Electronic Customer Relationship Management and Firm Performance
Customer relationship management is comprehensive approach focused on customer retention
and relationship development. It can also be defined as an automated business process
involving front office staff via multiple interconnected delivery channels. It is a process of
obtaining, maintaining and partnering with chosen customers resulting in high quality value
for bank and customers. Financial technologies brought about cost savings and convenience to
the customer by improving access, turnaround time and providing support service. Tracking
and measuring the dimension of how a bank relates with its customers helps identify the
bank strengths and weaknesses in the relationship management program and how to
continually improve it on basis of continuous feedback from customers (Sheth & Parvatiyar,
2001).
Khasawneh and Aba-Shanab (2012) define e-CRM as an electronic application that sends
alerts, enable online transaction, online reminders, update bank accounts on a real time basis
whenever transaction are done hence ensuring customers are up to date and in touch with the
system 24/7 whenever in need of services. Electronic customer relationship management
systems provide customers with convenience to operate in any environment and time.
Customer feels valued, recognized and part of the company or firm as stakeholders. This is
done by the creation of a data base for all customer records and provision of a portal on each
employee’s computer system allowing timely access to customer information by all members
of the organization. Electronic customer relationship management enables one to discover
information on customer products and performance results using real time information across
the business (Sheth & Parvatiyar, 2001). A strategic and successful customer relationship
mainly deals with accommodating the needs and desires of the customers and then correlating
them with the organization's strategy, people, technology and business processes (Goel &
Mousavidin, 2007).
A Ghanaian study reported that the bank staff members had knowledge of CRM strategies.
They also indicated that introducing CRM strategies had bettered the bank’s relationship with
customers, reduced loses to fraud and enhanced the bank’s reputation. The treatment from
bank staff was reported as positive by 78% of the customers. Fifty-four percent (54%)
respondents reported that they knew of the opportunity to complain with 78% of them
satisfied with the complaints handling. Only 32% respondents had received customer care
calls from the bank. Respondents also reported the bank was not doing well in the area of
consulting customers when new products were being introduced. The study reported that
understanding the needs of customers would ensure good customer relationship management
(Edusah, 2011).
Lombardo (2003) states that at least 60-80% of e-CRM projects fail because of poor
implementation, integration woes, lack of guidance, lack of employee support, no
accountability, many customer information systems have limited scope, complex technology
that are costly to maintain and have unimportant information on data mining and missing
integrated capabilities. Most customer information systems have moved the focus to ad hoc
reporting and simply querying capabilities instead of being an infrastructure resulting in
efficient customer equity management.
Wanjau (2013) study sought to investigate the effects of customer relationship management
on customer retention in commercial banks in a case study of KCB Kenya Limited Nairobi
region. The finding of the study was customer recognition was not used in customer retention
efforts but brand awareness, utilization of technology and customer loyalty programs and
promotion where the most used. Further research across tier 1 and tier two banks was
recommended. A knowledge gap on the effect of technology on customer retention in banking
or other service industries was identified.
Electronic Customer Relationship Management, Competitive advantage, and Firm
Performance
Evolution of customer relationship begun in 1990s as new concept that challenged prevailing
business landscape by globalization and internet bringing down barriers of entry resulting in
intense competition in the market environment. Traditional banking was challenged by online
or virtual banks for customers. Customer service became a strategic sustainable advantage that
identified customer as king and determinant to survival in a rapidly changing and competitive
environment (Sheth & Parvatiyar, 2001). An essential part of customer experience is their
perception and therefore if a customer thinks that a company truly puts his needs first, they
will keep using a company’s services (Clausen, 2009).
A bank’s customer touch points can consist of the following: the internet, automated
machines, agents, email, sales, direct mail, telemarketing, operations, call centre, fax, mobile
banking, point of sale terminal and virtual e-wallets. Electronic customer relationship
management is a fairly recent trend that uses financial technologies that exploit the strength of
the internet to create strong relationships with valued customers as a key to sustainable growth
and competitive advantage (Sivaraks et al., 2011).
Electronic customer relationship management is a web-based customer relationship tool that
synchronizes customer interaction, business functions and customer need to deliver superior
competitive advantage to a firm (Mishra & Padhi, 2013). E-CRM involves operational and
analytical systems that involve electronic channel, information system and internet in order
to co-ordinate non personal customer interaction (Solanki, 2011). It recognizes three levels of
service: the foundation service that includes the least necessary services, customer centric
service and valuable addition services (Bhatnager & Saxena, 2013).
The three main types of e-CRM are operational, analytical and collaborative. Operational e-
CRM involves all customer direct contact points, while analytical e-CRM deals with using
information system to process and interpret to understand of great amounts of customer data.
To gain sustainable competitive advantage will require a shift by banks from product centric
model to customer centric model. Such a shift will result in the following benefit to the bank:
delivery of correct products and services and at the right time via correct channels, value
addition at all customer interaction point, provision of appropriate feedback for more
personalized and customized product and services and development of trust in customer
relationship management system. Collaborative e-CRM involves combining customer data
from across all facets of the bank, for example, regular queries, customer complaints and
feedback in centralized system instead of various departments collecting their own customer
data thus making decisions based on an entire customer experience. Customer relationship
management is based on social networks and strong relationships (Beckett-Camarata et al.,
1998).
Electronic customer relationship management is focused on retaining customers and
relationship development (Sheth & Parvatiyar, 2001). Empirical studies on e-CRM show
various competitive advantages, for example, enhanced integrated customer profitability,
reduced response time and a better turnaround time to customer enquiries (Abu-Shanab &
Anagreh, 2015). Organization shifts from a human-capital concentration perspective to
another that emphasizes various electronic contact points for example, fax, phone, e-mail and
the Web. It results in a dramatic increase in being able to develop, manage, and measure
customer relationships (Sivaraks et al, 2011).
Developing a close association between customers and a company may lead to an added
opportunity for competitive advantage (Recklies, 2006). Therefore, according to Ul Haq et
al., (2010), the greater achievement of the organization relies on great customer experience
which is gained by managing customer relations. Relationship quality can be defined as a
customer's experience of how well their expectations, predictions, wishes and aims
concerning the entire relationship are fulfilled. The frequent parts of relationship outcomes
found in past studies are how customers are royal, their retention and how willing they are to
recommend (Sivaraks et al., 2011).
7
Table 2.1: Summary of Empirical Studies and Knowledge Gaps
Study Methodology Major findings Knowledge gaps Focus of current study
E-CRM effect on
customer–bank
relationship quality
and outcomes in
Thailand (Sivaraks et
al., 2011)
Literature review,
interviews, and field
surveys
E-CRM implementation showed a
significant relationship with
customer-based service attributes,
quality and outcome of customer–
bank relationships and an indirect
effect on relationship quality and
outcome through customer-based
service attributes.
Study looked at two
groups of
implemented e-
CRM via those that
did not and not by
level.
Measurements of
electronic customer
relation with a focus on
customers and how it
affects customers and
overall financial banking
performance
Improving customer
relationship
management in the
banking industry in
Ghana
(Edusah B., 2011)
Descriptive cross
sectional design and
personal interviews
Customers’ excitement on some
CRM strategies being put in place.
From the research, a necessary
factor that would lead to a
favorable customer relationship
management is, understanding
Focus on CRM in
general and not on
the electronic.
Measurements of ecr
with a focus on
customers and how it
affects customers and
overall financial banking
performance
8
customers’ needs
How branchless
banking strategy
affects financial
performance of
commercial banks in
Kenya (Dzombo et
al., 2017)
An exploratory
research design
When agency and electronic
banking channels were combined
as a multichannel strategy, there
was a significant positive effect on
bank’s financial performance
Need of studies to
identify effect bank
innovations on
customer
experience, loyalty
and effect of
electronic banking
on the cost
efficiency of
commercial banks
in Kenya
Measurements of
electronic customer
relation with a focus on
customers and how it
affects customers and
overall financial banking
performance
E-CRM strategy and
organizational
performance of
A case study research
design utilizing an
interview guide
An increase of performance of
firm’s operations, sales and
marketing due to customer
Focused on e-CRM
of Associated
Motors Ltd, a non-
Measurements of
electronic customer
relation with a focus on
9
associated motors
limited, Kenya
(Ng'ang'a M W.,
2017)
acquisition, customer retention,
efficiency, improved employee
behavior and cost reduction
measures
banking business
sector.
customers and how it
affects customers and
overall financial banking
performance
Customer relationship
management
capabilities influence
on performance of
Commercial Banks in
Kenya. (Githinji L.
S., 2017)
A descriptive and
correlational research
design was
used.
Most dominant customer
relationship management
capability commercial banks used
was the human resource capability
with building of relationships with
customers emphasized. IT and
human resource capabilities
showed a positively significant
outcome on organizational
performance.
The study focused
on a quantitative
method (cross
sectional study)
Measurements of
electronic customer
relation with a focus on
customers and how it
affects customers and
overall financial banking
performance
10
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