, but because of
the value they receive (Payne et al., 1995). Key findings of Gee et al (2008) indicates that
organizations must understand what drives both value and delight for their customers and
adopting a customer centric vision enables an organization understand their customers, deliver
customer delight and drive for loyalty. They also pointed out different customers have different
requirements and were delighted in different ways and appropriate monitoring of customers is
important to ensure that customer defections are not masked by customer acquisitions. This is
essential for the sustainable growth of an organization. Analysis of defecting customers allows
an organization to profile at risk customers where appropriate preventive measures can be put in
place to reduce customer defection (Gee et al., 2008).
According to Huseyin et al (2005) findings, it is more expensive to find and attract a new
customer than it is to retain an existing one and banks need to redefine their corporate image to
one that emphasizes service quality by introduction standards for service excellence to make
loyal. The study conducted by Huseyin et al (2005) has shown that customers are looking for
banks that keep their promises, instill confidence in the customer about the way they handle
transactions, provide prompt service and have employees that are competent and always willing
to help the customer. They also argued that due to the highly interactive nature of the employee-
customer relationship, including input from employees on what constitutes service excellence
were beneficial for banks and need to reassess what customers expect from them in terms of
products and services and thus, provide client specific services is very important.
As Balakrishnan and Els (2008) states service initiates aimed at customer relationship
management often look at four areas such as satisfaction, retention, loyalty and lifetime
profitability. They also suggest a fundamental criterion for the success of customer initiative
schemes is making sure that customer perceived value is met or better still, whether it is
23
exceeded and organizations should evaluate future service schemes with respect to cost and
results. They also pointed out that in a competitive environment where the customer has myriad
choices and few switching costs, loyalty could from the organization point of view decrease
costs and increase revenues.
2.2.10 CRM and customer loyalty
Today the most important thing to do about the reduced customer satisfaction is the
customer-centered practices adapted to each customer’s needs and values. By treating
different customers in different manners, firms can achieve customer loyalty (Tarhan, 2004:
77). Customer loyalty is the long and uninterrupted retention of the relationship by offering
service that meets and even goes beyond the customer needs (Acuner, 2001: 89).
Customer loyalty is defined with consideration paid to the amount of buying for a given
trademark. The level of loyalty is measured by the watching of the frequency of buying (Javalgi
and Moberg, 1997: 165). With the increase in the amount of accessible information in recent
years, the conscious level of customers has improved continually. Today’s customers are aware
of the power they have on the market and that every activity is realized for them. It is now
easier to reach the products and services. Before choosing a given trademark, consumers look
at the price, newness, accessibility of the product and the additional services offered. As the
alternatives increased, consumers’ loyalty to the products and services decreased (Tekinay,
2002: 129). Today firms have entered into an effort to present at a lower cost than their rivals
the products and services that can meet the customer wishes and expectations fully, so that
they can render customers more loyal.
2.2.11 CRM and Banking Industry
Banking is one of the service industries characterized by high customer contact with
individually customized service solutions where customer satisfaction has been an increasing
focus of research (Molina et al., 2007). Despite substantial investments in CRM applications,
24
there is a lack of research demonstrating the benefits of such investments (Mithas et al., 2005).
According to Mithas et al., (2005) CRM applications are likely to have an effect on customer
satisfaction for at least three reasons. First, CRM applications enable firms to customize their
offerings for each customer. By accumulating information across customer interactions and
processing this information to discover hidden patterns, CRM applications help firms
customize their offerings to suit the individual tastes of their customers. Customized offerings
enhance the perceived quality of products and services from a customer’s viewpoint. Because
first, quality is a determinant of customer satisfaction, it follows that CRM applications
indirectly affect customer
Globalization and technology improvements have exposed companies to a situation with

tough competition. In this new era companies are focusing on managing customer relationships
in order to efficiently maximize revenues. Today marketing is not just developing, delivering
and selling, it is moving towards developing and maintaining long term relationships with
customers. Relationship marketing is becoming important in financial services. Managers really
need to look at areas where opportunities lie, because industry consolidation, virtual delivery
channels and the ability to move money around with a click of a mouse are making it easier for
customers to leave one bank for another. In this situation CRM (Customer Relationship
Management) is an opportunity that banks can avail to rise above minor advantages by
developing actual relationships with their customers.
CRM in banking industry entirely different from other sectors, because banking industry purely
related to financial services, which needs to create the trust among the people.
Establishing customer care support during on and off official hours, making timely information
about interest payments, maturity of time deposit, issuing credit and debit ATM card, creating
awareness regarding online and e-banking, adopting mobile request etc. are required to keep
regular relationship with customers.
Customer relationship management in financial services industry is a cyclical process which
starts with definition of customer actions (Panda T, 2003). Panda T described customer
expectations are difficult to manage but are often the cause of dissonance which results in loss
25
of existing customer base. So understanding of customer expectations with regard to service

delivery levels and product quality is essential for establishing a long term symbolic value
relationship.
CRM, which is becoming a topic of increasing importance in marketing, is concerned with using
information technology in implementing relationship marketing strategies ( Ryals L, et al,
2001).
Customer service is the primary end of any bank. A customer always wants something and
expects that the bank should come up to the level to fulfill those needs. Again, the more you
provide, still more the consumer needs. Service quality is about meeting customer needs and
requirements, and how well the service level delivered matches customer expectations.
In today ‘s competition in Indian banking industry, customers have to make a choice

among various service providers by making a trade-off between relationships and economies,
trust and products, or service and efficiency (Sachdev et al, 2004). Hallowell Roger (1996)
conducted a research on customer satisfaction, loyalty, and profitability and found that as
compared to public sector, private sector bank customers’ level of satisfaction is comparatively
higher.
2.2.12 Benefits of CRM strategy in Banking Industry
Benefits of CRM can be categorized into three groups namely: Benefits for customers,
benefits for employees and benefits for banks.
It brings Coordinated and professional approach to customer contact, Up-to-date customer
information, Banks can offer more personalized services. Customers feel empowered if they
have greater access to products and services. For example, 24 hours banking. Targeted product
and service offerings can be timed to coincide with customer events and requirements e.g.,
26
Education Loans and Tourism Loans. Develop better communication channels. Collect vital
data, like customer details and order history Create detailed profiles such as customer
preferences Deliver instant, company-wide access to customer histories Identify new selling
opportunities
2.2.13 CRM in Financial Services and in the Ethiopian banks
The banking industry is one of the first sectors which deployed CRM solutions as
described by Khan & Bajaj (2012). Today, many financial services organizations are rushing to
become more customer focused (Peppard, 2002). Eriksson & Mattsson (1998) argue that banks
are known to have stable and long lasting relations with their customers, which is why
development of customer relations is a crucial strategic issue in banking. However, a basic
problem in banking is that the customer base is heterogeneous, ranging from homogenous
segments of customers with the same preferences to customers with individual demands for
customized services. Currently there are 3 government owned; and 16 Private Banks; Awash
International Bank, Abyssina Bank, Dashen Bank, Wogagen Bank, United Bank, Nib
International Bank, Cooperative bank of Oromia, Lion Bank, Zemen Bank, Oromia International
Bank, Enat Bank, Berhan Bank, Bunna Bank, Addis International Bank, Abay Bank, Debub
Global Bank operating in the country. Most of the banks started operation a decade ago.
Relationship Officers who are responsible for advising, consulting and providing
adequate information to customers. And branch managers who conduct the recruiting potential
customers, promote the bank in general and their branch in particular and monitor their
branch’s overall CRM practices. Efficient and effective customer services is also tailored by the
customer service managers who support branch managers CRM activities in executing
operational tasks of the branch and entertain customer request at sight. Deploying these
technologies enable the bank customers to withdraw, transfer and check their account 24
hours a day easily. Hence the bank also honors its customers particularly those who displayed
in earning considerable foreign currency on yearly basis and awards certificate and trophies
27
(www.combanketh.com) and arranges contest for those who deposit more than certain amount
which enables customers to win electronics materials and vehicles.
2.3 Empirical review
The following studies were reviewed to familiarize the topic of customer relationship
management to demonstrate the originality of this study and to reveal the gap it will fill in the
customer’s loyalty research.
All the quoted studies on the impact of customer relationship management on customer
loyalty/retention have concluded that relationship building with customers is important factor
for retaining one’s customers. Whether used as strategy or not, it is indicated that
organizations who have built relationships with their customers and have managed that well
are more successful in their attempt of retaining their customers. Most papers see customer
relationship as important contributor towards customer satisfaction where by satisfaction
resulting in customer retention/loyalty.
According to Swift (2001), cited in Rahimi (2007:18), companies can gain many benefits from
CRM. He states that the benefits are commonly found in one of these areas:
1. Lower cost of recruiting customers – the cost for recruiting customers will decrease since
there are savings to be made on marketing, mailing, contact, follow-up, fulfillment,
services, and so on.
2. No need to recruit so many customers to preserve a stay volume of business – the

number of long-term customers will increase and consequently the need for recruiting
many new customer’s decreases.
3. Reduced costs of sales – the costs regarding selling are reduced owing to that existing
customers are usually more responsive. In addition, with better knowledge of channels
28
and distributions the relationships become more effective, as well as the costs for
marketing campaigns are reduced.
4. Higher customer profitability – the customer profitability will get higher since the
customer wallet-share increases, there are increases in up-selling, cross-selling and
follow-up sales, and more referrals comes with higher customer satisfaction among
existing customers.
5. Increased customer retention and loyalty – the customer retention increases since
customers stay longer, buy more and buy more frequently. The customer does also
more often take initiatives, which increase the bounding relationship, and as a result the
customer loyalty increases as well.
6. Evaluation of customer profitability – the company will get to know which customer are
profitable, the ones who never might become profitable, and which ones that might be
profitable in the future. This is very important since the key to success in any business
is to focus on acquiring customers who generate profit, and once you have found them,
never let them go. All customers are not valuable; some many even be danger to the
business. This occurs when the customers use the company’s time, energy and
resources without generating enough business to make them worth the effort.
(Budhwani, 2002:38)
Mohammad Taleghani, Shahram Gilaninia and Seyyed Javad Mousavian, have mentioned
some of the key relationship marketing virtues based on their literature review as identified by
various scholars.
The stated virtues are: Trust (Macintosh and Lockshin,1997; Sirdeshmukh et al, 2002;
Veloutsou et al., 2002; Knemeyer et al., 2003; Beetles and Harris, 2010 ), Commitment (Morgan
and Hunt, 1994; Beetles and Harris, 2010), Competence (Smith and Barclay, 1997; Metawa and
Almossawi, 1998; Hunt et al, 2006), Equity (Kavali et al, 1999), Benevolence (Ndubisi and Wah,
29
2005), Empathy (Ndubisi, 2004), Conflict handling (Ndubisi and Madu, 2009; Gilaninia et al,
2011), and (Morgan and Hunt, 1994; Ndubisi and Wah,2005; Knemeyer and Murphy, 2005;
Tian et al., 2008.
Five of the virtues listed above (trust, commitment, communication, conflict handling&
competence) was used to see the impact of Customer Relationship Management on Customer
Loyalty. These five virtues are chosen for this study as they are found to be highly applicable to
any service giving industry and are mentioned repeatedly on most of relationship and loyalty
related studies like studies.
2.3.1 The Payne’s model of CRM
In line with implementing and evaluating the effect of CRM practices, a number of
comprehensive CRM models have been developed. Yet there is no agreement regarding a
common framework for the implementation and appraisal on how effective is the CRM
practices. The IDIC, the QCi, the CRM Value Chain, the Payne’s five-process, and the Gartner
Competency models being the top five popular CRM models, this study will introduce and refer
to the Payne’s five-process model which was developed by Payne (2005).
Payne and Frow (2005) uses interaction research and a combination of literature review and
field communication with executives to arrive at a strategic multi-functional process oriented
CRM framework consisting of five generic processes including strategy development process;
value creation process; multichannel integration process; information management process,
and performance assessment process. The process begins from developing business and
customer strategy (strategy development) and concluded with performance monitoring
through qualitative and quantitative measurement and key performance indicator. Data are
collected throughout these four processes. The notion that competitive advantage stems from
the creation of value for the customer and for the company is key to the success of CRM
In general, according to Payne’s model, the first two processes represent strategic CRM, the
multichannel integration process represents operational CRM, and the information
management process is analytical CRM. This study, while focusing on operational and analytical
30
CRM related activities, mainly concentrate on multichannel integration and information

management processes.
Malik and Wood-Harper (2009) tried to identify the problems and challenges in the banking
sector of Pakistan using CRM. Bohling et al., (2006) concluded that linking CRM strategy and
implementation more tightly with the overall marketing strategy of a business will lead to
greater CRM implementation effect.
2.4 Research Conceptual Model

The model of Ndubisi &Wah (2005) have been used in this study to analyze the effect of
customer relationship management on customer loyalty.
Figure 1 Conceptual Model

Source: Ndubisi and Wah (2005)
31
2.5 Hypotheses
Based on the conceptual model described above, these alternative hypotheses are formulated:
H1: There is significant positive relationship between trust and customer loyalty.
H2: There is significant positive relationship between commitment and customer loyalty.
H3: There is significant positive relationship between conflict handling and customer
loyalty.
H4: There is significant positive relationship between communication and customer
loyalty.
H5: There is significant positive relationship between competence and customer loyalty.
32
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 Introduction
In this chapter the methods that are used to conduct the primary research for the study are
discussed. The research method, design, process, approach, and strategy are explored. Further,
sampling, questionnaire design, data collection and analysis are also expressed in this chapter.
3.2 Research Approach
Logically there are two broad methods of reasoning known as the deductive and inductive
approaches. The deductive approach works from the more general to the more specific; this
ultimately leads to testing the hypotheses with specific data to confirm or not confirm the
original theories (Trochim, 1998-2000). while an inductive reasoning, by its very nature, is more
open-ended and exploratory; a deductive reasoning is narrow and is concerned with testing or
confirming hypotheses (Olle Stromgren (2007)
33
Accordingly, in line with the study objectives and strategy i.e. find out if customer
relationship management components have relationship and effects up on customer loyalty, the
study followed the deductive approach.
There is a tendency to divide research into qualitative and quantitative, Quantitative research
is the systematic and scientific investigation of quantitative properties and phenomena and their
relationships. The objective of quantitative research is to develop and employ mathematical
models, theories and hypotheses pertaining to natural phenomena.
The mixed research method of research approach is followed in this study because
mathematical models is applied and hypotheses is tested which require quantitative data and
methods, Qualitative method will also be employed for instrument development, problem
identification and hypotheses formation; a self-administered questionnaire is considered an
appropriate approach to collecting the data for this research. The qualitative data is collected
through secondary data sources. Finally, pre-testing of the questionnaire was conducted before
the questionnaire is distributed to the sample Respondents. Due to the nature of the research
which was to be studied at one time, the researcher will to use a cross sectional descriptive
approach
3.3 Research Design
Research design represents the major methodology driving the study, which are distinctive
and specific research approaches that are best suited to answer the research question (Comack,
1996). Accordingly, the researcher employed descriptive and explanatory research design with
which to describe and explained the effect of CRM on Customer loyalty together with
contribution of each component to customers’ satisfaction and loyalty to the brand is clearly
examined.
As to this study strategy, after considering the available time, cost, and suitability a cross-
sectional design is adopted in this study where data is collected at only one point in time, after
34
acknowledging that Cross-sectional research involves the measurement of all variable(s) for all
cases within a narrow time span so that the measurements may be viewed as contemporaneous
(Baltes, Reese, Nesslroade, 1988; Creswell, 1994). The advantage of cross-sectional research is
that it is more economical in time and cost than other designs.
3.4 Population and Sampling Techniques
3.4.1 Population
All individuals of interest to the researcher are called population (Alan and Kaufman,
2005). The target populations for this study were customers of commercial banks in Ethiopia.
Unit of analysis is related with the population (specific population) that is used to collect
data. The unit of analysis for this study was customers of Commercial banks of Ethiopia and
Zemen bank S.C. including both account holders and walking customers.
3.4.2 Sampling and Sampling Technique
Sampling is a procedure that uses a small number of units of a given population as a basis for
drawing conclusions about the whole populations (Albaum, 1997). A sampling frame is a list of
individuals in the population (Mooi and Sarstedt 2011). The most important aspect of sampling
is that the sample selected is representative of the population with representative it means that
the characteristics of the sample closely match those of the population (Mooi and Sarstedt
2011).
The study used non probability sampling technique from non-probability convenient random
sampling was used. Convenience sampling inherently is a non-probability sample method.
Zikmund (2003) demonstrated that convenience sampling was referred to as sampling by
obtaining units or people who were most conveniently available. Malhotra (2007) showed that
convenience sampling was common with market researchers and newspaper reporters.
Convenience sampling also called accidental or opportunity sampling is a technique in which a
35
sample is drawn from that part of the population that is close to hand, readily available, or
convenient.
The banking industry in Ethiopia comprises a total of 19 government and private owned
banks. Accordingly, the strata were two groups, Government owned and Private owned Banks,
the sample of this study included conveniently selected one government and one private
owned bank; these are Commercial Bank of Ethiopia and Zemen Bank S. C. respectively in Addis
Ababa, customers of these banks were the respondents for this study. The study include any
person who appears in the banks premises to get financial service, though the intention of this
research is to assess the effect of CRM from customer perspective and its effect on customer
loyalty it is impractical to assess the evaluation of all customers. Time limit and budget
constraint compel the student researcher to focus on selected branches of the two banks to
undertake the survey. Therefore, it is necessary to survey a sample of the population as an
alternative in order to formulate predictions about the entire population.
According to krejcie and Morgan (1970), chon (1969) for the population that is more than
100,000 at the confidence level of 95% and precision level of +or -6% the number of sample
size that should be obtained shall be counted, greater than or equal to 266.77 - 267 to
represent to the population.
Necessary sample size = (z-score)2*Std Dev*(1-StdDev) / (margin of error)2
= (1.96)2* 0.5*0.5/ (.06) 2
= 266.77
 Sample size= 267

 Where: 95% confidence level corresponds to value of 1.96 from Z-score table.
 Margin of error = +/-6%
 Std Dev= 0.5
36
The questionnaires are distributed to customers of the banks at any time of the day. In order to
make generalizations with confidence about the constructs under investigation, the
appropriate respondents have to be involved. Therefore, 294 questionnaires were distributed
to meet up to the required level of number of responses from customers of CBE & Zemen bank
S.C.
To obtain representative samples, in selecting the research respondents, convenient

method was applied, this sampling method helps for a population from which sample has been
constitute a homogeneous group, therefore the study takes 267 respondents as target
respondents from these customers who have account with balance and/or regular customer
for money transfer or any banks’ services.
Moreover, findings of previous studies, published journal articles, publications in

measuring customer relationship management effect and other source like websites were
considered as secondary data source
since there is a limitation of cost, time and difficulty of using sample frame, and difficulty
in determining the total population to list out the sample frame, convenience sampling
technique were used to choose customers of commercial banks, To avoid bias and got enough
mix of holders of different bank account, questioners were randomly distributed to walk in
customers in different time of the day at teller stations, account opening section, credit service
section and IBD departments of selected branches.
3.5 Data collection instruments and variables/data collection method
3.5.1 Data Collection
According to Catherine (2007), data may be collected as either primary or Secondary, the
research uses both primary and secondary data. The secondary data employed to explore the
theoretical issues is based on CRM books, journal articles, other research projects and credible
37
CRM web portals. Reviewing the secondary literature will enable for better understanding of
the research topic, in general, and the study problem at hand, in particular it serves as useful
reference for making comparisons to the primary research, later on in the research report.
For the purposes of gathering primary data for this research report, questionnaires were
prepared, Primary data were collected based on structured questionnaires. Structured
questionnaire (fixed response type) is used to collect primary data from respondent, by
focusing on the research objective, the questionnaire was adopted to extract customers’
experience regarding the customer relationship marketing dimensions namely Trust,
Commitment, communication, competence and conflict handling towards their customer
loyalty to respective banks. The questionnaires consist of two parts. Part one were prepared to
gather general information about the respondents’ gender, age, education, occupation, monthly
income and for how many time the customer using the banks’ services. Part two were prepared
to ask respondents to answer customer relationship management and customer loyalty
questions. This part consists of questions and measures the impact of customer relationship
marketing on customer loyalty which is divided in five dimensions.
All items in Sections used a five-point Likert-type scale ranging from Strongly Disagree (1)
to Strongly Agree (5). A five point Likert type scale ranging from 1 (one being strongly
disagree) to 5 (five being strongly agree) is a widely used rating scale which requires the
respondents to indicate a degree of agreement or disagreement with each of a series of
statements or questions. (Album, 1997). This rating scale is easy to construct and administer
and respondents readily understand how to use the scale (Malhotra et al., 2007). The Likert
scale used in this study is odd numbered; balanced (the number of favorable and unfavorable
categories is equal). The balanced state helps to obtain an objective data; has non-forced
choices “no opinion” to improve the accuracy of the data as proposed by Hasnich, 1992. Five is
an effective choice since the reliability decreases if the number of response options is greater
than five (Hayes, 1992).
38
The independent variable is customer relationship marketing and were measured by five
dimensions that are trust, commitment, conflict handling, competence and communication. The
dependent variable is customer loyalty and measured by the feelings of customers’ loyalty
towards their respective bank.
3.5.2 Data Analysis
After collecting the data through questionnaire, the process of analysis was done using
statistical tools like regression and correlation models. The data collected were edited, coded,
tabulated, and presented for analysis. Out of the different types regression, Multiple regression
analysis is a statistic technique used to investigate the relationships between a dependent
variable and two or more independent variables (Kothari, 2007). Therefore, is used to know by
how much the independent variable i.e. Customer relationship management, (the five
dimensions) explains or influences the dependent variable which is customer loyalty.
Correlation analysis also conducted to measure the strength of the association between CRM
dimensions and customer loyalty. And also descriptive analysis was used for the demographic
factors such as gender, age, education, occupation, monthly income and for how many times the
customers are using the bank’s services. Tools like tables and percentage were also used. Data
analysis was performed by using SPSS software version 20. In order to reduce the possibility of
getting wrong answers, different actions were taken to ensure the soundness of this study.
Multiple regression was used to further investigate the significant effects of the independent
variables on the dependent variable based on;
Y=a+b1x1+b2x2+b3x3+b4x4+b5x5+e
Where:
Y= Customer loyalty
39
B1= beta weigh or regression coefficient of trust
X1= Trust
B2= beta weigh or regression coefficient of Commitment
X2=Commitment
B3= beta weigh or regression coefficient of Conflict handling
X3=Conflict handling
B4= beta weigh or regression coefficient of Communication
X4=Communication
B5= beta weigh or regression coefficient of Competence
X5=Competence
 Data was collected from reliable sources, from respondents who are customers of the
bank. By customer, both walking individuals and account holder.
 The questionnaire was based on literature review to ensure the soundness of the
results.
 SPSS software version 20.0 was employed to analyze the data and special emphasis was
given during data coding
40
3.5 Methods of Presentation
The data from the study were presented in the form of tables, graphs and charts as
desired so as to make all the data readable and understandable by all concerned parties.
3.6 Reliability and Validity
Sound measurement must meet the tests of validity, reliability and practicality. In fact,
these are the three major considerations one should use in evaluating a measurement tool.
“Validity refers to the extent to which a test measures what we actually wish to measure.
Reliability has to do with the accuracy and precision of a measurement procedure ... Practicality
is concerned with a wide range of factors of economy, convenience, and interpretability (Jaipur
C.R. KOTHARI ,May 1990)
Kazi (2010) suggest two major criteria which applied to evaluate the quality of the study i.e.
validity and reliability.
3.6.1 Validity
Validity represents how well a variable measure what it is supposed to measure. Validity is
concerned with whether the findings are really about what they appear to be about. Kazi (2010)
defined the validity as “the degree to which a measure accurately represents what it is supposed
to”. Validity is concerned with how well the concept is defined by the measure(s). In this study
all variables (items) were inspected by the researcher with the support of customer service
officers to ensure that they were an adequate and a thorough representation of the construct
under investigation. To test the questionnaire for clarity and to provide a coherent research
questionnaire, a macro review was accurately held. Some items were added, based on valuable
recommendations. Some others were reformulated to become more accurate and clear, and this
were required for the purpose of enhancing the research instrument.
41
3.6.2 Reliability
Extents to which a variable or set of variables is consistent in what it is intended to measure

(Hair et al., 1998). It differs from validity in that it relates not to what should be measured, but
instead to how it is measured. Several measures have been used to establish the reliability of the
instrument. The current study used multiple items in all constructs. So the internal consistency
method is appropriate for the current study. Hair et al. (1998) mentioned that the rationale for
internal consistency is that the individual items or indicators of the scale should all be measuring
the same construct and thus be highly inter-correlated. Internal consistency reliability of all
questions were assessed by the Cronbach’s alpha coefficients of measurement items for each
construct. Zikmund (2003), suggest that a Cronbach’s alpha value of > 0.7 indicates a
considerably high reliability.
3.7 Ethical Considerations
All information collected were treated with confidentiality without disclosure of the
respondents’ identity. Moreover, no information was modified or changed, hence the
information was presented as collected and all the literatures collected for the purpose of this
study were acknowledged in the reference list.
In order to keep the confidentiality of the information that were given by respondents, they
will not be required to write their name and assured that their responses were treated in strict
confidentiality. The purpose of the study was disclosed in the introductory part of the
questionnaire. Furthermore, the researcher tried to avoid misleading or deceptive statements
in the questionnaire. Lastly, the questionnaires were distributed only to voluntary participants.
42
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRITAION
4.1 Introduction
This chapter presents the analysis of the survey questionnaire as well as results of the data
analysis in order to realize the ultimate objective of the study, no information was modified or
changed, hence the information was presented as collected and all the literatures collected for the
purpose of this study was acknowledged in the reference list.
The target population of this study was customers of selected Government and Private Banks
in Ethiopia. Questionnaires have been spread out and collected at one time within 10 days. Out
of 294 questionnaires including the additional 27 questioners dispersed to customers of banks at
different locations, 275 responses were returned. Out of these, 8 couldn’t use because of
incompleteness. Thus, 267 questionnaires were eventually used for the study with a response rate
of 90.8%, which is sufficient amount to carry out the study as stated by Saunders 2002.
The researcher uses different techniques to analyze the data as follows: The researcher used
descriptive statistics (frequency and percentage) to describe and analyze the demographics of the
respondents. Secondly, the researcher used descriptive statistics (mean and standard deviation) to
describe the opinion of the respondents on different variables. Next, the researcher used
Pearson’s correlation to determine whether there is a relationship between the dependent and
43
independent variables. Finally, the researcher conducts t - test to test each hypothesis. All the
results are generated using SPSS software and are presented in tabular form below.
4.2 Data screening and data clearing
Three steps are taken to conduct the survey and make sure the data collected is good for further
analysis
 The researcher selected respondents (bank customers) based on convenient sampling while
they visited banks premises at any time of the day.
 The Questionnaire is distributed and respondents are communicated the purpose of the
questionnaire.
 Finally, questionnaires are collected within days.
After the data is collected through structured questionnaire, computation and analysis is done by
using SPSS (Statistic Package for Social Science) software. Descriptive statistics Mean Score,
Standard Deviation and inferential statistics like Correlation test using Pearson’s correlation and
Multiple Regression analysis are used in order to address the initial research question of the
study.
4.3 Reliability test result
Alpha reliability is regarded as a measure of internal consistency of the mean of the items at
the time of administration of the questionnaire. Cronbach‟s alpha is a reliability coefficient
that indicates how well the items in a set are positively related to one another. It is computed in
terms of the average inter correlations among the items measuring the concept. Reliability is
calculated in such a way that it represents the reliability of the mean of the items, not the
reliability of any single item. This coefficient can hold a value of 0 to 1. The result of 0.7 and
above implies an acceptable level of internal reliability. The result of reliability test for the
questionnaire is shown in the following table.
44
Table 4.1 Reliability Coefficients of Research Measures (Cronbach’s Alpha)
Construct Items Cronbach's Alpha
Total items 22 0.871
Trust 4 .691
Commitment 3 .656
Conflict handling 4 .631
Communication 4 .552
Competence 4 .627
Customer loyalty 3 .390
(Own survey may, 2017)
Extensive literature review was performed to operationalize the variables. Specifically, Nunnally
(1978) recommended 0.70 Cronbach’s alpha value (internal consistency) for newly developed
research instruments. All the major research measures met Nunnally’s (1978) internal
consistency (reliability) standard. Therefore, subjects to the specific and unusual limitations
associated with this type of research, with an average Cronbach’s alpha value of 0.871 the
research instrument appears reliable and valid.
4.3 Descriptive analysis
Descriptive analysis was used to present respondents’ demographic status with the help
of general or demographics questions. The demographics factors used in this research are
45
gender, age, level of education, occupation, income level and length of relationship of the
respondents with the bank.
Table 4.2 Summary of Respondents’ Gender
Gender of respondent Frequency Percentage
Female 76 28.5%
Male 191 71.5%
Total 267 100.0%
Table 4.2 illustrates the frequency and percentage distribution of gender of the Respondents of
this research. Out of 267 respondents surveyed in this research, 71.5% were Male respondents
and 28.5% were Female respondents
Table 4.3 Summary of age of Respondents
Age of Respondents Frequency Percentage
< 18 27 10.1%
19-39 118 44.2%
40-59 96 36.0%
>60 26 9.7%
Total 267 100.0%
(Own survey may,2017)
46
Table 4.3 illustrates the frequency and percentage distribution of age of the respondents of this
research. The age group is categorized into 4 groups in this research. The largest group of
respondents falls into the age group of 19-39 years. It represents 44.2% of the total sample of
this research. Secondly, the respondents aged 40-59 years represent 36% of the total sample.
Next, respondents aged below 18 years represent 22.8% of the total sample. Finally,
respondents aged 60 years and above represent only 9.7% of the total sample.
Table 4.4 Educational level of the respondents
Education level of Respondent Frequency Percentage
Primary 39 14.6%
Secondary 79 29.6%
Diploma 68 25.5%
Degree 60 22.5%
Postgraduates 19 7.1%
Others 2 0.7%
Total 267 100.0%
Table 4.4 the educational level of the respondents looks like what is shown in above table. As it
can be seen from the table 22.5% of the respondents hold a first degree. 25.5 % of them are
diploma holders 29.6 of them are secondary school 14.6 of them are primary school the rest
7.8% have got their postgraduate and others.
Table 4.5 Summary of occupational status of respondents
47
Occupation of Respondents Frequency Percentage
Student 34 12.7%
Private sector 81 30.3%
Own business 85 31.8%
Gov. sector 57 21.3%
Others 10 3.7%
Total 267 100.0%
Table 4.5 the occupation of the respondents looks like what is shown in above table. As it can
be seen from the table 31.8% of the respondents hold their own business. 30.3 % of them are
private sectors21.3% of them are government sector12.7 of them are student and the rest 3.7%
have other occupation.
Table 4.6 Summary of Monthly income of Respondents
Income level of Respondents Frequency Percentage
< 2500 58 21.7%
2501-5000 68 25.5%
48
5001-10000 69 25.8%
>10001 72 27.0%
Total 267 100.0%
Table 4.6 illustrates that the largest groups of respondents have the income level of above
10001 birr. It represents 27% of the total sample of this research. Secondly, respondents with a
monthly income of 5001-10000 birr represent 25.8% of the total sample. Next, respondents
with monthly income 2501-5000birr represent 25.5%, respondents with a monthly income
below 25, 00 birr represent 21.7% of the total sample respectively.
Table 4.7 Summary of respondents’ time length as customer of the bank
Service year of Respondent Frequency Percent
< 1 year 43 16.1
1-3 years 67 25.1
3-5 years 73 27.3
> 5 years 84 31.5
Total 267 100.0
Table 4.7 illustrates the frequency and percentage distributions of respondent’s have been
customer of the bank. Out of 267 respondents surveyed in this research, accordingly 31.5% of
the respondents have been customer of bank for above 5 years. While about 27.3%
respondent’s customer of bank for 3-5 years, 25.1 of them are customer of the bank for 1-3
years. The rest 16.1% respondent’s have been costumer of bank for below 1 year.
49
4.4 Descriptive Statistics of variables
4.4.1 Analysis of the Level of Agreement
The researcher uses itemized rating scale to construct a range. This range was used to
measure the perception level of the respondents towards each variable. The researcher uses
the following formula to construct the range.
max min
Itemized rating scale =
ni
5 1
=
5
= 0.8
(The mean of each individual item ranging from 1- 5 falls within the following interval)
4.8 Interval of Means Perception
50
Mean interval perception
1.81 – 2.60 Disagree
2.61 – 3.40 Neutral
3.41 – 4.20 Agree
4.21 – 5.00 Strongly Agree
(poonlar Btawee,1987) as cited by Sidie Assefa (2015).
One statistical approach for determining equivalence between groups is to use simple
analyses of means and standard deviations for the variables of interest for each group in the
study (Marczyk et al. 2005). The mean indicates to what extent the sample group on average
agrees or does not agree with the different statement. The lower the mean, the more the
respondents disagree with the statement. The higher the mean, the more the respondents
agree with the statement.
4.9 Summary of descriptive statistics between variables
51
Variables Mean Std. Deviation N
Trust 3.52 1.21 267
Commitment 3.38 1.22 267
Conflict handling 3.46 1.18 267
Communication 3.36 0.60 267
Competence 3.53 1.24 267
Based on table above, competence has the highest mean score of 3.53 followed closely by
trust with a mean score of 3.52, conflict handling comes next with a mean score of 3.46 then
commitment scored forth 3.38 and communication has the list score of 3.36.
Accordingly, competence and trust variables lie in the category between 3.51 and 4.50
which means respondents have good perception on each of the variables under consideration, the
other three variable lies slightly less than 3.51 that indicates the respondents showed average or
moderate perception on the variables. On the other hand, the standard deviation shown on each
variable was relatively low. Low standard deviation means that the data are narrow spread,
which tells that customers gave close opinion on each variable.
52
4.5 Correlation Analysis
Like the demographic factors, the data from the scale typed questionnaire were fed to the
SPSS software version 20.00, to process the correlation analysis. Based on the questionnaire
which was filled by the customers of bank, the following correlation analysis was made. A
correlation coefficient is a very useful means to summarize the relationship between two
variables with a single number that falls between -1 and +1 (Field 2005). A correlation analysis
with Pearson’s correlation coefficient was conducted in this study. According to guidelines
suggested by Field (2005) to interpret the strength of relationship between variables, the
correlation coefficient(r) is as follows:
Correlation coefficient falls between; 0.1 to 0.29 weak relationships
0.3 to 0.49 moderate relationship
and > 0.5 strong relationship
In this study, Pearson correlation was used to examine the relationship between each of the
independent variables and the dependant variable using a two tailed test of statistical
significance at the level of 99% confidence and significance < 0.01
53
Table 4.10 Correlation between independent and dependent variables
Trust Commitment Conflict Communication Competence Customer

handling Loyalty
Trust Pearson
Correlation
Sig. (2-
tailed)
Commitment Pearson 1
Correlation
Sig. (2-
tailed)
Conflict Pearson .458** 1

handling Correlation
Sig. (2- .000

tailed)
Communication Pearson .509** .598** 1

Correlation
Sig. (2- .000 .000

tailed)
Competence Pearson .330** .520** .494** 1

Correlation
Sig. (2- .000 .000 .000

tailed)
Customer Pearson .262** .387** .268** .325** 1

Loyalty Correlation
Sig. (2- .000 .000 .000 .000
tailed)
From the results shown in table 4.10 above, each variable correlated perfectly with itself with
coefficients value of +1.00. The correlation between all the independent variables and dependant
variable is proved to be positive and significant, which means the improvement in any or all of
the independent variables results in improvement in customer loyalty
54
The correlation matrix shows that there is a positive and significant relationship between
commitment and customer loyalty; between conflict handling and customer loyalty; between
communication and customer loyalty. On the other hand, there is also a significant positive but
weak relationship between trust and customer loyalty with a value of r=0.262 at significant level
of p=0.000 & there is also weak & positive relationship between communication and customer
loyalty
4.6 Multiple Regression Analysis
This regression is conducted to know how much the independent variable explains the
dependent variable. It is also used to understand by how much each independent variable
(trust, commitment, conflict handling , communication & Competence) explains the dependent
variable, which is customers’ loyalty .The regression model presents how much of the variance
in the measure of customer loyalty is explained by the underlying dimensions of CRM, in
Ethiopian Banking industry, Customer loyalty was used as the dependent variable while
Customer relationship management dimensions were used as the independent variables.
Before the regression analysis, the four major assumptions of variables were tested for
checking errors. These are Homoscedacity, Normality, Independency and multicolinearity and
all the assumptions were satisfied, and the multicolinearity and normality result tables are
presented.
4.6.1 Multi collinearity test

Multi collinearity is tested in this study using the variance inflation factor (VIF) which
quantifies the severity of multicollinearity in regression analysis. Multicollinearity occurs when
there are high inter correlations among some set of the independent variables. Various
recommendations for acceptable levels of VIF have been published on various studies (a value of
10 by Hair, Anderson, Tatham, & Black, 1995; Kennedy, 1992; Marquardt, 1970;
Neter,Wasserman, & Kutner, 1989, a value of 5 by Rogerson, 2001 and even 4 by Pan & Jackson,
55
2008). The rule is that when tolerance value is less than 0.2 and the VIF exceeds 10; it is a
signal of multicollinearity, which could lead to misleading and/or inaccurate results.
4.11 Multicolinearity statistics
Model Collinearity Statistics
Tolerance VIF
1 (Constant)
Trust .622 1.607
Commitment .679 1.472
conflict handling .492 2.033
Communication .538 1.860
Competence .659 1.518
a. Dependent Variable: customer loyalty

(own survey may,2017)
Therefore, in this study the tolerance level for all variable is above 0.2 and VIF is less than 2.0,
confirming that the study is free from multicollinearity issue.
 Refer to collinearity Statistics shown above in table 4.16 , the tolerance and VIF
showed that there was no multicolinearity between the study predictors.
56
4.6.2 Normality statistics
4.12 Descriptive Statistics
N Minim Maxim Mean Std. Skewness Kurtosis

um um Deviati
on
Statis Statisti Statisti Statis Statisti Statis Std. Statis Std.

tic c c tic c tic Err tic Err
or or
Trust 267 1.00 5.00 3.517 .87676 -.660 .14 -.123 .29
8 9 7
Commitmen 267 1.00 5.00 3.376 .93623 -.376 .14 -.803 .29
t 7 9 7
Conflict 267 1.50 5.00 3.458 .81237 -.618 .14 -.262 .29
handling 8 9 7
Communicat 267 1.25 4.75 3.357 .78392 -.295 .14 -.520 .29
ion 7 9 7
Competence 267 1.00 5.00 3.533 .85937 -.864 .14 .440 .29
7 9 7
Customer 267 1.20 5.00 3.545 .76122 -.481 .14 .235 .29
Loyalty 6 9 7
Valid N 267
(list wise)
According to Sinn, on his SPSS Guide–Correlation & Regression, explained skewness as a

measure of degree and direction of symmetry, a normal distribution is symmetric and has
skewness value of zero, indicates the data is distributed evenly in between our respondents.
57
A skewness value more than half of its standard error indicates that the data is not
symmetrical.
Divide the skewness value by the S.E to find out if the skewness is statistically significant, if the
result is +/- 1.96 it is statically significant.(Cramer & Howitt,2004)
 The above normality table showed the distribution & confirmed to be normal and
the data were qualified for the regression analysis.
Adjusted R square was used to measure the percentage of variance in the customer loyalty
explained by the Trust, Communication, Commitment, conflict handling and Competence. The
regression model presents how much of the variance in the measure of customer loyalty is
explained by the underlying dimensions of CRM .
4.6.3 Regression Analysis between Independent and Dependent Variable
4.13 Model summary
Model R R Square Adjusted R Square Std. Error of the

Estimate
1 .421a .178 .162 .69691

a. Predictors: (Constant), competence, commitment, trust, communication, conflict handling
b. Dependent; customer loyalty
Based on table 4.13 above, the model or the predictor variables have accounted for 17.8%
with estimated standard deviation 0.69691, of the variance in the criterion variable (customer
loyalty). The other variables that were not considered in this study contribute about 82.2% of
the variability the Dependent.
4.14 ANOVA of Customer Loyalty
58
Model Sum of Df Mean F Sig.

Squares Square
1 Regressi 27.370 5 5.474 11.27 .000b

on 1
Residual 126.764 261 .486
Total 154.134 266
a. Dependent Variable: customer loyalty
b. Predictors: (Constant), competence, commitment, trust, communication, conflict handling
The above table 4.14 shows the overall significance/acceptability of the model from a
statistical perspective. As the significance value of F statistics shows a value of 11.271 and p
value (.000), which is less than p<0.05, the model is significant. This indicates the variation
explained by the model is not due to chance.
4.6.4 Regression for Customer Loyalty
Table 4.15 Regression for Customer Loyalty
Model Un standardized Standardized T Sig.

Coefficients Coefficients
B Std. Error Beta
1 (Constant) 1.948 .232 8.403 .000
Trust .023 .062 .027 .379 .705
59
Commitment .074 .055 .091 1.336 .183
Conflict .245 .075 .262 3.272 .001

handling
Communicatio -.025 .074 -.026 -.334 .738

n
Competence .142 .061 .160 2.312 .022
According to Table above, the regression standardized coefficients for the three
independent variables, i.e. conflict handling and Competence with beta value 0.262 &0.160
respectively. Their significance levels are .001 &.022 respectively, which are less than 0.05.
This indicates significant relationship between them and the dependent variable (customer
loyalty).
From the linear multiple regression equation, the standard regression coefficient (beta weight)
was determined to compare the effect of each independent variable has on the variability of the
overall customer loyalty. The regression coefficient explains the average amount of change in
dependent variable that is caused by a unit of change in the independent variable.
4.7 Hypothesis Tests
According to the research method, the Pearson Correlation Coefficient is used to test the hypotheses.
There are five hypotheses that aim to see if there is relationship between the five factors of Customer
Relationship Management (Trust, Commitment, Communication, Conflict Handling, and
Competence) and customer loyalty; two inferential statistics techniques were employed. The
independent t-test and one-way ANOVA were applied to compare demographic characteristics
and investigate how they are related with the independent variables.
60
T-test is used to test mean differences between two groups. In general, t -test requires a single
dichotomous independent variable and a single continuous dependent variable (Marczyk et al.
2005). Thus, t-test were used to compare mean difference between types of bank and
underlying factors perceived to be important in forming customer loyalty. Similarly, ANOVA is
also a test of mean comparisons across more than two groups or conditions (Marczyk et al.
2005). Hence, One Way ANOVA analysis between the factors perceived to be important in
customer loyalty and five service year’s groups were executed.
The hypotheses tests of this research are conducted within the following two grounds:
1. Use Pearson’s correlation test to test the relationship between the independent (X) and
dependent (Y) variable of the research.
2. Conduct t – test to test the significance of the relationship. This research uses a standard of
95% confidence interval to test all the hypotheses.
Five hypotheses was raised based on the five independent variable, each of them were analyzed and
two of them proved to be acceptable and the other three was rejected as of the findings of the study.
Table 4.16; Summary of Hypothesis
Hypothesis r-value Relationship Beta Sig. Result
H1: Trust has 0.272 Positive 0.27 .705
a significant positive
impact on Customer significant Not Supported
61
Loyalty
H2: Commitment has 0.262 Positive 0.91 .183
a significant positive
impact on Customer significant Not Supported
Loyalty
H3: Conflict handling has 0.387 Positive 0.262 .001
a significant positive Supported
impact on Customer Significant
Loyalty
H4: Communication has 0.268 Positive 0.026 .738
a significant positive significant
impact on Customer Not Supported
Loyalty
H5: Competence positive 0.325 Positive 0.160 .022
62
impact on Customer Supported
Loyalty significant
The hypotheses testing are summarized in table 4.16 above. The result also indicated that
conflict handling is the most important factor influencing customer loyalty of banking industry in
Ethiopia followed by competence variable.
63
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1. Introduction
The purpose of the study was to examine the effect of service brand equity dimensions to
customer loyalty of banks in Ethiopia. In this chapter of the study, summary of findings,
conclusion drawn, and recommendations of the study are stated. Limitation and suggestions
for future researches is also included at the end of this chapter.
5.2. Summary of the major findings
First the reliability and validity of research measure were tested using Cronbach’s alpha
coefficients 0.871, which is above the minimum required i.e. 0.7
 Then the demographic data showed the distribution of gender of the Respondents,
Out of 267 respondents surveyed in this research, 71.5% were Male respondents
and 28.5% were Female respondents Besides, respondents participated in the
survey were middle age, that falls in the into the age group of 19-39 years & aged
40-59 years resulted 44.2% &36% respectively, of the total sample of this
research. The respondents’ found to be in secondary level education, Diploma
holder, and degree holders with a very narrow gap in between i.e. 29.6%, 25.5% &
22.5% respectively. Major portion of the respondents have either private
64
organization employees or own their own businesses, 30.3% %31.8% respectively.

The respondents in this research showed a proportionate distribution in between
given group of income levels per month. Out of 267 respondents surveyed in this
research, 31.5% of the respondents have been customer of bank for above 5 years
that holds the largest percentage.
Most of the respondents tend towards agreeing that the bank is effective from the five
dimension evaluated with grand mean value ranging from 3.36 to 3.52. According to (poonlar
Btawee; 1987) as cited by Sidie Assefa (2015) each of the variables under consideration were
perceived as good & valid among respondents.
 Among the five dimensions of CRM effect higher number of respondents perceived
that the bank is effective in competence dimension. The least mean score of 3.36
was for the Commitment dimension according to the study findings.
In this study, Pearson correlation was used to examine the relationship between each of the
independent variables and the dependant variable using a two tailed test of statistical
significance at the level of 99% confidence and significance < 0.01.
 The Pearson correlation coefficient reveals that trust (r=0.272), Commitment

(r=0.262), Conflict handling (0.387), Communication (0.268), and Competence
(0.325) are all positively correlated with customer loyalty. The strength of
correlation is highest for Conflict handling followed by Competence with the Bank;
the correlation is also significant at .01 level two tailed.
 The multiple regression findings show that the two independent variables Conflict
handling (β=0.262) & Competence (C=0.022) significantly refer and explain the
dependent variable Customer loyalty supporting H3& H5. The rest of variables do
not support H1, H2 & H4 since the significant levels resulted above 0.05 with
(β=0.27)
65
 Based on the evidence of the R square value obtained which indicates of the
variance on customer Loyalty can be predicted by 17.8% of the independent
variables.
 Thus the hypothesis that CRM dimensions as a cumulative have a positive and
significant effect on customer satisfaction is accepted
 Finally, the t-test showed that all the independent variables have a positive t
observed value that is greater than the significance level, for independent variable
Trust with an r=0.272, t test resulted tr=4.67, for Commitment variable with
r=0.262 the observed t is 4.586, for Conflict handling with r=0.387, the t calculated
is also highest r=7.4,in the case of Communication r=0.268, t calculated is 4.7, and
for the last variables Competence r=0.325 the tr=5.92 resulted as the second
highest.
 Based on the value of β all the dimensions have positive relationship with the
dependent variable. Indicated that the discussed dimensions’ have significant
effect on customer loyalty
 Among the five dimensions the conflict handling has strong degree of importance
on customer Loyalty followed by Competence.
 The two hypothesis, H3 & H5 were supported and the other three, H1, H2, H4 were
not supported by the finding
5.3 Conclusion
Based on the findings summarized in the previous section the following conclusions were
drawn.
 The main objective of this study is to examine the effect of customer relationship
management on customer loyalty in the banking sector in Ethiopia. The researcher
concluded that CRM effect dimensions namely: Trust, communication, conflict
handling, commitment & Competence have positive significant correlation with the
dependent variable customer Loyalty.
66
 One of the specific objectives of the study was to investigate the effect of conflict
handling on customer loyalty in the banking sector in Ethiopia. Conflict handling
appeared to be the most correlated construct with customer loyalty in the Ethiopian
banking industry with a correlation coefficient of 0.387. It is also the most dominant
factor in predicting customer loyalty with a beta coefficient of 0.262. This result
supported the findings of previous researchers (Veloutsou et al. 2004). It was also
discussed as, The ability of the product or service provider to handle conflict well
will also directly influence customer loyalty. Clow & Kurtz (2003) This implies that
when the company can manage conflicts well and try to avoid any possible conflicts
customers remain loyal to their respective banks. Thus, improving conflict handling
methods brings improved customer loyalty.
 The other objective aimed as an objective was, to determine the effect level
competence has customer loyalty in the banking sector in Ethiopia. Competence is
the second most correlated construct with customer loyalty in the Ethiopian banking
industry with a correlation coefficient of 0.325. It is also the second most dominant
factor in predicting customer loyalty with a beta coefficient of 0.160. The implication
is that as customers are more sensitive to competent service & they tend to be loyal.
So, increasing competency in every direction increases Customer loyalty.
 According to the specific objective of the study i.e. To find out the level of effect,
trust, Commitment & Communication have on customer loyalty in the banking sector
in Ethiopia. they were analyzed and the findings shows that Trust, Communication &
commitment were found to be less considered in the loyalty of banking customers
but Trust has a significant direct relation with customer loyalty at 0 .272 correlation
coefficient and on the other hand, there is also a significant positive but weak
relationship between communication and customer loyalty with a correlation
coefficient value of 0.268. Even though, in previous studies it was discussed that
Commitment as an important determinant of the strength of CRM, and a useful
construct for measuring the likelihood of customer loyalty and predicting future
purchase frequency (Morgan and Hunt, 1994). The variable Commitment has the
67
weakest correlation coefficient .262 that indicates, customer of this selected banks
gives little concern regarding their loyalty.
In conclusion, taking in to account the above result Ethiopian banks should note the two
dimensions of CRM, conflict handling & Competence to be antecedents that are found to predict
loyalty and emphasize them in their marketing strategy.
5.4. Recommendations
To be successful in implementation of CRM practices, the financial and banking organizations

must define and develop a business strategy as well as a supporting infrastructure for that
strategy (Kwamena, 2013). This study investigated the influential dimensions of CRM that
makes consumers to be loyal to the Bank. the findings of the study followed by the conclusion
made by the researcher, the following recommendation was developed to be used by Ethiopian
banks currently exercising CRM. The problem statement of the study goes around the fact that
CRM is already under operation but the banks lacks a follow up mechanism to make sure its
effect.
 In order to enhance customer satisfaction the bank should make continuous effort to
enhance the effect of CRM dimensions specially the dimensions, Competence &
Conflict handling, which have significant effect on customer satisfaction.
As the findings of the study showed consumers’ loyalty depends highly on Conflict handling
attributes; it is a sensitive dimension of CRM to the customer.
 Since it has the highest influence on customer satisfaction, the banks should be very
conscious in improving more the mechanisms used to handle conflicts. For example,
Try to avoid conflict probability by closely monitoring the work environment,
narrow gaps for potential problems, and try to reach a win-win situation at time of
conflict, Having a complain managing personnel can lead to the success of firms and
to get sustainable competitive advantages by retaining loyal customers.
68
Competence is explained in different dimensions, the study raised competence in relation

to knowledge, locations convince and employees service quality and that experience of the
customer is important to bring out the long-term loyalty.
 Therefore, bank’s officials responsible for the success of the adopted CRM strategy
should give attention to being competence regarding all dimensions of bank service.
Recruiting outstanding stuffs, arranging trainings and experience sharing stages and
creating Customer focused culture all over the bank.
 Even though the three dimensions; Trust, Commitment & Communication,
unexpectedly have shown little effect on customer satisfaction still they are
positively correlate with the dependent variable. The banks should not ignore the
dimensions; rather they should Acknowledge many Marketing practitioners and
scholars and dedicate some level of effort to balance their effect on customer loyalty.
High level of customer satisfaction leads to increased in customer loyalty. Customer loyalty
promises higher intention to purchase, word-of-mouth recommendation, profit, market share,
and return on investment, overall a great competitive advantage. Hence the management of the
bank should enhance the awareness of frontline employees regarding CRM
 Finally the bank is recommended to utilize the banking technology and the CRM
implementation activities in collecting the necessary customer data that will help in
customizing the service and make sure of its application in every stage of service.
 The management of the banks are recommended to understand their gap and take
action regarding the practice.
5.5 Directions for Further Studies
We can raise certain limitations in this study and acknowledge them before moving on to
generalizations of findings. The study is focused on examining CRM dimensions effect and
effect on customer Loyalty and Further future research is recommended to assess the influence
69
of the effect of CRM dimensions on customers’ retention and loyalty since this study were
conducted on two selected banks, There is limitation with regard to scope of the study the
branches were data was collected were due to location convince, therefore, additional studies
with broader customer base are needed to have a complete picture about the subject matter in
Ethiopian context.
Since CRM is a wide concept it has many other variables related to it that might have even
more effect on it than raised on this study. Therefore Gathering the data by using different
uncover other variables that might have an impact on customer loyalty in order to be able to
dig deeper insights to the issue.
This research focused only on the perceptions of customers and did not measure the
observation from customers of the banks. Future researches should consider the employees
perception and the bank as a business perception, and measure the variable accordingly.
CRM can be adopted by any business organization and the variables that has effect on customer
loyalty in the case of banking industry might be insignificant in other sections, therefore there
is a huge room for future researchers to study CRM application in other industries.
All the above mentioned problems in effect limit the realm of the study .Hence it does not
address all customers of the banks and doesn’t consider other industries future researchers are
appreciated.
70
Appendix I
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xiv
Appendix II Questioner
ADDIS ABABA UNIVERSITY SCHOOL OF COMMRCE

MASTERS OF MARKETING MANAGEMENT
Researcher: Ayda Elias
Contact Address: +251-913 20 66 06
E-mail: [email protected]
Self-Administered Questionnaire Guide
Research topic: The effect of customer relationship management on customer loyalty.
Dear respondents: I would like to express my earnest appreciation for your generous time,
honest and prompt responses.
Objective: To examine the effect of customer relationship management on customer loyalty in the
banking sector in Ethiopia.
This questionnaire is designed to collect data about the impact of relationship marketing
on customer loyalty in the case of commercial bank of Ethiopia. The information that you offer
me with questionnaire was used as a primary data in my case research which I am conducting as
a partial fulfillment of the requirements for the degree of Master’s of marketing management at
Addis Ababa University School of commerce. Therefore, this research is to be evaluated in terms
of its contribution to our understanding of customer relationship marketing and its impact on
customers’ loyalty and its contribution to improve the area.
xv
I need your help and would appreciate your sparing a few minute to complete the attached
questionnaire and answer the questions related to CRM practices in your bank that you are
customer to. Results was used to help and expand our knowledge and understanding of any
major shift in relationship marketing practices. All answers will be kept strictly confidential and
only aggregate results will be reported.
General Instructions
• There is no need of writing your name.
• Please indicate the extent to which you agree/disagree with the following statements.
Strongly Disagree carries the least weigh of 1 while Strongly Agree carries the highest
weight of 5. Please put √ mark accordingly
Part I: Demographic or General information
-39 years
3. Education q
xvi
5. Monthly income
Below Birr 2500 -5000
6. For how long have you been customer of the bank?
- 3 years s
Part II
Please, indicate your opinion by marking the appropriate box on the five point scale where:
Variables Level of agreement
#
Strongly Disagree Neutral Agree Strongly
Disagree Agree
(1) (5)
(2) (3) (4)
Trust
7 The bank is secured and confidential regarding 1 2 3 4 5

my financial information
8 The bank shows all the necessary concern to 1 2 3 4 5
my financial transactions
9 Employees of the bank are trustworthy 1 2 3 4 5
xvii
10 In your experience, the bank taken as reliable 1 2 3 4 5

entity
Commitment
11 The bank promise for quality service all the 1 2 3 4 5
time
12 The Bank is committed in providing easy 1 2 3 4 5

&speedy transactions
13 My relationship with the bank is one that I 1 2 3 4 5
really care about
(SD) (D) (N) (A) (SA)
Conflict handling
14 The bank tries to avoid potential conflict 1 2 3 4 5

15 The bank tries to solve obvious conflicts 1 2 3 4 5
before the problems exist
16 The bank shows a sincere interest in solving 1 2 3 4 5
customers’ problems rapidly
17 The bank is responsive to my complaints 1 2 3 4 5
Communication
18 1 2 3 4 5
The employees of the bank understand your
specific needs
19 1 2 3 4 5
The bank clearly communicates about each
bank’s policy to their customers (about
customers’ right, responsibility, and other
related issues)
xviii
20 1 2 3 4 5
The bank clearly communicates to you about
how and where to complain in case of a
problem
21 The Bank use information from customers to 1 2 3 4 5

design or improve its services.
Competence
22 The bank’s staff appears knowledgeable& 1 2 3 4 5

confident in communicating information
23 The bank’s staff cope successfully with 1 2 3 4 5
unexpected events
24 1 2 3 4 5
Bank has convenient locations to all its
customers
25 The Bank employees go beyond their 1 2 3 4 5

responsibility to serve customers
(SD) (D) (N) (A) (SA)
Customer loyalty
26 1 2 3 4 5
I am a loyal customer to the bank
27 1 2 3 4 5
The bank always come to my mind at time of
need for bank service
38 1 2 3 4 5
I would always recommend the bank to
someone who seeks my advise
Thanks for your assistance!!
xix
Appendix III
SPSS results
: Correlation between trust and customer loyalty
Trust Customer
Loyalty
Pearson
1 .272**
Correlation
Trust
Sig. (2-tailed) .000
N 267 267
Pearson
.272** 1
Correlation
customer
loyalty Sig. (2-tailed) .000
N 267 267
**. Correlation is significant at the 0.01 level (2-tailed).
xx
ANOVA
customer loyalty
F Sig.
Between
2.430 .003
Groups
Within
Groups
Total
Correlations
commitme customer
nt loyalty
Pearson
1 .262**
Correlation
commitment
N 267 267
Pearson
.262** 1
customer Correlation
loyalty
xxi
N 267 267
ANOVA
customer loyalty
F Sig.
Between
3.745 .000
Groups
Within
Groups
Total
Correlations
conflict customer
handling loyalty
xxii
Pearson
1 .387**
Correlation
conflict
handling Sig. (2-tailed) .000
N 267 267
Pearson
.387** 1
Correlation
customer
N 267 267
ANOVA
Customer loyalty
F Sig.
Between Groups 6.261 .000
Within Groups
Total
xxiii
Correlations
Communication Customer loyalty
Pearson Correlation 1 .268**
Communication Sig. (2-tailed) .000
N 267 267
Pearson Correlation .268** 1
Customer loyalty Sig. (2-tailed) .000
N 267 267
Correlation is significant at the 0.01 level (2-tailed).
ANOVA
Customer Loyalty
F Sig.
Between
5.706 .000
Groups
Within
Groups
Total
xxiv
Correlations
competen Customer
ce loyalty
Pearson
1 .325**
Correlation
competence
N 267 267
Pearson
.325** 1
Correlation
Customer
N 267 267
ANOVA
Customer Loyalty
F Sig.
Between
4.229 .000
Groups
xxv
Within
Groups
Total
xxvi

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The Effect of CRM on customer loyalty

ADDIS ABABA UNIVERSITY COLLEGE OF COMMERCE

POSTGRADUATE STUDIES DEPARTMENT OF MARKETING

THE EFFECT OF CUSTOMER RELATIONSHIP

By: - AYDA ELIAS SEID

ADDIS ABABA UNIVERSITY, SCHOOL OF COMMERCE DEPARTMENT OF

ADDIS ABABA UNIVERSITY COLLEGE OF COMMERCE

POSTGRADUATE STUDIES DEPARTMENT OF MARKETING

Analysis of the effect of CRM on customer loyalty; In The

By: - Ayda Elias Seid

Advisor: Mulugeta G/Medhin (PhD)

A Research Thesis Submitted to Addis Ababa University College of Commerc

ADDIS ABABA, ETHIOPIA

ADDIS ABABA UNIVERSITY COLLEGE OF COMMERCE

POSTGRADUATE STUDIES DEPARTMENT OF MARKETING

Analysis of the Effect of customer relationship management on

Customer Loyalty: The Case of Selected Banks in Ethiopia

By: - AYDA ELIAS SEID

APPROVED BY BOARD OF EXAMINERS

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Declared by: Ayda Elias Seid

(MA Student researcher)

Name of the Advisor: Mulugeta G/Medhin (PhD).

LIST OF ABBREVIATIONS...................................................................................... Error! Bookmark not defined.

LIST OF FIGURES ..................................................................................................................................................... iii

1.1. Back ground of the study....................................................................................................................................1

1.2 Background of the companies ............................................................................................................................. 4

1.3 Statement of the problem ....................................................................................................................................5

1.4 Research question ................................................................................................................................................6

1.5 Objective of the Study .........................................................................................................................................7

1.6 Significance of the Study ....................................................................................................................................8

1.7 Scope of the study ...............................................................................................................................................8

1.8 Definition of Terms .............................................................................................................................................9

1.9. Organization of the Study................................................................................................................................. 10

Chapter two ................................................................................................................................................................. 11

Review of related literatures ........................................................................................................................................ 11

2.1 Introduction ....................................................................................................................................................... 11

2.2 Theoretical review ............................................................................................................................................. 11

2.3 Empirical review ............................................................................................................................................... 28

2.4 Research Conceptual Model .............................................................................................................................. 31

2.5 Hypotheses ........................................................................................................................................................ 32

CHAPTER THREE ..................................................................................................................................................... 33

RESEARCH DESIGN AND METHODOLOGY ....................................................................................................... 33

3.1 Introduction ....................................................................................................................................................... 33

3.2 Research Approach ........................................................................................................................................... 33

3.3 Research Design ................................................................................................................................................ 34

3.4 Population and Sampling Techniques ............................................................................................................... 35

3.5 Data collection instruments and variables/data collection method .................................................................... 37

3.5 Methods of Presentation .................................................................................................................................... 41

3.6 Reliability and Validity ..................................................................................................................................... 41

3.7 Ethical Considerations ....................................................................................................................................... 42

CHAPTER FOUR ....................................................................................................................................................... 43

DATA PRESENTATION, ANALYSIS AND INTERPRITAION ............................................................................. 43

4.1 Introduction ....................................................................................................................................................... 43

4.2 Data screening and data clearing ....................................................................................................................... 44

4.3 Reliability test result .......................................................................................................................................... 44

4.3 Descriptive analysis........................................................................................................................................... 45

4.4 Descriptive Statistics of variables ..................................................................................................................... 50

4.5 Correlation Analysis .......................................................................................................................................... 53

4.6 Multiple Regression Analysis ........................................................................................................................... 55

4.6.1 Multi collinearity test ..................................................................................................................................... 55

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