Relationship between Customer Relationship Management Process and Marketing Effectiveness of Commercial Banks in Kenya

Abstract

Commercial banks today are realizing that proper management of customers to build long-term relationships reduces the cost of acquiring new ones and consequently, improves marketing effectiveness and firm’s performance in general. Customer Relationship Management (CRM) is meant to help companies build these relationships. However, studies have shown that many customer relationship management programs do not yield the expected results. The purpose of this study was therefore to establish and explain the magnitude and the direction of the relationship between the CRM process in terms of Relationship Initiation, Relationship Maintenance and Relationship Termination and Marketing Effectives. Marketing effectiveness was measured in terms of customer satisfaction, customer retention and the value of the customers. Explanatory research design was employed for this study as the focus of the study was to establish and explain the relationship between CRM and marketing effectiveness at each of the three phases of the CRM process. The target population was the customers of the 43 commercial banks in Kenya for branches based in Nairobi City County. A sample of 385 customers was selected. Sampling was done using multi-stage sampling method where the banks were first categorised into large, medium and small as grouped by the Central Bank of Kenya. Proportional stratified sampling was used at stage two to consider the number of customers to be sampled from each stratum of the banks while at stage three, stratified random sampling was used to select the banks and customer to participate in the study. Purposive sampling was used to pick on either the marketing manager or the customer care manager for each of the selected banks for the interviews. Primary data was collected by use of questionnaires for customers, while an interview schedule was employed for the managers. The data was subjected to descriptive, correlation and regression analysis to establish the relationship between CRM process and Marketing effectiveness. The null hypotheses were rejected based on the significance of the parameters in the regression model (t-test).The study found xix a positive statistically significant relationship between relationship initiation, relationship maintenance and relationship termination (CRM process) with marketing effectiveness. Relationship maintenance recorded the strongest relationship with marketing effectiveness while relationship termination had the least. The findings also showed that commitment moderated the relationship between the CRM process and marketing effectiveness. The study recommends that commercial banks should put in place a set of deliberate and proactive processes, policies and structures for initiating customer relationships, maintaining relationships with valuable customers and dissolving unprofitable customer relationships. Banks should continually improve existing processes as customers’ needs change and also in line with changes in technology. The study also recommends that banks should cultivate both customer and managerial commitment in order to enhance CRM outcomes, and that they should adopt an integrated approach to CRM. The study suggests further research on viability of relationship termination, to confirm if it adds more value to marketing effectiveness to discontinue non profitable customers, or to try and develop them by meeting their needs more satisfactorily