2. authors, discussed in order to explain the


2.1 Introduction

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The Literature Review comprises of related
theories and works of authors, discussed in order to explain the purpose of and
to answer the research problems of the study. In the first part of the theory,
an overview on CRM and the different types of CRM is elaborated. The second
part comprises of the development of a CRM Strategy especially in the Financial
Sector and lastly it covers factors on Focus on the Customers; Managing
Customer Complaints; Customer Retention through Quality Service; Service
Recovery; Benefits and Barriers to CRM.


2.2 What is Customer Relationship

Customer Relationship Management (CRM) in its simplest form, is a way to manage
leads; people having an interest into the business and its existing customers
in the most efficient way possible to extract the most value. Companies don’t
go through all these efforts for nothing. They do it to increase customer
loyalty, sales and make more profit in the future. Rogen Baran, Christopher
Zerres & Michael Zerres, 2014 stated that CRM is a mean of addressing increasing
competition, the changing economic conditions and promotional dependence
through the use of customer knowledge; knowledge gained through relationship
development and marketing programs.

results in high level of customer satisfaction leading to long term buying
relationship between the supplier and the customers. Since it is good for the
business, CRM is everybody’s responsibility in an organization. Paul Greenberg
2017 argued that customers want to feel valued and also want to feel that the
company respects them in ways that makes the engagement worthwhile. Gray &
Byun, 2001 believe that this relationship involves the continuous corporate
change in culture and process which helps to provide flawless synchronization
between customer service, marketing, information technology and other customer
related functions.



2.2.1 Types of CRM


of CRM could be understood through two perspective:        

1.         Proactive versus Reactive CRM

CRM would state that the firm is responding to customer’s reactions,
complaints, suggestion or requirement whereas reactive CRM is where the
organisation anticipates the means to cope with future needs of customers
thereby providing value to customers through their offerings.


2.         Operational CRM/ Front office CRM

main goal of operational CRM is to combine all business functions in terms of
sales, marketing and support databases into a specific repository which deals
with sales force automation system, interactions with customers at the first
touch points through mails, phones, fax or loyalty programs, managing campaigns
and finally sales management system.


3.         Analytical/ Back office CRM 

type of CRM is involved in analyzing different customer’s demand, preferences
and activities or complaints with the view of customizing a solution to the
client’s queries. Effective applications such as Online Analytical Processing
could be used to support decision making as well as data mining which will
analyse patterns of large amounts of information collected about customers
through prediction, sequence and association.


4.         Collaborative CRM

aim of collaborative CRM is to use the information collected by all functions
to improve quality service and create a lifetime value with partners. This is
done through two way communication, improve effectiveness in all touch points,
to raise customer switching costs and customer retention. 

to Kracklauer H. Alexander and Mills D. Quinn, (2004), collaborative CRM is an
integrated organisation wide system which concede for greater customer responsiveness
throughout the supply chain.


2.3 Strategic Customer Relationship
Management (CRM)

An excellent start point for a company to define a CRM strategy is to establish
what its ideal customer is. If the company could attract just the perfect
customers, that have a strong relationship with the business, which are
retained for a long period of time, these customers will have characteristics
and attributes that the company should be able to articulate, define and
breakdown into a profile.

well as defining the ideal customer, the company also needs to define the
journey – from the point where they’ve never been a customer to their first
engagement, developing a qualified sales opportunity, bringing them onboard and
then developing the relationship into a long term relationship. According to
Buttle, F (2008) Customer Relationship Management (CRM) is the “core business
strategy” that bridges internal affairs and functions, and external networks,
to create and deliver value to targeted customers at a desired profit.

Woodcock (2000) defined it as a “business attitude” – they view it as an enhanced
value activity, which identifies, determines and focuses the various
capabilities of the organisation to the customers opinion in order to deliver
long term uncommon customer value, at a profit, to well-known existing and
future customer segments.  Each company
needs to do this within the context of the market in which they operate because
ideally the way they sell will exploit the companies’ unique to the market in
order to attract the ideal customer in the first place.


2.3.1 Developing a CRM strategy


CRM right is tough, and involves quite commitment but both time and money. Even
though CRM technology gets more and more sophisticated and Project Management
gets more and more mature, it is still reported that between 40% to 50% of CRM
projects fail to make their objectives. Researches made by Gartner Group (2001)
disclosed an average of 50% of failure. A survey made by Forrester in 2009
found that the rate of failure was to 47%.

Cook (2010) underlined that the common facts and factors that usually
contributes to  these failures are;

Lack of focus – where the company fails to
align its focus on the enterprise’s most strategic imperatives, which for him,
the company knows what its goals are and being able to express them in clear
and measureable terms.

Lack of commitment – from the top
management to the sales staff and the collective group of customer-facing

Engaging into CRM Technology as the only
solution – Successful CRM also involves a willingness to change any aspect of
the way the company use to relate to its customer and embrace the change as the
new normal. This can imply the improvement and redesigning of customer facing
sales, marketing customer support activities, among others.

(2002) states that the planning and the development of a CRM strategy is not
the task of an individual but a team – taking us to the conclusion that the
first step on developing a CRM strategy is to build a team and then eventually,
to define the company’s vision and set high level but attainable goals in order
to avoid lack focus and lose track of the ended goals.


2.4 Customer Relationship Management
in Financial Institutions


the myth of business, customers’ expectations tend to be the moving target in
order to get CRM right and have loyal customer. However, no one just meets the
customers’ expectations – we either exceed it of we fall off. Some of the
common expectations of customers in the banking sector are:

Ø  Trust
and Security – give them the comfort that their money is in safe hands and can
be trusted to keep it in confidentiality.

Ø  Accessibility
– banking services or products should be accessible in a convenient way.

Ø  Courtesy
– showing politeness & professionalism either interacting personally or
through telephone to the customer and that, despite the financial status of the

Ø  Professionalism
and Appearance – in terms of grooming of the employees and the infrastructure
of the bank itself; IT; Websites and physical bank units.


The expectations of customers in the
banking sector may look familiar to those in other sectors but still, some are
peculiar in banks – and it they have difficulties in handling and coping with
these expectations, the threat of disruption from other banking service
providers will become a reality.

bid data about the current/future trend in the sector is a competitive
advantage for any firm. According to (Venkatraman and Henderson, 1998):

Ø  Customer response to campaigns

Ø  Order and order fulfilment dates

Ø  Products sales and purchase data

Ø  The account transaction information

Ø  The web interaction data

Ø  Customer demographic data

Ø  Sales data with various channels

the following data financial organization should collect in order to have
effective CRM systems. Moreover (Beckett-Camarata et al., 1998)  added that The
ability to identify profitable customers and then customize marketing on the
basis of customer value has enabled many banks to punch above their weight in
today’s competitive environment.


2.5 Focus on the customer


companies talk about being customer focused without really knowing what it
means. Many companies begin, and many continue without a clear sense of their
target customer. Most of them like to feel like the company is addressing them
directly. Because of high competition and availability of similar products on
the market, customer satisfaction is a vital part of successful customer
relationship management. Buttle (2009) states that customer satisfaction and
loyalty is one of the main reasoning for CRM, hence improving the company’s
business performance.

if the supplier does not offer the best price in a particular transaction, customer
loyalty means sticking with the supplier who treats them well and gives them
good value in the long term – Lovelock and Wirtz (2007).

there is no definite rule to create customer loyalty but according to Bonsal and
Gupta (2001) studies have shown these following aspects might help to build
that; firstly – focus on key customers; secondly – generating high level of customer
satisfaction with every  interaction
proactively; thirdly – understand customer needs and demand, then respond to them
before the competition does; fourthly – develop closer ties with customers and
finally – create a value perception.

customer satisfaction could be very difficult at times because it is an attempt
to measure human feelings. However measuring customer satisfaction should be
set as a parameter. It also considered as reliable feedback and it provides an
effective, direct, meaningful and objective way the customers’ preferences and
expectations – (Gerson, 1993). It was for this reason that some existing
researcher presented that “the simplest
way to know how customers feel, and what they want is to ask them” this applied
to the informal measures – Levy (2009).


2.6 Managing Customers Complaints


commonly used definition of complaint is “an expression of dissatisfaction”,
whether justified or not. Google dictionary defines a complaint as a statement
that something is unsatisfactory or unacceptable. (Landon 1980), defined it as a declaration of dissatisfaction
on a service provider’s behalf to a responsible party.

many authors saw it as an opportunity to be used as a roadmap and an audit tool
for developing a culture which is not against complaint handling but for the
maximization of customer retention. (Eccles & Durand, 1998) argue that companies
should consider factors such as the reasons behind customer complaints, mutual
benefits, therefore complaint handling and ways to instill a service recovery
strategy.”Customer complaints are a valuable source of
important market intelligence which companies should use to correct the root
cause of the problem and to improve the service or product”. (McCollough, Berry and Yadav, 2000).

As per  the (7
Tips for Managing Customer Complaints | Business Blogs, n.d.), in order to turn
a possible catastrophe into a solidly loyal customer, these are the following
tips companies should put into practice:

When a customer yells at you because he is
frustrated, disappointed, and angry for something you both know is not your
fault, don’t take it personally. This will help you control your own attitude,
and that will ease the situation.

Don’t ignore complaints, even when they
are indirect and non-confrontational. When there is basis to them, it shows the
flaw in the business, which was up to that point, unknown to you. When this is
the case, acknowledge such to the customer.

Keep a log of complaints and review them
on a regular basis. A standard form is a good idea, and everything that
happens, including follow-up should be written down and dated.

Always have a standard way of dealing with
complaints – whether phone complaints, emails, letters, and face-to-face
confrontations. They are all important clues to how the business is doing.

If a customer receives a product that is
not working, make him much happier if he can bring it right to you and exchange
it. If a new one has to be ordered, then place the order immediately, and don’t
wait for him to ship it back. The company will have made a friend when he gets
it back just days after he has returned it!

Always try to compensate a dissatisfied
customer (even if there is any basis to his complaint). Refunds, a discount on
a different model, getting it fixed, or replacing it, will renew his trust in
your business.

When nothing you do calms your customer,
ask him what he would do in your shoes. Does he have a better solution? Then
explain why that would/would not be feasible, or modify it to a point where
both you and he feel it is fair. Thanking him for his input will make him feel
important and you will win kudos.


2.7 Customer Retention through Quality


does differentiate between good, bad or indifferent companies is the quality of
service. An excellent customer experience can change the perception the
customer has on the company. Attracting new customers costs more than retaining
existing customers – Good quality customer service keeps customers coming back;
bad customer service drives them away, taking their family and friends with

expect consistent quality of customer service; with a similar, familiar look
and feel whenever and however they contact the company – good quality customer
service is only one factor in meeting customer needs. Service quality is the
consumer’s overall impression of the relative inferiority or superiority of the
organization and its services according to Bitner et al (1994), taking us to
the next factor – well-designed products and processes which meet customers’
needs more often. Consequently, to improve competitiveness, banks have to
understand customer needs and expectations (Parasuraman, 1991) and satisfy
their customers by providing better products and service.

Morales, Ladhari, and Pons (2002), stated that SERVQUAL measuring tool “remains as the most complete attempt to
conceptualize and measure service quality”. Originally formulated by
Parasuraman et al. (1985) it firstly composed of ten various components. Later
in 1988, these ten components were collapsed into five different dimensions of
Reliability, Responsiveness, Assurance, Empathy and Tangibility as a basis for
making a tool for testing the service quality. However Francis Buttle particularly
notes that SERVQUAL’s five dimensions (Reliability, Responsiveness, Assurance,
Empathy and Tangibility) are not universal and that the model fails to draw on
established economic, statistical and psychological theory.



Customer Satisfaction and Retention










2.8 Customer Retention through


from service failure, service recovery is the process through which the service
provider offers additional services for addressing customer complaints in order
to avoid negative impacts.  Lovelock and Wirtz
(2011) “Service recovery is an umbrella
term for systematic efforts by a firm to correct a problem following a service
failure and to retain a customer’s goodwill” or in simple terms, “attempt to deliver service right at the
second try” Berry, Parasuraman, (1991). The errors, being human or
non-human, are more common in service operations due to the complexity of the
consumer’s needs. As much as the companies try to retain customers
despite that no service system is perfect – that mistakes do happen,  they 
will always try achieve  more  market 
share  and  in  this 
respect,  the  service 
recovery enhances customer satisfaction and loyalty.

recovery in 1970s and early 1980 was meant to deal mostly with damages within
telecommunication, computers renovation or recuperating from natural
destructive forces according to Brown, Cowles & Tuten (1996). Andreasen
& Best (1977)  found that since then,
marketers together with scholars gradually were stressing on the importance of
being not only reactive towards service problems but also toward potential
long-lasting benefit from recovery which can manifest itself thorough enhancing
customer loyalty and spreading positive word of mouth Berry, Zeithaml &
Parasuraman (1988). Gilly (1987) states that often consumers who get proper
service response become more satisfied than those who were satisfied from the core
service and did not complaint.



2.9 Benefits of Customer Relationship


to Swift (2001), the benefits of CRM might have an impact on the different
areas in the organisation as explained below:

CRM help companies to reduce overheads
involved in acquiring customers;

It is not necessary to have a high number
of customers to have a flourishing business, that is firms might retain those
generating high contribution to its market wallet;

Increase customer satisfaction through the
use of technology; data mining could be used to better respond to customer’s
demand and anticipate any change in taste or behaviour and innovate

CRM would help to decrease the number of
customer complaints;

CRM would bring accuracy, relevancy and
quality data that would be recorded on a centralized database and this would
improve worker’s effectiveness for example the sales team and firms could
allocate adequate resources to the identified pattern;

CRM will help organisation in providing
customized or personalized service thereby improving customer service;

CRM will help in fostering and maintaining
long term relationship with customers and other relevant stakeholders such as
supplier among others and finally ;

Increase customer retention might increase
the share wallet of the firm with the following:

Ø  Reduce

Ø  Increase
cross selling, up selling;

Ø  More
referrals from satisfied customers;

Ø  Allow
company to benefit from competitive advantage;

Ø  Enhance
customer loyalty and;

Ø  Increase
business profitability.



2.10 Barriers to Customer
Relationship Management


Quick implementation of CRM without any

firms are just implementing CRM just for the stake on being in line with its
competitors although they do not have a knowhow on this technique;


Lack of information and training

will not only function through the buying of the required technology but this
should also be accompanied with a trained workflow together with adequate
knowledge to embrace this system.


Change in organization’s culture and

whole way of operating business functions and hierarchy should be changed in
order to cope with the new techniques of CRM.


Lack of leadership


senior management do not demonstrate or have adequate charisma or traits to
deal with the CRM techniques, they neglect the motivating factor towards
employees or omit the maintenance and up grading part of the evolution.



Ø  Poor
objective setting;

Ø  Inadequate

Ø  Lack
of change management and;     

Ø  Inadequate
post implementation operation.


aim of CRM is to rise customer loyalty and corporate profitability although the
META group identified that “55 % of all CRM projects do not produce results”
(Seligman, 2002).


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