The core aim of Relationship Marketing is to build a long lasting mutually are continuously searching for reliable and serviceable strategies to be linkages between bonds, service quality, relationship quality, loyalty and. marketing strategy on customer loyalty of retail bank sector in Pakistan and to with customers in a timely, reliable and proactive fashion, and handling conflict from one sector of the service industry in one country, more The relation. to empirically investigate the impact of relationship marketing underpinnings service, communicating with customers in a timely, reliable and proactive long- term relationships with them to make their customers loyal (Gilaninia et al, ). .. Shani and Chalasani () in their identification of the bond developing.
Numerous studies have confirmed this assertion. For example, Ndubisi, ; Rosenberg and Czepiel, have shown that the cost of serving one loyal customer is five to six times less than the cost of attracting and serving one new customer.
Also, Reichheld and Sasser found that when a company retains just 5 per cent more of its customers, profits could increase by 25 per cent to per cent. Furthermore, Kim and Cha assert that by reducing customer defections by 15 per cent firms can improve their profitability by 25 to 85 per cent. This promotes closer targeting for the effective delivery of customer value Bose, This can result in tremendous service improvement and increased customer value culminating in win-win or positive reciprocal exchanges Gronroos, ; Gronroos, Colgate and Stewart posit that financial decisions persist throughout life hence customers prefer to remain with their service providers over a long time.
One major reason frequently mentioned for the adoption of relationship marketing in the banking sector is competition resulting in the need for the effective management of relationships to ensure long-term beneficial relationships and thereby promote competitive advantage on sustainable basis Ndubisi, The number of major banks with universal banking licence as at 51 European Journal of Business and Management www.
Following the liberalization of the banking industry in Ghana, competition has assumed such intensity that the very survival of individual banks has come under serious threat. Evidence of mergers and acquisitions in the past two years attests to this fact. Against this backdrop, staying ahead of the competition and achieving competitive advantage appear to be one of the critical challenges facing many a bank in Ghana today.
RM has, therefore, emerged as a key business strategic option for banks in their bid to hold on to their customers. The lure for RM adoption has been bolstered by the fact that, RM has been a subject of academic research and practice in recent times.
In view of the fact that there are various constructs of relationship marketing practices and their implementations involve cost, it is important to find out which of the constructs have the most influence on customer loyalty. The understanding of the effect of various constructs as well as key mediating variables between RM and customer loyalty would assist banks in reducing cost by concentrating on the most important constructs and mediation variables.
Specifically to evaluate the effect of Relationship Management constructs and key mediating variables on customer loyalty. Scholars have identified key principles that have been theorized in the relationship marketing literature.
For example, trust Moorman et al. However, Ndubisi and Wah, synthesised the various elements of RM constructs into five key variables to provide a blueprint for the implementation of RM strategy. According to them, the framework for relationship marketing underscores the fact that RM has certain core underpinnings or practices which are clearly delineated by trust, commitment, communication, conflict handling and competence.
These concepts delineate the likely relationships among the components or constructs of relationship marketing.
Therefore, relationship marketing practices and mediating variables are hypothesised to lead to customer loyalty. Customer loyalty component of this framework focuses more on the behavioural dimensions of loyalty such as relationship longevity or repeat purchase, Share of customer walletUp-Selling, Word-of-Mouth, Cross-selling opportunities and Referrals.
Figure 1 depicts the relationships between the constructs of relationship marketing practices coupled with the effect of mediating variables to derive customer loyalty. These relationships are hypothesized to provide a broader framework for understanding the dimensions of RM and how relationship marketing practices can be effectively leveraged by firms to reduce customer defection and increase customer loyalty.
Developed for the study This section integrates the discussions in the previous sections to provide a broader perspective of Relationship Marketing and Customer Loyalty given the effect of mediating variables.
In this direction relationship marketing practices and mediating variables are first discussed followed by customer loyalty which is the dependant variable. Thus, trust is expected to have positive effect on customer loyalty. Like trust, commitment is another important variable for determining the strength of a marketing relationship.
Wilson observed that commitment was the most common dependent variable used in buyer-seller relationship studies. Since, commitment is higher among individuals who believe that they receive more value from a relationship; highly committed customers are willing to demonstrate higher levels of commitment due to the value they placed on the existing relationship derived from past positive experience. Consequently, highly committed firms are expected to continue to enjoy the benefits of such reciprocal exchanges.
The frequency of communication between the parties indicates the strength of the relationship and this is expected to have positive effect on customer loyalty. Poorly-handled conflicts could also lead to negative word-of-mouth and eventually customer exit.
Conflict handling, therefore, is hypothesised to have positive effect on customer loyalty.
University of Hertfordshire Research Archive
Once customers perceive the organisation to be competent, they are more likely to stay with them. Thus, it is assumed that competence as a relationship marketing construct would have positive effect on customer loyalty. Hsieh, Chiu, and Chiang argued that organisations which exhibit good social and financial bonds are more likely to retain their customers. Dickie warns against starting a CRM project if senior management does not fundamentally believe in re-engineering a customer-centric business model.
This is because without top management commitment, such initiatives are bound to fail because momentum quickly dies down with negative consequences on customers. Thus, top management commitment or support is expected to have positive effect on customer loyalty. Additionally, employee motivation is critical in relationship marketing programmes.
This is done to reduce employee resistance Chen and Popovich, to the implementation of RM. Through employee motivation RM can be successfully implemented to influence customer loyalty positively. Thus, employee motivation is expected to positively influence customer loyalty.
CRM applications take full advantage of technology innovations with their ability to collect and analyze data on customer patterns, interpret customer behaviour, develop predictive models, respond with timely and effective customized communications, and deliver product and service value to individual customers. Therefore, IT infrastructure is expected to have positive effect on customer loyalty. In their view, customers will continue to be loyal to a particular firm if they feel and realise that better value is being offered.
Kotler asserts that the most important consideration to attain high customer loyalty is for firms to deliver high customer value. He further states that it has been the practice by firms to devote much attention and effort to attracting new customers rather than maintaining existing ones, adding that traditionally, firms emphasise more on making sales rather than building relationships.
Customer loyalty is seen as one of the major drivers of success. This is acknowledged by Pullman and Gross who argue that loyal customers are the key to success for many service organizations.
Bowen and Shoemaker indicate that a small increase in loyal customers can result in a considerable increase in profitability. Loyal customers provide strong word-of-mouth, create business referrals, provide references, and serve on advisory boards Raman, Methodology This study used cross-sectional data collected from Relationship officers and Managers of 15 Banks with universal banking license in Ghana in This study adopted the survey strategy because it is cross-sectional in nature and cross-sectional studies usually employ the survey strategy Robson, The choice for this research design became necessary because it has been found to be suitable for analyzing issues by considering a cross-section of the population at one point in time Robson, Based on a five-point Likert scale ranging from 1 for 'strongly disagree' to 5 for 'strongly agree', one set of questionnaire was developed for relationship officers and relationship managers of the selected banks in the Greater Accra region in The questions sought to establish the extent of RM practices and customer loyalty, and also to identify the factors that may impact on bank expectations, experiences and perceptions of the quality of relationships built and developed by Ghanaian banks.
Fifteen 15 out of the twenty-six 26 banks approached for participation agreed to participate in the study. Purposive sampling technique was used to select the respondents for the study since the study only targeted relationship staff of the respective banks.
The population consist of relationship officers and managers of universal banks in Ghana. A total of questionnaires were returned, giving a response rate of Data was collected through the use of fully structured questionnaires. The questionnaire consisted of both open-ended and close-ended questions. The close-ended questions were developed on a five-point Likert scale ranging from 5 strongly agree to 1 strongly disagreewhich sought to elicit information on RM practices, key mediating variables and customer loyalty.
The open-ended questions elicited background information of respondents. Descriptive statistics and multiple regression analysis were used to report results of findings. The Multiple regression analysis was made using the RM practices and mediating variables as the independent predictor variables and customer loyalty as the dependent outcome variable. This is commonly used as a measure of the internal consistency or reliability of a psychometric test score for a sample of examinees.
As a general rule, a coefficient greater than or equal to 0. The lower limit of acceptability was 0. Quantitative analysis was also done to test the relationship between customer loyalty and customer relationship marketing constructs as well as mediating variables.
The model is stated as follows: The least standard deviation of 0. This means the respondents irrespective of the bank have the most related views as far as Social and Financial Bonds as a component of their RM practices are concerned. The highest standard deviation of 0. This means the respondents have more diverse views with regards to the issue of commitment perhaps, commitment depends on the type of bank.
These responses were found to be very reliable with Cronbach Alpha value of at least 0. Comparatively, the banks pay the biggest attention to trust in their RM practice. This is followed by conflict handling, communication, commitment, competence and social and financial bonds respectively. A mean of approximately 3 was obtained for employee motivation. This means the respondents irrespective the bank have the most similar views as far as Employee motivation as a component of the mediating variables is concerned.
This means the respondents have more diverse views with regards to the issue of I. Comparatively, the mediating variable the banks are most concerned about is Top Management Commitment. This is followed by I. An R-Square of 0. Error Beta Constant 1.
Relationship Marketing and Customer Retention in Bangladesh’s Food Retailing Sector
Table 4 shows evidence of mediation using the mediator tests of Sobel, Aroian and Goodman with their respective Z-values and associated p-values. The results indicate strong evidence of mediation for top management commitment and employee motivation with p-values of 0. In the case of IT infrastructure, the result indicates weak evidence of mediation with the resultant p-value of about 0.
In an era of mounting competition, the need to maintain mutually beneficial lasting relationship with valued clients cannot be underestimated. In the light of this, the study provides managerial implications for bank managers as well as relationship marketers. The theoretical implication of this research is that the study provides empirical evidence within the Ghanaian context that the six practices of RM namely: This is evidenced by the fact that It, therefore, builds on earlier 57 European Journal of Business and Management www.
The findings showed that, if a bank wants to achieve a high rate of customer loyalty, then RM has to be considered as a strategy. In other words, banks must make continuous efforts to effectively manage their relationships with their customers because the manner in which they build and maintain these relationships will affect their loyalty.
Specifically, banks must take the necessary steps to improve upon their competence since competence has been found in this study to be a chief driver of customer loyalty. This confirms prior studies of Parasuraman et al.
In improving competence levels, managers should take the necessary steps to deploy knowledgeable staff and equip them with the requisite skills in relationship management to enable them provide stellar services whilst being passionate about service quality.
Therefore, intensive technical training programmes are required to deliver services that are satisfactory and delightful. Continuous training and investment in customer service are needed to ensure consistency in quality service delivery. Employees in turn must display a strong and enduring desire to provide first class service to the customers to win their confidence.
These factors in combination drive customer loyalty and increased customer retention. Trust, as revealed by the findings, showed a rather negative relationship with customer loyalty but the relationship is insignificant.
This means that respondents do not consider trust as a primary factor in determining customer loyalty. A possible explanation to this is that banks in Ghana are, generally, trustworthy perhaps due the sound regulatory framework in the country that ensures that banks adopt sound banking practices in conformity to regulatory standards; hence customers have no reasons to worry about trust.
Therefore, while banks seeking to enhance customer loyalty should not focus too much on trust as a primary determinant of customer loyalty in Ghanaian banking industry, they should nonetheless pay heed to issues of trust since a breach of trust can lead to lack of confidence in the bank.
Managers must, therefore, put in place measures that will lead to trusting relationships. Managers must thus, make efforts to keep promises made to customers, keep customers information confidential and provide quality service that will win the confidence of their customers. Commitment proved to be a strong determinant of customer loyalty. This confirms earlier findings by Ndubisi and WahNdubisi et al. The practical implication to managers is that, managers must show keen enthusiasm and commitment in making frequent changes to meet the ever-changing customer needs and requirements.
Furthermore, if banks want to increase customer loyalty, they must encourage the building of strong relational ties in the form of social bonds between their employees and customers. While this was not found to be significant in generating customer loyalty or satisfaction as in Hofstede and Nartehit would be prudent not to disregard the value of social bonds altogether since Ghana is a collectivist society, while not emphasising it as a key factor contributing to customer loyalty.
Not only must banks show concern for customer needs, they must take steps to also involve customers in their social functions and treat them as real friends and partners, not just customers. If possible, banks should go the extra mile to participate in family events of their customers.
In a collectivist society such as Ghana, a high premium is place on such social events such as funerals. The economic growth coupled with the growth of urbanisation, changes in demographic factors, increases in employment and income levels has had a profound influence on consumers shopping behaviour and hence, Customer Relationship Marketing.
The core aim of Relationship Marketing is to build a long lasting mutually bonded relationships with customers and various other important stakeholders. The concept has attracted considerable attention among scholars in recent decades and has appeared in service marketing literature as a new marketing paradigm.
The concept is considered to be critical to the success of any organisation as it has been an accepted phenomenon that maintains that existing customers are far easier to retain than is the process of acquiring new customers. In order to stay in business and cope with the challenging business dynamism, organisations are continuously searching for reliable and serviceable strategies to be employed in order to increase customer retention. However, there is a lack of an accepted level of consensus among researchers on the core antecedents of relationship marketing that can be used to achieve the above aims, especially while the concept is new in the context of organised retailing sectors in Bangladesh.
In response, this thesis developed a conceptual framework of customer retention strategy to conduct an empirical investigation in one holistic model: As well as iii the effect of CRM on customer loyalty and retention.
The model incorporates bonds, service quality and components of relational quality Trust, commitment and satisfaction into one relationship model to show the relationship between these five constructs and customer loyalty and finally the independent variable of customer retention. The model establishes eleven hypotheses to understand the relationships between various constructs.
A sample of grocery food retail customers were selected in a random sample from four selected superstores located in Dhaka, the capital of Bangladesh.
Data were collected via mail questionnaires. The questionnaires content validity was tested by conducting a pre-test of 50 households before conducting the final survey.