HARAMBEE UNIVERSTY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT
ASSESSMENT OF CUSTOMER RELATIONSHIP MANAGEMENT AND
CUSTOMER LOYALTY PRACTICE (IN THE CASE OF COMMERCIAL
BANK OF ETHIOPIA, FITCHE BRANCH)

A Research proposal submitted to department of Management for partial

fulfilment of Bachelor of Arts (BA) Degree in Management

Advisor: ______________ ( )

December, 2024

Fitche, Ethiopia
 Acronyms
CRM: Customer Relationship Management
CBE: Commercial Bank of Ethiopia.
ATM: Automatic teller machine

Table Contents
Acronyms................................................................................................................................................................ i
Table Contents........................................................................................................................................................ii

CHAPTER ONE.........................................................................................................................................................1

INTRODUCTION......................................................................................................................................................1

1.1. Background of the Study.........................................................................................................................1

1.2. Statement of the Problem.......................................................................................................................2

1.3. Research questions..................................................................................................................................2

1.4. Objective of the Study.............................................................................................................................2

1.4.1. General Objective..........................................................................................................................2

1.4.2. Specific objectives.........................................................................................................................2

1.5. Scope of the Study...................................................................................................................................3

1.6. Significance of the Study.........................................................................................................................3

1.7. Organization of the study........................................................................................................................3

CHAPTER TWO........................................................................................................................................................4

REVIEW OF RELATED LITERATURE..........................................................................................................................4

2.1. Definition of Customer Relationship Management.................................................................................4

2.2. Why do Organizations need and Undertake Customer Relationship Management?..............................4

2.3. Issue should be considered in customer relationship management........................................................5

2.3.1. Benefit of Customer Relationship Management...........................................................................5

2.3.2. Achieving Good CRM.....................................................................................................................6

2.4. Customer Loyalty.....................................................................................................................................6

2.4.1. Behavioral Loyalty.........................................................................................................................6

2.4.2. Attitudinal Loyalty.........................................................................................................................6

2.4.3. Benefit of Customer Loyalty..........................................................................................................7

2.5. Antecedent factors of customer Loyalty..................................................................................................7

2.5.1. Customer Satisfaction....................................................................................................................7

2.5.2. Customer Relationship Management (CRM).................................................................................8

2.6. Customer Relationship Management in Banking Industry.......................................................................8

2.7. Challenges of CRM in the Bank................................................................................................................9

CHAPTER THREE....................................................................................................................................................10

RESEARCH METHODOLOGY AND DESIGN.............................................................................................................10

3.1. Research Design....................................................................................................................................10

3.2. Study Period and Population.................................................................................................................10

3.3. Sample Size Determination (CR. kottan, 2000)......................................................................................10

3.4. Sampling Technique..............................................................................................................................11

3.5. Source of Data.......................................................................................................................................11

3.6. Methods of Data Collection and procedure...........................................................................................12

3.7. Method of Data Analysis.......................................................................................................................12

CHAPTER FOUR.....................................................................................................................................................13

TIME AND FINANCIAL PLAN..................................................................................................................................13

4.1. Time Break Down..................................................................................................................................13

4.2. Financial Break Down............................................................................................................................14

Reference.............................................................................................................................................................15
 CHAPTER ONE
INTRODUCTION

1.1. Background of the Study

Previously marketing efforts has been directed majorly at gaining new customers However, with
increased competition and low customer switching costs, building customer loyalty is now a critical
goal for organizations (Srivastava, J. and Wang, J.H (2002).
The key to build lasting customer relationships is to create superior customer value and satisfaction. In
their view, Kotler and Armstrong (2008) satisfied customers are more likely to be loyal customer and to
give the company a larger share of their business. Targeting, acquiring, and retaining the right customer
is at core of many successful business firms, once a firm has win customer it sees as desirable, the
challenge shift to building relationship and turning them in to loyal customers who will generate
growing revenue for the firm in the future. Customer relationship management (CRM) concerned with
customer data management that is managing detail information about individual customers and
carefully managing customer touch points in order to maximize customer loyalty by delivering superior
customer value and satisfaction (Coa tes 2012).
Customer relation management is one of several antecedent of loyalty. Because CRM is the “seed” out
of which loyalty develops, enhancing customer relationship management is an important means for
achieving loyalty. Failure to meet customer needs and expectation and failure in maintaining effective
customer relationship management technique is assumed to result in dissatisfaction which is considered
as the major causes of customers exit from organizations (Buttle &Burton, 2001.)
Commercial bank of Ethiopia, Fitche branch has been encountering a problem of customer
dissatisfaction and customer exit from the organization. This is due to poor customer relationship
management technique. Therefore, corrective action must be taken in order to eliminate this problem.
In fact, maintaining an effective customer relationship management is a big issue in banking service.
There is no study undertaking on the area of the impact of CRM on customer Loyalty. This is the
reason that initiates the researcher to conduct a research on the topic: “the assessment of customer
relationship management and customer loyalty practice in commercial bank of Ethiopia, Fitche
branch.”
1.2. Statement of the Problem
Commercial bank of Ethiopia is one of the most successful financial institutions in Ethiopia (Gashaw,
F. (2015). and the one which provides service of that needs to attract many customers of the
organization. Managing customer relationship is a key for service providers who want to earn their
customer’s loyalty and avail themselves from its benefits such relationship management is facilitating
through the implementation of CRM system. However now a days the bank has encounter the problems
of customer exiting from the bank, the increasing customers dissatisfaction from time to time, the
customers has become shift to other competitors bank and also the numbers of bank loyal customers
has been decreased (Tadikamalla, P (2005). And also, there may be some challenges which hinder
customer relationship management in the bank such as the difficulty to measure customer satisfaction
in the bank (Levesque, T. and McDougall, G. (2000).

1.3. Research questions

This study answers the following basic questions;
1. What measure does the bank use to increase customer loyalty?
2. How the banks handle its customer complaints?
3. What are the strength and weakness of the bank regarding customer relationship management?
4. How CBE practice CRM?

1.4. Objective of the Study

1.4.1. General Objective

The general objective of the study is to assess the practice of customer relationship management on
commercial bank of Ethiopia, Fitche branch.

1.4.2. Specific objectives

1. To identify the different measures that the bank uses to increase customer loyalty.
2. To determine how the company (bank) handle its customer complaints
3. To identify strength and weakness of the bank regarding its customer relationship management
practice.
4. To describe CRM as antecedent of customer loyalty
1.5. Scope of the Study
Even though, commercial bank of Ethiopia has many branches, due to some constraints like time and
budget this study is limited to commercial bank of Ethiopia, Fitche branch on the assessment of
customer relationship management and customer loyalty practice in Fitche city. And the study uses
descriptive types of research design to gather information about the study population.

1.6. Significance of the Study

The outcome that drawn from this study help the bank in order to identify the main customer-oriented
areas or touch point that would be carefully address to improve with customer needs and also to
identify the strength and weakness of the bank in dealing with its customers, then to take corrective
action on the CRM system. The study will also be used as a reference for other researcher who is
interested in this subject matter.

1.7. Organization of the study

This report is organizing four chapters. The first chapter is consisting of the back ground of the study,
statement of problem background of the organization, objective of the study, scope of the study
significance of the study, organization of the study. And the second chapter consists of the literature review.
The third chapter consists of the methodology of the study. The fourth chapter deals with Budgeted cost
and time schedule

CHAPTER TWO
REVIEW OF RELATED LITERATURE

2.1. Definition of Customer Relationship Management

Different authors define customer relationship management in different time some of these are listed as
follows. Customer relationship management is the process of building and maintaining profitable
customer relationship management by delivery superior customer value and satisfaction and involves
carefully managing customer touch point to maximize customer loyalty or its strategy, process and
enabling technologies that allow organization to acquire and retain its best customer (Kotler, 2008).
Customer relationship management concerns the relationship between the organization and its
customer. Customers are the lifeblood of any organization be it global corporation with thousands of
employee and multibillion turnover or sole trade with a hand full of regular customer relationship
management refers to practice, strategies and technologies that companies use to manage and analyze
customer interaction and data throughout the customer lifecycle, with goal of improving business
relationships with customers, assisting in customer retention and driving sales growth. Customer
relationship is a corporate wide approach to understanding customer behavior influencing it through
continuous relevant communication and developing long term relationships to enhance customer
loyalty acquisition, retention and profitability (Ellen Gifford, 2002).

2.2. Why do Organizations need and Undertake Customer

Relationship Management?
As Ellen Gifford (2002) stated the ultimate purpose of customer relationship management, like any
organization initiative, is to increase profit. In the case of customer relationship management this is
achieved mainly by providing a better service to your customer than your competitor. Customer
through a good customer relationship management capability will also reduce cost wastage and
complaints effective CRM also reduce staff stress because, a major cause for stress reduces as service
and relationship improve.
According to (Carlos G. Duran, 2001) the reason for emergency of CRM is: -
 The mass market has become more costly
 The customer has gain importance, not market share
 The term customer value has gain importance
 The concept of customer satisfaction and customer loyalty become important.
 Intensive competition and development in communication technology

2.3. Issue should be considered in customer relationship

management
The enterprise should pay attention to the following issues so as to improve their relationship with
customer (Holloway, 2002) those are: -
 Recognizing customer
  Distinguishing customers
 Listening customer
 Making all sort of contact with the customer
 Enterprise identify itself with the customer
 Adopting to the customer

2.3.1. Benefit of Customer Relationship Management

Gifford, (2002), states that there are significant business benefit derivable forms an integrated customer
relationship management approach. These include:
 Reduced costs, because the right things are being done
 Increase customer satisfaction because they are getting exactly what they want (i.e. exceeding
expectations).
 Growth in number of customers
 Maximization of opportunities (i.e. increased service, referral etc.).
 Long term profitability and sustainability
 Highlighting poor operational process 
Offering a big advantage of competition to the enterprises
 Reduction in procedure cost
 Improvement of customer loyalty increase to race of shaft loyalty.
Benefits to customers, Ansoff (1990) as quoted by Onus (2008) includes:
Risk and stress reduction
High quality service since the service provider becomes knowledgeable about customer
requirement.
Social and status benefit from continuity relationship with a supplier since repeated contract
may develop relationship resembling personnel friendship which can feed one’s status.
Avoiding switching cost because maintaining a relationship with suppliers avoids the cost
associated with switching to a new provider.

2.3.2. Achieving Good CRM

Achieving good CRM required many organizations to adopt new perspective (Ellen Gifford) clarity as
follows. Consider the following
Traditional customer is something you „do to‟ the customer.
 Modern CRM is „done with‟ the customers.
The second statement is emphasized the big difference between conventional traditional service, and
the modern progressive CRM approach, your relationship with customer should be on going
cooperative and built for long term organizations who have many transitory relations with customer the
cost of keeping existing customer is a tiny fraction of cost of acquiring new customers (Ellen Gifford,
2002).

2.4. Customer Loyalty

There is still no universal agreement on the definition of loyalty. However, we can see the two
dimensions of loyalty i.e. behavioral and attitudinal dimensions (Esther A. Dimly, 2009).

2.4.1. Behavioral Loyalty

Behavioral loyalty is a customer’s overt behavior toward a specific product/ service in terms of repeat
purchasing pattern a repeat purchasing pattern. It can be determined as actual purchase frequency, the
portion of occasions in which a specific brand is purchased as compared to the total number of
purchased brand. Behavioral loyalty is observed form purchase behavior if a business can successfully
achieve repurchase behavior, and then it is on the way to generating customer loyalty (Kumar and Shah
2004).

2.4.2. Attitudinal Loyalty

The mere measurement of repeat purchase does not capture the whole meaning of loyalty. Some
scholars argue that behavioral loyalty (repeat purchase) alone is too simplistic and does not capture the
multidimensionality of loyalty (Kumar and Shah, 2004). Attitudinal loyalty represents a high order, or
long term, commitment of customer to the organization that cannot be inferred by merely observing
customer repeat purchase behavior. This as often results as an outcome of a long fruitful relationship
between the organization and the customer over the time (Kumar and Shah, 2004). (Van Looyetal,
2003) putting in to consideration both behavioral and attitudinal aspects of loyalty, defined customer
loyalty as “customer behavior characterized by a positive buying pattern during an extended period
(measured by means of repeat purchases, frequency of purchase) and driven by positive attitude
towards the company and its products or services”. The consideration of attitude in addition to
behavioral representation makes loyalty not just richer conceptually (loyalty is a process, not just an
act) but also more useful for practical purpose. (Dick & Basu, 1994).
 2.4.3. Benefit of Customer Loyalty
Customer loyalty generates numerous benefits. According to Holbrook (2001), a stable customer base
is a core business asset that enables improved organizational profitability and suggests that a high
customer loyalty implies a higher market share and an ability to demand relatively a higher price
compared to those competitors. Loyal customers are cheaper to serve; less price sensitive, foster
positive word of mouth promotion.
Customer loyalty creates a stable pool of customers for firm‟s products or services Loyal customers
demand less time and attention from the organizations they patronize and behave favorably towards the
company in a variety way (e.g. forgiving product (service) because they are emotionally committed
(Crosby, 2002).

2.5. Antecedent factors of customer Loyalty

Maintaining customer is increasingly difficult in many industries consequently; companies need to
consider the antecedents of customer loyalty and their relative importance (Lewis and Soureli, 2006). It
is important to gain insight to the two antecedent factors of customer loyalty customer satisfaction and
customer relationship management (CRM).

2.5.1. Customer Satisfaction

Satisfaction is one of the several antecedents of loyalty. Customer satisfaction is the ability to bridge
the gap between customer expectations and product/ service delivery”. It is achieved when the customer
expectations about the performance of service or product being consumed are met or exceed. The
strong focus on customer satisfaction is based on the implicit assumption that there is strong positive
relationship between customer satisfaction and loyalty (Anton mittal, 2007).
Failure to meet customer needs and expectations is considered as a major cause of customers exit from
organization because it is assumed to result in dissatisfaction. Therefore, organizations must be
customer focused/driven to gain intrinsic knowledge of the customer’s needs and expectations.
Moreover, an organization’s capacity to satisfy customers need prevent both customer withdrawal and
the arrival of new competitors (Buttle & Burton, 2001).

2.5.2. Customer Relationship Management (CRM)

“All businesses are based on relationships. The firm only has to make them visible and meaningful for
its customer provided that the customer wants them” (Gronroos, 2007).
 Customer relationship management is the overall process of building and maintaining profitable
customer relations by delivering superior or value and satisfaction (Kottler and Armstrong, 2006).
CRM is an attempt to modify customer behavior over time and strengthen the bond between the
customer and the company, with the purpose of maximizing the value of the relationship to the
customer for the customers benefit and the company‟s benefit. CRM could enhance a company‟s
ability to achieve the ultimate goal of retaining customers and so gain strategic advantage over its
competitors. CRM allows organizations to distinguish between customers that are profitable, nearly
profitable, and unprofitable and have the potential to be profitable.
The customer awareness of organization customer relationships could raise their loyalty toward the
corporation, which would in turn increase company income, enhance market share, and achieve other
corporate objectives (Bull, 2003).

2.6. Customer Relationship Management in Banking Industry

Today, many businesses such as banks, insurance companies and other service provider realizes the
importance of CRM and its potential to help them acquire new customers, retain the existing ones and
their life time value. (Onus, 2008) argues that CRM is a Sound business strategy of identifying the
banks most profitable customer & prospects, and devotes time and attention to expanding account
relationships with those customers through individualized marketing and customized service all
delivered through the various sales channels that the bank uses. The banking industry is facing an ever-
increasing level of competition around the world as the dynamics of the business change bank have
understood the need to capitalize on the new technologies to gain advantage in the competition by
exploiting their customer base, brand value and costly infrastructure investment in order to increase
profits as there is a direct link between the customer satisfaction and profitability. However, the banks
faced challenges in implementing CRM it includes;
 lack skilled people
 lack of quality of customer data
 problem of using customer data more intelligently
 problem of using right technologies
 The evolving customer profiles
2.7. Challenges of CRM in the Bank
As (Antony Lawrence, 2010) stated that CRM is not easy to understand but when it come up to
implementation it becomes very difficult for the bank. Generally, it is observed that the bank does not
fail to select right tools but they fail to implement it improper way. Banks are finding it difficult track
and pitch profitable customers across the various contact channel such as ATM, email, voice
recognition and wireless. Bank should train customer to serve themselves and connect customer
focused marketing campaign across the various service and products.
The challenge for the bank is to retain and depend on the profitability of existing customer relationship.
In attempt to be more profitable the banks have been come competitive and more customers oriented.
The CRM is one of such tools which help in meeting the customer expectation according to their
changing needs. Banks have started acknowledging the importance of the customer in developing their
business. They have recognized that is essential to protect and grow its customer base and ultimately its
profitability.
The banks can do this by building relationship with its customer. To meet the customer, need to beat
the computation they must deliver superior quality service. The CRM approach adopts by 10 the bank
focused on maximizing the value of customers and the bank. There are key derivers to customer loyalty
such as: positive staff attitude, honesty, integrity, productive advice and delivery promised service and
so on (Antony Lawrence, 2010)

CHAPTER THREE
RESEARCH METHODOLOGY AND DESIGN

3.1. Research Design

The research is undertaken on the title of “The Assessment of customer relationship management and
customer loyalty practice in case of commercial bank of Ethiopia, Fitche branch.” This is carrying out
by using descriptive method i.e. because the objective of our study is to understand what state affairs is
exist at present about CRM and loyalty in the bank and this help us to reveal what problem exist in the
bank and to describe current situation of the bank and also to answer the question „what is? ‟ (Cooper,
and Schindler, 2003).
3.2. Study Period and Population
Target populations for the research are employees and customers of Commercial Bank of Ethiopia,
Fitche branch.

3.3. Sample Size Determination (CR. kottan, 2000)

Z 2 p(q) N
n=
e 2 ( N  1)  ( Z ) 2 ( p)(q) n= sample size

Z = Confidence level

p = probability of success (90%)

q= probability of failure

N= population

e= error term (10%)

By using the above formula, we determine 28 samples among the employees of commercial bank of
Ethiopia Fitche branch from the total of 41 employees but we used 100℅ of total employee to
determine sample size that is because all 41 employees are important for our study that have direct
contact with the customers.
n = (1.64)2(0.5) (0.5) (41) = 27.8 ≈ 28
(0.1)2(41-1) + (1.64)2(0.5) (0.5)

In addition to this, from 80000 customers of the bank 1000 customers are believed to be representative
for the study after calculating using the following formula :( Yamane 1973)

Where,
Z = Confidence level (90%)
N= total population
n= sample
e= error term (10%)
 = 80000
(1+80000) (0.01)2 =1000 customers

3.4. Sampling Technique

We used both probability and non-probability sampling technique. From the various categories of
probability sampling technique, we specifically employed simple random sampling technique for
determining sample size of employees. This is because first, all the employees are considered equally
important for the study. Second the researcher has an access to get the list of all employees of the bank
by using employee’s hierarchy. Bank employee hierarchy would include all the employees of a bank
working all together for a smooth functioning of all bank operations. And the last but not the least
reason is in order to avoid bias. We also used judgmental sampling technique for manager.
On the other hand, among the different types of non-probability sampling technique, convenience
sampling technique would be selected. This is for the reason that it is difficult to get the list all the
customers of the bank. Due to time and budget constraint the researcher is forced to use convenience
sampling technique. Therefore, 100 convenient respondents among the entire customers of the bank
were used.

3.5. Source of Data

In this study primary data source had been used to assess customer relationship management and
customer loyalty practice. The primary data for this study are the responses of employees, customers,
and manager of the bank. In addition, secondary source of data would be obtained from different
documents and related literature regarding CRM and customer loyalty is employed.

3.6. Methods of Data Collection and procedure

Data in the research are gathered from two main sources i.e. primary source of data and secondary
source of data.
Primary source of data
1. Questionnaires: that contain relevant variables which contain both open and close ended
questions would be developed by the researcher.
 2. Interviewing: which enables the researcher to gather information relevant to service provision
in the office, employee’s motivation in CRM.
And additional sources (secondary data source) include:
Related literature, regarding customer relationship management and customer loyalty would be used as
a source of information. The researcher used different written materials. It includes: Books, documents,
different research work regarding the topic of the study and internet.
Before gathering data required for the study, the required sample size was identified. Then after, the
necessary tools for collecting information have also been prepared as much as possible. The next step
would be collecting the required information using tools for collecting information. The data had been
collected based on inductive approach. As the data collected, the process of analysis follows.

3.7. Method of Data Analysis

As it has been disclosed in the data collection procedure, the data analysis is carried out after the data
has been collected. Since the major data collection instrument is questionnaire, it is a must that
collecting all the necessary data prior to analyzing it. When analyzing the data, tabulation and
percentage is used. The explanation and description had been given on each table.

CHAPTER FOUR
TIME AND FINANCIAL PLAN
4.1. Time Break Down
Time plan or time budget is a time table explaining how the researchers expected to carry out project
or research. It is a plan in a term of months and expected completion.

No Activity Oct Nov Dec Jan Feb Mar April May June

1 Title Selection xx
 2 Literature review xx

3 Preparation of proposal xx

4 Comments for first draft xx

proposal

5 Finalization of proposal xx

6 Proposal submission xx
7 Data collection xx
8 Data analysis xx
9 Data processing xx

10 Report writing xx

11 Submission of final xx
research

12 Report presentation and xx

defense

4.2. Financial Break Down

There will be different costs incurred to undertake the proposed study so the researchers estimate the
following minimum cost per item.

No. Item Unit Quantity Unit in birr Total cost in birr

Stationary
1 Paper Pocket 1 500 500
2 Pen - 5 25 125
3 Ruler - 1 15 15
4 Binder - 3 40 120
Other
5 Flash - 1 450 450

6 Transportation - - - 600
7 Mobile card - 10 25 250
8 Contingency (10%) - - - 300
of cost
Total =1600

Reference
 Ansoff (1990) benefits of customer relation management.

 Antony Lawrence (2010), customer relationship management, 2nd edition, Himaly publishing
house, New Delhi

 Bull. C. (2003). Strategic issues of customer relationship management implementation.

 Buttel.F & Burton, J. (2001), does service failure Influence customer loyalty? Journal of
consumer behavior

 Cooper, D.R. &. Schindler P.S (2003). Business Research Methods (8th edition). New York:
McGraw-Hill: New York

 Carlos G. duran, (2001) the emergency of customer relationship management

 Crosby, L.A (2002). Exploding some myths about customer relationship management.
Managing Service Quality: An International Journal.

 Holbrook, M. (2001), the chain effects from brand trust and brand effect to brand performance

 Dick, A. & Basu, K. (1994), customer loyalty towards an integrated conceptual framework,

 Journal of academy of marketing science, volume.

 Ellen Gifford (2002), customer relationship management principles, strategy & Ideas for
effective customer relationship management.

 Esther A. Dimly, (2009), the impact of building customer loyalty as a means of sustaining
continuous organization growth in highly competitive UK retail market.

 Coates, G (2008), understanding and profitably managing customer loyalty, Marketing

intelligence & planning, (2014).

 Gashaw, F. (2015). Determinants of Default in Project Finance (The Case of Commercial Bank
of Ethiopia), Addis Ababa University.

 Gronroos.C, (2007), service management and marketing: customer management on service

competition England: willey Higher education.

 Kotler and Gary Armstrong (2008), Principle of marketing, 11th edition, prentice hall of India
New Delhi.

 Kumar, V & Shah D. (2004), building & sustaining profitable customer loyalty for the 21th c,
journal of retailing.

 Lewis, B. & Soureli, M. (2006). The Antecedents factor of customer loyalty in retail banking.

 VanLooyetal B. Gamines P. & Van Dierdonck, R. (2003) service management: an integrated

 Approach (2nd Ed). Harlow, England prentice Hall.[Link]

 Holloway, A. (2002), it’s All about Relationships”, Database: Business Source Premier,
Canadian Business, Vol. 75, and Issue 20.
 Anton. Mittal. (2007), Customer Relationship Management, New Jersey: Prentice-Hall Inc.

 Srivastava, J. and Wang, J.H (2002) A case on analytical CRM.

 Tadikamalla, P. (2005) Dual Emphasis and the Long-Term Impact of Customer

 Semih Onus (2008). Customer Relationship Management in Banking sector and A model design
for Banking Performance Enhancement Maslak, Istanbul.

 Levesque, T. (2000), “Determinants of Customer Satisfaction in Retail Banking”, International

Journal of Bank Marketing,