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INFLUENCE OF ELECTRONIC CUSTOMER RELATIONSHIP MANAGEMENT,
COMPETITIVE ADVANTAGE AND PERFORMANCE OF COMMERCIAL BANKS IN
NAIROBI CITY COUNTY KENYA
Background of the Study
Electronic customer relationship management, which is the computerized delivery of new and
traditional banking products and services directly to customers through electronic, interactive
communication channels, is the wave of the future. It is beneficial to customers in relation to
ease and transactions cost. However, electronic customer relationship management provides a
number of challenges in terms of how the financial system is regulated and supervised, how the
macroeconomic policy is designed and implemented, security, legal risk and customer
satisfaction (Dzombo et al., 2017). With the growth of electronic customer relationship
management this study investigated electronic customer relationship management as the
independent variable. The competitive advantage was the moderating variable in terms of factors
that may influence relationship quality including trust issues, satisfaction and commitment while
those that may influence relationship outcomes include the loyalty of customers, their capacity
and willingness to recommend (Sivaraks et al., 2011). Financial performance was the dependent
variable. This study described how these variables help in developing electronic customer
relationship.
The main contributor to this transformation from traditional banking has been technology,
allowing provision of digital financial service such as mobile, online and e- banking, merchant
and agency banking-wallet technologies. A survey by FSD-Kenya indicated that agency banking
had resulted in a significant access to banking services. A similar trend is seen in mobile banking
strategy and electronic banking around the world (Dzombo et al., 2017). The rapid growth in
mobile, internet, agency banking and in the number of ATMs indicates a major move towards
use of electronic money as opposed to the over-the-counter customer service (KCB, 2018). The
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efficiency and effectiveness of the banking industry is dependent on people skills, customer
satisfaction and technological innovation by fintech companies and banks (Mishra & Padhi,
2013). Gathungu (2018) also opined that application of e-banking technological innovations has
boosted the efficiencies and return on shareholder investment among banks and financial
institutions in Kenya.
These new technologies are utilized by banks to achieve customer intimacy, drive their
preferences to deliver stronger relationship and coordination of customer retention and
acquisition in a fierce global village. Commercial banks in Kenya have shifted from production
efficiency to customer experience with more demanding and knowledgeable customers (KCB,
2018). Competitive advantage via customer value can be analyzed using three circles analysis.
This is an internal analysis technique where the three circles represented by customer wants,
company product/services and competitor products/services are carefully examined to clearly
state what the firm’s competitive advantage is and how it is different from those of the
competitors. Thus the strategic team starts by analyzing what customers of their product and
service value most and why. The circles interlock at different places. These are a central point
called the point of parity, the company point of difference and the competitors’ point of
difference. The three points offer critical issues in building a real value-based competitive
advantage. A point of parity explains how well the company is delivering its offering. The
company’s point of difference represent how big and sustainable the advantages are based on
distinctive capabilities while the competitive point of difference represents how well the firm is
able to counter the competition (Pearce & Robinson, 2013).
Electronic Customer Relationship Management
Customer relationship management (CRM) incorporated with e-business is referred to as
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electronic customer relationship management (e-CRM). Companies can then use it for
conducting activities with customers in a personalized, interactive and relevant way using both
traditional and electronic channels. It helps an organization infrastructure to be extended to
businesses and partners. This leads to new opportunities of learning customer needs, gaining new
economies and getting in touch with new customers in real time. It involves processes for
managing customer relationships using the internet, web browsers or other electronic touch
points. Personalized individual views are based on history and preferences and it is therefore
possible to have an individual customized view. E-CRM system is created for external use with
the web based application for enterprise-wide use (Deshmukh et al., 2013).
E-CRM is being applied to enhance organization performance by promoting effective and
efficient management of customer relationship (Ng’ang’a, 2017). It is beneficial to both a
company and its customers. As a result, companies improve their capacity in a competitive
market, increase profit rates, reduce costs, and decrease in cycle times for sales activities being
put in place as well as increasing marketing knowledge. The customer benefits include customer
loyalty, improved customer experience and enhanced efficiency of customer processes and
reduced costs (Abu-Shanab & Anagreh, 2015).
Customer relationship management (CRM) is a business plan to choose and manage relationship
with valuable clientele (Deshmukh et al., 2013). Therefore, CRM is focused on customer
retention and relationship development (Sheth & Parvatiyar, 2001). A small firm or organization
can build and maintain customer relationships through face-to-face interactions between the staff
and customers. However, an increase in business size and number of customers it becomes
difficult to build these relationships and manage customer relationships quickly (Deshmukh et
al., 2013). Customer relationship management view differs based on the audience and
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customized needs. In CRM, the system is created for internal use with web applications designed
for a single department or business unit (Deshmukh et al., 2013).
Competitive Advantage
The competitive advantage is concerned with achievement of organizational objectives by
deploying a combination of factor inputs (Karadag, 2015). In the banking sector, competitive
advantage is measured in both financial and non-financial terms. The strategic management
literature however offers little consensus on the set of indicators that helps define and measure
competitive advantage. One of the renowned contributors on this subject by the name Igor
Ansoff consolidated all financial and non-financial aspects into one single measure namely,
return on investment (Ansoff, 2016). However, Ansoff (2016) did acknowledge that return on
investment is also maximized through non- economic objectives which constitute the broader
measures of competitive advantage including stakeholder satisfaction (Carton & Hofer, 2011).
Modern day organizations view competitive advantage from the perspective of improvements in
aspects of the organization such as satisfaction, efficiency and effectiveness (Poureisa,
Ahmadgourabi, & Efteghar, 2013).
The relationship between E-CRM and performance is underpinned by the acknowledgment that
it is more expensive to acquire a new customer than to keep one (Salmen & Muir, 2013).
However, nurturing a long-term relationship with profitable customers is identified as a key
strategy for enhancing a firm’s profits (Chen & Chen, 2013). Through positive word of mouth, a
firm enjoys a reduction in cost of recruiting new customers and by extension, a reduction in per
unit cost of sales is realized since the existing customer markets the firm free of charge
(Sureshkumar & Palanivelu, 2011). E- CRM to competitive advantage includes the provision of
quality products, superior service delivery processes, growth in reputation, goodwill and loyalty
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of customers (Dhillion & Kaur, 2012; Dolly & Pruthi, 2014). The deployment of e-CRM is
especially critical to Kenya’s banking industry given that banking services are typically high
involvement services, which necessitate a close engagement with customers.
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