EFFECTS OF RELATIONSHIP MARKETING ON

CUSTOMER LOYALTY
(The case of Hibret Manufacturing and Machine Building
Industry)

A Thesis Submitted to the School of Graduate Studies of Addis

Ababa University in Partial Fulfillment for the Award of the Degree
of Master of Arts in Marketing Management

By:- Abaynesh Desta

ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE

MARKETING MANAGEMENT POSTGRADUATE PROGRAM

May, 2014
Addis Ababa, Ethiopia
 Addis Ababa University

Graduate School of Commerce, College of Business and Economics

This is to certify that the thesis prepared by Abaynesh Desta Gashaw, entitled “Effects of
Relationship Marketing on Customer Loyalty (The Case Of Hibret Manufacturing And
Machine Building Industry)” and submitted in partial fulfillment of the requirements for the
degree of Master of Arts in Marketing Management complies with the regulations of the
University and meets the accepted standards with respect to originality and quality.

Signed by the Examining Committee:

Examiner ___________________________ Signature ______________ Date _____________

Examiner ___________________________ Signature ______________ Date _____________

Advisor ___________________________ Signature ______________ Date _____________

__________________________________________________

Chair of Department or Graduate Program Coordinator

i
 Acknowledgments

First and foremost, I would like to praise the Almighty God for helping me in all the matters.

Next, I have to heartily thank all the people who unreservedly assisted me in all the processes of
the preparation of this thesis. I am obliged to mainly thank my advisor Dr. Negi R. for all the
constructive comments he rendered me. I am also extremely grateful to the whole staff and
customers of Hibret Manufacturing and Machine Building Industry (HMMBI) without whose
kind and honest cooperation the study could have been impossible. Leaders of Metals and
Engineering Corporation (METEC) and HMMBI also deserve my heartfelt thanks for giving me
hands in all aspects of the study.

My greatest appreciation shall go to my family, my husband and kids, who had remarkable roles
in the whole course of my study and the preparation of this particular thesis. My families and
friends who backed me up to this success merit my gratitude. Thank you all.

ii
 ABSTRACT

The survival of any organization depends on its customers either profit oriented or non profit
oriented organization. Customers are the source of profits to be earned by a profit making
organization. Due to the more and more fierce competition in today’s business, many companies
are required to build long-term profitable relationship with customers and to achieve customer
loyalty. Therefore, relationship marketing has become more and more important since the last
decade of 20th century.

There are many different relationship marketing dimensions implemented for retaining
customers’. Therefore, this study is aimed to explain the effect of relationship marketing
dimensions (trust, commitment, conflict handling, and empathy) on customer loyalty, by
focusing on HMMBI. A conceptual framework was used as a guideline to test the relationships
between relationship marketing dimensions and customer loyalty. A quantitative and qualitative
approach is chosen in this research. In order to collect primary data, a questionnaire is designed
and was given to the customers of the HMMBI. In addition to questionnaire, semi-structured
interview questions are prepared to get information from the organization which is analysed
qualitatively. The SPSS version 20.00 for windows is used to process the primary data which is
collected through questionnaire. The findings show that relationship marketing dimensions have
impact on customer loyalty. All the independent variables are positively and directly related to
customer loyalty particularly in HMMBI and in general in manufacturing industry. The
relationship between relationship marketing and customer loyalty is significant. Therefore,
manufacturing industries should make the whole system on work with customers, not in opposite
of customers. And the industry must develop an RM program that will help it build and support
positive relationships with its customers and particularly a CRM program which enables it gather
data about each individual customer of it to treat them knowing their individual needs also they
are expected to invest more on attracting new customers and retaining the existed ones with
regard to relationship marketing to increase customer loyalty.

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 Table of Contents

Contents Page
Acknowledgements ………………………………………………………. i
Abstract …………………………………………………………………… ii
Table of Contents ………………………………………………………… iv
List of Tables …………………………………………………………….. vii
List of Figures ……………………………………………………………. viii
List of Appendixes ………………………………………………………. ix
List of Acronyms ………………………………………………………… x

Chapter One: Introduction …………………………………………………... 1

1.1. Background of the Study ……………………………………………... 1
1.2. Background of the Company …………………………………………. 2
1.3. Statement of the Problem …………………………………………….. 3
1.4. Research Questions …………………………………………………... 4
1.5. Objectives of the Study ………………………………………………. 4
1.6. Conceptual Definition of Terms ……………………………………… 4
1.7. Significance of the Study …………………………………………….. 5
1.8. Delimitation of the Study …………………………………………….. 6
1.9. Organization of the Study …………………………………………….. 6

Chapter Two: Review of Related Literature ………………………………... 7

2.1. Relationship Marketing Thought and Practice ……………………….. 7
2.2. What is Relationship Marketing? …………………………………….. 9
2.3. Relationship Marketing Versus Transaction Marketing ……………... 11
2.4. Relationship Marketing dimensions ……………….……………….. 13
2.4.1Trust ………………………….………………………………… 13
2.4.2. Commitment …………………….…………………………..... 14
2.4.3. Conflict Handling……………………………………………… 16
2.4.4. Empathy………………………………………………………... 18

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 2.5. Customer Loyalty………………………………………………………. 18
2.6. Customer Retention ………………………………………………..… 20
2.7. Customer Loyalty and Customer Retention …………………………. 21
2.8. Conceptual Framework of Relationship Marketing…………………… 22

Chapter Three: Research Design and Methodology ………………………... 24

3.1. Research Design ………………………………………………………. 24
3.2. Target Population and Sample .…………..……………………………. 25
3.3. Data collection instruments and variables……………………………... 25
3.4. Data analysis…….. ………….………………………………………... 26
3.5. Reliability Test …………………………………….…………………. 27
3.6. Summary ……………………………………………………………... 28

Chapter Four: Data Presentation and Analysis ……………………………. 29

4.1.Descipitive Analysis ………………………………………………….. 29
4.1.1. Gender of Respondents ………………………………………….. 30
4.1.2. Age of Respondents………………………………………………. 30
4.1.3. Education Level of the Respondents …………………..………… 30
4.1.4 Length of Relationship of the Respondents with the Industry……. 31
4.2. Correlation Analysis……………………………..……… ……..……… 31
4.2.1. Correlation analysis between RM and customers’ loyalty ..…….. 31
4.2.2. Correlation analysis between Trust and customers’ loyalty……..... 32
4.2.3. Correlation analysis between Commitment and customers’
loyalty ………………………………………………………….. 33
4.2.4. Correlation analysis between Conflict Handling and customers’
loyalty……………………………………………………………. 33
4.2.5 Correlation analysis between Empathy and customers’ loyalty..… 34
4.3 Regression Analysis……………………………………………………… 35
4.3.1 Regression Analysis of Relationship Marketing and Customers’

Loyalty……………………………………………………………. 35

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 4.3.2. Regression Analysis of Trust and Customers Loyalty …………………… 36
4.3.3. Regression Analysis of Commitment and Customers’ Loyalty…………… 37

4.3.4 Regression Analysis of Conflict Handling and Customers’

Loyalty……………………………………………………..………………. 38
4.3.5. Regression Analysis of Empathy and Customers’ Loyalty……………..… 39

4.4 Result Disscssion…………………………………………………………………... 40

Chapter Five: Summary, Conclusions and Recommendations ……………………….. 45

5.1 Conclusions. …………………………………….…………………………….….. 45
5.2. Limitations ………………………………………………………………….…. 47
5.3. Recommendations ……………………………………………………………… 47
5.4. Further Studies ……………………………………………………………… 48
Bibliography
Appendixes

vi
 List of Tables

Tables Page

Table 2.1: Description of the shift from Transaction Marketing to RM ……….. 12

Table 4.1: Gender of Respondents……………………………………………… 29

Table 4.2 Age of Respondents ………………………………………………… 30

Table 4.3: Educational Level of Respondents …................................................. 30

Table 4.4: Length of relationship of the respondents with the Industry ……... 31

Table 4.5: Correlations between relationship marketing and customers’ loyalty 32

Table 4.6. Correlations between Trust and customers’ loyalty………………… 32

Table 4.7. Correlations between Commitment and customers’ loyalty………… 33

Table 4.8. Correlations between Conflict Handling and customers’ loyalty…… 34

Table 4.9. Correlations between Empathy and customers’ loyalty…………… 34

Table 4.10. Regression analysis Result for Relationship Marketing

and Customers’ Loyalty……………………………………………… 35

Table 4.11. ANOVA result for Relationship Marketing and

Customers’ Loyalty………………………………………………….. 36

Table 4.12 Coefficients of Relationship Marketing Dimensions………………… 36

Table 4.13. Regression analysis Result for Trust and Customers’ Loyalty……… 37

Table 4.14. ANOVA result for Trust and Customers’ Loyalty………………….. 37

Table 4.15. Regression analysis Result for Commitment and Customers’ Loyalty…38

Table 4.16. ANOVA result for Commitment and Customers’ Loyalty………….. 38

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Table 4.17. Regression analysis Result for Conflict Handling and

Customers’ Loyalty……………………………………………… 38

Table 4.18. ANOVA result for Conflict Handling and

Customers’ Loyalty………………………………………………….. 39

Table 4.13. Regression analysis Result for Empathy and Customers’ Loyalty…… 39

Table 4.14. ANOVA result for Empathy and Customers’ Loyalty…………… 39

viii
 List of Figures
Figures Page
Figure 2.1: Conceptual frame work of the research ……………………… 17

ix
 List of Appendixes

Appendix 1: List of Questions Set as Guide for the In-depth Individual Interviews Designed for
People in the Category of Experts

Appendix 2: A Questionnaire Filled by HMMBI’s Customers (English Version)

x
 List of Acronyms

B2B - Business to Business

CNC - Computerized Numeric Controlled

CRM - Customer Relationship Management

FDRE - Federal Democratic Republic of Ethiopia

GTP - Growth and Transformation Plan

HMMBI - Hibret Manufacturing and Machine Building Industry

ICT - Information Communication Technology

METEC - Metals and Engineering Corporation

RM - Relationship Marketing

TQM - Total Quality Management

4P’s- Product, Price, Promotion, and Place or Distribution

ANOVA- Analysis of Variance

SPSS- Statistical Package for the Social Sciences

xi
 Chapter One
Introduction
1.1 Background of the Study
Relationship Marketing (RM) has emerged as one of the dominant mantras in business strategy
circles (Palmatier et al, 2006a), with relational exchanges as the basic unit. At a macro level,
organizational and environmental factors like strategic network competition (Hunt, Arnett, and
Madhavaram, 2006), technological advances, Total Quality Management (TQM) programs,
growth of service economy and organizational development programs (Sheth and Parcatiyar,
1995) have been instrumental for development of RM, whereas at the micro level customers
engage in relational exchanges when they believe benefits exceed costs (Hunt, Arnett, and
Madhavaram, 2006).

The survival of organizations depends on its customers. Customers are the source of profits to be
earned by a profit making organization and the primary reason for being in the operation for not-
for-profit organizations. Thus, customers are the backbone and lifeline of organizations. Often it
is said that without customers there is no businesses.

Relationship marketing gives a company new opportunities to gain a competitive edge by

moving customers up a loyalty hierarchy from new customers to regular purchasers, then to loyal
supporters of the firm‟s goods and services, and finally to advocates who not only buy its
products but recommend them to others (Smith, 2003). By converting indifferent customers into
loyal ones, companies generate repeat sales. The cost of maintaining existing customers is far
below the cost of finding new ones, and these loyal customers are profitable ones. Lacey and
Morgan (2009) findings suggest that customers with stronger levels of commitment are indeed
more willing to contribute as customer advocates. They also pointed out that relationship
marketing represents a dramatic change in buyer-seller interactions from the previous
transaction-based marketing that focused on a single transaction. Effective relationship
marketing heavily relies on developing strategic partnerships with customers (Boone &Kurtz,
2005). Studies of the impact of RM on customer loyalty outcomes lean to approach the way
customers encounter a problem with regard to the products provided by the manufacturing
industry. A small group of studies treat that customer loyalty is a function of trust, commitment

1
and conflict handling. The evidence is almost uniformly consistent in indicating that customers
are loyal when the industry relationship marketing is good. A relative handful study of Ndubisi
(2006) has specifically examined that relationship marketing such as trust, commitment and
conflict handling have a direct effect on customer loyalty. This study shows the effect of
relationship marketing including other underpinning such as empathy on customer loyalty in the
Ethiopian case.

1.2 Background of the Company

Hibret Manufacturing and Machine Building Industry (HMMBI) is one of the 15 industries
running under the Federal Democratic Republic of Ethiopia (FDRE) Metals and Engineering
Corporation (METEC), which is one of the institutions established by the FDRE government for
the realization of the Growth and Transformation Plan (GTP) and acceleration of the ongoing
transition to industrialization, as stated in a company bulletin published by METEC in July 2013.
Since its establishment as a public enterprise – July 9, 2010 – by the council of Ministers‟
regulation number 183/2002, METEC has been working hard for the realization of its objectives
(METEC, 2013).

HMMBI gratifies the whole demands of all industries incorporated under METEC and industries
of the country by supplying them with spare parts for sugar, textile, cement, construction, vehicle
industries as well as tanneries, and spare parts and bodies for vehicles. Moreover, the industry
produces industrial machines, medals and other engraved products, trophies, badges and chest
pins. The industry has installed computerized numeric controlled (CNC) machineries for the
production of spare parts which by their nature require precision. It also upgrades customers‟
conventional machines into CNC. Beside production, it provides consultancy services in
machines and tools engineering.

At this particular time, in which the nation is working toward an industry led economy, a great
deal is expected from industries like HMMBI, which at the moment is saving huge amount of
hard currency and time that is used to be spent on importing the machines and spare parts that are
now being locally produced (METEC, 2013). If the industry manages and runs all its businesses
in a scientific way and manages its relationships strategically, the contribution it can make for

2
the realization of the country‟s aspirations will be undeniable. In order to see to the applications
of some of the scientific methods, this research is conducted in the particular area of relationship
marketing – its effects on customer loyalty.

1.3 Statement of the Problem

Interactions and ongoing relationships are crucial for organizations to meet the dynamic needs of
customers and counter competition through developing long term relationships with stakeholders
(Hunt and Lambe, 2000), especially in business-to-business (B2B) exchanges. As the
competitive environment becomes more turbulent, the most important issue the sellers face is no
longer to provide good quality products or services, but also to keep loyal customers who will
contribute long-term profit to organizations. To compete in such swarming and interactive
marketplace, marketers are forced to look beyond the traditional 4Ps of marketing strategy, and
particular to relationship marketing.

With respect to the practices of RM in the Ethiopian context, limited research works witnessed
and majority in the context of service rendering firms, rather in the manufacturing sector.
According to Robson (2012) and Shimeles (2011), the practice of RM is in infant state in
Ethiopia. Even in the cases where little attempts have being made to implement RM, the
practices are found to be misunderstood and undermined that they are not paid attention to. The
researchers also suggested that the practice needs to follow the scientific methods and should be
supported by the Information and Communication Technology (ICT) (Robson, 2012; Shimeles,
2011).

Therefore, this study attempts to examine the role of RM in developing loyal customer, along
with the assessment of the performance of RM practices at HMMBI. In general, the study
examine the impact that RM dimensions have on customer loyalty in the context of HMMBI.

3
 1.4 Research Questions
To deal with the problem established above, the following basic research questions were
attempted to answer in the course of the study.
1. How do the RM dimensions relate to each other?
2. What effects does, the RM dimensions have on customer loyalty in the context of
HMMBI?
3. How does RM practice perform in HMMBI in B2B context?

1.5 Objectives of the Study

The main objective of this study is to examine the effects of relationship marketing
underpinnings on customer loyalty in the context of HMMBI.

Specific objectives include:

1. To examine the relationship between RM dimensions of trust, commitment, conflict
handling and empathy
2. To assess the effects of trust, commitment, conflict handling and empathy on customer
loyalty.
3. To describe the performance of the RM practices in HMMBI in B2B context.

1.6 Conceptual Definition of Terms

Business to Business market: describes commerce transactions between businesses, such as
between a manufacturer and a wholesaler, or between a wholesaler and a retailer.
Customer Relationship Management: CRM is the utilization of customer-related information or
knowledge to deliver relevant products or services. Levine (2000)
Loyalty: The seller's perception of the consumer's positive attitude to the product manifested by
rebuying. (Hougaard and Bjerre 2009: 67).

Relationship Marketing: refers to all the activities necessary to identify, establish, maintain and
enhance profitable relationships with internal and external customers and other

4
 stakeholders, so that the objectives of all parties involved are met through mutual
exchanges and the making, enabling and keeping of promises (Payne, 1995).
Compliant handling: the ability of each supplier‟s to minimize the negative consequences of
manifest and potential conflicts Dwyer (1987)
Empathy : the capacity to share and understand another‟s state of mind or emotion. Ndubisi
(2004)
Commitment: enduring desire to maintain a valued relationship. (Morgan and Hunt, 1994)
Trust: a willingness to rely on an exchange partner in whom one has confidence (Morgan &
Hunt, 1994).

1.7 Significance of the Study

As has been stated in the background part, METEC has shouldered the biggest role in making the
GTP, the plan on which Ethiopia is relying for its prosperity, successful. On the other hand, the
corporation is too young, as it was established in 2009, and the experience it has in relations
marketing is also the same. As an industry being run under METEC, HMMBI also has the
similar features regarding its objectives and experiences in RM. Nevertheless, it is ambitious
enough to satisfy its customers – that have very large number – by delivering products that suit
them individually. This definitely happens to be impossible without proper implementation of
RM, which aims at satisfying customers, retaining them and building a long lasting relationship
with all the stakeholders. Literature assert that a scientifically implemented RM program,
especially CRM determines the performance and success of the firm. Therefore, this study
remains to be significant for it tried to indicate the relationship between RM and customer
loyalty. The findings and conclusions of the study are vital in showing the level of HMMBI‟s
success in RM practices and what has to be done if improvements are required.

Other beneficiaries from the study are taken to be marketers, and RM and CRM practitioners
who are working for the various manufacturing industries that are functioning in Ethiopia. As
repeatedly stated, this study explains the effects of RM dimensions on customer loyalty in the
case of HMMBI. The findings and conclusions reached upon and the recommendations proposed
may help these practitioners to draw lessons from the study and adopt what they learnt in their
respective firms‟ RM and/or CRM programs.

5
In addition, to the best knowledge of the researcher, there are no researches published on RM
practices of HMMBI. So, this research becomes a spring-board for further studies to be
conducted in RM in different firms of the country. Moreover, it may assist researches to be
conducted in the future as it adds to the literature in RM and CRM.

1.8 Delimitation of the Study

This study is delimited to explain the effects of Relationship marketing on customer loyalty in
the case of HMMBI. In order to make the study very specific and focused, only the B2B markets
were deliberately taken into account. This was due to resource constraints like time and money.
Moreover, the B2B customers included in the sample are made to be those found in Addis Ababa
City.

1.9 Organization of the Study

This thesis is comprised of five chapters. The first chapter gives an introduction which contains
background of the study, statement of the problem, basic research questions, objectives of the
study, conceptual definition of terms, significance of the study, and delimitation of the study.
The second chapter deals with the review of related literature. Here, both theoretical and
empirical evidences related to the topic under study are raised. This is followed by Chapters
Three and Four that deal with the research design and methodology, and results and discussions,
respectively. The third chapter described the type and design of the research, the subjects or
participants of the study, the sources of the data, the data collection tools employed, the
procedures followed in the data collection, and the methods of data analysis used. The fourth
chapter, in its turn, summarized the results or findings of the study and interpreted them in
accordance with the literature reviewed. The last part of the paper, Chapter Five, constituted
summary of the findings which were drawn from the results discussed under Chapter Four, and
the conclusions made out of the summary of the findings. Limitations that could influence the
conclusions made out of the study are addressed beside the recommendations of the researcher.

6
 Chapter Two
Review of Related Literature
This chapter makes use of theoretical underpinnings to explain the effects of RM on customer
loyalty in Business to Business (B2B) context within the case of HMMBI.

Relationships are central for business people. Experiences teach us that people who know each
other do business well because business relationships are facilitated by the long-term friendship
that develops among them. For marketing and business are subsets or properties of society,
relationships, networks and interaction have been practically at the core of business since time
immemorial. They have certainly not gone unnoticed by business people. To the contrary,
“relationships have too long gone unnoticed in research and education” (Gummesson, 2008: 15).
Lately, but, it could win the attention of marketing researchers and scholars that one can find an
abundant literature written and empirical research conducted on the topic.

2.1. Relationship Marketing :Thought and Practice

Marketing‟s early bias for distribution activities is said to be evident as the first marketing
courses were focused on effectively performing the distributive task (Bartels, 1976) and that
early marketing thinking centered on efficiency of marketing channels (Cherrington, 1920;
Shaw, 1912; Weld, 1916 & 1917). Later the institutional marketing thinkers viewed the
phenomena of value determination as fundamentally linked to exchange because of their
grounding in institutional economic theory (Alderson, 1954; Duddy and Revzan, 1947).
Although institutional thought of marketing was later again modified by the organizational
dynamics viewpoint and marketing thinking was influenced by other social sciences, exchange
remained the central dogma of marketing (Alderson, 1965; Bagozzi, 1974, 1978 & 1979; Kotler,
1972).

After World War II, a shift from distribution functions to understanding consumer behavior
could be seen as marketing focus began to shift from distributive functions to other aspects of
marketing. With the advent of market research, producers, in an attempt to influence end
consumers, began to direct and control the distributors regarding product merchandising, sales
promotion, pricing, etc. Thus repeat purchase and brand loyalty gained prominence in the

7
marketing literature (Barton, 1946; Churchill, 1942; Howard and Sheth, 1969; Sheth, 1973;
Womer, 1944). Notions like market segmentation and targeting were then developed as tools for
marketing planning, and as a result the marketing concept evolved and consumer, not distributor,
became the focus of marketing attention (Kotler, 1972). After that, producers adopted
administered vertical marketing systems so that they gain control over the channels of
distribution (McCammon, 1965). Nevertheless, marketing orientation was still transactional as
its success was measured in such transactional terms as sales volume and market share. It was
only in the 80s that marketers began to emphasize customer satisfaction measures to ensure that
they were not purely evaluated on the basis of transactional aspects of marketing and that sale
was not considered as the culmination of all marketing efforts (Sheth and Parvatiyar, 1999).

The practice of RM is said to be very old enough. Gummesson (2008: 328) mentioned
“RM/CRM are new terms, but represent an old phenomenon.” and Sheth and Parvatiyar (1995b)
also state that it has historical antecedents going back into the pre-industrial era. Much of it was
due to direct interaction between producers of agricultural products and their consumers, and
craftsmen who often developed customized products for each customer. Such direct interaction
led to relational bonding between the producer and the consumer. It was only after industrial
era‟s mass production society and the advent of middlemen that there were less frequent
interactions between producers and consumers leading to transactions oriented marketing. The
production and consumption functions got separated leading to marketing functions being
performed by the middlemen.

As times went on, however, several factors contributed to the rapid development and evolution
of relationship marketing. One was the advent of sophisticated computer and telecommunication
technologies that allow producers to directly interact with end-customers. Another factor was
the growth of the service economy. Since services are typically produced and delivered at the
same institution, it minimized the role of the middlemen. It happened therefore not to be difficult
to see that relationship marketing is important for scholars and practitioners of services
marketing (Berry and Parsuraman 1991; Bitner 1995; Crosby and Stephens 1987; Crosby, et. al.
1990; Gronroos 1995). The total quality movement, which demanded companies to involve
suppliers and customers in implementing the program at all levels of the value chain, has also

8
been taken as another force driving the adoption of relationship marketing. As a result of the
Total Quality Management (TQM) philosophy they came to form partnering relationships with
suppliers and customers to practice TQM. Other programs such as Just-in-time (JIT) supply and
Material-resource planning (MRP) also made the use of interdependent relationships between
suppliers and customers (Frazier, Spekman, and O‟Neal, 1988).

In addition, in the current era of hyper-competition, marketers are forced to be more concerned
with customer retention and loyalty (Dick and Basu, 1994; Reicheld 1996). As several studies
have indicated, retaining customers is less expensive and perhaps a more sustainable competitive
advantage than acquiring new ones. Marketers are realizing that it costs them less to retain
customers than to compete for new ones (Rosenberg and Czepiel 1984). So they rely on RM to
retain their customers.

Fueled by new technology and growing availability of advanced product features and services,
customer expectations are changing almost on a daily basis. Consumers are less willing to make
compromises or trade-off in product and service quality. In the world of ever changing customer
expectations, cooperative and collaborative relationship with customers seem to be the most
prudent way to keep track of their changing expectations and appropriately influencing it (Sheth
and Sisodia, 1995). These and many other reasons have currently made RM very prominent.

2.2. What is Relationship Marketing?

Though RM is a young concept to in the field of marketing, as has been discussed in the section
above, many scholars and practitioners have tried to define the term „Relationship Marketing‟ in
different ways and from different perspectives. Some of these themes offer a narrow functional
marketing perspective while others offer a perspective that is broad and somewhat paradigmatic
in approach and orientation.

A narrow perspective held by Bickert (1992) is that relationship marketing is database marketing
emphasizing the promotional aspects of marketing linked to database efforts. Another narrow
viewpoint is to consider relationship marketing only as customer retention in which a variety of
after-marketing tactics is used for customer bonding or staying in touch after the sale is made

9
(Vavra, 1991). A more popular approach with recent application of information technology is to
focus on individual or one-to-one relationship with customers, which integrates database
knowledge with a long-term customer retention and growth strategy (Peppers and Rogers, 1993).

On the other hand, Shani and Chalasani (1992: 44) define relationship marketing as “an
integrated effort to identify, maintain, and build up a network with individual consumers and to
continuously strengthen the network for the mutual benefit of both sides, through interactive,
individualized and value-added contacts over a long period of time”. The individual account
concept in industrial markets to define relationship marketing is also taken by Jackson (1985: 2)
as “marketing oriented toward strong, lasting relationships with individual accounts”. In other
business contexts, Doyle and Roth (1992), O‟Neal (1989), Paul (1988), and have proposed
similar definitions of relationship marketing.

Berry, who introduced the term in „Relationship Marketing‟ into the literature, defined
relationship marketing as “attracting, maintaining, and – in multi-service organizations –
enhancing customer relationships” (1983: 25). This definition of his also has a strategic
viewpoint about relationship marketing in somewhat broader terms. He stresses that attracting
new customers should be viewed only as an intermediate step in the marketing process.
Developing closer relationship with these customers and turning them into loyal ones are equally
important aspects of marketing.

Sheth and Parvatiyar (1998) discuss that the domain of relationship marketing should be limited
to only those cooperative and collaborative marketing actions that are focused on serving the
needs of customers. They further state that the delimit would be consistent with marketing‟s
customer focus and understanding that made the discipline prominent. They also draw an
important aspect of Berry, Gronroos, and Morgan and Hunt definitions and consider the set of
generic processes of relationship initiation, relationship maintenance and relationship termination
is also identified by Heide (1994) to come up with their definition of the term. So they define
RM as “… the ongoing process of engaging in cooperative and collaborative activities and
programs with immediate and end-user customers to create or enhance mutual economic value,
at reduced cost” (Sheth and Parvatiyar, 1998: 7 & 8).

10
Although each one of them is following the value of interactions in marketing and its consequent
impact on customer relationships, Gronroos (1990) and Gummesson (1987) take a broader
perspective and advocate that customer relationships ought to be the focus and dominant
paradigm of marketing. This way, it can be taken that their beliefs resemble that of Berry‟s. For
instance, Gronroos (1990: 138) says that marketing is to establish, maintain, and enhance
relationships with customers and other partners, at a profit, so that the objectives of the parties
involved are met. This, he continues, is gained by a mutual exchange and fulfillment of
promises.

Gummesson even makes his perspective broader and defines RM as “interaction in networks of
relationships” (2008: 5). He explains the three core concepts in his definition – relationships
require at least two parties who are in contact with each other (The basic two-party relationship
of marketing, the dyad, is that between a supplier and a customer); a network is a set of multi-
party relationships, which can grow into enormously complex patterns; in the relationships, the
simple dyad as well as the complex networks, the parties enter into active contact with each other
known as interaction.

In the context of the present study, the definition of RM is preferred to be as defined in

Gummesson (2008) because two among the three core concepts of the definition – network &
interaction – are the points of departure between RM and Transaction Marketing. These notions
emphasize the continuity of the RM process and the need that every stakeholder has a role in
building and maintaining the relationship.

2.3. Relationship Marketing versus Transaction Marketing

According to Jackson (1985a, b), RM is often presented as the opposite to transaction marketing,
the one-shot deal. In transaction marketing, the fact that a customer has bought once does not
forecast the probability for repurchase, not even if a series of purchases have been made. A
customer may repeatedly use the same supplier because of high switching costs, but without
feeling committed to the supplier or wanting to enter a closer relationship. Transactions lack
history and memory and they don‟t get sentimental. Peck et al. (1999) summarizes the

11
comparison between RM and Transaction Marketing and describes the shift to RM as put below
in Table 2.1.

Though the two are taken to be different, Gummesson (2008: 25) argues that they can be posed
under the other.
In order to conceptually incorporate transaction marketing in RM, it can be seen as the
zero point of the RM scale. The scope of the relationships can then be enhanced until a
customer and a supplier are practically the same organization. The zero relationship of
RM has a price component within which the lowest price connects the buyer and the
seller. … The zero relationship also has a convenience component which implies that
the customer often buys where it is simplest and most convenient on a certain occasion.
On such occasions price is almost immaterial.

Characteristics Transaction focus Relationship focus

Focus Obtaining new customers Customer retention
Orientation Service features Customer value
Timescale Short Long
Customer service Little emphasis High emphasis
Customer commitment Limited High
Customer contact Limited High
Quality An operations concern The concern of all
Table 2.1 Description of the shift from Transaction Marketing to RM
Source: Peck et. Al. (1999: 44)

In line with what is presented in the above table, Gummesson (2008: 24) says that in RM,
loyalty – especially customer loyalty – is emphasized. All these imply that customer retention
and customer loyalty are at the heart of RM.

Compared with traditional or transactional marketing, relationship marketing is more concerned

in building customer relationships in order to achieve long-term mutual benefits for all parties
involved in the exchanges (Kotler & Armstrong, 2010). They also argued that relationship

12
marketing essentially means developing customers as partners, where an approach is different
from traditional transaction.

2.4 Relationship marketing dimensions

2.4.1 Trust
As Morgan and Hunt (1994) demonstrate it, RM is built on the foundation of trust. They define
trust as a willingness to rely on an exchange partner in whom one has confidence. Trust ensures
that the relational exchange is mutually beneficial, as the good intentions of partners are not in
doubt. Customers buying services are specially benefited by the existence and development of
trust (Berry, 1983). Trust is an important ingredient in firm-customer relationships and ultimately
in the development of loyalty (Ndubisi, 2007). Therefore, firms should strive to win customers‟
trust. The ways in which this can be achieved include the giving and keeping promises to
customers, showing concern for the security of transactions, providing quality services, showing
respect for customers through front-line staff, fulfilling obligations, and acting to build customers
confidence in the company and its products. Morgan and Hunt (1994) conceptualize trust as
existing when one party has confidence in an exchange partner's reliability and integrity. They
indicated that trust is a generalized expectancy held by an individual that the word of another can
be relied on. Their definition highlights the importance of confidence. The literature on trust
suggests that confidence on the part of the trusting party results from the firm belief that the
trustworthy party is reliable and has high integrity, which is associated with such qualities as
consistent, competent, honest, fair, and responsible. Trust in relationship marketing is very
important. This is the main focus in service organizations. It needs to go along with commitment.
If deliverable is good then trust increases. Ndubisi (2007) emphasizes that an integral element of
the relationship marketing approach is the promise concept. He argued that the responsibilities of
marketing do not only, or predominantly, include giving promises and thus persuading customers
as passive counterparts in the marketplace to act in a given way, but also in keeping promises,
which maintains and enhances evolving relationship. He also pointed out that fulfilling promises
that have been given is equally important as a means of achieving customer satisfaction,
retaining the customer base, and securing long-term profitability. In practical business activities,
therefore, the development of trust is considered to be a critical result of establishing a long-term
successful relationship between all the parties involved. In face of complicated markets,

13
customers tend to behave and make purchasing decision depending on their previous consuming
experiences. Investing in long-term relationship with customers helps to develop customer trusts
and improve the effective quality of a relationship in order to obtain mutual interests. Customers
with trusts in producer‟s capability would probably be willing to commit to a product
relationship for meeting their expectations (Morgan and Hunt, 1994). They argued that even
when the environment is changing, the customers would believe that the producer will take
customers interests into account instead of doing anything harmful to the development of
relationship. They conceptualized organizational trust by proposing three core elements as:
trustee‟s ability, trustee‟s kindness and trustee‟s integrity. Cumulative process in a relationship
was considered to construct trust on the basis of a party‟s capability of implementing its
obligations continuously. Trust is considered so important to long-term relationships and
enhancing customer loyalty. Many authors have suggested that customers‟ trust has a significant
role in building long-term relationship and achieving customer loyalty (Berry, 1983; Kotler &
Armstrong, 2010). According to Clow & Kurtz (2003), the key to developing a customer
relationship competitive advantage is not merely obtaining a contractual agreement, it is
developing mutual trust. They argue that the customers must be able to trust the seller and know
that he or she will provide the service when needed at the service quality level desired and the
seller must be able to trust and work with the customer in a mutually beneficial relationship. This
relationship involves both parties sharing information and working together to solve problems.
The primary action in gaining customer acceptance of service process modification is to develop
customer trust (Clow & Kurtz, 2003). They pointed out that service modifications are much
easier to accomplish if customers trust the service providers. Service providers must understand
customer habits and know how, when, and why customers purchase the service. The more the
producer knows about the customer‟s use of product, the easier the change will be to implement.
The results of Taylor, Celuch and Goodwin (2004) suggest that trust is consistently the most
important antecedents to customer loyalty.

2.4.2 Commitment
Commitment is another important determinant of the strength of a marketing relationship, and a
useful construct for measuring the likelihood of customer loyalty and predicting future purchase
frequency (Morgan and Hunt, 1994). These authors defined commitment as an enduring desire to

14
maintain a valued relationship. This implies a higher level of obligation to make a relationship
succeed and to make it mutually satisfying and beneficial. They also suggested when
commitment is higher among individuals who believe that they receive more value from a
relationship, highly committed customers should be willing to reciprocate effort on behalf of a
firm due to past benefits received and highly committed firms will continue to enjoy the benefits
of such reciprocity. In the relationship marketing area, Berry (1983) maintains that relationships
are built on the foundation of mutual commitment. He also argued that a common theme emerges
from the literature on relationship that parties identify commitment among exchange partners as
key to achieving valuable outcomes for themselves, and they endeavor to develop and maintain
this precious attribute in their relationships. Therefore, commitment is central to all the relational
exchanges between the firm and its various partners. As for commitment, to be a critical factor in
building customer loyalty, conducting a study of accommodating to customers‟ needs, tailoring
products to requirements, and being generally flexible in customer relationships is needed
(Ndubisi,2007). He also indicated that banks should recognize the influence of service
commitment in keeping loyal customers, and act accordingly. They must also show genuine
commitment to customer relations. Morgan and Hunt (1994) viewed that a committed partner
wants the relationship to endure indefinitely and is willing to work at maintaining it. Lacey
(2009) suggests that committed customers are not just expected to maintain current purchasing
activities, but to increase both the level and proportion of their purchasing activities over time.
He argued that customers who remain within a firm are more likely to increase business volume
in the future. Based on this study, through the level of customer participation the highest
spending customers receive the greatest rewards. Committed customers are positive in both
attitude and behavior and they are described as delighted with the brand. They may be dependent
upon to make continuing purchases and getting engaged in positive and delighted word-of-mouth
exchanges with other potential customers. Committed customers are resistant to competitors‟
attempts to persuade them and likely to be willing to extend their business with the brand, and to
evolve their relationship with the brand over a period of time (Rowley, 2005). More specifically,
they hardly consider other brands. Information search and the decision-making associated with
switching is regarded as too labor intensive, and switching, in general, is regarded as too risky.
Such loyal customers are very susceptible to marketing communications from brands to which
they are loyal, and can even communicate the messages surrounded in those marketing

15
communications to other actual or potential customers. Clearly, every business would wish to
convert as large a proportion as possible of their customers into committed loyal. They are the
true loyal, they add value to the brand, and are almost as enthusiastic as the seller to continue the
relationship with the seller. Both sides recognize the mutual benefits of the relationship, in
minimizing risk.

2.4.3 Conflict handling

In interpersonal communication, conflict occurs when an individual perceives incompatibility
between his or her own personal goals, needs, or desires and those of the other party. In dealing
with conflict, people use different strategies to accomplish their goals. Dwyer (1987) defined
conflict handling as the ability of each supplier to minimize the negative consequences of
manifest and potential conflicts. Conflict handling helps the supplier to avoid any potential
conflict, solve that particular conflict before it creates problems and provides it with the ability to
discuss the solution openly when the problem arises. Conflict handling requires cooperative
behavior from exchange partners. According to Evans and Beltramini (1987), in a negotiation
setting, cooperative versus competitive intentions have been found to be linked to satisfactory
problem solution. In short, good conflict resolution will result relationship quality positively.
Conflict handling is an important relationship builder. Even though it is difficult to achieve zero
defects in product all the time, but it is so important that companies put in place effective conflict
resolution or problem solving mechanism. A major problem which had been resolved
satisfactorily may leave in its wake a happy and loyal customer, but may be minor issues, if not
handled carefully, will result in defection. A more excellent approach, for example proactive in
planning and implementations, includes identifying potential conflicts, solving conflict before
they manifest, avoiding potential conflict and blocking them. These efforts could bring a better
relationship and loyalty to the particular firm (Ndubisi, 2007). Ndubisi and Wah (2005) found a
significant relationship between conflict handling and customer loyalty, indirectly through trust
and perceived relationship quality. As mentioned earlier, the ability of the product or service
provider to handle conflict well will also directly influence customer loyalty. Clow & Kurtz
(2003) identified and explained the four types of conflict faced by customers.

16
 i. Employee – Customer conflict
Conflict can occur between employees and customers when either of the parties does not follow
the expected role. Conflict also occurs between the employee and the customer if the customer
does not take care of the facility the way the employee feels. Both customers and employees are
expected to behave in accordance with their role scripts. When behavior deviates from scripts, a
conflict will arise. To reduce employee – customer conflict, both customers and frontline staff
members must understand their roles. Company personnel should instruct new customers about
their roles and may need to remind current customers occasionally. Training employees how to
deal with different types of customers and their behaviors can also be beneficial.

ii. Customer – Role conflict

Occasionally there is a conflict between the customers and their expected roles. In these
situations, the frontline staff must provide instructions to the customer on his or her role without
insulting the customer. The frontline staff should also attempt to give the client a sense of
cognitive control through providing information about the products to be supplied.

iii. Customer – Organization conflict

Conflict between the customer and the organization is common. Most of these situations occur as
a result of policies of the service organization. In most cases, the individual‟s conflict is with the
organization and not with the frontline people. Dealing with customer – organization conflict is
difficult to alleviate because most organizations do not want to change policies. When conflict
occurs, frontline people should analyze their policies and decide if it is time to modify or
eliminate the policy.

iv. Customer-Customer conflict

Conflicts sometimes arise among customers. Such conflicts are very familiar in service sectors
but not in manufacturing sectors. Conflicts among customers may arise when they are served
simultaneously or when one customer is served in the presence of other customers. They might
also sometimes occur among customers who have different expectations. A customer who wants
quick, speedy service may be aggravated at the customer in front of him who wants to talk and
wants personalized service. Handling conflict among customers is difficult. Employees of all
types of services should be trained on how to handle and how to minimize conflicts among
customers. Yekunoamlak (2004) conducted survey and proved that to maintain good relationship

17
with customers, the way customers are handled such as proper acts of frontline employees and
proper customer service are significantly important for customer loyalty. He also suggested that
proper complaints handling and efficient service failure recovery procedures are considered as
very important factors for customer satisfaction by many customers.

2.4.4 Empathy
According to Ndubisi (2004) Empathy is the capacity to share and understand another‟s state of
mind or emotion. This author also pointed out that the basic idea of empathy should be
characterized by looking at the expressions of the customers facially or from their body
movement, or by hearing their tone of voice, which may convey immediate sense of how they
feel. Empathy is also often characterized as the ability to put oneself in the shoes of another, or in
some way experience the outlook or emotions of another being within oneself. Empathy has the
added value of reducing reliance on legal governance, since exchange partners who are governed
by the principle of empathy are more likely to treat others in the manner they would like to be
treated. Clow and Kurtz (2003) define empathy as the ability of a person to identify the feelings
or thoughts of another. This skill is necessary because customer contact personnel serve as the
interface between customers and the organization. If customers have special requests or
problems, they want employees to understand the problem from their point of view. Zeithaml
and Bitner (2003) argued that it is difficult to imagine an organization would deliver caring,
individualized attention to customers independent of its employees. According to these authors
empathy implies that employees will pay attention, listen, adapt, and be flexible in delivering
what individual customers need.

2.5 Customer loyalty

Customer loyalty is one of the most important goals of implementing RM activities. Oliver
(1997) defined customer loyalty as a deeply held commitment to re-buy a preferred
product/service consistently in the future, thereby causing repetitive same-brand or same brand-
set purchasing, despite situational influences and marketing efforts having the potential to cause
switching behavior. Similarly, Kunoe (1994) (in Hougaard and Bjerre, 2009: 67) defines
customer loyalty as “…the seller's perception of the consumer's positive attitude to the product

18
manifested by re buying”. This is to say that loyalty is something a company strives to attain,
not something that can just be requested or assumed. It must be earned.

It is assumed that customers who are behaviorally loyal to a firm display more favorable
attitudes towards the firm, in comparison to competitors. Customer satisfaction and loyalty are
highly correlated. Customer satisfaction in a relationship is a good basis for loyalty (Leverin and
Liljander, 2006). Lacey (2009) undertook a research and concluded customers are vital sources
for future revenue streams and marketing intelligence to the firm, and loyal customers are
willingly share insights about their needs and provide the opportunity for firms to tailor products,
pricing, distribution channels, and marketing communications. This author also indicated that
relational outcomes reflect the combination of marketing resources that contribute to a more
efficient and effective marketing enterprise, including personal referrals, sharing personal
information, engaging in firm-sponsored marketing research activities, providing complaint
feedback, being more open to firm promotions and increasing purchasing activities. Results of
Pantouvakis and Lymperopoulos (2008) support that in order for service company services
strategies and tactics to yield desired results; attention should be given to the increasing loyalty
of customers. Knowing the buying motivations of customers has been an important part of
understanding customer loyalty and brand switching behavior. Oliver (1997) describes four
levels of loyalty based on these components:

i. Cognitive: one brand is preferable based on superior brand attributes.

ii. Affective: liking towards brand has developed over the course of multiple purchase
situations that were satisfying.

iii. Conative: Affective stage with the express intention to re-buy.

iv. Action: Conative stage plus the active desire to overcome situational influences and
marketing efforts that may have the potential to cause switching behavior.

On reaching the action phase, the customer possesses a deep commitment to repurchase but also
is active in blocking the influence of alternative brands. Action level loyalty will be created when
consumers intentionally immerse themselves in a social system that rewards brand patronage. As
Oliver (1997) lists the requirements for this state to occur are the following.

19
 a. The product must be perceived as superior by a large enough segments of the firm‟s
customers in order to be profitable.
b. The product must be subject to respect (or focused commitment).
c. The product must have the ability to be embedded in a social network.

2.6 Customer Retention

To underscore the need for customer retention in RM, Gummesson (2008: 25) says that “(t)he
beginning of a relationship is often romantic and passionate. It is when the passion phase fades
that the real work of building a relationship starts.” Similarly Peck et al. (1999) reinforces the
idea by explaining that few companies claim to have achieved the appropriate balance between
acquiring and retaining customers. The reason for this, as they put it is that there is a real danger
in placing too much focus on marketing activities directed at new customers. They say too much
by way of financial resources may be used in acquisition; although these valuable customers are
lost because too little subsequent effort is given to retaining them. “If customer service does not
meet customer expectations, it is unlikely that a customer will be retained and the reputation of a
company may be damaged by adverse word-of-mouth publicity” (Peck et al., 1999: 44). This
indicates that a great deal of attention needs to be paid to customer retention if RM programs
have to be successful.

Strengthening this argument, Payne and Holt (2001: 8) refer to researches indicating the reasons
why retained customers are more profitable than new customers.
 the cost of acquiring new customers can be substantial. A higher retention rate
implies that fewer customers need be acquired more cheaply;
 established customers tend to buy more;
 regular customers place frequent, consistent orders and, therefore, usually cost
less to serve;
 satisfied customers often refer new customers to the supplier at virtually no cost;
 satisfied customers are often willing to pay premium prices for a supplier they
know and trust;
 retaining customers makes market entry or share gain difficult for competitors.

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 2.7 Customer loyalty and customer retention
Today companies are target on developing stronger bonds and loyalty with their ultimate
customers. In the past, many companies took their customers for granted. Their customers either
did not have many alternative suppliers, or the market was growing so fast that the company did
not worry about fully satisfying its customers. These companies need to pay closer attention to
their customer defection rate and undertake measure to reduce it. Today‟s companies are going
all out to retain their customers. They are struck by the fact that the cost of attracting new
customer may be five times the cost of keeping a current customer happy (Kotler & Armstrong,
2010). Good customer relationship management creates customer delight. In turn, delighted
customers remain loyal and talk favorably to others about the company and its products. Studies
show big differences in the loyalty of customers who are less satisfied, somewhat satisfied, and
completely satisfied (Kotler & Armstrong, 2010). Even a slight drop from complete satisfaction
can create an enormous drop in loyalty. Thus, the aim of customer relationship marketing is to
create not just customer satisfaction, but customer delight and customer loyalty. Companies are
now realizing that losing a customer means losing more than a single sale. It means losing the
entire stream of purchases that the customer would make over a lifetime of patronage.

As companies move form a transaction-oriented view of their customers to a relationship-

building view, they will create and sponsor programs to keep their customers coming back,
buying more, and staying loyal. The challenge is to develop a special relationship with the
company‟s best customers in which they experience good two-way communication and see
themselves as receiving special privileges and awards. Among the most promising programs are
frequency marketing programs and club marketing programs (Kotler, 1994). Frequency
marketing programs (FMP) are designed to provide rewards to customers who buy frequently
and/or in substantial amounts. Kotler (1994) defined frequency marketing as the effort to
identify, maintain, and increase the yield from best customers, through long-term, interactive,
and value added relationships. Frequency marketing is an acknowledgement of the Pareto
principle – which 20% of a company‟s customers might account for 80% of its business. In club
marketing programs - many companies have created club concepts around their product (Kotler,
1994). Club membership can be offered automatically upon purchase or promised purchase of a
certain amount.

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2.8. Conceptual Framework of Relationship Marketing
Although RM is a relatively young field of inquiry, its theory is an extremely rich area of
research (Hunt et al., 2006). These authors indicated that RM can take many forms and, as a
result, its theory has the potential to increase the understanding of many aspects of business
strategy. They also argued that in the development of the explanatory foundations of relationship
marketing theory, it provides answers to three „why´ questions:

A. Why is relationship marketing so prominent now?

B. Why do firms and consumers enter into relationships with other firms and
consumers?
C. Why are some efforts at relationship marketing more successful than others?

The answers to these questions provide a broad base from which to view relationship marketing
theory. First, it is suggested that the prominence of relationship marketing is due not just to the
rise of services, technology, and information-oriented firms, but also to the rise of strategic
network competition. Strategic network competition, which involves independent owned and
managed firms agreeing to become partners within a network, emphasizes the importance of
inter-firm cooperation as a means to compete successfully with other networks. To be successful
(both individually and as a network), the firms in a strategic network must become proficient at
relationship marketing. Second, relationship marketing theory implies that consumers enter into
relational exchanges with firms when they believe that the benefits derived from such relational
exchanges exceed the costs. The benefits include:
 The belief that a particular partner can be trusted to reliably and competently
provide quality market offerings;
 The belief that the partnering firm shares values with the consumer;
 The customer experiences decreases in search costs;
 The customer perceives that the risk associated with the market offering is
lessened;
 The exchange allows for customization that results in better satisfying the
customer‟s needs, wants, tastes, and preferences.

22
Based on relationship marketing theory firms engage in relationship marketing because it
increases their competitiveness. It is noted that customers do so when relationships contribute to
the firm‟s ability to efficiently/effectively produce market offerings that have value for some
market segment(s). That is, they do so when relationships become resources. Relational
resources have the potential to improve a firm‟s marketplace position and, in turn, its financial
performance. Based on relationship marketing theory, there are relational factors such as trust,
commitment, conflict handling, and empathy that influence customer loyalty. Relationship
marketing theory concerned on relational factors and their influence on relationship marketing
outcomes like customer loyalty and relational. The conceptual framework of the research is
presented below (figure 2.1)

Independent variables Dependent variable

Trust

Commitment

Customer Loyalty

Conflict handling

Empathy

Figure 2.1: Conceptual framework of the research

23
 Chapter Three
Research Design and Methodology
This chapter of the study deals with the study design, the sources and methods of data
collection, and the techniques of data presentation and analysis.

3.1 Research Design

This research work is explanatory in its nature. In addition, it is used some qualitative data from
HMMBI‟s employees/experts. Thus In relation to research approach, this study employed the
blend of the two research approaches; the qualitative and quantitative, or is to be called mixed-
method approach to answer the research questions. The quantitative and qualitative approaches
are used just to implement the former with the latter, and narrow the gap that could have been
created had only one of the approaches been employed. One of the strengths of a mixed method
study is that the perceived biases of one research method are mediated by the biases of the other
(Creswell, 2003; Meyer, 2004). Bryman (in Jonker and Pennink 2010: 92) states that “. . . in
the end when quantitative and qualitative research are jointly pursued, much more complete
accounts of social reality can ensue”. Many people, including Robson (2012) and Shimeles
(2011), used the same blends of the two approaches to maximize the advantages of it in similar
contexts.

3.2 Target population and Sample

The non-probability sampling technique used in the study was the expert sampling technique to
select the employees/experts from the organization to take part in in-depth semi-structured
interview. This was used to select samples out of the marketing and managerial personnel for this
is a technique where respondents are chosen in a non-random manner based on their expertise on
the phenomenon being studied (Bhattacherjee, 2012: 70).

The Industry has about 150 B2B customers throughout Ethiopia, out of which 50 are located in
Addis Ababa. By considering the scope of the study all the 50 customers located in Addis Ababa
are contacted to take part in the stud. In this way, all the 50 customers were participated in the
study.

24
3.3 Data collection instruments and variables
The study used both primary and secondary data as its source of information. Primary data was
collected based on open ended and close ended questionnaire and in-depth semi-structured
individual interview. The secondary data was collected by reviewing books, articles and journals
related and online information available.

The questionnaire that was filled out by customer respondents was designed beforehand and
distributed among the sample population. A great deal of care was taken while preparing the
questionnaires, because questionnaires by their nature are filled out in the absence of the
researcher. Besides referring to the guideline that Kothari (2004: 100 - 104) sets, model
questionnaires with standardized format were reviewed from different sources to develop the
questionnaire.

The questionnaire was designed to be with two parts. The first part was prepared to gather
general information about the respondent‟s gender, age, education and for length of relationship.
This part consisted of 4 questions. Part Two was prepared to ask respondents about the effects of
HMMBI‟s RM practices on its customers‟ loyalty. This part consisted of 21 close ended and 2
open ended questions. The close-ended questions provided the respondents with alternatives
arranged in the five point Likert scale, going through strongly disagree (measured as 1), disagree
(measured as 2), no opinion (measured as 3), agree (measured as 4), and strongly agree
(measured as 5).

The other instrument of data collection was an in-depth semi structured individual interview.
Bryman (2004: 543) makes the following statement while discussing the advantage of semi-
structured interview.
Semi-structured interview covers a wide range of types. It typically refers to
a context in which the interviewer has a series of questions that are in the
general form of interview guide but is able to vary the sequence of questions.

25
 The questions are frequently somewhat more general in their frame of
reference from that typically found in a structured interview schedule.

Stating another merit of the semi structured interviews, Hancock (2002: 13) says that they
involve a series of open ended questions based on the topic areas the researcher wants to cover.
The open ended nature of the question defines the topic under investigation but provides
opportunities for both interviewer and interviewee to discuss some topics in more detail. “If the
interviewee has difficulty answering a question or provides only a brief response, the interviewer
can use cues or prompts to encourage the interviewee to consider the question further. In a semi
structured interview the interviewer also has the freedom to probe the interviewee to elaborate on
the original response or to follow a line of inquiry introduced by the interviewee”.

The semi-structured individual interview consists of 11 questions with regard to the effects of
relationship marketing activities on customer loyalty in the Industry. The researcher deliberated
the use of it as a technique of gathering data from the HMMBI‟s top level managers and
marketing personnel. Thick information could be found from the interviews conducted. The
interviews were entirely tape-recorded so as not to miss points discussed in the middle of the
interview because of a strive made to take notes of responses. In addition, this gave the
interviewer ample time to focus on the process of interviews.

The independent variable is relationship marketing and measured with the help of the four
dimensions – commitment, compliant handling, trust and empathy. The dependent variable is
customer loyalty.

3.4 Data analysis

After collecting the data through questionnaire and interview, the process of analysis began.
Analysis of data in this research was done by using statistical tools like regression and
correlation models. Regression analysis was used to see how much the independent variable -
relationship marketing – explains or influences the dependent variable, which is customer
loyalty. Correlation analysis was also conducted to measure the strength of the association
between relationship marketing dimensions and customer loyalty. And also descriptive analysis

26
was used for the demographic factors such as gender, age, educational level, and the length of
relationship with the Industry. The data gathered by the use of semi-structured individual
interview was analyzed qualitatively. Tools like tables and percentage were used to present the
data, and the analysis was performed by using SPSS software version 20.00. In order to reduce
the possibility of getting wrong answers, different actions were taken to ensure the soundness of
this study.
1. Data was collected from reliable sources, from respondents who are customers of
the industry.
2. The questionnaire was based on literature review to ensure the soundness of the
results.
3. SPSS software version 20.00 was used to analyze the data and special care was
given to the process of data coding.

3.5 Reliability test result

Alpha reliability is regarded as a measure of internal consistency of the mean of the items at the
time of administration of the questionnaire. Cronbach‟s alpha is a reliability coefficient that
indicates how well the items in a set are positively related to one another .It is computed in terms
of the average inter correlations among the items measuring the concept. Reliability is calculated
in such a way that it represents the reliability of the mean of the items, not the reliability of any
single item. So, the alpha reliability of 10 items would be higher than that of 5 similar items.
This coefficient can hold a value of 0 to 1. The result of 0.7 and above implies an acceptable
level of internal reliability. The result of reliability test for the questionnaire is shown in the
following table. As it is indicated in the table, the test result is between 0.702 and 0.938.
Therefore, based on the test, the results for the items are reliable and acceptable.

27
 Table 3.1. Reliability test for the questionnaire
No. of Cronbach’s Alpha
Items
Trust 4 0.938
Empathy 4 0.920
Commitment 3 0.702
Conflict handling 5 0.811
Customer loyalty 5 0.914

3.6 Summary
In this chapter, the research design chosen for this particular research and the justifications for
the choice were discussed. Moreover, the data collection techniques that were used in an
appropriate way to the research design were presented. The use of these techniques has made it
possible to collect quality data that significantly contributed to finding responses to the central
questions raised in the study.

Finally, the chapter described how the data collected were processed and presented. The
proceeding chapter makes use of qualitative data presentation and analysis to come up with
specific findings.

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 Chapter Four
Data Presentation and Analysis
This chapter attempted to present, analyze and interpret the data collected and relate them to the
theory discussed in the second chapter of the paper. At the same time, the data is analyzed in
association with the research questions raised in Chapter One. The center of focus of the
presentation and analysis of data, this being the main objective of the study, are pieces of
information only that are directly related to the effects of RM on customer loyalty in HMMBI.

The data, as has been discussed in the preceding chapter, were gathered from primary source
through semi structured in-depth individual interviews with expert employees and questionnaires
filled out by customers of the Industry and secondary sources.

In terms of organization, this chapter is put into four subparts. Following the first subpart, which
deals with the descriptive analysis, comes the second subpart that discusses the correlation
analysis between the variables of the topic under study. The third subpart is one that presents the
regression analysis. Bringing the information gotten from the data analyzed, the last subpart
discusses the results reached upon.

4.1 Descriptive analysis

Descriptive analysis was used to present the data collected in relation to the demographic factors
for more clarification. It is mainly important to make some general observations about the data
gathered with the help of general or demographics questions. The demographics factors used in
this research are gender, age, level of education and length of relationship of the respondents
with the Industry.

29
4.1.1 Gender of respondents
The gender of the respondents, as shown in Table 4.1, is male dominated. Most of the
respondents are male (64.0%) while the female are 36%.

Table 4.1: Gender of respondents

Frequency Percent
Male 32 64.0
Female 18 36.0
Total 50 100.0

4.1.2 Age of respondents

The respondents‟ age is presented in the following table. The table shows that 64. % of the
respondents are between the age of 20-39 years, followed by the respondents who are between at
40-59 years age to be 28. %. The rest 8% are above 60 years old.

Table 4.2: Age of respondents

Frequency Percent
20-39 years 32 64.0
40-59 years 14 28.0
60 years & above 4 8.0
Total 50 100.0

4.1.3 Educational level of the respondents

The educational level of the respondents looks like what is shown in table 4.3. As it can be seen
from the table 52. % of the respondents hold a first degree. 32. % of them are diploma holders
the rest 16. % have got their second degrees.

Table 4.3: Educational level of respondents

Frequency Percent
Diploma 16 32.0
Degree 26 52.0
Postgraduate 8 16.0
Total 50 100.0

30
4.1.4 Length of relationship of the respondents with the Industry
The data indicating the length of relationship that the respondents have with HMMBI is
presented in Table 4.4. Accordingly 32. % of the respondents have relationship with the Industry
which dates back up to 5 years. While 28. % of the customers did business with HMMBI for
more than 5 years, 24. % of them are customers for the past 4 years. The rest 16.0% have got a 3
year relationship with the Industry.

Table 4.4: Length of relationship of the respondents with the Industry

Frequency Percent
3 years 8 16.0
4 years 12 24.0
5 years 16 32.0
above 5 years 14 28.0
Total 50 100.0

4.2 Correlation Analysis

Like the demographic factors, the data from the scale typed questionnaire were fed to the SPSS
software version 20.00, to process the correlation analysis. Based on the questionnaire which was
filled by the customers of HMMBI, the following correlation analysis was made.

4.2.1 Correlation analysis between relationship marketing and customers’ loyalty

Pearson correlation test was conducted to know the degree of relationship between the
independent variable, which is relationship marketing, and the dependent variable, customers‟
loyalty. The results of the correlation between these variables are shown in table 4.5. As it is
indicated in the table there is a significant correlation between relationship marketing and
customers‟ loyalty. In other words relationship marketing and customers‟ loyalty have
relationship (r = 0.575 with p<0.01).

31
 Table 4.5: Correlations between relationship marketing and customers’ loyalty

Relationship Customer loyalty

Marketing
Pearson
1 .575
Relationship Correlation
marketing Sig. (2-tailed) .000
N 50 50
Pearson
1 .575
Correlation
Customer loyalty
Sig. (2-tailed) .000
N 50 50
**. Correlation is significant at the 0.01 level (2-tailed).

4.2.2 Correlation analysis between trust and customers’ loyalty

Pearson correlation test was also conducted for trust and customers‟ loyalty and the results are as
shown in table 4.6. As it can be seen from the table, there is significant positive correlation
between trust and customers‟ loyalty. This is to say that trust and customers‟ loyalty are
correlated in a relationship (r = 0.487).

Table 4.6: Correlations between trust and customers’ loyalty

Trust Customer loyalty

Trust Pearson 1 .487
Correlation
Sig. (2-tailed) .000
N 50 50
Customer Pearson .487 1
loyalty Correlation
Sig. (2-tailed) .000
N 50 50
**. Correlation is significant at the 0.01 level (2-tailed).

32
4.2.3 Correlation analysis between commitment and customers’ loyalty
For these variables, commitment and customers‟ loyalty, also Pearson correlation test was
conducted and the results shown in Table 4.7 were able to be acquired. As it is shown in the
table, there is significant correlation between commitment and customers‟ loyalty. This implies
that commitment and customers‟ loyalty have high relationship (r = 0.773).

Table 4.7: Correlations between commitment and customer loyalty

Correlations
Commitment Customer loyalty
Pearson
1 .773**
Correlation
Commitment
Sig. (2-tailed) .000
N 50
50
Pearson
.773** 1
Customer Correlation
loyalty Sig. (2-tailed) .000
N 50 50

**. Correlation is significant at the 0.01 level (2-tailed).

4.2.4 Correlation analysis between conflict handling and customers’ loyalty

In order to see the correlation between conflict handling and customers‟ loyalty, Pearson
correlation test was conducted, and the results found were like shown in table 4.8. As it is clearly
indicated in the table, there is significant positive correlation between conflict handling and
customers‟ loyalty. In other words conflict handling and Customers‟ loyalty have moderate
relationship or correlation (r = 0.604).

33
 Table 4.8: Correlations between conflict handling and customers’ loyalty

Customer Conflict handling

loyalty
Pearson
1 .604
Customer Correlation
loyalty Sig. (2-tailed) .000
N 50 50
Pearson
.604 1
Conflict Correlation
handling Sig. (2-tailed) .000
N 50 50
**. Correlation is significant at the 0.01 level (2-tailed).

4.2.5 Correlation analysis between empathy and customers’ loyalty

Pearson correlation test was also conducted to know whether there is significant correlation
between empathy and customers‟ loyalty, and the results are shown in Table 4.9. As it is clearly
indicated on the table, there is positive correlation between empathy and customers‟ loyalty. The
result of correlation analysis prove that empathy and customers‟ loyalty are correlated with a
relationship (r = 0.319).
Table 4.9: Correlations between empathy and customers’ loyalty
Empathy Customer loyalty
Pearson
1 .319
Correlation
Empathy
Sig. (2-tailed) .024
N 50 50
Pearson
.319 1
Customer Correlation
loyalty Sig. (2-tailed) .024
N 50 50

34
4.3 Regression analysis
This regression is conducted to know how much the independent variable explains the dependent
variable. It is also used to understand by how much each independent variable (trust,
commitment, conflict handling and empathy) explains the dependent variable, which is
customers‟ loyalty. The results of the regression analysis are presented as follows.

4.3.1 Regression analysis of relationship marketing and customers’ loyalty

The Results of regression analysis against customers‟ loyalty can be seen in Table 4.10. The
result shows that relationship marketing has the power to explain customer loyalty. In this case
the results of correlation of relationship marketing and customers‟ loyalty and R Square (0.331)
are taken into consideration. The regression analysis model summary indicates that RM which is
entered into the regression model on SPSS has relationship with customers‟ loyalty with
correlation coefficient of 0.575. The R square is the explained variance and it is actually the
square of the multiple R (0.331)2. Therefore, it is pointed out that 33 percent of relationship
marketing can explain the dependent variable that is customers‟ loyalty. As it is indicated in
Table 4.11, total relationship marketing was considered as predictors of customers‟ loyalty and
reported high level of significance p < 0.01. And also the R square value of 0.331 confirming
that, 33% of the variation in customer loyalty is explained by relationship marketing.
Relationship marketing as used for prediction was found to be significantly related to customers‟
loyalty as the p-value is less than 0.01.

Table 4.10: Regression analysis result for relationship marketing and customers’ loyalty

Model summary
Mode R R Square
l
1 .575a .331

35
 Table 4.11: ANOVA result for relationship marketing and customers’ loyalty

Model F Sig.
Regression 23.709 .000b
1 Residual
Total

Table 4.12 titled as coefficients of relationship marketing dimensions, helps us to understand

which variables among the four independent variables is the most important in explaining the
variance in customers‟ loyalty. As it is indicated in the table, high beta value shows that it is
significant in explaining. If we can see the Beta column under standardized coefficients below,
we can understand that the highest number in the beta is 0.773 for commitment dimension and
the second highest is conflict handling with 0.604. Therefore, commitment and conflict handling
are the major determinant of customers‟ loyalty. It can be seen also from the table that the four
independent variables were significant in explaining customers‟ loyalty.

Table 4.12: Coefficients of relationship marketing dimensions

Model B Beta T Significance

Trust .465 .487 3.868 0.000

Commitment 1.509 .773 8.437 0.000
Conflict handling .677 .604 5.253 0.000
Empathy .347 .319 2.334 0.24

4.3.2 Regression analysis of trust and customers’ loyalty

As it is indicated in the model summary in Table 4.13, trust explains customers‟ loyalty. In this
case, the results of correlation of trust and customers‟ loyalty and R Square (0.238) are taken into
consideration. This R square is the explained variance and it is actually the square of the multiple
R (0.487)2 which is 0.238. Therefore, it is pointed out that 24% of Customers‟ loyalty is
explained by trust. As it is indicated in table 4.14, trust was considered as predictors of
customers‟ loyalty and reported high level of significance p < 0.01. And also the R square value

36
of 0.238 confirming that, 24% of the variation in customer loyalty is explained by trust. Trust as
used for prediction was found to be significantly related to customers‟ loyalty as the p-value is
less than 0.01.

Table 4.13: Regression analysis result for trust and customers’ loyalty
Model summary

Model R R Square
1 .487a .238

Table 4.14: ANOVA result for trust and customers loyalty

Model F Sig.
Regression 14.963 .000b
1 Residual
Total

4.3.3 Regression analysis of commitment and customers’ loyalty

Table 4.15 shows the results of regression analysis for commitment and customers‟ loyalty. In
this case, the results of correlation of these two variables and R Square (0.597) are taken into
consideration. Here the R square is the explained variance and it is actually the square of the
multiple R (0.773)2 which is 0.597. Therefore, it is possible to state that 60% of customers‟
loyalty is explained by commitment. As it is indicated in Table 4.16, commitment was
considered as a predictor of customers‟ loyalty and reported high level of significance p < 0.01.
The R square value of 0.597 also confirms that, 60% of the variation in customer loyalty is
explained by commitment. Commitment as used for prediction was found to be significantly
related to customers‟ loyalty as p-value is less than 0.01. It is the highest of all the independent
variables in explaining customers‟ loyalty.

37
 Table 4.15: Regression analysis result for commitment and customers’ loyalty
Model summary
Model R R Square
a
1 .773 .597

Table 4.16: ANOVA result for commitment and customers’ loyalty

Model F Sig.
Regression 71.186 .000b
1 Residual
Total

4.3.4 Regression analysis of conflict handling and customers’ loyalty

The regression analysis result of conflict handling and customers‟ loyalty is as presented in Table
4.17. As it is clearly indicated in the table, conflict handling can explain customer loyalty in
HMMBI. The correlation result of these variables and the R square are considered. In this case
the R square is the explained variance and it is actually the square of the multiple R (0.604)2
which is 0.365. Therefore, it is possible to state that 37% of customers‟ loyalty is significantly
explained by conflict handling. Conflict handling was considered as a predictor of customers‟
loyalty and reported high level of significance p < 0.01 as it is indicated in Table 4.18. And also
the R square value of 0.365 confirms that 37% of the variation in customer loyalty is explained
by conflict handling. Conflict handling as used for prediction was found to be significantly
related to customers‟ loyalty as p-value is less than 0.01. It is the second highest of all the
independent variables in explaining customers‟ loyalty.

Table 4.17: Regression analysis result of conflict handling and customers’ loyalty
Model summary
Model R R Square
1 .604a .365

38
 Table 4.18: ANOVA result for conflict handling and customers’ loyalty
Model F Sig.
Regression 27.596 .000b
1 Residual
Total

4.3.5 Regression analysis of empathy and customers’ loyalty

The result of regression analysis of empathy and customers‟ loyalty indicates that empathy can
explain customers‟ loyalty to some extent. In this case also, the correlation result of these two
variables and the R square are taken. The R square is the explained variance and it is actually the
square of the multiple R (0.319)2 which is 0.102. Therefore, it is possible to conclude that 10.2%
of customers‟ loyalty is explained by empathy. As it is indicated in table 4.20, empathy was
considered as a predictor of customers‟ loyalty and reported high level of significance p < 0.01.
And also the R square value of 0.102 confirming that, 10.2% of the variation in customer loyalty
is explained by empathy. Empathy as used for prediction was found to be significantly related to
customers‟ loyalty as p-value is less than 0.01.

Table 19: Regression analysis result of empathy and customers’ loyalty

Model summary
Model R R Square
a
1 .319 .102

Table 20: ANOVA result for empathy and customers’ loyalty

Model F Sig.
Regression 5.449 .024b
1 Residual
Total

39
4.4 Results Discussion
This research is concerned in the elements of relationship marketing towards customers‟ loyalty
in manufacturing industry, taking the case of HMMBI. The objective of the study is to explain
the effects of RM on customer loyalty within the Industry by analyzing the relationship of every
construct in the theoretical framework.

Demographic factors such as gender, age, level of education, and length of customers‟
relationship with the Industry have been taken into account to learn the general characteristics of
the respondents. The research took 64.0% male and 36.0% of female respondents. In terms of
age, the majority (64.0%) of the respondents are found to be between 20 – 39 years of age. Those
who are between 40 – 59 constituted 28.0%. With regard to the level of education, 52.0% of the
respondents are Bachelors‟ Degree holders while the 32.0% got Diplomas. The respondents with
Masters‟ Degree accounted for the rest 16.0%. Looking at the length of customers‟ relationship
to the Industry, 60.0% of them have a relationship that aged 5 years and above. The relationships
that stayed for 4 years and 3 years accounted 24.0% and 16.0% of the customers respectively.
Among the demographic factors only length of the customers‟ relationship is correlated with
customers‟ loyalty. The result of Pearson correlation between the variables indicates that their
relation is strong (r = 0.754) (sig = 0.01). The other dimensions have no clear relationship with
customers‟ loyalty.

Based on the results of Pearson correlation test, trust is positively correlated with customers‟
loyalty (r = 0.487). In other words if customers trust the Industry, they will be loyal to it. In
order to increase this positive relationship, HMMBI should be able to keep the promises it makes
to its customers so that it encourages repeat purchase to establish strong relationship. In addition,
trust only will exist if customers have confidence in the Industry‟s ability to perform
satisfactorily. Therefore, trust has power to determine the loyalty of customers. With regard to
trust, the Industry can be perceived by its customers as honest in its performance if it has strong
and lasting relationship with customers. Customer trust has a significant role in building long-
term relationship and achieving customer loyalty (Berry, 1983). So, the finding of this research
in this aspect is in line with what Berry (1983) states.

40
The regression analysis of trust dimension and customer loyalty indicates that 24.0% of the
variance R square in customers loyalty has been significantly explained by trust. The finding of
Ndubisi (2007) showed that trust is an important ingredient in firm-customer relationships and
ultimately in the development of loyalty. And also the finding of Morgan and Hunt (1994)
concluded that customers with trusts in the producer‟s capability would probably be willing to
commit to a relationship for meeting their expectations. Therefore, the result of this study on
trust dimension is similar to the above findings that trust has the power to increase customers‟
loyalty.

Commitment is another element of relationship marketing that is taken into account to explain
customers‟ loyalty. Based on the correlation test result, commitment is positively and highly
correlated with customers‟ loyalty. The correlation coefficient between commitment and
customers‟ loyalty is the highest of all correlation results of relationship marketing dimensions
which is 0. 773. This shows that commitment is a major determinant of customers‟ loyalty, and
customers will critically evaluate the commitment of the Industry. The commitment of the
Industry will help it to retain customers by improving products it supplies. By having committed
employees, manufacturers can continue retaining existed customers and attracting new customers
to generate more profit. To this extent the commitment dimension of RM plays great role.
Therefore, industries are expected to have committed employees to treat the customers as they
want. This particular result is supported by the study of Fullerton (2003). According to this
researcher, commitment has a strong positive effect on the softer aspects of customer loyalty
such as advocacy and willingness to pay more for the products
.
With regard to the regression analysis of commitment dimension and customers‟ loyalty, 60.0%
of the variance R square in customers loyalty is significantly explained by commitment. It is the
highest of all the independent variables in explaining customers‟ loyalty. The result of Morgan
and Hunt (1994) viewed that a committed partner wants the relationship to endure indefinitely
and is willing to work at maintaining it. Research by Lacey (2009) also suggested that
committed customers are not just expected to maintain current purchasing activities, but to
increase both the level and proportion of their purchasing activities over time. Therefore, the

41
result of this research, regarding, commitment is similar to the above findings that commitment
has the power to increase customers‟ loyalty.

The other factor that is included in the dimensions of relationship marketing is empathy. It was
found to have positive and moderate relationship with customers‟ loyalty. The correlation
coefficient between these variables is 0.319. Empathy is one of the important tools to create long
term relationship with customers. Nearly high number of customers wanted to be treated as they
want to be treated by HMMBI‟s employees. If this is the case, industries need to treat customers
as they want to be treated so that they acquire loyal customers. When the customers are treated in
a good way they become satisfied and loyal. As a result, empathy has power to create lasting
relationship with customers and shaping the minds of the existed customers to talk favorably
about the industries to other customers. Therefore, HMMBI needs to understand its customers‟
needs and wants and continuously evaluate its products to satisfy and attract customers in a
better way.

With regard to the regression analysis of empathy and customers‟ loyalty, 10.0% of the variance
R square in customers loyalty is significantly explained by empathy. The finding of Zeithaml and
Bitner (2003) showed that it is difficult to imagine an organization would deliver caring,
individualized attention to customers independent of its employees. As it is mentioned by
Parasuraman et al., (1988) empathy is one of the important elements to measure the service
quality in service industries area. So, the result of this research on empathy of RM supports the
above findings that empathy has power to make customers loyal.

The last but not the least factor included in the relationship marketing underpinnings was conflict
handling. As it is indicated in the correlation analysis, conflict handling dimension has positive
and moderate relationship with customers‟ loyalty. The correlation coefficient between conflicts
handling and customers‟ loyalty is 0.604. It is the second highest of all correlation results of RM
elements. When manufacturers have good conflict handling procedures and solving the
manifested problems successfully, the customers express their complaints or any feelings they
have freely and will become loyal customers. In order to encourage customers to complain when
there is problem, manufacturers are responsible to aware and inform their customers in advance

42
how and where to complain. Generally, appropriate and acceptable conflict handling procedure
will create strong relationship with customers. The above result is supported by Tax (1998). The
results from this study indicate that investments in complaint handling can strengthen customer
relationships, and build customer commitment.

The regression analysis result for conflict handling and customers‟ loyalty is 37% of the variance
R square in customers‟ loyalty has been significantly explained by conflict handling. It is the
second highest of all the independent variables in explaining customers’ loyalty. The result of
Ndubusi (2007) indicated that customers tend to be loyal to industries that handle customer
complaints which will always happen and other conflicts satisfactorily. Ndubisi and Wah (2005)
found a significant relationship between conflict handling and customer loyalty. And also the
result of Yekunoamlak Hailu (2004) proved that to maintain good relationship with customers,
way customers are handled such as proper acts of frontline employees and proper customer
service are significantly important for customer loyalty. Therefore, the result of this research on
conflict handling dimension is similar with the above results in indicating that proper conflict
handling can increase customers‟ loyalty.

In order to know the current information of the bank with regard to relationship marketing and
Customers’ loyalty concepts, interviews were conducted with the Head of Marketing Department
and Head of Customer Service of HMMBI with the help of a total of 11 interview questions used
as guidelines.

Answering the questions raised about the RM practices in the Industry, the interviewees
indicated that there are activities showing the existence of RM practices in the Industry. Both
the Head of the Marketing Department and the Head of the Customers‟ Service stated that there
are attempts that the Industry is making in keeping in touch with its customers. Some of these
attempts were that they keep data about the whereabouts of their customers, the nature of
products they buy, and the like in order to easily access customers or suppliers when needed to.

In addition, the Head of Customers‟ Service of the Industry stated that the industry has designed
a mechanism in which it continuously gathers feedbacks from its customers. He further said that

43
the Industry uses the feedback collected as input to strengthen the relationship it has with
customers. The Head of the Marketing Department said that the Marketing Department works
hard to strengthen the relationship it has with its customers by considering issues of marketing
like price, quality and delivery time. This, he says, builds the relationships the Industry has with
customers and suppliers on a firm ground.

Both the interviewees said that they know their loyal customers well though their level of loyalty
has never been measured using any scientific mechanism. They indicated that most of their loyal
customers, particularly those from the government sector, always come to HMMBI whenever
they needed products of high quality and precession because the Industry keeps itself up with up-
to-date and brand-new technologies. This, they said, is what indicates the level of their
customers‟ Loyalty. The Head of Customer Service made a rough estimation to inform the
researcher about 70% of their customers are loyal to the Industry.

Asked about how the Industry measures the dimensions of RM – trust, conflict handling,
commitment and empathy – the interviewees stated that the Industry has no organized way to
measure them. However, they said that they attempt to measure the performances of the
employees on the basis of the customers‟ needs and the complaints that the customers may make.
The Head Customer Service mentioned that the Industry has installed suggestion boxes and
comment books as way of gathering customers‟ complaints though there is no clear policy put in
place about it. Moreover, the Head of Marketing Department said that HMMBI‟s employees are
very respectful to their customers and are very willing to listen to what customers demand.

Finally, both the interviewees informed the researcher that there is an attempt being made in
recognizing the Industry‟s regular customers though the task was not carried out in an organized
manner. They also said that the customers‟ specific needs are tried to be identified through the
feedbacks and complaints gained from customers as the Industry wants to provide them with
customized products.

44
 Chapter Five
Conclusions and Recommendations
This study has attempted to examine the effects of RM underpinnings on customer loyalty in the
context of HMMBI. In order to do so, an attempt was made to examine the relationship between
RM dimensions of trust, commitment, conflict handling, and empathy in the context of HMMBI,
to assess the effects of trust, commitment, conflict handling, and empathy on customer loyalty,
and to describe the performance of RM practices in HMMBI, in B2B context.

The study was conducted by blending the two research approaches, qualitative and quantitative
approaches, so as to fill the gap that might have happened if only one of the approaches were
used. Data were gathered, analyzed and interpreted to enable conclusions to be drawn out of the
findings of the study.

This chapter, so, wraps up by presenting the conclusions reached upon and based upon them
forwarding things that must be given attention for the maximized effects of RM on customer
loyalty that HMMBI could gain from running an RM practice that considers the underpinnings.

5.1 Conclusions
Based on previous theories and researches conducted in the areas of RM and its outcomes, this
study could show clear links between RM and customer loyalty, which helps to deeply
understand the relationship and interaction between them. The findings support the assumption
that relationship marketing dimensions can enhance the quality of a buyer-seller relationship and
in turn increase customer loyalty. Trust, commitment, conflict handling and empathy are not only
the desired outcomes of RM, but also the antecedents of customer loyalty.

1. In regard to the Pearson correlation analysis, it could be clearly seen that the four RM
dimensions namely trust, commitment, conflict handling, and empathy are positively related
to each other. The relationship between these dimensions appears to be as follows:
 Trust and commitment have strong relationship.
 Trust and empathy have moderate relationship.
 Trust and conflict handling have moderate relationship.
 Empathy and commitment have moderate relationship.
 Empathy and conflict handling have moderate relationship.
45
  Commitment conflict handling have moderate relationship.

2. From the analysis made to assess the relationship between customer loyalty and RM
dimensions, it could be found out the four dimensions of RM are positively related to
customer loyalty. This could indicate that the dimensions positively affect the customers‟
loyalty. The relation customers‟ loyalty has with each dimension in HMMBI‟s condition is
put as follows.
 Trust and customers‟ loyalty have moderate relationship.
 Commitment and customers‟ loyalty have strong relationship.
 Conflict handling and customers‟ loyalty have moderate relationship.
 Empathy and customers‟ loyalty have relationship.

3. Looking at the correlation between the demographic factors of the customers and their
loyalty, it could be seen that only the customers‟ length of relationship with the Industry has
strong correlation. The other demographic factors have no relationship with customer
loyalty.

4. The correlation between RM and customer loyalty turned out to be positive. This implies
that RM directly influences the level of customers‟ loyalty. It could also be clearly
understood from the regression analysis part, that RM explains customers‟ loyalty. The
regression analysis indicated that 33% customer loyalty is explained by RM. Each
independent variable is also regressed against customers’ loyalty and the result shows that all
the independent variables can explain the dependent variable – customers‟ loyalty.
The regression analysis result looks like the following.
 33% of customers’ loyalty is significantly explained by relationship marketing.
 24% of customers‟ loyalty is significantly explained by trust.
 60% of customers‟ loyalty is significantly explained by commitment.
 10% of customers‟ loyalty is significantly explained by empathy.
 37% of customers‟ loyalty is significantly explained by conflict handling.

46
5. As could be learnt from the data gathered from the in-depth semi-structured interviews,
HMMBI doesn‟t have an RM program and a body particularly responsible to it. However the
company exercises some activities that can be considered as RM practice.

6. It could also be seen from the interviews that the Industry has a very good number of loyal
customers who manifest their loyalty with repeated purchase.

7. Another conclusion made out of the interviews was that HMMBI has not set a mechanism in
which it measures the level of customers‟ trust, commitment, and employees‟ level of
empathy to their customers.

8. The interviews also indicated that the Industry doesn‟t have a clear policy of complaints
handling though customers who show up with complaints are treated fairly.

9. The data from the interviews could also lead to a conclusion that shows the efforts that the
Industry made in recognizing its regular customers, providing individualized attention to
them, and learning the customer’s specific needs is limited.

5.2 Limitations
Some limitations are faced giving the research a hard time. The very big hindrance was the short
time the researcher had to carry out the research. Another is that the researchers‟ unreserved
attempt to make use of secondary data about the customers‟ relationship with the Industry could
not succeed.

5.3 Recommendations
Based on the conclusions drawn out of the findings, the following points are forwarded as
recommendations so that the Industry can maximize the return it gains from the RM practices it
experiences to boost the level of customers‟ loyalty.
1. HMMBI must develop an RM program that will help it build and support positive
relationships with its customers and particularly a CRM program which enables it gather
data about each individual customer of it to treat them knowing their individual needs.

2. The Industry has to train and orient the employees, especially in the frontline staff, how
important RM is. This will increase the level of empathy that the employees show to

47
 their customers and thereby increase customers‟ satisfaction and trust on the Industry,
which in turn increases loyalty.

3. The Industry should appear be trustworthy and show commitment, by providing

individualized attention to customers and by resolving conflicts in a manner that will
eliminate unnecessary loss and inconvenience to their customers.

4. HMMBI should develop a mechanism in which it measures all the variables of RM,
(customers‟ loyalty, trust, commitment, employees‟ empathy to customers and efforts
made to handle complaints) and consequently act upon the findings in its RM program.

5. The Industry has to work hard to increase the level of trust that its customers put on it, by
supplying quality products, keeping its promises, listening to customers, considering the
individual customers‟ needs and the like.

6. HMMBI should develop a clearly determined conflict handling policy, train employees
on how to react upon complaints, develop a culture of informing customers about any
change that takes place in advance, and widen the methods of customers‟ feedbacks
collection.

7. The Industry must also install a reward mechanism, especially for its frontline staff
members, based on their contributions to the success of the RM program and thereby to
the increase they make to the level of customers‟ satisfaction.

5.4 Further Studies

This study focused on the examining the effects of RM on customer loyalty, in the particular
case of HMMBI. So it took the four dimensions of RM – trust, commitment, conflict handling
and empathy – into consideration to reach upon its findings. This research topic, however, can
be further explored by adding more RM dimensions like value, communication, cooperation, and
others which could influence customer loyalty.

This research has not looked into the possible influences of socio-demographic factors on the
RM, the RM dimensions and customer loyalty. Future research studies might fruitfully
investigate such moderating influences. Another issue that future studies can attempt to do is a
survey by applying longitudinal design and increasing the sample size.

48
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 Appendix 1

List of Interview Questions

1. How do you evaluate the relationship marketing activities of your Industry?
2. What are the relationship marketing strategies that your Industry uses to make customers
satisfied and loyal?
3. How do you see your employees’ efforts to create good relationship with customers?
4. How do you appraise your customers’ level of trust on the Industry, the conflict handling
procedures of your Industry, and the level of your employees’ commitment and empathy
of your customers?
5. Are there a clearly defined policies and procedures to handle complaints?
6. How do you see your employees’ willingness to listen to customers?
7. To what extent do you think that the Industry’s complaint handling procedures affect
your customers’ satisfaction and loyalty?
8. How do you see your employees in treating customers with respect?
9. Does the Industry inform customers about any change that takes place in advance?
10. How do you rate your Industry’s efforts in:
 recognizing the regular customers?
 providing individualized attention?
 learning the customer’s specific needs?
11. Would you mention anything you think important to enhance customer satisfaction and
loyalty?
 Appendix 2
ADDIS ABABA UNIVERSITY
GRADUATE SCHOOL OF COMMERCE
DEPARTMENT OF MARKETING MANAGEMENT
A questionnaire to be filled by HMMBI’s customers

Introduction:
Dear Respondent,
This questionnaire is intended to be filled out for the purpose of gathering data for the research to
be conducted to fulfill the requirements for a second degree in Marketing Management.
Therefore, its purpose and objective is limited to only gathering information to be used in the
same research.

The research deals with the Relationship Marketing (RM) practices in Hibret Manufacturing and
Machine Building Industry (HMMBI). It focuses on the effects of RM on customer loyalty: the
case of HMMBI. The data collected will help the researcher to find out the condition of the RM
practices in the Industry, pinpoint if anything is against the scientific way, and to recommend
alternative measures that could improve the RM practices if the findings demand so. Therefore
filling this questionnaire means a lot on your side as you are contributing to the research.

Instructions:
A. You are never expected to mention your names.
B. You are kindly requested to give genuine responses for the information you provide is
only used for the purpose of the research and its confidentiality will be high.
C. Please, mark ‘X’ in the boxes whenever the questions provide you with alternatives.
D. Whenever the questions do not provide alternatives, please give your responses clearly
and in Amharic (in English if you are a foreigner).
E. You may provide more than an answer whenever the conditions compel you to do so.

Thank you in advance for your cooperation.

 Part I: Demographic or General information

Choose the suitable answer and tick in the box given for each question.

1. Gender Female Male

2. Age Below 20 years 20-39 years

40-59 years 60 years and above

3. Education qualification Primary Secondary Diploma

Degree Postgraduate Others

4. Length of relationship: Below a year 1 year 2 years 3 years

4 years 5 years Above 5 years
PART II.

Please, indicate your opinion by marking  the appropriate box on the five point scale
where:

1=Strongly Disagree 2= Disagree 3=No Opinion 4=Agree 5=Strongly Agree

No Questions 5 4 3 2 1
Trust
1 The industry is consistent in providing quality prouct
2 Employee of the industry show respect to customers
3 The industry fulfils its obligation to customers
4 Given my experience, the industry can be trusted Completely
Empathy
5 Employees of the HMMBI deal with customer’s in a caring fashion

6 HMMBI employees give the individualized attention to customers

7 The employees of the industry understand your specific needs
8 HIMMBI employees have the customer’s best interest at heart
Commitment
9 The industry makes adjustment to suit my needs
10 I am very committed to continue my relationship with HMMBI
11 My relationship with HMMBI is very important to me
Conflict Handling
12 HMBI tried to avoid potential conflict
13 HMMBI has the ability to openly discuss solutions when problems arise
14 HMMBI shows a sincere interest in solving customer problem
15 The industry clearly communicates to you about how and where to
complain in case of a problem
16 The industry gives you prompt response for your complaints
Customer Loyalty
17 HMMBI is the first to comes to my mind when making purchases decision .
18 I am a loyal customer to HMMBI
19 I would always recommend HMMBI to someone who seeks my advise
20 Even if close friends recommended another industry, my preference for
HMMBI would not change
21 I have a strong relationship with the industry.

22. What makes your relationship strong or weak?

___________________________________________________________________________
___________________________________________________________________________

23 What do you suggest the industry to increase customer loyalty?

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________

Thank you for your cooperation.