Effects of Customer Relations on Credit Demand
Name
DDBA 8110 - Business Operations
Walden
2022
Effects of Customer Relations on Credit Demand
According to Evans, (2003) terms customer Relations, or Public Relations as it is more
frequently termed, may simply be defined as an activity designed to improve the environment in
which an organization operates in order to improve the performance of that organization. From
this definition it will be noted that the public interest groups, or target areas of the program, are
clearly both internal and external to the project.
Customer empowerment generally refers to the process a firm adopts to encourage and reward
employees who exercise initiative, make valuable creative contributions, and do whatever is
possible to help customers solve their problems (Herzberg, 2003). Reichheld, (2001) reports that
he has yet to encounter a company that has achieved extremely high customer loyalty without
fostering similarly high loyalty among employees. Most business representatives prefer to deal
with regular customers because they are easy to serve, they understand the firms preoccupations,
and make only a few requests (Leone, 2002).
Partnerships are created when suppliers work closely with customers and add desired services to
their traditional product and service offerings Laskin, (1999). Payne (1997) puts partnering at the
extreme end of his loyalty scale, regarding it as an important step that usually leads to the
development of a close and durable relationship between supplier and customer. Wilson (1995)
has developed an integrated model devoted to the explanation of CRM process phases. In this
model, partner selection is considered to be the first step in the CRM process.
Personalization refers to the extent to which a firm assigns one business representative to each
customer and develops or prepares specific products for specific customers. Personalization is
about selecting or filtering information for a company by using information about the customer
profile (Schubert, 2003) a major component of personalization is the distribution of customized
mail to a customer or customization of the relationship between firm and customer. This concept
outlines a clear distinction, established by Gronroos (1999), between CRM and the management
mix. The latter is a far more clinical approach in which the seller, or business representative,
plays an active role, while the buyer, or customer, takes up a more passive position. In such a
scenario, there is no personalized relationship between customer and business representative.
Personalization, rather, is only included in CRM.
The development of loyalty involves building and sustaining a relationship with a customer,
which leads to the repeated purchase of products or services over a given period of time. A loyal
customer base allows companies to devote their energies to other business matters Rowley,
(2000). Customers can demonstrate their loyalty in several ways. They can choose to stay with a
firm, whether this continuance is defined as a relationship or not, or they can increase the number
of purchases, or they can do both Dawes, (2000). For the purposes of this research, loyalty will
be considered as the final result, or the key element, of effective CRM. Since many authors have
suggested that loyalty is a relational phenomenon Lockshin,
(1997), our purpose is to link loyalty to the emerging theory of CRM Lockshin, (1997).
Although some authors, such as Dick (1999), distinguish between brand loyalty, store loyalty,
salespeople loyalty, product and service loyalty, and so on, in this study the concept of loyalty
will be considered as the combination of all these types. Some authors, such as Evans & Laskin
(1994), have also studied the impact of CRM on customer loyalty, but have not made any
distinctions between different types of loyalty. They have merely specified that their concept of
loyalty went beyond the idea of industrial loyalty. Therefore, the variable chosen to measure the
effectiveness of CRM in this study is customer loyalty.
2.4 Knowledge Gap
Sufficient research has been carried interest rates, advertising, good customer relations
and tenure as a way of motivating clients to go for credit facilities. For instance according to
Murdoch, (1999) raising interest rates can in principle exacerbate moral hazard and adverse
selection, worsening loan repayment rates and screening out the most reliable borrowers. This
adequately shows that interest rates largely influence. These areas have been adequately
covered but other factors that influence credit demand like entrepreneurship and ways of
managing the credit have little or very less information. The information on entrepreneurship
and methods of credit management if adequately captured can be of great beneficial to
borrowers who can acquire credit and manage the same without difficulty and misusing the
funds leading to losses. There’s insufficient knowledge on risk attitudes of the clients or
cutomers. Risk attitude may increase the willingness to seek credit or not. Risk adverse
individuals may not easily choose to acquire credit for farm investment while risk loving
farmers will have higher propensity to seek credit. Risk neutral farmers may or may not form
intensions to seek credit depending on other factors unrelated to risk. Perceptions towards
weather may create positive or negative influence depending on whether the famer feels that
weather in the region is reliable or not
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