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Customer Relationship Management (CRM) practices are business strategies designed to reduce costs and increase profitability by solidifying customer loyalty. With intense competition among insurance companies in Ghana, this study sought to assess Customer Relationship Management practices and Customer Retention in NSIA Insurance. The study was conducted to identify critical factors necessary for customer retention in carrying out customer relationship management practices in the selected insurance company and to develop effective customer relationship management practices to manage customer retention for sustainability within the insurance industry using NSIA Insurance as a case study. Well structured questionnaires and face-to-face interview were the methods adopted for the investigation of the study. A sample size of 40 respondents was considered, they were made up of customers and the staff who are fully involved in customer relationship management of the insurance company. Data collected from the completed questionnaires and the interviews were grouped into frequency tables and expressed in percentages. The researcher relied on the SPSS in interpreting the collected data. The study shows that even though NSIA insurance has policies on customer relationship management practices, these policies are not carried out fully to accomplish the ultimate goal of customer retention. The study recommends that for the insurance company to command an adequate number of loyal customers, NSIA Insurance should consistently improve on its quality of service to address the preference of the customers and consider the five service quality constructs of reliability, assurance, tangibility, empathy and responsiveness.
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CUSTOMER RELATIONSHIP MANAGEMENT AND CUSTOMER RETENTION
BY
AMA ACHIAA KANKAM BOADU
Ama Achiaa Kankam Boadu is an author with a bachelor’s degree (B.A) in marketing, a
master’s degree (MSc) in marketing and postgraduate certificates in; social media marketing
from Boston University and risk management for projects from University of Adelaide.
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ABSTRACT
Customer Relationship Management (CRM) practices are business strategies designed to
reduce costs and increase profitability by solidifying customer loyalty. With intense
competition among insurance companies in Ghana, this study sought to assess Customer
Relationship Management practices and Customer Retention in NSIA Insurance. The study
was conducted to identify critical factors necessary for customer retention in carrying out
customer relationship management practices in the selected insurance company and to
develop effective customer relationship management practices to manage customer retention
for sustainability within the insurance industry using NSIA Insurance as a case study. Well
structured questionnaires and face-to-face interview were the methods adopted for the
investigation of the study. A sample size of 40 respondents was considered, they were made
up of customers and the staff who are fully involved in customer relationship management of
the insurance company. Data collected from the completed questionnaires and the interviews
were grouped into frequency tables and expressed in percentages. The researcher relied on
the SPSS in interpreting the collected data. The study shows that even though NSIA
insurance has policies on customer relationship management practices, these policies are not
carried out fully to accomplish the ultimate goal of customer retention. The study
recommends that for the insurance company to command an adequate number of loyal
customers, NSIA Insurance should consistently improve on its quality of service to address
the preference of the customers and consider the five service quality constructs of reliability,
assurance, tangibility, empathy and responsiveness.
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CHAPTER ONE
GENERAL INTRODUCTION
1.1 Background of the Study
Over the last few decades insurance companies have exhausted a large chunk of resources in
their quest to secure new businesses. In as much as it is important to exploit new businesses
and enter emerging markets, it is also essential to maintain existing customers and enhance
customer relationship (Weinstein, 2002). In reality, the cost associated with acquiring new
customers is astronomically high as compared to the cost of retaining existing customers.
This implies that a minimal increase in the retention rate will add several thousands of Ghana
Cedis to the premium revenue.
Historical accounts vividly indicate that when a customer holds two insurance policies with
an insurance company, the customer is likely to renew the policy than a customer who holds
a single policy. This analytical process makes it quite strenuous to identify the type of
customers that are profitable and should be retained by the company. Undoubtedly searching
for new customers is indispensable but retaining and enhancing long lasting relationships
with profitable customers is the main emphasis now. Insurance companies have now realized
that parting ways with a customer means losing a life time’s worth of referrals and purchases
and not just a single sale. The target for marketing now is to attract new customers with a
promise to provide superior value and retain current customers by delivering satisfaction
(Kotler& Armstrong, 2011).
In Ghana, the insurance industry is characterised with a whopping majority of the insurance
companies offering the same services with little variations. Insurance companies can set
unique standards through tenacious customer satisfaction and effective customer relationship
management. Customer retention is a key variable in customer relationship management.
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Customer satisfaction is the essential condition for retaining customers; it compares the
expectations of a customer to the perception of the customer being satisfied (Kracklauer et
al., 2004). This highlights the relevance of customer retention as a vital tool in Ghana’s
competitive insurance industry.
Customer relationship management (CRM) represents an activity to build accurate
knowledge on customer behaviour in order to initiate strategies that encourages customers to
continually enhance their business relationship with a corporate entity (Parvatiyar&Sheth,
2001). The strategies mostly used in customer relationship management are anticipated to
litigate the occurrence of service failures that motivate customers to switch from one
insurance company to the other as referenced by (Crosby et al., 1990; Jones & Farquhar,
2003; Best, 2002; Mithas et al., 2005; Uppal, 2008 and Sharma et al., 2011) in their works.
The study of Verhoef (2003) shows that customer relationship management has a positive
relationship with customer retention. Other researchers like Verhoef&Donkers (2001) also
confirm the use of technology as a key variable in retaining customers. This confirms that
CRM plays a major role in allowing insurance companies to use strategies which rely heavily
on customer database in coordinating effective customer relationship towards the ultimate
goal of customer retention. Customer relationship management has quintessentially been
considered as a major determinant of customer retention. Apparently the noteworthy nexus
between customer relationship management and customer retention is worth studying in the
highly competitive insurance industry of Ghana.
1.2Problem Statement
Insurance companies offer unique financial services that propel economic growth in a
country. The services range from the underwriting of risks common in economic entities and
the mobilization of large amount of funds through premiums for long term investments. The
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risk absorption role of insurers ensures financial stability in the financial markets and
provides a sense of security to economic entities. The business world without insurance is
unsustainable since risky business may not have the capacity to retain all kinds of risks in this
ever changing and uncertain global economy (Ahmed et al., 2010). Indeed, a well-developed
and evolved insurance industry is a boon for economic development as it provides long- term
funds for infrastructure development of any economy (Charumathi, 2012). The National
Insurance Commission, the regulatory body of the Ghanaian insurance sector, has therefore
intensified its supervision, field visits, and has adopted a risk-based assessment of insurer’s
activities. All of these regulatory measures are to ensure that the performance of insurance
companies is in sound condition.
In spite of the important role of the insurance industry, there is little information in the
industry to help professionals to work to make good policies and address the needs of
customers and formulate effective policies. Availability and easy access to accurate statistics
on the Ghanaian insurance market remains a big challenge to the sector today. Most
Ghanaians therefore are totally at a loss about what actually transpires in the industry. This
has affected insurance penetration negatively in Ghana. For instance, in 2008, insurance
penetration in Ghana was 1.57%, whiles South Africa recorded 12.7% (National Insurance
Commission [NIC] Annual Report, 2008). Furthermore, there is little research conducted on
the effect of CRM on customer retention in the insurance industry at large and particularly in
Ghana from the customer’s perspective (see Abu, 2011).
1.3 Research Objectives
The aim of the study is to assess the customer relationship management practices and how
this affects customer retention in NSIA Insurance Company, Kumasi. The specific objectives
are as follows:
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To examine the customer relationship management practices adopted by the NSIA
Insurance company in Ghana.
To examine the challenges NSIA Insurance is exposed to in carrying out customer
relationship practices in Ghana.
To establish the effect of customer relationship management (CRM) on customer
retention in NSIA Insurance.
1.4 Research Questions
From the objectives stated above, the study seeks to answer the following questions.
What are the customer relationship management practices adopted by NSIA
Insurance?
What are the challenges associated with customer relationship practices in NSIA
Insurance?
How does customer relationship management (CRM) affect customer retention in
NSIA Insurance?
1.5 Significance of the Study
The results of this study would hopefully be significant in the sense that it would enable
insurance companies to better understand why customers defect; the effect of customer
relationship management and the various motivational factors which could be harnessed to
inspire customers to retain them to increase and sustain productivity.
The study which focuses extensively on NSIA Insurance as a case study will contribute to the
existing knowledge on customer relationship management and customer retention. The study
will aid policy makers in implementing improved policies in the insurance industry as well as
serve as a foundation for future research work to be conducted in this area.
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1.6 Scope of the Research
This study focused on Customer Relationship Management and how it affects Customer
Retention in NSIA Insurance. The customers of NSIA Insurance will be the population for
the study and the study will be carried out within a time frame of 3 months.
1.7 Limitations of the Study
In spite of the significant contribution of this study to the existing literature, the study has
several limitations. The study is limited to NSIA Insurance in Kumasi; inadequate financial
resources and time constraint was the reason for choosing the branch of Nsiah insurance
company in Kumasi.
1.8 Structure of the Research
The Chapter One, of the study is the introductory chapter, which contains the background of
the study, the structure of the work, the statement of the problem, the objective of the study,
limitation of the study and the organization of the study. The Chapter Two consists of the
detailed discussion on the accessible studies by a variety of researchers on customer
relationship management, technology and customers retention in an organization. The
Chapter Three of the study contains the research methodology to be applied for the study.
It discusses the alternative methods of studying the effects of customer relationship
management on customers’ retention. The fourth Chapter of this study consists of the data
analysis which would be collected for the study and also comprises of the results and
discussions to be extracted from objectives developed for the study. The concluding Chapter
of this study consists of the summary results, conclusion of the study and recommendations
for the insurance industry in Ghana.
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CHAPTER TWO
LITERATURE REVIEW
2.1 Customer Relationship Management
CRM is an acronym for Customer Relationship Management. There is no generally accepted
definition of CRM even though CRM is considered to be an essential business approach.
According to Swift (2001), CRM is an enterprise approach to understanding and influencing
customer behaviour through meaningful communications in order to improve customer
acquisition, customer retention, customer loyalty, and customer profitability.
Customer Relationship Management is the strategic use of information, processes,
technology, and people to manage the customer’s relationship with your company
(Marketing, Sales, Services, and Support) across the whole customer life cycle (Kincaid,
2003). Additionally Parvatiyar&Sheth (2001) defined CRM as a comprehensive strategy and
process of acquiring, retaining, and partnering with selective customers to create superior
value for the company and the customer. It involves the integration of marketing, sales,
customer service, and the supply-chain functions of the organization to achieve greater
efficiencies and effectiveness in delivering customer value.
CRM has been conceptualized by Reinartz et al. (2004) from the customer perspective as: A
systematic process to manage the customer relationship initiation, maintenance, and
termination across all customer contacts points in order to maximize the value of the
relationship portfolio. Also Padmavathy (2012) defined CRM as a set of customer-oriented
activities supported by organizational strategy and technology, and is designed to improve
customer interaction in order to build customer loyalty and increase profits over time.
The definitions above accentuate CRM as a complete set of approaches for administrating
customer relations in terms of marketing, customer and support services.
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The organizations can use information technology and information systems to combine CRM
procedures to please customers. For the purpose of this study, CRM will be defined as
organization of comprehensive information regarding customers through the use of
complicated software and analytical tools to cautiously manage client contact points to
maximize profit and retain the customers.
2.1.1 Component of Customer Relationship Management
In the paper of (Kim et al, 2003) a framework of CRM was proposed from information
processing view point in the aspects of relationship initiation, worth, positioning and
commitment. The approach suggests that, customer information is crucial in administrating,
attracting and retaining successful relations with customers across the developmental phases.
The argument continues that, when organizations concentrate on their association with
customers, some of the customers will be retain and provide value for the firm in terms of
generating higher profits. Therefore, organizations can improve their relationships with
customers by properly managing customer information. A related conceptual framework of
CRM was anticipated to integrate business procedures, organizational arrangement,
investigative structures and technology to represent customers view (Chan, 2005). In a
different study Kim et al. (2003), developed a framework of CRME to consist of customer
knowledge, interaction, value and satisfaction. The study declares that, business interactions
are handled well only when CRM activities aimed at satisfying the customers’ personal and
distinctive needs. Through incorporation of business processes and technology, organizations
are able to sustain and improve the relations with customers. From functional and
organizational capabilities perspective, Reinartz et al. (2004 ) offered a model for CRM
processes based on three different levels of relationships namely; initiation, maintenance, and
termination. Payne et al. (2005) further studied the significance of business strategy in CRM
implementation.
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The authors developed a model that assigned the business strategy with customer strategy to
establish value for both firm and customers. By so doing, the lifetime value of advantageous
clients is maximized.
The Literature discussed above suggests that, when organizations implement CRM processes
by considering business strategy, organizational motivation and information technology, then
customer relations established can be retained. The integration of these elements permits
firms to gain knowledge about profitable customers in order to achieve business performance
increase.
2.2 Customer Retention
Customer Retention can be defined as the possibility of a client to be retained by the
organization (Morgan& Hunt, 1994). Also Hall (1997) considers customer retention as
maintaining customers for life. The life span worth of a customer to any business can be
appreciated in their financial performance. Some studies considered Customer retention from
a behavioural perspective. Thus, the customer feeling belong and dedicated to the company.
For instance, the customer recommends the company to others and willing to repurchase
services or products from the organization (Diller, 1996; Diller &MuÈllner, 1998; Gremler&
Brown, 1998; Homburg et al., 1999; Oliver, 1999).
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According to Keiningham et al. (2007, p 364), customer retention is defined as “customers‟
stated continuation of a business relationship with the firm. For Internet service providers
(ISPs), it is continuing to use the same provider. For retail banks, it is continuing to maintain
an account relationship with the bank. And for discount retailers, it is the continued repeat
shopping with the retailer”. For the purpose of this study, customer retention will be defined
as the company’s ability to maintain their obtainable customer base.
2.2.1 Components of Customer Retention
Retaining customer relationships are viewed as one of the crucial possession for companies
(Webster, 1992; Collier &Bienstock, 2006). Some previous studies affirms that, maintaining
obtainable customers is mostly worthwhile than acquiring new customers (see Rosenberg
&Czepiel, 1984; Vandermerwe, 1996). As a result, some researchers have developed interest
in examining the strategies for attracting and sustaining good relationships with obtainable
customers (Duncan & Moriarty, 1998; Gonza´lez et al., 2004). Again Finn (2005) suggests
that, Relationship quality plays an important role in sustaining long lasting relationship.
Researchers have studied relationship quality from customer’s perspective (Crosby et al.,
1990; Kumar et al., 1995). Sharing information sustains the quality of relationship.
Information as a main resource can help organizations to appreciate their customers and
reinforce their customer base against their competitors (McKean, 1999; Fruchter&Sigue´,
2005). Thus, distributing information with customers can make and retain the assurance of
customers. Hence, sharing information often with customers can help organization to retain
them (Crosby et al., 1990). One of the efficient way to attract prospects is through the
assistance of retain customers who offers referrals (Johnson et al., 2003;Collier&Bienstock,
2006).
A referral from existing customers permits the sales force of the organization to penetrate into
markets which are untouchable (Boles et al., 2000). However, this strategic business potential
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of referrals is disregarded by companies (Bachrach, 1999; Connors, 1998) and very little
attention has been given to it academically (Boles et al., 2000). Keeping high quality
relationship with clients seems to boost their readiness to offer referrals (Finn, 2005). This
leads to achievement of retained relationship. As soon as clients expect continued dealings,
the clients will be willing to respond by referring colleagues, family and friends to their
companies (Johnson et al., 2003; Washburn, 1996).
Also Noordewier et al. (1990), advocate that when a company expects a customer
relationship to transcend, then the current interaction should be fostered. Continuous
communication with the same service provider boosts customer willingness to refer others to
their service providers. Base on the above academic literature reviewed, it is suggested that,
when quality relationship exist between customers and their service providers, the
relationship is sustain mainly by the distribution or sharing of information. Customers then
feel close and part of the company which boost their moral to provide referrals to their
service providers. This happens mainly because customers anticipate future interaction with
their service providers. Therefore, the components of customer retention in this study are;
relationship quality, information sharing, willingness to provide referrals and anticipation of
future interaction.
2.2.2 Benefits of Customer Retention
Customer retention provides several benefits to an institution (Abratt and Russell, 1999). In
reality, customer who stays with an institution or company for long is much more profitable
than searching for prospects (Reichheld& Kenny, 1990; Rust & Zahorik1993). Numerous
reasons such as reducing high cost of searching and catching the attention of prospects,
expanding the volume of sales and profits, and advertising by customers through word of
mouth. When customers understand clearly the services of the company, this influences the
customer’s willingness to stay with the institution hence customer retention. Furthermore,
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customer retention positively affects the organizations returns, productivity, reducing
switching of customer to competitors and introducing fresh prospect (Felvey, 1982;
Reinartz& Kumar, 2000). Additionally Reichheld and Teal (1996), recommend that when a
customer gets use to the company’s dealings, they make very important business connections,
purchase many products, and become less responsive to price of the products of the company.
In the midst of all these benefits, Kamakura et al. (1991) states cross selling as an important
tool for ensuring quality relationship with customers.
This leads to increase in product consumption by customers thus cross-selling merely
supports customer retention which prevents customers from moving to competitors. When
customers stay with the organization for long, it enables the company to appreciate the
consumers purchasing behaviour in terms of their choices of products and occasion.
According to Beckett et al. (2000), some customers pretend to be loyal to a particular service
provider even though they despite their activities because of three main reasons below.
Firstly, they are unable to distinguish amongst them. Secondly, customers are enticed by
accessibility to the service provider. Thirdly, customers view the cost of changing to a
competitor as high, and perceive the exercise tedious and useless.
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2.2.3 Inertia as a determinant of Customer Retention
This happens when a consumer constantly buy the same brand anytime shopping. The
customer habitually buys the brand and this requires less effort (Solomon, 1994). The
consumer does not see the need to waste time to go through the five steps of choosing new
brand ; recognizing the need for the product, seeking for information, assessing substitutes,
finally deciding to buy and after purchase behaviour. It is obvious that, the purchasing
processes begins long before real buying takes place and prolongs (Assael, 1998; Kotler&
Armstrong 2011). Habitual buying behaviour and Inertia can be used interchangeably in this
work. Inertia is unconscious behaviour, it is defined as particular measure of construct made
up of “passive service patronage without true loyalty” (Huang & Yu, 1999). The term true
loyalty means the possibility to buy frequently and constantly whiles the cause of inertia or
habitual buying is obtaining inertly unconsciously in spite unconstructive thoughts about the
brand and product (Chintagunta&Honore, 1996).
Most policyholders in the insurance industry hardly refer to the policies after purchase and
usually fail to remember (Crosby & Stephens, 1987). Thus, if the insurer does not contact the
client, the latter hardly follow up on the policy which in turn prevents termination of the
policy. Therefore, it is believed that, the likelihood for a customer to continue a policy is
greater if policy holder passively purchase the product.
2.2.4High Switching Costs Promotes Customer Retention
Specifically, switching cost is defined as charges associated with altering service with regards
to time, financial cost and emotional reasons (Dick &Basu, 1994). It is possible to encounter
switching cost when changing from present company to other in the insurance industry
(Williamson, 1979). Thus, it is likely to suffer charges during information search (concerning
claim settlement and fiscal strength), and operational cost (attempting to negotiate for fair
price on products and managerial charges) (Berger et al., 1989 ; Eckardt, 2008).Such charges
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forbid customers from switching insurers in effect exercising monopoly on the customers
(Williamson, 1979). Consequently, when an insurance company is chosen, switching to
another insurer come along with some charges and that reduces the intent of clients to change
(Dahlby& West, 1986; Schlesinger & Schulenburg, 1993). Due to the high charges associated
with changing service providers, customers are at the mercies of these service providers
(Morgan & Hunt, 1994). Since it is expected that switching cost raise, it is possible for
customers to stick to the same service company (Ping, 1993; Jones et al., 2000;
Ranaweera&Prabhu, 2003). As a result, the higher the switching cost, the service company is
privileged to retain their customers.
2.3 Technology
It is imperative for business entities to understand the impact that technology has for both the
existing technological advancement as well as future developments. This forecast of
technology advancement is believed to lie in accurately predicting future technology
capabilities and the impact that technology will have on the business (Pearce & Robinson,
2013). Technology can help protect and improve the profitability of firms in growing
industries. A study by Wanjau (2011) found that technology assisted in identifying ways to
detect customer retention incentives, customer satisfaction, customer acquisitions, and
customer loyalty.
Also Wanjau (2011) found that CRM systems assisted significantly in addressing the issues
of customer complaints more efficiently as the data is collected regularly, analyzed and
applied.
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Again, Kotler and Keller (2009) believe that new technology also creates major long-run
consequences that are not always foreseeable, for example mobile phones, video games and
the internet have not only reduced attention to traditional media but have also reduced face-
to-face social interactions Most customers today are now interacting with business through
social media platforms and emails. Technology improvements like mobile money transfers
for example M-pesa makes it possible to deposit money and make payments from the comfort
of their homes.
2.3.1 Importance of Data
According to Buttle (2009) CRM is dependent on Data and Information technology. Data
provides all the insights that are essential for CRM. It is believed that CRM requires high-
quality data. This data needs to the acquired, stored, analyzed, maintained, improved and
distributed properly to be of any value. The data requirements for CRM are determined by the
actions taken at the primary stages on the value chain model.
According to Porter (1985) technology development consists of a range of activities that can
be broadly grouped into efforts to improve the product and the process. Porter argued that
Research and development has too narrow a connotation to most managers hence he termed
the category technology development instead of Research and Development. A study by
Wanjau (2011) showed that technology led to increased customer retention and that it helps
build better relationships with customers.
It is believed that in order to create personalized products companies have to collect and
analyze data and this will in turn enable success of a company (Yeuhet al., 2010). This means
that failure or success of a company depends on howthey handle information gathered.
Several studies show how information technology is an important factor and that it influences
customer satisfaction and retention. The increasing availability of technology allows firms to
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collect and analyze customer level data and interact with customer simultaneously (Kumar,
2012). According to Peppard (2000) information is important as it enables organizations to
tailor products and services and also create lifetime value.
Information that is received concerning customers should be managed and arranged in a way
that makes it easy to make decisions and also to retrieve information. It is believed that
gathering information about customers constantly reduces the need for traditional marketing
research tools such as customer surveys and focus groups. This is enabled by data
warehousing technology which makes CRM possible and it transforms customer data into
customer intelligence that can be used to form a better understanding of customer behaviour.
This data includes all sales, promotions, and customer service activities (Shepard et al.,
1998).
According to Porter (1987), Information technology (IT) enables businesses to redesign
business processes in order to improve on performance. It is used to better implement CRM
strategies and is believed to be an easy way to collect and analyze data concerning buying
behaviour of customers. It also helps firms to make predictions, deliver products and services
on time. Meaning that after collecting data and analyzing the behaviour of customers they can
actually tell what product or service customers can purchase next. Also Eckerson and Watson
(2000) believe that using technology to “optimize interactions” with customers, companies
are able to learn from past interactions to optimize future ones.
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2.3.2 Internet
Technology through use of web or online environments also affects CRM positively. Some
companies today incorporate online platforms and they use them to easily access
opportunities to the target customers online. This is because the internet has become a vital
part of technology today. Growth of the Internet has also brought new meaning to building
customer relationships. Customers can now access information about an organization and
order products online at any time of the day. The web has become an important tool in
building lasting relationships with customers by offering services in traditionally impossible
ways (Peppers & Rogers, 2000). According to Kennedy (2006) internet and email are
electronic and interactive media and they are now playing significant role in
operationalization of CRM and enable personalization of products and service. This will
increase customer retention. Customers expect organizations to anticipate their needs and
provide consistent service at levels above their expectations. In return, customers are loyal to
the organization for longer periods of time.
The ability to respond directly to customer requests in real time and interact with customers
enables a customized experience and companies are able to develop, nurture, and sustain
lasting relationships. The end game is to transform these relationships into greater
profitability by increasing repeat purchase rates and reducing customer acquisition costs
(Wanjau, 2011).Bennett et al. (2005) argued that the main component of any CRM strategy
entails the facilitation of two-way interaction between individual customers and the
organization and interaction is about every aspect of the relationship. This helps
organizations to channel products that are customized and fit their preferences. Additionally
Bennett et al.(2005) believe customer plays an important role in Information technology
because without data or willingness to provide data then there is not much company can do to
access information.
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A study by Ngambi and Ndifor (2015) showed that information technology had a negative
effect on performance of financial institutions; however this study focused on performance of
business and not customer retention. They concluded that the negative influence could be due
to the fact that investing in information technology can significantly increase the firm
expenses. This means that an investment of this magnitude can have positive influence on
customer retention as it becomes easier for company to organize activities. The importance of
information technology therefore cannot be dismissed as the study of Simonetet al. (2012)
showed that investments in IT enhance firm performance.
According to Ngambi and Ndifor (2015) information technology does not work alone without
adequate training of employees to use this technology. If there is no training the technology
cannot be a positive influence to generate a higher-order “superior CRM capability”.
Information technology is necessary to enable customer data interpretation. Ngambi and
Ndifor (2015) also found out that customer retention programs affect financial performance
positively and significantly. They argued that it is important to track retention of business
because it shows that customers are satisfied with the service and it also helps in prediction of
future financial performance of company. Advances in IT helps organizations gather specific
information about customers and this in turn helps in creating relationship with customers
which will in turn increase customer retention.
2.3.3 Electronic Customer Relationship Management (E-CRM)
A concept of E-CRM has been introduced by various scholars and this is known to most as
technology based CRM whereby companies are taking advantage of technology advancements
in order to enhance CRM. According to Milovic (2012) E-CRM enables companies to
implement interactive, personalized and relevant communication with customers through
electronic and traditional channels. This means that companies can interact with their
customers and therefore they can direct personalized products to their customers. Due to
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growing global penetration of the Internet, e-CRM has become increasingly popular as a
Communication tool and is used as a relationship-building platform (Lam et al., 2013). Again
Saini and Kumar (2015) based their study on how e-CRM affects customer satisfaction and
argued that there will be an increase in online shopping which will become part of our life. This
however will be in the long run for the insurance industry as advancement in technology has
not been fully adopted. They suggested that more studies should be done in areas of e-CRM
and how its relationship with customer loyalty and customer retention.
2.4 Customer Recognition
Customer recognition is when firms try to identify which customers are valuable and which
customers are not. This is believed to benefit firms because once the firm knows which
customers are valuable they are able to maximize their efforts in ensuring that their valuable
customers remain happy at all times. This means that customers have to be divided into
groups in order to fit them in their various segments (Wanjau, 2011). This however does not
mean that other customers are neglected. According to Buttle (2009) a value chain model is
used by organizations as a guideline to create customer value. This model consists of two
levels the primary level and the secondary level. The primary level consists of 5 stages
whereby at the first stage the firm carries out a customer portfolio analysis. This is a stage
where company identifies the customers that are more desirable; Buttle (2009) argued that
some customers are more desirable than others.
After identifying their customers, firms try to find out everything they can about their
customers so as to make them strategically fit. At this stage firms try to find out information
that they need about their customers, every aspect of their lives from the day they were born
to the last detail that would seem unnecessary. This helps them know what sort of product to
target their customers and hence create value for customers. A study carried out by
Mascareigne (2009) showed that some customers acknowledge the advantages of pinpointing
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products directly to them; this means that customers are happy when they feel that their needs
are directly targeted to them. It tells the customer that you are concerned and put their needs
first. Customers that feel appreciated will come back.
Customer recognition is all about identifying your customers and providing products and
services that best suit their needs. Managers should therefore know everything about their
customers, products and services should be offered according to customers’ needs this is
termed customer orientation (Abdullateef, Mokhtar&Yussoff, 2010). Studies show that
customer recognition has been given many terms, such as customer orientation, market
orientation, or market driven firms but it all boils down to how organizations identify their
customers to serve their needs and create value as they all refer to organizations that focus on
customer needs and wants which forms the basis of their marketing strategies. According to
Kotler (2000), five marketing philosophies guide a company's selling efforts, whereby the
fourth concept the marketing concept focuses on the needs of the buyer.
This is believed to be a crucial concept for the success of any organization as many scholars
agree that it leads to superior performance and firm profitability, (Racela, 2014).An article by
Levit (1960) on marketing myopia explained that companies should define what business
they are in, and that this question plays an important role in determining the growth of the
company. He argued that the failure of any firm is not as a result of competition or saturation
of the market but is due to failure of management. The researcher clarified that a business
that focuses on the customer and not production tends to do better. He also argued that
segmenting customers makes it possible to be accountable to each customer and therefore
obtain early warnings for those customers that might be considering switching to another
service provider. This means that knowledge about customers can enable firm to take
necessary measures so that they do not lose their customers. It is important for organization to
focus on key customers and this has an impact on customer outcomes that is; customer
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satisfaction, loyalty and retention (Yim, Anderson, & Swaminathan, 2004). For the purpose
of this study customer recognition is therefore a set of activities carried out by firms from
identifying their customers, managing knowledge, to providing value for their customer.
According to Day (2003) an organization has to have the ability to retain and develop close
relationships with customers. This helps the organization to know their customers and
therefore create value once they know what their customers’ preferences are. It enables
organizations to provide specific products and services tailored to a specific customer. Study
carried out by Wanjau (2011) showed that most organizations did not invest enough into
research to understand how the customers should be recognized and uplifted.
The study showed that Kenya Commercial Bank concentrated more on selling extra to the
customer rather than recognizing the customer in order to retain the customer. The research
unit focused more on new product innovation rather than how to recognize the current
customer’s value with aim at increasing the business within the same customer and enhance
customer profitability.
2.4.1 Types of Information Needed for Customer Recognition
According to Shy and Stenbacka (2011), a firm can gather two kinds of information that
enable customer recognition; the information about their valued customers, the ones that they
have established relationships with and second the information about what these customers
prefer. They introduced three types of consumer recognition namely; identity recognition and
this is where firms simply identify their customers but not their preferences, secondly
asymmetric preference recognition whereby they identify both customers and their
preferences, and lastly symmetric preference recognition and this is when they identify
customers, their preferences and preferences of customers that purchase from rivals, and here
firms in same industry share information about their customers’ preferences.
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In conclusion, Shy and Stenbacka (2011) pointed out that firms benefit from recognizing their
customers’ preferences regardless of whether the information is shared or not, but the
exchange of information reduces gains from customers and customers prefer that they do not
share information. Their study focused on how customer recognition contributes to
profitability of the firm. Esteves (2008) carried out a study to show the competitive effects of
price discrimination based on customer recognition, and concluded that the more the
information the more intense competition becomes. Also Perreault and McCarthy (2002)
believed that customer recognition involves a firm improving their marketing efforts by
gathering detailed information and using this information to create value, establish a good
relationship with customers and therefore increase profits. An insight on who is buying from
you helps determine customers’ tastes and preferences (Vyas&Sina, 2008).
2.4.2 Feedback and Response
Customer recognition is also not only about getting information about what customer need
and want but is also about managing feedback and responding to customers’ queries.
According to Usitalo, Hakala and Kautonen (2008) the basic idea is not about making the
complaining customer satisfied but it is about responding to these complains and making sure
that it never happens again by removing the source of the complaint. This helps to avoid
similar errors to occur. Also Mekonnin (2015) carried out a study that investigated customer
orientation and business performance in respect of customer treatment, main customer
focused bank structures and introducing latest banking technology to upgrade customer
service. The results of the study showed that all customer orientation was positively
correlated with business performance. Although this study was concentrating on how
focusing on customers contributes to performance, it is important to note that if a business is
performing well then customers are more likely to repeat purchase. The researcher therefore
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concluded that customer orientation is crucial for financial institutions like the banking sector
since their business income is generated from service rendered to customers.
According to Ngambi and Ndifor (2015) marketers build social bonds with customers by
viewing them as clients who are not nameless faces. This means that they should try to find
out everything about their customers so that they can create a bond with their customers.
Interaction with their customers on a personal level helps the company in that customers feel
a sense of belonging and closeness with the brand and service provider. It also helps
companies to offer solutions that are directly linked to the customers’ needs, because by
interacting with their customers they can determine the needs and wants of the customers.
According to Sadeket al.(2011) banking institutions are expected to know who their
customers are and to determine the customer group that produces higher profits.
They should also know what factors keep their customers happy and so as to influence their
loyalty. This means that focus should always be on the customer and what they need.
In the argument of Boohneet al. (2012) an improvement in the market orientation practice
will lead to high business performance thus ensuring the long term survival of the businesses.
The long term survival of business is based on the retention of customers meaning that if
business performs well then customers are most likely to come back to repurchase services
and remain loyal. According to Homburg et al. (2011) maintaining a high-level of customer
oriented service helps in building long term agent-customer relationships and identifying the
highest level of customer orientation can help an agent maximize his customer relationship
potential to achieve maximum sales results. The ultimate goal for any organization is
profitability and continued survival and to achieve this companies have to maximize efforts
and make their customers a priority. Also Homburg et al.(2011) believe that the heart of
market orientation is its customer focus.According to Mekonin (2014) market orientation is a
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business culture that focuses on creating superior value for customers. Customer orientation
focuses on maximizing both efficiency and effectiveness at a customer level (Smith & Chang,
2010). This means that in order to be effective, businesses should solely focus on customers
want.
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2.4.3 Loyalty Programs
In order to build loyalty firms use loyalty programs and these are said to maximize customer
retention (Bolton, Kannan & Bramlet, 2000). They believe that these programs have become
common and that the main aim is to retain customers. Studies carried out by Mascareigne
(2009) showed that the number of customers from the different agencies was insignificant to
have loyalty programs but she did not dismiss the argument by other scholars that suggests
that loyalty programs have a positive influence on customer retention (Verhoef, 2003).
Through loyalty programs, firms can potentially gain more repeat business, get opportunity to
cross-sell and obtain rich customer data for future CRM efforts (Liu, 2007). Loyalty program
is a program that allows consumers to accumulate free rewards when they make repeated
purchases with a firm (Liu, 2007). This means that they are a type of incentive for customers
to keep coming back for more. In their study Grahame and Hammond (2003) believed that
there are two aims of loyalty programs, the first aim is to increase sales and revenues and
therefore increasing profitability and the other aim is to create a bond between customers and
the service provider or firm, and maintain the current customer base. This means that
customer retention is achieved because if company is able to maintain its customer base then
that means their loyal customers will continue to use services. According to Verhoef (2003),
loyalty programs that provide economic incentives positively impact customer retention.
Loyalty programs can include; buy 4 and get the 5th burger for free, bonus points for every
purchase, miles allocated for frequent customers. These are believed to attract customers to
come back for more, hence increase repeat purchase. A loyalty program should have the
ability to create a bond via reward structure that encourages customers to stay loyal, get
involved and strengthen the relationship (Vyas and Sina, 2008). There are however questions
that have been raised by various scholars as to whether loyalty can be achieved by these
programs alone, and some have concluded that it does not create true loyalty.
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In the study of McMullan and Gilmore (2008), they highlight the importance of
understanding how customers with differing levels of loyalty development may respond
better to a differentiated strategy due to the effect of what sustains and renders their loyalty
vulnerable. This means that there are different loyalty stages namely; high level loyalty,
medium level loyalty and low level. Customers with high level loyalty value recognition and
unique rewards but are believed to be less price sensitive the middle level also value
recognition and a relationship with service provider and price plays important role and the
low level customers are more price sensitive. Customers with a low level of loyalty are least
interested in developing a relationship, but very interested in promotional offers. Additionally
Khan (2012) believes that improvement of customer satisfaction will increase loyalty. Loyal
customers will bring referrals to the firm.
2.4.4 Objective of Loyalty Programs
According to Kumar and Reinartz (2002) the objective of loyalty programs is to build true
loyalty, gain effective and efficient profits and also create value alignment. They argued that
true loyalty is not achieved by enticing customers with rewards and bonuses but is achieved
through providing value for customers. Loyalty Programs that are believed to provide
sustainable competitive advantage are those that use the data obtained from consumers into
more effective marketing decisions and thus result in true value creation for customers
(Reinartz, 2002).
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According to Bowen (2015), customers who provide repeat business and also hold a positive
attitude toward the brand are true loyal customers; he also defined those that hold a favourite
attitude toward a brand but purchase occasionally as latent customers and customers whose
high-frequency purchases is not based on favourite attitude, but are led by habits,
conveniences or financial incentives, are classified as having spurious loyalty. Finally,
customers who display a low level of repeat purchase and attitudinal attachment are low-
loyalty customer.
In the study of Clark (2010), fifteen business benefits of a loyalty initiative were identified
and among the fifteen included the benefit of retaining existing customers as well as
acquiring new customers and winning back churned customers, these are customers that cut
ties with a firm. Also Reinatz (2004) believed that there are three benefits of loyalty
programs. He believed that loyalty programs help in building true attitudinal and behavioural
trust, enables efficiency in profits and enables effective profits. Studies also show that loyal
customers are more likely to purchase more, with a high-margin of supplemental products
and services and reduce costs associated with consumer education and marketing loyal
customers are also known to be low price sensitive. According to study done by Magatef and
Tomaleigh (2015) all the loyalty programs are useful and important for building and
maintaining customer retention. This means that for organizations to increase retention they
should implement loyalty programs strategies.
2.5 Loyalty Programs and Customer Retention
Loyalty is believed to be close to the heart of CRM and is defined as, “the biased behavioural
response, expressed over time by customers with respect to one supplier out of a set of
suppliers, which is a function of decision making and evaluating process in brand or store
commitment”(Brink &Brendt, 2008). Customers will be committed to the services that are
offered by a particular service provider, and will continue using those goods and services
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even if a better offer comes along. It is believed that the customer carries a particular bond
with an organization and therefore it is emotional. Also Smith (1996) states that it is not just
repeat purchases, it is about customers having a sense of belonging.
According to Brink and Brendt (2008) the only way to keep some customers loyal is by
giving them a reason to be loyal. Aim for businesses should be to make customers satisfied
and the more customers are satisfied, the more they become loyal to your brand and keep
coming back for more. Lombard (2011), in his study argued that in order to establish
customer loyalty there is need to concentrate on two way communication and conflict
handling and that implementing communication strategies and conflict handling strategies
increases loyalty which will in turn increase profitability and sustainability of the firm.
Relationship marketing is believed to work if marketers adopt a customer management
orientation. It emphasizes on the importance of customer lifetime values and retention
(Kumar &Reinartz, 2003). Customer Relationship Management improves performance of
businesses and is done so by increasing customer satisfaction which in turn increases
customer loyalty. Customer satisfaction increases because the information that firms gather
about their customers give them a better understanding of what they need and therefore create
improved customer value propositions. If customer satisfaction rises, so does customer
intention to repurchase (Buttle, 2004).
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2.5.1 Customer Lifecycle
According to Phelp (2001), customers have a peculiar lifecycle and these include the contact
phase where you make initial contact with the customer. At this stage firms reach out to the
customers they wish to provide services for. The next stage is the acquisition stage where the
aim is to retain the customer by collecting as much information as they can so as to provide
goods and services in line with the customer’s needs. The firm finds out every single detail
about their customers so as to make informed decisions and provide goods and services that
satisfy specific needs. This is followed by the retention phase where firms create long term
commitment and loyal customers; and lastly the loyalty phase where goal is to extend
customer loyalty and here firms try to establish and identify life time value of their
customers.
2.5.2 Switching Barriers Effect
According to Vyas and Sina (2008) switching barriers is part of factors that shape loyalty,
this is because once a consumer signs a loyalty program, if he/she leaves it, then he/she loses
the points accumulated on previous purchases made. Thus once a consumer becomes a
member of any loyalty program, switching barriers are created. The loyalty program will
therefore tie the customer to a particular service or product and hence it becomes more
expensive to switch to another customer and hence they have to continue using the current
service or brand. Also Ngambi and Ndifor (2014) argue that financial bonding is a CRM
strategy that attempts to make the customer attach to a particular firm through financial
incentives.
These incentives can be in the form of lower prices for greater purchase volume or lower
prices for customers that have been loyal to the firm for a long period of time. An example
they used was airline incentive whereby a frequent flier can be awarded miles or free airline
ticket as an incentive. Incentives can also come in the form of stable prices or lower prices
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than competitors for loyal customers and are used as retention strategies (Ngambi&Ndifor,
2014). They however argued that loyalty programs do not necessarily keep customers loyal
because they can easily be copied by competitors and they can therefore be unsuccessful and
firms should be very careful when using this strategy. Additionally Singh and Khan (2012)
highlighted how short term actions with few modifications with the profit will turn into long
term customer loyalty and hence long term benefit. They focused on understanding customer
retention and customer loyalty and their importance to the business.
In order to make loyalty programs effective, managers need to provide emotionally engaging
experience during redemption process and they need to be viewed as a business strategy
which requires long term commitment. The success of loyalty programs is belived to depend
on improving the perceived value of the rewards offered (Vyas&Sina, 2008).
Also Pullins and Roehm (2002) assumed that participation in a loyalty program motivates a
customer to purchase the program sponsor’s brand repeatedly and also that these programs
create switching barriers to other service providers or suppliers since it depends on prior
customer behaviour. Although several scholars have questioned the effect of loyalty
programs Verhoef (2003) built an argument in favour of the positive effect of loyalty
programs on customer retention and his study showed that customer retention is indeed
influenced by loyalty programs. This means that loyalty programs provide a tier effect and
hence customers will not switch to another service provider.
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2.5.3 Variables involved in Customer RelationshipManagement
Several variables of values have been identified as essential components of relationship
building process.(Ravald&Gronroos, 1996), compared relationship values with safety,
credibility, and security, which, in turn, build trust, commitment, communications, promise
and conflict handling. A combination of those then increases loyalty and may influence in a
collectively beneficial relationship for suppliers and shoppers. It represents part of built-in
figuring out of relationship variables. Notably, trust entails a belief that a relationship
companion will act within the quality pursuits of other partners.
2.5.4 Trust
Various definitions of trust have interested by its existence in trade relationships and have
relied on its concept as a perception or expectation in such relationship and beliefs in
interpersonal trustworthiness (reliability of promises, honesty, helpfulness, and mutual
interests in trade relationships) serve as symptoms of trust in purchaser-vendor relationships.
Believe and commitments, commonly defined as relationship values, are relevant accessories
of relationships. In trade-to-consumer relationships, the place results rely on the conduct,
price and service best, believe is chiefly central (Johnson & Cullen, 2002). It represents a
element of integrated skills of relationship variables. Chiefly, trust involves a notion that a
relationship partner will act in the best pursuits of alternative companions (Morgan & Hunt,
1994).
Within the area of customer relationship management, trust has been seen as an essential
variable for the accomplishment of relationships in the business-to-consumer (B2C)
relationship building, enhancement and maintenance processes. Trust has been outlined as a
willingness to depend on an exchange accomplice in whom one has self belief. For that
reason, countless extraordinary conceptualizations of believe exist. However, long-
established to most definitions of trust are a confidence between the parties that the other
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celebration is risk-free and that the events will act with a degree of integrity when dealing
with every different. A betrayal of this believes via the provider or service provider could
lead to defection or purchaser switching. It's within the belief that an accomplice's phrase or
promise is secure and a celebration will fulfil his duties in such relationships.
2.5.5 Commitment
Commitment is an important determinant of the strength of a customer relationship
management strategy and a useful construct for measuring the likelihood of customer loyalty
and predicting future purchase frequency and it is one of the most common dependent
variable used in buyer-seller relationships. In buyer-vendor contexts principally in the trade-
to- patron relationships, commitment is unique as an aspiration for sustained relationship and
an effort to make sure its protection or as a pledge for relational balance between exchange
partners. Commitment is based on affective explanations such as emotional attachment,
belonging, and admire for the companion, manifested within the type of a liking to develop
and toughen the connection with a further individual or crew (Sharma et al., 2001).
Emotional commitment is explained in phrases of the similarity of values and targets among
partners, implying that relationship members share beliefs about correct and valuable
behaviours and objectives. Commitment is in most cases used to investigate both man or
woman and behaviour in firms and mark out types of action characteristic of specific sorts of
persons or organizations (Wong & Sohal, 2002).
Within the marketing literature, it's believed that commitment is a permanent desire to keep a
valued relationship. This implies a larger stage of responsibility to make a relationship be
triumphant and to make it collectively pleasant and priceless (Morgan & Hunt, 1994)). On the
grounds that, dedication is bigger amongst individuals who suppose that they obtain more
price from a relationship, purchasers who particularly committed are always disposed to
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reciprocate efforts of a firm because of prior advantages bought and particularly committed
corporations and patrons will continue to experience the benefits of such reciprocity.
2.6 Promise
Promise has additionally been stressed as a basic component of the relationship advertising
methodology. It has been contended that the obligations of advertising don't just, or
overwhelmingly, incorporate giving guarantees and in this way influencing clients as
uninvolved partners in the commercial centre to act in a given manner, additionally in
keeping guarantees, which keeps up and upgrades developing relationship (Ndubisi ,2007).
Satisfying promises that have been given is just as critical as a method for accomplishing
consumer loyalty, holding the client bolster, and securing long haul gainfulness.
2.6.1 Communication
Communication refers to the capability to provide timely and trustworthy information. A new
view of communications provides an interactive dialogue between the company and its
customers, which takes place during the relationship building stages. Communication in
relationship advertising and marketing method keeping in contact with valued customers,
delivering well timed and reliable knowledge on carrier and service changes, and speaking
proactively in case of service delivery failure. It is the communicator's undertaking in the
early phases to construct recognition, improve client alternative (by means of selling price,
performance and other points), persuade interested shoppers, and inspire them to make the
purchase determination (Ndubisi & Chan,2005). Communications also inform disillusioned
buyers what the company is doing to rectify the reasons of dissatisfaction. When there's
mighty conversation between an organization and its customers, a greater relationship will
result and customers can be more loyal.
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The key constructstrust, value, commitment and interaction-are the main element that
determines the nature and scope of relationship between the customer and the organization or
service provider. How well these activities and processes are coordinated and managed
determines the continuation and future of the relationship including the roles of the
peripherals like stake holders, suppliers financial institutions employees government policies.
2.6.2 Managing Relationships
As most organizations are charting ways to shift from transactional focus marketing towards
relationship building, enhancing and maintenance marketing. The shift is necessary in view
of several challenges facing the most businesses today especially the service industry. Most
organizations strive to build and enhance relationships for their clients for long term benefits.
But then, the problem of managing such relationships with their customers becomes a
problem. How can organizations organize and manage their relationships and what forms of
network structures are more or less useful for managing relationships?
A customer-focused service culture could be developed. The customer-focused service
culture revolves around the needs and wants of the customer, having appreciated the
importance of the rationale and processes of relationship marketing. The hotel enterprise
needs to decide on this approach to organize and manage relationships with customers. The
basis is that ongoing, long- term relationships are essential for a business’ viability and
market performance. Marketing managers should devote their energy to develop and maintain
relationships with customers .Long-term commitments entail treating customers differently at
all times. However, damage can be done if staff does not understand what is expected of
them. Hence, the need to exploit fully the potentials of internal market by establishing
communication channels, develop customer responsive focus and a unified sense of purpose
among employees. The purpose is to remove barriers to organizational efficiency and develop
customer awareness. The internal marketing is based on the notion that every employee is a
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customer to each other. Long-term relationship enhancement requires improved customer
service and high levels of service and depends on ensuring that suppliers and customers are
happy (Dibbs et al, 2001). The concept requires that all staff work together in line with set
goals of the organization. Internal marketing is a philosophy for marketing human resources
with marketing perspective (Gummesson, 1987).
In order to achieve this internal cohesiveness, (Reynoso& Moore, 1996) suggests six steps:
Create internalawareness
Identify internal ‘suppliers’ and‘customers’.
Determine internal customer’sexpectations.
Communicate these expectations to internalsuppliers.
Internal suppliers to modify their activities to reflect internal customers’ views.
Measure internal service quality and receive feedback to ensure a satisfactory
exchange between internal customers’andsuppliers.
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2.6.3 ConceptualFramework
Some researchers argue that customer relationship management is not most effectively
founded on looking at person transactions (O'Malley and Tynan, 2000). Even as transactional
marketing is now considered as integrated into relationship marketing (Tyler and Stanley,
1999), relational alternate is an extended-term and tricky relationship between service
vendors and buyers, now not easily or simplest a series of transactions (Berry, 1983; Jackson,
1985; Dwyer et al., 1987). Relationships are prone to countless on contract legislation and
more on issues similar to trust, equity, accountability, and commitment (Gundlach and
Murphy,1993).
Many factors together with product, nice, fee, trade rate, and demand can all have a major
impact on income. Nonetheless, customer relationship management strategies may also
influence sales and manufacturer loyalty (Heffernan et al., 2008; Lee et al., 2001). Several
problems associated with marketing such as fast patron turnover and the consequences of
discontinued consumer relationships have come to be critical for a lot of companies.
Developing competition, coupled with enterprise maturity and recessionary pressures, mean
that businesses can't fully rely upon new consumers to take the situation of misplaced
customers (Zeithaml et al., 2006). Client enchantment but now not purchaser retention and
brand loyalty are at the heart of transaction marketing exchanges which enhance, promote
and supply merchandise by the use of short-time period, discrete monetary transactions.
Relationship marketing is viewed through some academic commentators to symbolize the
starting of a paradigm shift in advertising (Gronroos, 2000; O'Malley and Tynan, 2000). The
evolution of relationship marketing has been one of the vital enormous trends in advertising
over the many years, exceptionally relating to industrial marketing (Dwyer et al., 1987;
Palmatier et al., 2006; Sheth and Parvatiyar, 1995).
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Again Yau et al. (2000) compared a relationship marketing orientation (RMO) with a
traditional market orientation in terms of its relative impact on the business performance of
firms in retail, wholesale and manufacturing industries from the perspective of Chinese
managers in Hong Kong. The findings of their paper suggested that while relationship
marketing is relevant to every industry, it has particular importance to the manufacturing
industry and business-to-business operations.
The literature on market orientation has provided evidence of the positive relationship
between RMO and the business performance and brands of firms (Heffernan et al., 2008;
Palmatier et al., 2006). As the business environment changes and customers become more
demanding, firms must practice effective customer relationship management practices to
compete effectively (O'Malley and Tynan, 2000). Changes in the business environment will
not only affect wholesale and retail business, but also the manufacturing sector through the
entire supply chain. Likewise, as competition intensifies, direct consumers as well as
institutional buyers will become more demanding. Therefore, a market orientation is a
necessary but no longer sufficient condition for firms to remain successful. This applies to
firms of all sizes in all industries (Yau et al.,2000).
In the study of Abramson and Ai (1997) the business-to-business sector in China specifically,
the guanxi-style buyer-seller relationships (guanxi as a complex set of social relationships)
were strongly related to reduce levels of perceived uncertainty about the business
environment and a variety of improved performance outcomes. Also Wong (1998) undertook
a study on guanxi and relationship performance on industrial buying in China and suggested
that firms should adapt relationship marketing plans to compete in the changing environment
of the Chinese market. The findings of these studies indicate that relationship marketing has a
significant impact on the business performance of firms in both service and industrial
marketing.
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Several studies on the effects of relationship marketing on the business performance of firms
across a range of industries have been reviewed (Palmatier et al., 2006). Given that customer
relationship management practices is more important in the industrial business-to- business
context than the consumer context; most studies are located in the industrial business-to-
business context. Briefly, the findings of these studies indicate that customer relationship
management practices has a significant impact on the business performance and brands of
firms in both service and industrial industries (Lee et al., 2001; Sin et al., 2006), with
particular importance in the manufacturing industry (Liu and Wang, 1999; Wong and
Chan,1999).
Customer retention enables organizations command a pool of profitable loyal customers for
mutual benefit. A conceptual model attempts to show the relationships that exist between
salient variables (Ghobadian et al, 1994); as it is a simplified description of the actual
situations (Seth et al, 2005).It is envisaged that a conceptual model in relationship marketing
enable management appreciate and understand the importance of customer retention in
business transactions.
This will enhance the overall profitability of the organization as well as assist to attain a
competitive edge and increase in market share.”
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Figure 2.1. The Process of Customer Relationship Management Practices in Insurance
Companies
2.6.4 Effects of Customer Relationship Management on Customer Retention
A corporation can scale back price significantly (via customer retention) by means of
constructing a good relationship with purchasers. For example, it has been proven that it is
cheaper to serve an existing customer than to draw and serve a brand new one (Ndubisi,
2006). Companies may additionally shrink uncertainty of demand through constructing
relationship with consumers. Prior studies have urged that amazing relationship promoting
(marketing) shall be extra significant when: the provider is tricky, custom-made, and
delivered over a continuous circulation of transactions (Berry, 2003); many consumers are
relatively unsophisticated concerning the carrier (Ghingold and Maier, 1996); and the
atmosphere is dynamic and uncertain in ways that have an effect on future wishes (demand)
and offerings (Crosby et al., 1990).
TRUST
COMMITMENT
SOCIAL BONDS
PROMISE
COMMUNICATION
CUSTOMER
SATISFACTION
CUSTOMER
ORIENTATION
CUSTOMER
RETENTION
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According to Crosby et al. (1990), these traits apply to reliable offerings such as accounting
and plenty of financial services equivalents to banking. The social penetration conception
states that companions will continue to deepen a relationship so long as anticipated
advantages exceed predicted bills (Altman and Taylor, 2003). Considering a excessive
excellent organization-consumer relationship can shrink customers' uncertainty or perceived
threat, and believe, dedication, verbal exchange, and conflict-handling capability can enhance
relationship nice, it's logical to expect an association between these variables and total
company-client relationship fine.
The progress of effective purchaser relationships is largely advocated as a key detail of
advertising and marketing systems within the provider sector. The benefits associated with
the development of such relationships are idea to be peculiarly important within the case of
offerings for which credence qualities are high. Nonetheless, a key characteristic of most
offerings is client participation within the construction and the delivery of the provider. The
potential of an institution to advance and preserve a relationship with its purchasers shall be
stylish on their willingness to take part. For participation to be important, customers have to
perceive that it yields benefits which might be higher than these which accrue from non-
participation.
If the connection is to remain positive the consumer must be at the hub of it and so it is
foremost to have the shoppers' pleasant curiosity at coronary heart. Regarding this difficulty
is co-setting up products and repair augmentation. These will, in many situations, be
employed with the aid of businesses adding extra carrier to distinguish from its opponents'
offerings. In this context the ''extras" have to be valued by way of the patron, and now not
without difficulty on hand in different places (i.e. “adaptation", Wilson, 1995). A high
emphasis on better carrier and repair great is extra noted as a main detail inside relationship
marketing (Christopher et al., 2001).
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The above causes represent an attempt to favourably lock-in or retain the purchaser and many
lecturers espouse the value of consumer retention related to relationship marketing
conception (Wright et al., 1998). Also Barnes (1994) observes that tactics corresponding to
frequent-purchaser schemes, the place the purchaser has to return to the equal enterprise to
accumulate ''points", develops a barrier to exit. Irish grocery chain, Superquinn, differentiate
their loyalty scheme by means of introducing ''each frequency marketing and particular direct
marketing, which so many so-called loyalty schemes forget to include'' (Conneran, 1996).
Loyalty is a tricky variable to quantify; nonetheless, Hawkes (1996) reemphasized the
thought of the loyalty ladder, with the lowest rung being suspect and the best rung suggest,
Schneider (2000) found: ''what is shocking is that researchers and businessmen have
concentrated some distance more on easy methods to appeal to buyers to merchandise and
services than on hold them''. Promoting merchandise to current buyers is nearly extra rate-
potent than the bills incurred while shopping for brand spanking new ones (Hartley et al.,
1995; Mitchell, 1995;Jackson, 2000).
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CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter focuses primarily on the research design and throws more light on the
methodology that was used to test the research questions. A well structure questionnaire was
used collect data for the study.
3.2 Research Paradigm
As pointed out by Kvale (1996) and Mikkelsen (1995), the ultimate success of a research is
mainly determined by the choice of research method. The research design is considered to be
the blueprint of the research as vivid directives on which questions to study, which data is
appropriate, the type of data to collect, and how to analyze the results are clearly illustrated
(Adèr, Mellenbergh, & Hand, 2008).
Research design is divided into constant and flexible research designs (Robson, 1993). Others
have noted this difference as quantitative study designs and qualitative research designs,
respectively. In constant designs, the design of the study is constant earlier than the most
important stage of information assortment takes situation. Fixed designs are probably
conception driven; otherwise it’s inconceivable to understand prematurely which variables
need to be controlled and measured. Most of the time, these variables are measured
quantitatively. Bendy designs allow for more freedom in the course of the info collection
method. One motive for using a bendy research design may also be that the variable of
curiosity is not quantitatively measurable, similar to tradition. In different cases, idea might
not be had earlier than one begins the research. Examples of quantitative designs include
experimental designs, non-experimental designs and quasi experimental designs.
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In an experimental design, the researcher actively tries to vary the drawback, circumstances,
or expertise of contributors (manipulation), which may result in a transformation in habits or
results for the members of the gain knowledge of. Non-experimental study designs
nonetheless, do not involve a manipulation of the hindrance, situations or experience of the
participants. Quasi research designs on the other hand are research design that follow the
experimental procedure, however don't randomly assign men and women to (therapy and
comparison) corporations.
The research procedure adopted by the researcher is the case study procedure. The case study
technique was used because of time constraint and the truth is that it is pleasantly used in
trendy issues. Yet another bases on which the case study procedure was used is the fact that
not all contributors can be interviewed, as a result this pattern is used to generalize the
findings.
3.2.1 Purpose of the Study
From the Literature, the three main purposes under which any investigation is made are:
descriptive, exploratory and explanatory purposes. Exploratory study refers to the initial
research into an idea to gain in-depth understanding about the matter of interest. Studies that
establish causal relationships between variables may be termed explanatory research. The
emphasis here is on studying a situation or a problem in order to explain the cause and effect
relationships between variables. Data could be collected and subject to statistical test such as
correlations in order to have a clearer view of the relationship. In addition, one might collect
qualitative data to explain the reasons why one variable affect the other in the relationships
(see Saundersetal., 2009;Griffiths,2004;Romme,2003). Descriptive study is conducted for the
purposes of narrating or accounting for an event or problem.
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For the purpose of this study, the researcher conducted an exploratory research in attempt to
assess the customer relationship management practices and customer retention in NSIA
insurance company in Kumasi.
3.3 Sampling Procedures
This section gives a detailed account of the sample and the population of the study.
3.3.1 The Population and Sample
Many researchers, specifically Cooper and Schilndler (2003) define population as the total
collection of elements which a researcher wishes to make some inferences. The target
population consists of the staff and customers of NSIA Insurance in Kumasi. This is
estimated at about three hundred and fifty (350) customers. A sample size refers to the
number of variables to be included in a study (Malhotra and Briks, 2005). Normally, it is
drawn from the general population for the study. A sample size of forty (40) respondents was
purposively selected. The choice of customers of the NSIA Insurance is based on the
demographic characteristics sex, age, marital status and educational qualification/s; apart
from the objectives of the study. The sampling technique used in selecting the sample size is
the purposive sampling technique. Purposive sampling technique is a type of sampling
technique where the sample size is selected in accordance with the objective of the
researcher.
The reason for the choice of technique is largely due to the interest of the researcher as well
as time constraint as this research is time bound. In determining the sampling frame, the
research considered the proportion of all customers and staff of NSIA insurance used in the
case study.
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3.3.2 The Sampling Technique
The adopting and implementing an appropriate sampling technique is critical for the success
of a research which involves the use of a sample for data collection (Shiu et. al, 2009). Again
Maylor and Blackmon (2005) state that a given sample represents a section of the study
population that will be studied, in order to understand the population from which the sample
was drawn. Therefore, Adams et al (2007) states that sampling is the process of selecting
study participants for the purpose of classifying a population under study. This study was
conducted at NSIA Insurance Company in Kumasi. The Kumasi branch of NSIA Insurance
Company was the ideal business organization for the researcher at the time this study was
conducted. This was mainly because the information required for the study was quite
accessible with the NSIA Insurance Company in Kumasi as compared to other branches of
the company in other parts of the country. A purposive sampling technique was employed in
selecting the respondents who are made of the staff of the company who work at the customer
service department, the branch manager and the customers of the company. A purposive
sampling technique which is also known as judgmental sampling is a non-probability sample
that allows the researcher to select a sample from the population based on their characteristics
and the objective of the study.
3.4 Sources of Data
In a research work, there are two types of data; secondary or existing data created by a
separate entity and primary or actual data gathered in the course of the study (Hair et al.,
2007). Primary data is the actual information gathered purposely for the researcher’s use,
whereas secondary data is information gathered from other individuals for a new cause such
as books, journals, articles, and web-based data (Ghauri and Grönhaug, 2005).
Primary data was used for this study so questionnaires were used as a source of gathering the
primary data from the customers while a structured interview was used to gather information
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from the management of NSIA Insurance in Kumasi. Practically the primary data was
collected via the use of questionnaires and structured interviews.
3.5 Data Collection Tools
The questionnaire is a means of gathering information from respondents through a series of
questions (Parahoo, 2006). The questionnaires were self-administered to the respondents by
the researcher. Primary data was obtained from the use of questionnaire to collect data in
order to assess the customer relationship management and customer retention in NSIA
Insurance. Questions were in closed-ended and open-ended types. The researcher designed
only one set of questionnaire for the customers. In designing the questionnaire, items were
selected from the literature. Afterwards, the supervisor of the thesis moderated the
questionnaire to check content. Additionally, a pilot study was carried out where the
questionnaire was given to five insurance experts, managers and customers to evaluate. They
commented on the errors and the researcher made the necessary corrections leading to the
final questions.
The researcher administered the questionnaires personally to the respondents. Items in the
questionnaire were partly open-ended and partly close-ended. The open-ended items allow
the respondents to answer the questions freely and fully in their own words and with their
frame of reference. Generally, open-ended questions are flexible, encourage rapport and
offers possibilities of depth whiles the closed-ended items allow the given respondents to
answer the questions of specific nature. The close-ended questions were developed on a five
point Liker scales ranging from 1 (strongly agree/ satisfied) to 5 (strongly disagree /
dissatisfied). The open-ended questions elicited information about the background of the
respondents. Copies of the questionnaires were administered to the selected respondents in
the sampling population of all customers of NSIA Insurance in Kumasi. After the responses,
the researcher retrieved the copies of the questionnaires.
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3.6 Data Analysis
In the study of Macnee and McCabe (2007) the researchers affirm that data gathering is an
act of collecting facts from spotting individuals through the study questions in forms of
questionnaires, interviews and checklists. In mobilizing the actual or primary information
from respondents, questionnaires were employed. Apart from content analysis, simple
percentages mean scores; and standard deviation was employed in analyzing the data in this
research. Percentages describe data in simple and clear analysis. The mean scores measure
the central tendency of the standard deviation (S.D.) which showed the dispersion of
opinions. The statistical tools mentioned were used because the application of statistics
especially the appropriate statistical methods employed in a given situation is not always
obvious but is best described by the researcher by keeping the objectives of the study in
mind.
3.7 Quality of the Research
The content validity of a research would best be described in the form of the validity and
reliability of the questionnaire containing the right questions and phrasing. According to Aina
(2002) a pretest is a “dress rehearsal” that helps to clarify certain problems inherent with the
collection instrument. For the purpose of this study, a pilot study was conducted using four
experts, two managers and two customers of NSIA Insurance in order to ensure clarity and
accuracy of the questionnaire. The pre-testing revealed that, the respondents did not properly
understand some of the questions. The respondents also revealed that, some of the questions
were too long and winding. As a result some of the questions were re-worded in order to be
precise and clear.
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3.8 Research Ethics and Limitations
Ethical considerations form an important part of the design of a research methodology
(Saunders et al., 2007). More often than not, some studies on Customer Relationship
Management and Customer Retention have indicated that issues relating to ethics accounts
for the frequent low response rates. The researcher therefore took steps to minimize the effect
of unethical issues relating to this research work. The first action taken by the researcher was
to formally send a letter to the management of NSIA Insurance requesting to use their outfit
as a case study for the study. The respondents were also assured that the data provided to the
researcher will only be used for only academic purpose. This was important in assuring
respondents who might perceive they are given out sensitive information relating to their
personal life that the data provided will not be used for any other purpose. Respondents were
also allowed to complete the questionnaires in their convenient time considering the busy
work schedule of respondents.
Although so much effort was put into this methodology, some imperfections came into focus.
These include time constraint, cost of transportation to interview respondents, some of the
managers were reluctant to give out information on their relationship with customers;
probably for fear of the researcher leaking such information to their competitors while some
customers refused to go into details about their relationship with NSIA Insurance company.
Sometimes, the opinions of some respondents were laced with complaints about other
insurance companies in the Kumasi metropolis.
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CHAPTER FOUR
RESULTS AND DISCUSSION
4.1 Introduction
This chapter presents the relevant data of the results obtained from the field work to address
the objectives of the study. It also presents analysis and discussion of the results and findings
in the light of existing literature on relationship marketing. This study was made to evaluate
customer relationship management practices and customer retention in the insurance industry
in Ghana with NSIA Insurance, Kumasi as a case study.
In this chapter, the data collected for the study were analyzed and interpreted. The data is
presented in tables beginning with demographic variables and then research questions that are
formulated to guide the research. The first part of the chapter considered the demographic
background of the respondents, focusing on sex, level of education and numbers of years with
the insurance company. The second part presented the findings from the study in relation to
the research question.
4.2 Demographic Data
Demographic Data constitute the criteria of respondents that were used for the research.
Demographic information taken for the purpose of this research includes gender, age group,
educational level and tenure dealing with the Insurance Company. Below explains the details
of the demographic data in tabular.
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4.2.1 Gender
A total of forty (40) questionnaires were distributed among the customers of the NSIA
Insurance, Kumasi; there were 20 males and 20 females representing 50% each. This means
that, the services of the NSIA Insurance is patronized by both males and females.
Table 4.1 Gender
Frequency
Percent
Valid
Percent
Cumulative
Percent
Valid
MALE
20
50.0
50.0
50.0
FEMALE
20
50.0
50.0
50.0
Total
40
100.0
100.0
Source: Field work, 2019.
4.2.2 Age
The next demographic variable of the participants examined was their age. The results
showed that, the majority of the respondents were in the age bracket of 20 29 years. This
was followed by the age bracket of 40-49 years. 30-39 years also followed and lastly was the
ages of 50 years and above. This means that, those below the age of 20 years do not patronize
the services of the insurance company. This is shown in Table 4.2 below.
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Table 4.2 Age
Frequency
Percent
Valid
Percent
Cumulative
Percent
Valid
20-29YRS
21
52.5
52.5
52.5
30-39YRS
6
15.0
15.0
67.5
40-49YRS
10
25.0
25.0
92.5
50YRS AND
ABOVE
3
7.5
7.5
100.0
Total
40
100.0
100.0
Source: Field work, 2019.
4.2.3 Level of Education
Table 4.3 Level of Education
Frequency
Percent
Valid
Percent
Cumulative
Percent
Valid
WASCE
9
22.5
22.5
22.5
DIPLOMA
8
20.0
20.0
42.5
DEGREE
15
37.5
37.5
80.0
POST GRADUATE
8
20.0
20.0
100.0
Total
40
100.0
100.0
Source: Field work, 2019.
From the above table 4.3, it can be noted that customers holding degree constitute 37.5%
of the respondents, those holding WASCE as their highest certificate also constitute
22.5% which is followed by the respondents/customers who hold a DIPLOMA OR POST
GRADUATE degree constituting 20% each of the respondents. Educational level of
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respondents from this perspective could be said to be balances since no section hold more
extremely than the other. Meaning people at different levels of the educational ladder
engage the services of NSIA Insurance.
4.2.4 Period a Customer has patronized the services of the Insurance Company
Respondents indicated their number of years of patronizing the NSIA Insurance as required
by the researcher. From their response, it was gathered that 27 of the respondents
representing 67.5% had been patronizing from NSIA insurance within the last 5 years, while
12 of the respondents representing 30% also indicated that they have been patronizing the
services of NSIA Insurance between 5-9years and only one of the respondents indicated he
has been patronizing the services of the insurance between 15-19years. This indicates that,
the insurance company has some loyal customers and is able to retain them. This could be as
a result of the services they provide.
This is illustrated in the table 4.4 below
Table 4.4Period a Customer has patronized the services of the Insurance Company
Frequency
Percent
Valid
Percent
Cumulative
Percent
Valid
<5YRS
27
67.5
67.5
67.5
5-9YRS
12
30.0
30.0
97.5
15-19YRS
1
2.5
2.5
100.0
Total
40
100.0
100.0
Source: Field work, 2019.
The next part of the analysis deals with the direct questions to the respondents. For the
analysis sake and due to the way the responds were arranged, the Likert scale applied here
was, 1=Strongly agree, 2=agree, 3=Neutral, 4=disagree, and 5=Strongly disagree while the
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Uo was set at 2.5, with 95% as the significance level in accordance with the antecedent.
Three things must occur at the same time for an item to be accepted as measuring a particular
dimension. 1) It must have a mean score of less than 2.5; 2) it must have a t-value of equal or
greater +-1.65; and 3) it must be statistically significant at 0.05 (p-value = or < 0.05). The
absence of any would mean the rejection of that variable.
4.2.5 Trust
Trust as seen as one of the variables that is considered in relationship marketing was the first
issue the questionnaires sort to inquire into. To vividly explain the table below and the
responds that were given by the respondents the following has to be noted. From the area
stated questionnaire in the table:
1 = Always trust Nsia Insurance
2 = High Integrity
3 = Ability to keep Promise
4 = I’m considered in making important decisions
5 = management doing their best to have a long term relationship with me
6 = Always been checked on by the insurance company
Table 4.5 Trust
QUES
TEST VALUE = 2.5
T
Mean
Sig. (2-tailed)
Mean Difference
1
-3.399
2.1000
.002
-.40000
2
-4.416
2.0000
.000
-.50000
3
-3.250
2.0500
.002
-.45000
4
-2.762
2.2000
.009
-.30000
5
-5.597
1.8000
.000
-.70000
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6
-1.030
2.3500
.309
-.15000
Source: Field work, 2019
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As shown in table 4.5 above, all six (6) questions fell within a positive rating or scale
indicating that customers trust NSIA Insurance. However, all the questions proved to be a
significant factor as far as Trust was concern except the 6th variable/question which fell out of
range as its’ sig value was above 0.05.
4.2.6 Commitment
The next integral factor that was discussed was the level of commitment of Nsia Insurance to
see their clients/customers satisfaction. As explained in the literature review, commitment to
customers satisfaction is one factor that relationship marketing takes into consideration to
retain their customers. Under this section also, six different questions were asked and
customers’ responds were analyzed to indicate whether the insurance company is committed
and if their commitment level plays any role in their decision to always seek to patronize their
services.
Table 4.6 Commitment
QUES
TEST VALUE = 2.5
T
Mean
Sig. (2-
tailed)
Mean
Difference
Std.
Deviation
7
-1.207
2.3250
.002
-.17500
.91672
8
-.495
2.4250
.000
-.07500
.95776
9
-3.569
2.1000
.002
-.40000
.70892
10
-.4953
2.5750
.009
.07500
.95776
11
-1.275
2.3000
.000
-.20000
.99228
12
-1.884
2.2500
.309
-.25000
.83972
Source: Field work, 2019.
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The corresponding meanings of the various question numbers are: 7 = issues are seen from
the customer’s point of view8 = customers intention to maintain and develop relation with
INSIA Insurance 9 = ready to put in all effort to make the relationship work10 = INSIA
Insurance spends effort in maintaining the relationship 11 = Satisfied with relationship with
NSIA Insurance12 = was right to seek the services of INSIA Insurance
Four questions verifying customers’ commitment to the INSIA Insurance were statistically
significant below 0.05. The questions 7, 8, 9 and 11 are these which make it clear that
customers feel that the level of the insurance company’s commitment to customers is high.
The other issue that whether the customers were certain of their choice to seek the service of
INSIA Insurance could be an issue to query but as it seems their choice might not have been
the best but they ended up appreciating and getting satisfied with the services rendered by
INSIA Insurance. Also since the mean of almost all the question is below 2.5, it could be
realized that the question asked by the researcher proved necessary and therefore was those
factors contributed to the commitment the Insurance had to their customers.
4.2.7 Social Bonds
Table 4.7 Social Bonds
QUES
TEST VALUE = 2.5
T
Mean
Sig. (2-tailed)
Mean
Difference
Std.
Deviation
13
.787
2.6250
.436
.12500
1.00480
14
-1.786
2.2250
.082
-.27500
.97369
15
-1.864
2.2000
.070
-.30000
1.01779
16
-3.009
2.1500
.005
-.35000
.73554
Source: Field work, 2019.
The above table 4.7 explains how customers are attached personally to NSIA Insurance.
Customers upon feeling respected and appreciated in the organization aims on always visiting
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the organization and having felt the same way they felt upon their previous visit. The
significance nature of these questions seemed lower and proved insignificance but the mean
are above the limit i.e. 2.5 which makes it appropriate question to determine the importance
of the factors asked on determining their social bond.
4.3 Customer Orientation
This section seeks to know the limit to which customers are made aware of the situations and
developments of the insurance company.
Table 4.8 Customer Orientation
QUES
TEST VALUE = 2.5
T
Mean
Sig. (2-tailed)
Mean
Difference
Std.
Deviation
17
-2.173
2.2250
.036
-.27500
.80024
18
-.458
2.4250
.649
-.07500
1.03497
19
.000
2.5000
1.000
.00000
1.03775
20
-3.612
2.0250
.001
-.47500
.83166
21
-5.759
1.8750
.000
-.62500
.68641
22
-4.760
1.9750
.000
-.52500
.69752
23
-2.687
2.1250
.011
-.37500
.88252
Source: Field work, 2019.
It can be deduced from the table above that the variables which are the questions that was
asked by the researcher to respondents contributes to the objective of the researcher. Their
significant on the average can be seen as 0.005 which out of seven questions, three was seen
significant.
The average level of mean required to say for a fact that majority of the respondents agreed to
the fact that the insurance company always communicates to them changes and other issues
they have undergone for improvement of services is 2.5. Any mean below shows a high
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output which is seen in this instance. Almost all the variables responds below 2.5 as mean
except question 19 which had exactly 2.5.
4.3.1 Customer Satisfaction
The researcher asked various questions from customers to determine their level of satisfaction
of the services rendered to them by INSIA Insurance. As indicated earlier, the test value was
also set here at 2.5 indicating that any mean result from respondents to a question below 2.5
is accepted. In addition to this the significant level of the questions to the area of discussion
has to be below 0.05 to be deemed as significant.
It can be seen from the table 4.9 below that the mean distributions of the various responds
from respondents were all below the 2.5 acceptable frame which makes them accepted but it
was only one that produced a significant level above the 0.05. But in all it can be concluded
that majority of them are satisfied with the services rendered by NSIA Insurance
Table 4.9 Customer Satisfaction
QUES
TEST VALUE = 2.5
T
Mean
Sig. (2-
tailed)
Mean
Difference
Std.
Deviation
24
-2.683
2.0500
.011
-.45000
1.06096
25
-3.371
2.0250
.002
-.47500
.89120
26
-4.093
1.8750
.000
-.62500
.96576
Source: Field work, 2019.
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4.3.2 Customer Retention
Customer retention here seeks to indicate the customer decision and readiness to maintain a
relationship with NSIA Insurance as a result of the research conducted. As indicated in the
research objective, customer retention is one vital area for consideration as far as this
research was taken into consideration. Customers by their responds to the various questions
asked by the researcher indicate their readiness to continue patronizing the services of NSIA
Insurance.
The table 5 below represents the findings of the issues asked under the customer retention.
Table 4.10 Customer Retention
QUES
TEST VALUE = 2.5
T
Mean
Sig. (2-
tailed)
Mean
Difference
Std.
Deviation
24
6.426
3.7000
.000
1.20000
1.18105
25
-1.464
2.2500
.151
-.25000
1.08012
26
-2.449
2.3000
.019
-.20000
.51640
27
-4.634
1.8750
.000
-.62500
.85297
28
-4.634
1.8750
.000
-.62500
.85297
Source: Field work, 2019.
4.3.3 Discussion of the findings
This research study, which is focused on an assessment of customer relationship management
practices and customer retention; the case of NSIA Insurance, Kumasi has been carried out to
the latter. Certain findings have been made that attract a summary discussion here.
Firstly, it was discovered that service quality is an essential ingredient for customer retention
in the insurance industry. This confirms the study of Brink and Brendt (2008) who asserted
that the only way to keep some customers loyal is by giving them a reason to be loyal. Aim
for businesses should be to make customers satisfied and the more customers are satisfied,
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the more they become loyal to your brand and keep coming back for more. Customer
retention is an indispensable tool for successful customer relationship management practices
in the insurance industry. Therefore the primary role of management of such industries is to
discover various strategies that will suit their target market and enable them to gain and retain
them.
The peculiar characteristics of the insurance industry being, essentially, a service industry
make the analysis of these factors particularly beneficial in terms of an insurance company’s
profitability, market-share, maintaining a pool of loyal customer and sustainability of the
company.
In reality, a customer who stays with an institution or company for long is much more
profitable than searching for prospects (Reichheld & Kenny, 1990; Rust & Zahorik1993).
Numerous reasons such as reducing high cost of searching and catching the attention of
prospects, expanding the volume of sales and profits, and advertising by customers through
word of mouth. When customers understand clearly the services of the company, this
influences the customer’s willingness to stay with the institution hence customer retention.
Furthermore, customer retention positively affects the organizations returns, productivity,
reducing switching of customer to competitors and introducing fresh prospect (Felvey, 1982;
Reinartz& Kumar, 2000).
Additionally Reichheld and Teal (1996), recommend that when a customer gets use to the
company’s dealings, they make very important business connections, purchase many
products, and become less responsive to price of the products of the company.
From this follows the need to adopt a customer relationship management practice that will
take into account all the factors which have a direct or indirect bearing in the implementation
of this strategy. On the other hand, customer retention programme as an integral part of
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customer relationship management practices can only be executed within the context of these
strategies given the need to build, enhance and maintain relationship with customers within
the framework of such parameters as trust, commitments, co-operation, and communication
and shared values. Several variables of value have been identified as essential components of
relationship building process. Evidently (Ravald & Gronroos, 1996), compared relationship
values with safety, credibility, and security, which, in turn, build trust, commitment,
communications, promise and conflict handling. A combination of those then increases
loyalty and may influence in a collectively beneficial relationship for suppliers and shoppers.
This calls for critical analysis of the customer relationship management practices in the
organization. INSIA Insurance has customer relationship practices for achieving customer
retention. This begins with ensuring that customers have their trust in the services of NSIA
Insurance.
This is done by the management and staff of NSIA Insurance frequently communicating with
their customers and informing them of the insurance company’s new products and services.
Sharing information sustains the quality of relationship. Information as a main resource can
help organizations to appreciate their customers and reinforce their customer base against
their competitors (McKean, 1999; Fruchter & Sigue, 2005). Thus, distributing information
with customers can make and retain the assurance of customers. Hence, sharing information
often with customers can help organization to retain them (Crosby et al., 1990).
Almost every customer has an expectation of how their transaction with NSIA Insurance will
be. In view of this expectation, the management of NSIA Insurance has have put in place
measures to ensure the demands of the customers are fulfilled satisfactorily. It was noted in
the study that some customers will always choose the services of NSIA Insurance because of
the trust they have in the insurance company.
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Also the commitment of NSIA Insurance to its customers was not well explained as most
customers indicated that although they were committed to the insurance company, the
company usually overlooks the commitment it owes to the customers in an attempt to satisfy
the Insurance company’s goals. This mostly had customers wondering whether to continue
patronizing their services or try the services of another insurance company. In the paper of
(Kim et al, 2003) a framework of CRM was proposed from information processing view
point in the aspects of relationship initiation, worth, positioning and commitment. The
approach suggests that, customer information is crucial in administrating, attracting and
retaining successful relations with customers across the developmental phases. The argument
continues that, when organizations concentrate on their association with customers, some of
the customers will be retain and provide value for the firm in terms of generating higher
profits. Therefore, NSIA Insurance can improve the relationship with customers by fully
committing to the customers.
In conclusion, NSIA Insurance has only two management members who mostly keep track of
their customers and perform most of the operational duties. This presumably affects the
general practice of relationship building between the insurance company and the customers.
Therefore the management is required to train additional employees on customer relationship
management practices.
This will aid in carrying out effective customer relationship management practices as an
improved ratio of staff to customer will mean customers will have enough time when
accessing the services of NSIA Insurance.
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CHAPTER FIVE
SUMMARY FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
5.1 Summary of findings
Based on the perspective that the researcher focused the research work, customers were given
the priority to determine the modes management of the insurance company can use to retain
them. And the findings indicates that customers loyalty to the insurance company depends on
various factors such as the company’s level of trust the customers perceives, also the level of
social bonds between the insurance company and the customers, the extent to which the
insurance company is willing to commit to their relationship to the customers and also the
level of due care the insurance company owns to the customers.
This can be ascertain that the responds from the respondents in this research were not bias
since not only did they indicate their different level of each variable considered by the
researcher but also clearly distinguished their responds based on their individual desires and
wants. Thus to say each variable to every respondents has its own grading system. But the
fortunate things were that respondents’ satisfaction means so much to them when they are
considering revisiting the hotel to enjoy their services.
It was also found out in the research that, for customer to determine whether or not to
maintain his/her relationship with the insurance company and continue to patronize their
services had a little or nothing to do with the tenure of their patronization of their services but
has a lot to do with their first point experience and the level of satisfaction they got from the
insurance company.
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65
5.2 Conclusions
The study is purposely meant to impact the insurance industry in the area of maintaining their
existing customers and through them marketing themselves and making new customers. In
this study, the researcher came across several findings and from the findings made various
conclusions which based on the researcher’s view can be accepted by the other insurance
companies particularly, NSIA Insurance as a guide for customer relationship management
approach to retain its customers.
The basic standard deviation and mean used in the analysis proved the variables selected for
this research are significant and therefore when the various selected variables are employed
into the running of various insurance companies, customer retention would be a great
advantage to the management.
To enhance customers’ satisfaction, the following critical issues can be adopted in the
insurance industry:
Efficient technology and internet facilities
Regular update of customer database.
Practicable loyalty programme to stimulate switching barriers.
Efficient internal marketing activities and
Ensure provision of the services that continuously satisfy customers.
Also it was deduced that customer satisfaction is the most important factor to consider when
you aim at maintaining the existing customers and through them advertising the insurance
company and getting more customers. This is basically through the word of mouth
recommendation. Their continue visit and using of the facilities of the insurance company
automatically draws others to find out the special experience that is pulling him/her to the
place.
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66
This as explained doesn’t mean that the other variables examined above such as trust, social
bonds, orientation etc doesn’t contribute in the retention of customers but the concluding fact
from the findings states that customers satisfaction means in lot in terms of aiming to retain
them.
5.3 Recommendations
In view of the findings, this research study carried out which is concerned with evaluation of
relationship marketing strategies for customer retention in the insurance industry in Ghana
with NSIA Insurance, Kumasi as a case study. The following recommendations have been
put forward which will go a long way to assist insurance companies to develop strategies for
customer retention for sustainability of their business by enhancing their profitability and
increase in market share.
Insurance companies need to establish the rationale for building, enhancing and maintaining
relationships in insurance enterprises so as to tap from the numerous potentials and benefits
accrued from it. Sources of customer satisfaction should be identified to enable the insurance
company improve on the current level of services performance and examine areas where
product or service innovations could be made. This would assist the insurance company
assess the processes of relationship building and enhancement such as trust, commitment and
communication. In addition, the insurance company should understudy the peculiarity of the
Ghanaian environment such as security and crisis management. To command an adequate
number of loyal customers, NSIA Insurance should consistently improve on its quality of
service to address the preference of the customers and consider the five service quality
constructs of reliability, assurance, tangibility, empathy, and responsiveness.
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Finally, the insurance company should introduce and implement customer switching barriers
and introduce other customer oriented incentives to ensure continued customer loyalty and
customer retention.
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68
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