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Lunghwa University of Science and Technology
Department of Business Administration
Thesis for a Master’s Degree

The impact of customer relationship
management practices on customer
satisfaction in BIDV – Cao Bang branch

Researcher: Luc Thi Phuong Hoa

Supervisor: Assoc. Prof. Chih-Chung-Chu
Co-Supervisor: Dr. Nguyen Trung Hien

May 2018


Lunghwa University of Science and Technology
Approval Certificate of Master's Degree Examination Board
This is to certify that the Master’s Degree Examinations Board has
approved the thesis The impact of customer relationship management
practices on customer satisfaction in BIDV – Cao Bang branch published
by Ms Luc Thi Phuong Hoa in the Master Program of Graduate School of
Department of Business Administration
Master’s Degree Examination Board

Board Members:

Assoc.Prof.PhD.Kwannin Kuo

Dr. Dao Tung


Dr. Doan Thu Trang
Advisor

Assistant Professor Chih-Chung Chu

Dr. Nguyen Trung Hien

Chair

Date:






ABSTRACT
Thesis Title: The impact of customer relationship management practices on customer
satisfaction in BIDV – Cao Bang branch

Pages: 86

University:Lunghwa University of Science and Technology
Graduate School:Department of Business Administration
Date:May, 2018

Degree:Master

Graduate Student: Luc Thi Phuong Hoa
Supervisor: Assoc. Prof. Chih-Chung-Chu

Co-Supervisor: Dr. Nguyen Trung Hien
Keywords: CRM, customer satisfaction, service quality, reality, impact.
In the global economic integration trend, the competition in the Vietnamese banking
industry is becoming tough and fierce. This lead to financial institutions more interested
in building and maintaining a strong relationship with their customers in order to
achieve an optimizing goal customer satisfaction. For this reason, customer relationship
management (CRM) has become an indispensable part of the service sector, especially
in banking industry. Therefore thesis has focused on the CRM practices at Bank for
investment and development of Vietnam JSC – Cao Bang Branch (BIDV- Cao Bang
branch) to research the relationship between CRM practices and customer satisfaction in
there. Data used in making analysis was collected from conducting survey at BIDVCao Bang branch. Based on 185 valid responses from customer, the study indentified
three components – SERVICE QUALITY, CUSTOMER DATA BASE, and SOCIAL
NETWORK INTERATION – which explain customers’ evaluation of perceived CRM
practices at BIDV-Cao Bang branch. The relationship between these CRM practices
components and customer satisfaction is investigated through regression analysis. As
the result showed, these three components of CRM practices have positive relationship
with employees’ motivation in which SERVICE QUALITY has the most significant
impact on customer satisfaction level. In addition, based on these findings, the thesis
also gives some suggestions for BIDV-Cao Bang branch to further improve CRM
practice and customer satisfaction level.

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ACKNOWLEDGEMENT
First of all, I would like to send my sincere thanks to the lecturers, especially to my
supervisors Assoc. Prof. Chih-Chung-Chu and Dr. Nguyen Trung Hien for their devoted
attention, lessons and guidance, which have equipped me with key knowledge and
essential skills throughout the course. More importantly, everything I have learned here
would undoubtedly help me tremendously in my work in the future.

I would also like to thank International School - Vietnam National University,
Lunghwa University of Science and Technology for useful supports during studying and
researching to complete this paper. This course has equipped and improved and added a
lot of knowledge about the different areas. In addition, the course also helps me to have
a relationship, have the opportunity to share information and learn from other students
in the program.
I am pleased to gratitude leaders and my colleagues at BIDV-Cao Bang branch for
their enthusiastic support and creating favorable conditions for me to have more useful
information to complete thesis.
In my thesis will not avoid the shortcomings. I look forward to receiving comments
from lectures and students so that I can add to complete this paper.

Thank you!
Author
Luc Thi Phuong Hoa

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TABLE OF CONTENTS
ABSTRACT ........................................................................................................................ i
ACKNOWLEDGEMENT .................................................................................................. ii
TABLE OF CONTENTS ..................................................................................................iii
LIST OF TABLES ............................................................................................................ vi
LIST OF FIGURES .......................................................................................................... vii
1. INTRODUCTION .......................................................................................................... 1
1.1 Problem identification .............................................................................................. 1
1.2 Research objectives, questions and scope ................................................................. 2
1.2.1 Research objectives .......................................................................................... 2
1.2.2 Research questions ........................................................................................... 2

1.3 Research scope, objects and methods ........................................................................ 2
1.3.1 Research objects ................................................................................................ 2
1.3.2 Research scope .................................................................................................. 2
1.3.3 Research methods .............................................................................................. 3
1.4 Contribution of the research...................................................................................... 3
1.5 Structure of the thesis ............................................................................................... 4
2. THEORETICAL FRAMEWORK .................................................................................. 5
2.1 Conceptual framework on Customer Relationship Management ............................... 5
2.1.1 Concepts of customer and types of bank customers ........................................... 5
2.1.2 Concepts of CRM and CRM system .................................................................. 6
2.1.3 Characteristics of CRM ..................................................................................... 7
2.1.4 The role and benefits of CRM in banking sector ................................................ 8
2.2 The major aspects of a CRM success ...................................................................... 10
2.2.1 Service Quality ................................................................................................ 10
2.2.2 Employees Behavior ........................................................................................ 11
2.2.3 Customer Database .......................................................................................... 11
2.2.4 Conflict Handling ............................................................................................ 12
2.2.5 Physical Environment ...................................................................................... 13
2.2.6 Social Network Interaction .............................................................................. 14
2.3. Customer Satisfaction and the effect of CRM ........................................................ 14
2.3.1 Customer Satisfaction ...................................................................................... 14
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2.3.2 The Effects of CRM on Customer Satisfaction ................................................ 15
2.4 Literature review .................................................................................................... 16
2.5 Research Model and Hypotheses ............................................................................ 18
2.5.1 Research Model............................................................................................... 18
2.5.2 Hypotheses ...................................................................................................... 18
3. RESEARCH CONTEXT AND METHODOLOGY ...................................................... 20

3.1 Overview of Bank for investment and development of Vietnam JSC ...................... 20
3.2 About BIDV – Cao Bang branch ............................................................................ 23
3.3 Research Methods .................................................................................................. 26
3.3.1 Designing questionnaires ................................................................................. 26
3.3.2 Sample and Data Collection ............................................................................ 28
3.4 Analyzing data plan ................................................................................................ 29
3.4.1 Reliability analysis by Cronbach’s alpha ......................................................... 30
3.4.2 Exploratory factor analysis .............................................................................. 31
3.4.3 Regression analysis ......................................................................................... 32
4. ANALYSIS THE REALITY OF CRM PRACTICES IN BIDV – CAO BANG
BRANCH AND SURVEY RESULTS ..................................................................... 34
4.1 BIDV’s business results in the period from 2012-2016 ........................................... 34
4.1.1 The development reality of mobilization service .............................................. 35
4.1.2 The reality of loaning and investment services activities .................................. 39
4.1.3 The reality of fee-base financial service activities ............................................ 43
4.2 The reality of key dimensions of CRM activities in BIDV Cao Bang in the period
from 2012-2016 .................................................................................................... 44
4.2.1 Customer database system ............................................................................... 44
4.2.2 Analyzing customer database .......................................................................... 45
4.2.3 Selecting targeted customer ............................................................................. 45
4.2.4 Developing customer relationship .................................................................... 46
4.2.5 Evaluating the reality of CRM performance in BIDV Cao Bang ...................... 48
4.3 Research results and analysis .................................................................................. 49
4.3.1 Data description .............................................................................................. 50
4.3.2 Reliability analysis and scale ........................................................................... 53
4.4 Exploratory Factor Analysis ................................................................................... 57
4.4.1 Exploratory Factor Analysis of CRM Practices Scale ...................................... 58

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4.4.2 Exploratory Factor Analysis of Customer Satisfaction Scale ............................ 62
4.4.3 Research model – Version 2 ............................................................................ 63
4.5 Regression Analysis ............................................................................................... 63
4.5.1 Regression Analysis ........................................................................................ 63
4.5.2 Research model and hypotheses tested result ................................................... 67
5. FINDINGS AND DISCUSSIONS ................................................................................ 69
5.1 Assessment of perceived CRM practices in BIDV - Cao Bang Branch.................... 69
5.2 The impact of CRM factors on customer satisfaction in BIDV - Cao Bang branch .. 70
5.3 Suggestions to improve CRM performance and customer satisfaction in BIDV Cao Bang branch ................................................................................................... 70
5.3.1 Improve Service Quality and customer database components .......................... 70
5.3.2 Improve Social Networking Interaction component ......................................... 70
5.3.3 Improve other components of CRM practices .................................................. 71
6. CONCLUSION ............................................................................................................ 72
REFERENCES................................................................................................................. 73
APPENDIXES ................................................................................................................. 76

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LIST OF TABLES
Table 1. Encoded Data ..................................................................................................... 29
Table 2. Cronbach’s alpha values and internal consistency (George & Mallery, 2003) ...... 31
Table 3. BIDV’s key performance indicator in the period of 2012-2016 ........................... 35
Table 4. BIDV’s growth rate and mobilized capital structure in the period of 2012-2016 .. 36
Table 5. The growth rate and loan structure of BIDV in the period of 2012-2016 ............. 40
Table 6. Back payment and indicator of loan balances by quality ..................................... 41
Table 7. Specific criteria for selecting each customer group.............................................. 46
Table 8. Descriptive Analysis ........................................................................................... 50
Table 9. Gender distribution among 185 participants ........................................................ 51

Table 10. Reliability of scale ............................................................................................ 54
Table 11. Exploratory Factor Analysis of CRM practices ................................................. 58
Table 12. Reliability statistics and exploratory factor analysis of CRM practice, 2nd time ...... 60
Table 13. Exploratory Factor Analysis of Customer Satisfaction Scale ............................. 62
Table 14. Correlations ...................................................................................................... 64
Table 15. Collinearity Statistics ........................................................................................ 65
Table 16. Regression analysis summary ........................................................................... 66
Table 17. Regression analysis – the second time ............................................................... 67
Table 18. Hypotheses Tested Results ................................................................................ 68
Table 19. Perception on main elements of CRM at BIDV - Cao Bang branch ................... 69

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LIST OF FIGURES
Figure 1. Research model ................................................................................................. 18
Figure 2. BIDV’s market share of mobilization capital period of 2012-2016..................... 37
Figure 3. BIDV’s market share of gross loan in Vietnamese banking industry in the
period of 2012-2016 ................................................................................................. 42
Figure 4. Age distribution among 185 participants ............................................................ 52
Figure 5. Kind of services used by 185 participants .......................................................... 52
Figure 6. Research model – Version 2 .............................................................................. 63
Figure 7. Regression Standardized Residual ..................................................................... 65
Figure 8. Research module result ...................................................................................... 68

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1. INTRODUCTION
1.1 Problem identification

In today's competitive environment, customers are the most important assets of
many businesses in general, of banks in particular. Financial service providers aware
their existence and development depend on the way they gain customers, satisfy their
needs and maintain customers loyalty to the bank. Customer-centric business strategy is
becoming a top priority strategy for banks. Hence, building a customer relationship
management system to develop, maintains and strengthens relationships with both
current and prospective customer groups will enable the banks to better satisfy
customers needs, increase the value for them. This is the effective competition
determinant that brings the greatest benefit to the bank. Bank for investment and
development of Vietnam JSC (BIDV) is one of the largest commercial banks in the
country with expanding scale and diversified services to meet an increasing demand of
different customer groups. The role of customer relationship management has been
recognized by BIDV Vietnam in general, BIDV Cao Bang branch in particular as one of
the main effective tools in competition with other commercial banks of Vietnam and
financial institutions.
Although the bank has a large number of customer but in local area recently
appearance of many strong competitors makes BIDV Cao Bang unavoidable the risk of
losing customers. Rival banks such as Vietcombank, Vietinbank and Techcombank etc.
are both more modern and invested by foreign financial corporations. Meanwhile, the
customer relations management at BIDV Cao Bang in recent years is still limited. Many
old customers of the bank left while it has yet established a long-term relationship with
its current customers. In addition, in daily transactions, several customers are not really
satisfied with the customer care services and staffs’ attitude of the bank. It seems that
BIDV Cao Bang branch is gradually missing the opportunity to maintain and develop
close relationships with customers when it ignores many potential customers. This is not
only push up the cost of finding new customers, but cause difficulties in attracting and
maintain current customers. From these facts, the author has chosen the research topic
“The impact of CRM practices on customer satisfaction in BIDV - Cao Bang branch” to
find solutions which help BIDV Cao Bang improve its customer satisfaction and CRM
practices in the future.

1


1.2 Research objectives, questions and scope
1.2.1 Research objectives
The paper focuses on determining the awareness and use level of CRM activities in
achieving customer satisfaction in BIDV - Cao Bang branch and the major elements of
CRM applied in there. The study is also to examine the impact of customer relationship
management on customer satisfaction in BIDV-Cao Bang branch. Base on survey
results and evaluating the relationship between CRM performance and customer
satisfaction, the paper provided valuable suggestions and recommendations to the BIDV
- Cao Bang branch which can improve its customer relationship management practices
and satisfaction.
1.2.2 Research questions
To what extent do BIDV - Cao Bang branch apply the CRM concepts?
What are the main elements of CRM practices that can achieve customer satisfaction
in BIDV - Cao Bang branch?
What is the relationship between CRM practices and customer satisfaction in the
BIDV - Cao Bang branch?

1.3 Research scope, objects and methods
1.3.1 Research objects
The study’s objects include the CRM performance and individual customer
satisfaction so I also based on investigate results of the reality of retail banking business
in BIDV - Cao Bang branch and its CRM process to access the CRM implementation in
this organization and their influences on customer satisfaction. From those collected
data and analysis results will formed the basics for determining and selecting the later
solution for CRM performance and improve customer satisfaction for BIDV - Cao Bang
branch in the future.


1.3.2 Research scope
The study mentioned the CRM performance in BIDV - Cao Bang branch and the
relationship between CRM practices and their customer satisfaction. Therefore, it is not

2


only stopped at testing the theories regarding the customer relationship management,
customer satisfaction and the research models used to measure CRM performance and
customer satisfaction but further, it is the way for me to apply the knowledge, skills and
my experiences into the construction the CRM strategy for a specific enterprise, from
that contribute the useful points in CRM activities of BIDV - Cao Bang branch where I
am working for. In this paper, I will focus on research the information and figures
related to the reality of the CRM activities of BIDV - Cao Bang branch in the period
from 2012 to 2016.

1.3.3 Research methods
In order to answer the three main research questions, the author uses following
research methods:
Secondary data: figures were collected from financial statements, annual reports of
commercial banks, data published by Vietnam banking association, reports by
independent organizations and actual data of retail banking business and CRM
implementation at BIDV - Cao Bang branch.
Primary data collection and analysis: collected data from investigation would be
processed by software SPSS version 21.0 with methods such as reliability test Cronbach
Alpha, exploratory factor analysis, one-way ANOVA and multiple linear regression
analysis. The author found out solutions to attain the above objectives.

1.4 Contribution of the research
Within the boundary of this thesis, the author aimed to explore the significant

correlation between the CRM performance and customer satisfaction. Base on assessed
results the reality of CRM performance in BIDV - Cao Bang branch as well as the
satisfaction level of its customer, the author proposed some solutions to improve CRM
activities and improve customer satisfaction for BIDV - Cao Bang branch in the future.
Those solutions constituted setting up a process and procedures of solving customer
complaint complaints and problems because effectively solving customer complaints is
the best way to improve customer perceptions of BIDV's professionalism and integrity;
building and conducting a customer-oriented culture; improving physical environment
and upgrading information technology system infrastructure of which focus on
deployment systems serve for retail banking activities.

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1.5 Structure of the thesis
Regardless of the introduction, conclusion, reference and appendices the thesis has
four major parts as following:
Theoretical Framework
Research context and methodology
Analysis the reality CRM practices in BIDV – Cao Bang branch and survey result.
Findings and Discussions

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2. THEORETICAL FRAMEWORK
This chapter will provide theoretical framework for the research. It includes
fundamental concepts on customer relationship management, its role and benefits in
banking sector. The characteristics, process of CRM and customer satisfaction will be
presented too. Furthermore, the major aspects of a CRM success as well as research

model and its hypotheses were also mentioned in there.

2.1 Conceptual framework on Customer Relationship Management
2.1.1 Concepts of customer and types of bank customers
The organization’s customer is a collection of individuals, groups or businesses
whose demand to use the company's products and expect to satisfy their needs. For a
bank, customers involved in both the input supply process such as saving, exchange
bills etc. and the consuming output process when they borrow money from the bank. A
relationship between a bank and customers is a two-way relationship that facilitates coexistence and development. The success or failure of the customer is the decisive factor
for the existence and development of the bank vice versa bank's innovation in service
products quality facilitates customer's business success. Based on customers’ buying
behavior they will be categorized into institutional clients or individual clients. There
are three main customer groups in banking sector consist of capital mobilizing
customers, debit customers and customer related to the financial and monetary services,
the bank's assets.
Capital mobilizing customers might be come from business enterprises in the fields
of production, circulation and services, public administration sector or residents.
Business enterprises’ aim of money sending into the bank is payment transactions for
their business operations. For this capital resource, due to the bank has not paid interest
or low interest rates so it seems very beneficial for banks when using it to lend.
Moreover, the bank takes advantage of idle capital in the payment phase that is created
by banking services. In operation process, several public agencies have got extra
business activities that be allowed by laws or have got non-state funds such as gifts,
rental space. These funds will be sent to the bank under the form of a dedicated account

5


for interest. When the economy grows, population classes will have income streams in
the form of extra earning which is the significant capital mobilized source for the bank.

Debit customers: Bank’s borrowers may be customers who use the loan for the
right purpose and payment both principal and interest as their commitment, but there are
also several other customers who unable repay their loan. In these cases, the bank
should have a borrower selection method rely on financial indicators (such as payment
ability, operating expenditure, self-financing ability, profitability, comply with financial
report preparation and submission), and non-financial indicators including reputation in
credit relations, assets assurance level, relationship level with banks. For each indicator
has a certain scale with a total score of 100 which is applied to divide customers into
groups. The bank identifies the target customer groups and then develops a relationship
management strategy with these customer groups. In general, banks have a lot of
different customers so classification and good relationships management with target
customers are not simple. It requires the organization’s participation and directly
instruction from the manager board.
Customer related to the financial and monetary services, the bank's assets: this
customer group comes from individual consuming and institutional markets. In
individual consumption market, customers tend to buy bank’s service products for their
living with small quantities so there is no binding relationship to the banks. Moreover
their buying behavior is influenced by many factors of psychological, social culture, and
personal. They are often no higher education and less knowledgeable than corporate
clients. Contrary, in institutional market customer usually buy on a large scale and
quantities thus, the relationship between institutional customers and banks are often
closer and interdependence each other. Their purchasing mainly to business or perform
some functions and they are more concerned with profits, cost reduction, price
negotiation. They require discount in certain cases or the ability to meet the working
demands for example requirements on supply plans, quantity, quality, location etc. so
banks should base on customers’ expectations to meet the maximum their needs.

2.1.2 Concepts of CRM and CRM system
Bodenberg (2001) defined customer relationship management as a comprehensive
business strategy of which revenue, profit and customer satisfaction are achieved

through organizing customer segmentation, nurturing customer satisfaction, and

6


executing customer centric processes. CRM techniques should be focused on customers,
enhancing approach, interact and integrate with customers more effectively through all
channels and functional departments of the business.
The CRM systems are designed to support businesses research, thoroughly
understand customer demand and habits, approach and communicate with customers in
a systematic and effective way, manage their information to serve customers better.
Moreover this system allows bank staffs to edit customer information through various
interaction channels including company’s website, telephone, live chat, post, email,
marketing materials, and social media. They also might be record or access detailed
customer information such as personal account information, purchase history, buying
preferences and concerns etc. The value information provided by the CRM system can
help promote a bank's overall business goals. For example, if the sales consultants know
the customer's certain needs they can provide right products and services that customer
expect. A CRM system consists of four main techniques components encompass
customer data-store for communication, updating data source; tools for analyzing
databases and identifying patterns of customer behavior; tool management strategy
allow marketing department to define clearly communication method and convenience;
common issues about environmental changes to maintain and update databases and
media resources to send messages to customers. Furthermore CRM system has got a big
data and comprehensive that so staffs in different units could be access the same
information.

2.1.3 Characteristics of CRM
CRM are formed on 4 principles consist of customers should be managed as
important assets; The customers benefits are always change and not all customers have

the same desire; demand, desire, buying behavior of customers are change too; by the
skills to understand customers and find out their benefits and the organization can meet
their needs and maximize customer value in the organization's client portfolio. CRM
allows the bank to identify, attract and engage the best customers to achieve higher sales
and profits. It also builds lasting, meaningful, personal relationships with customers
who will create income for the business in the future. CRM develops and improves
relationships with current customers by cross-selling and up-selling activities that bring
the business closer to customers, to better understand each client, to deliver greater

7


value to him/her, and to make each person more valuable to the business. If customers
receive products and services that more convenience, value and satisfy from the bank,
they are more willing to spend all their time and money to the bank than any competitor.
Building customer value increases the value of the demand chain, the business flow
from the customer back to the retailer and then the manufacturer. CRM involves
behaving toward different customers in different ways. When a company applies its
client strategies to interact directly with each individual customer, s/he tells the
company how s/he wants to be treated. Based on this interaction, the company will
adjust its behavior to him/her. In essential, this is a one to one relationship (a customer
with a business - customer input to the output of business for a particular customer).
The CRM model becomes different in business and competition is due to the
company's business strategy that achieves specific customer goals through activities
toward specific customers. CRM creates optimum investment efficiency by integrating
personal customer information into each functional unit of the organization from
customer service, production and logistics to channel management. CRM is both an
operational and analytical process in which operational CRM focuses on software
settings and process changes that affect daily operations of the business. Analytical
CRM concentrates on the necessary strategic planning to build customer value as well

as culture, metrics, organizational changes to implement successful strategies. The
CRM objective is the profit growth by providing right products to right customers, right
channel with suitable time and cost. The overall business objective of this strategy is
gradually increases the value of the customer base which increasingly profitable for
business.

2.1.4 The role and benefits of CRM in banking sector
Without a doubt, in the fiercely competitive environment of banking market, the
decrease in customer loyalty and changes in customer trends have forced banks to seek
solutions to attract and retain customers and increase revenue. To understand, manage
information and meet customer requirements, the role of CRM has been affirmed as
instrumental to identify and capture the most profitable customers for the bank. It
combines between advance technology and manpower to create new business strategies
that ensure the maintenance of a sustainable competitive advantage by satisfying
existing clients and attracting new ones. CRM helps the banks provide appropriate

8


services and cost saving to their customers, develop fit products and services for these
clients, increase customer loyalty and long-term value. In banking context, the
functionality of CRM system enable the bank handle a large number of individual retail
customers at the same time as well as control the rate of customer retention and crosssell their products effectively. CRM facilitates banks to implement data mining
techniques to understand their customers, also determining prospects and the best way
to communicate and marketing their cross-selling products to potential customers.
Dealing with services by contact centers and online, CRM operations would save costs
for the banks.
Nelson (2012) stated that the core benefits of banking CRM are improving
customer service and communication; value cross-selling to raise revenue; automating
banking procedures; better control the quality of products and services; select customer

information, and building marketing strategy. He suggested that CRM information and
analysis tools make the bank more concentrate customers and their satisfaction that
create profits for these financial providers. The bank's profitability has been seen in
factors of better infrastructure, easy staff training, customer satisfaction and retention.
Integrates processes of customer information, products price, templates for proposals
and marketing collateral etc. are systematically centralized, which will help bankers
manage easier and more understand their customers. Bligh (2004) found that CRM
allows the bank to separate customers into different segments that help them customize
the services and create demand by multi-channel/waves campaigns. The 360-degree
views give bankers a multi-dimensional perspective on their customers. It means
transparent transactions through a single window to accelerate the cross-selling of
different products to customers. The CRM accelerates and consistent decision-making
process based on the database and customer’s CRM perspective. Risks in business
operation can be reduced when a banker uses a CRM system to track and interact with
customers through phone, fax, e-mail, online portals, wireless devices, ATMs, and face
to face contacts with bank staffs at transaction office. The banking CRM benefits clients
with convenience services such as internet banking, mobile banking, ATMs etc. They
receive bank’s feedback faster and get more information about beneficial products to
them.

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2.2 The major aspects of a CRM success
Azzam (2014) defined that in the banking sector, customer satisfaction depend on
their assessment on CRM through six elements including service quality, employee
behaviors, customer database, conflict handling, physical environment and social
network. In this section I will study these factors as a theoretical background to build
research scales and hypothesizes in next part.


2.2.1 Service Quality
The American Society for Quality gave the definition of quality as “the totality of
features and characteristics of a product or service that bears on its ability to satisfy
stated or implied needs” (Jay et al., 2009). We can define quality products as goods and
services that are reliable in the sense that they do the job they were designed for and do
it well, which increases perceived value, but they are also differentiated by various
attributes that customers perceive to have a higher value (Charle et al., 2004). Service
quality can be defined as the difference between customer expectations of service and
perceived service. If expectations are greater than performance, then perceived quality
is less than satisfactory and hence customer dissatisfaction occurs (Parasuraman et al.,
1985; Arash Shahin). In another way, service quality can be defined as the ability of a
service to perform its functions including the overall durability, reliability, precision,
ease of operation and repair, and other valued attributes (Kotler et al., 2005).
Banking service quality is intangible and estimated highly base on customers’
experience. Most bank claim that the bank is in the financial industry; therefore, they
tend to compete each other base on their financial capacity rather than service quality.
However, existence of any business including banking is due to customers who decide
the amount of company’s sales based on their perceptions of service quality. In other
words, service quality will determine the bank’s profitability, and customers will
determine how service quality should be. In this thesis, banking service quality may be
defined as the ability to satisfy the customer’s requirements and needs. This ability
includes everything that customers think they will be received from those services like
accurate process, affordable price, on-time delivery, attitude of staffs, etc.

10


2.2.2 Employees Behavior
The interaction between bank and customers is a mirror that reflects the bank’s
service quality, image and brand and its employees are the image representatives for it.

Through communication with customers, bank staff’s image reflects the bank’s image.
Customer dissatisfaction will affect the bank’s prestige and vice versa a good image will
be recognized and disseminated if bank staffs satisfy clients. Skilled employees knew
that providing excellent customer service closely relate to their polite attitude,
amiability and serve style attentive as well as other professional qualities. For example a seller will not lie about bank product or service just for his/her attractive commissions.
S/he will give the customer a fully truth about the product/service honestly even s/he
does not forget and sincerely thank customers for their interest and using the bank's
products/services. Direct bank clerk treats all customers equally, irrespective their
business size. S/he always responds and provides service fast, efficient and high quality
to all customers. Moreover, in high-pressure situations such as complaints from
customers about the bank's products/services, she still listens calmly and understands
the customer's problems in order to find out the most appropriate solutions. At the
transaction offices, employees' positive attitudes can be reflected by their courtesy
behavior and helpful even for customers who may not trade or deal with very small
values. In fact, banker probably never ensures that 'visitors' eventually become their
biggest customers. It seems that customers often consider organization’s employees
behavior as the way the business owners operate their company. An employee tries his
best to help a customer solve a problem can create an image in consumer minds that a
bank is helpful and efficient. On the other hand, a customer who has to wait a long time
for service and then be served by a cold or uninteresting employee, s/he might leave
with a negative impression on the bank.

2.2.3 Customer Database
Customer database is data of existing customers, potential customers and customers
no longer trade. Data of exiting customer including prime information (personal
information) that helps identify customers such as name, address, code, phone number
etc. this information might be changed so it should be update regularly; demographic
characteristic including age, gender, marital status, education, income and number of
family members are less changeable over time; behavior such as purchase frequency,


11


expenditures, changes in purchase types; attitude data which is often difficult to collect,
quantify because they relate to emotions, praise comments and criticism of customers
about the bank and their expectation; affecting factors on transaction decision
encompass elements belong to enterprise such as product quality, price, type of product,
customer service, long-term relationship etc. and customer factors such as marriage,
retired, internet access etc.
For customer no longer trade: it is necessary to collect their data to find out
corrective measures or appropriate interactions to attract customers back. For these
clients, beside their basic information, demographic characteristics, extra data to be
collected consist of behavior that relate to former purchasing characteristics of customer
and their expenditures to the business; time and method of customer transaction; the
reason for customers to stop dealing with the bank.
For potential customer database: their portfolio similar with existing customer
however bank’s products have to meet their specific demand. The banker might be use
clusters and upgrades database to research and add information of this customer group.
In short, customer database ensures effectively marketing operation, increases the
business’s ability in enforcing profitable market segments by categorize customers into
different groups to implement marketing programs effectively; keeping customers and
encouraging repurchase and target potential consumers. In customer relationships, the
database is used to identify the most profitable customers, attract potential customers,
send personalized messages related to products/services before and after purchase to
consolidate, cross-selling, ensure effective communication with customers, improve the
promotion results with the right orientation, personalize customer service, achieve
confidential communication with customers.

2.2.4 Conflict Handling
Naoui & Zaiem (2010) defined conflict as the process in which a party recognizes

that his or her rights are either dissenting or negatively affected by another party.
Conflict can bring negative or positive results, depending on the nature and intensity of
the conflict. In fact, conflict in service business is unavoidable, so the manager’s
concern is not whether or not but where the conflict is, what type and scale it belong to
and its intensity to basis for the corresponding strategies and interventions. Dwyer et al.,

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(1987) suggested four steps that help employees solve conflicts with their customers
effectively below:
Positive thinking: some staffs think that customers complain about company’s
product or service that is not good. But if you look at another aspect, you will find that
it is a good thing, is company’s chance to constantly improve on its products and
services. Customers who are interested in your company, they will complain to you and
give you the opportunity to modify and this is a challenge that you need to overcome. If
the customer does not complain but silently leaves to another company, you have no
chance to correct the mistake.
Help customers relieve frustration: when customers are angry, their highest
demands are often just to relieve discommode. In such situations you should learn and
use your listening skills. Put yourself in the customer position to understand their
feelings. Let customers see you are on their side, be their friend.
Find out information about the problem: everything happens with its own reason.
No smoke, no fire that is the immutable principle of sales and customer service. Making
ingenious questions will make customers easy sharing their problems that help you find
out the real problem the customer is experiencing.
Help customers choose the best solution: a perfect service must always consider the
customer’s problem as your problem. Customers do not care how you will implement
them, they only care about the problem and the results they receive. Always show your
customers how good your service quality by time and service quality. Satisfying

fastidious customers, you will have the absolute loyal customers for your enterprise
because a few companies that can make them happy like your company.

2.2.5 Physical Environment
The physical environment is the conditions, means, tools that serve the bank’s
process of providing services to the customer. It is reflected in aspects such as a interior
decoration in the transaction office, parking, waiting areas, air conditioning, lighting,
and catalogs, flyers introduce bank’s products and services and other available facilities
for client’s convenience. The bank’s physical environment is a CRM aspect that has a
positive influence on the perceptions and satisfaction of service users towards service
quality. When customers assess positively on the physical environment of the business,
it also positively affects their satisfaction and their feeling of service is also appreciated

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higher. According to S.Wheelan (2002), the physical environment or tangible element
of the enterprise is an indicator for the "promise delivery good service" that will create
credibility to the customer about the service provider.

2.2.6 Social Network Interaction
The organizational purpose is combine social media network with customer
relationship management (CRM) strategies to optimize the strength of social interaction
to come closer to customers. By doing so, social network interaction facilitate business
increased its revenue cost reduction and efficiencies. Enterprises are rapidly take
advantages of social networking to build virtual communities that they might be create
innovative social commerce programs, improve customer care and easier investigate
market feedback than ever before. Businesses follow up clients from social networking
website such as face book, twitter, linkedIn and many others which to be used as a sale
channel because nowadays, customers like to use the social networks to share

information about themselves and their interests. However, these channels also generate
many information gaps which are difficult for businesses to control them. In fact, these
vulnerabilities are gradually being filled by the applications of social CRM software and
it is also difficult to tight-fisted for businesses to acquire this advanced technology.

2.3. Customer Satisfaction and the effect of CRM
2.3.1 Customer Satisfaction
The definition of customer satisfaction has been widely debated as organizations
increasingly attempt to measure it. Customer satisfaction can be experienced in a variety
of situations and connected to both goods and services. It is highly personal assessment
that is greatly affected by customer expectations (Center for the study of social policy,
2007). Philip Kotler defined customer satisfaction is the extent to which a product’s
perceived performance matches a buyer’s expectations. If the product performance falls
short of expectations, the buyer is dissatisfied. If performance matches or exceeds
expectations, the buyer is satisfied or delighted (Kotler et al., 2005). Customer
satisfaction is an important theoretical as well as practical issue for the marketers and
consumer researchers. Customer satisfaction can be considered as the essence of success
in today’s highly competitive world of business (Vanniarajan et al., 2007). Lovelock et

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al. (1998) listed various virtues with respect to satisfaction. Firstly, satisfaction is
impeccable from customer loyalty and commitment factor with respect to the
relationship. Secondly, highly satisfied customers are more likely to spread positive
word of mouth about the firm and its products and services to other potential customers,
which in essence can turn into a major advertisement and promoting factor for the firm
and its products and services. Thirdly, customers who are highly satisfied are more
likely to be forgiving for mistakes from the part of the firm, since if the customer was
enjoying quality products and services from the firm in the past and happen to get under

quality products or services for some reason, the person is more likely to come to the
conclusion that it is just a onetime mistake. Customer satisfaction is regarded as a major
priority for banking industry sector since banking industry is generally characterized as
the business industry segment which involves high rate of customer contact and
providing industrialized service solutions thus giving much focus of research to
customer satisfaction in banking sector. It is also found that customer satisfaction is
closely connected with interpersonal trust (Geyskens et al., 1996) In this research,
customer satisfaction can be understood as psychological state of customers when
service they received matches or exceeds what they expected.

2.3.2 The Effects of CRM on Customer Satisfaction
Applying CRM to the retail banking market is one of the most effective ways to
help banks deal with the facing difficulties. Customers are the products consumers of
businesses and also bring revenue to them. When customers are satisfied with the bank's
products quality they will continue to buy more products in a long time if the banker is
always providing new products and improving existing products. They will talk about
their bank and products with compliments, also keeping their unconcerned to
competitive brands that against bank’s products and even offering valuable suggestions
and ideas about those products and services. This will be a free-cost source of
advertising information and extremely effective for the enterprise. Through the CRM
system, customer information will be updated and stored. Based on this database, a
bank can analyze and identify potential and long-term customers to create appropriate
customer care strategies, build long-term customer relationships for their aim of optimal
satisfaction. Thus CRM has a positive impact on customer satisfaction if an enterprise
has a good CRM strategy, customer satisfaction will automatically be increased.

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Conversely, the lacking of a good CRM strategy will lead to customer dissatisfaction.

When the more develop society, the increasing customers’ demand, they require higher
quality and price. They are always interested in the purchasing benefits but if the bank's
capacity is not good enough to handle these requests, the conflict will be more likely to
happen and it loss customers. Rahman et. al, (2014) argued that maintaining the desired
level of customer satisfaction requires a proactive corporate responsiveness in
approaching, building and retaining satisfied customers for sustainable competitive
advantage in the market. Therefore, the enterprise needs to take-care customers at the
first and after purchase. Enhancing take care customer after purchase give them respect,
satisfaction and they are willingness to use or introduce others to use bank’s products or
services the next time.
In today's a retail banking model, applying philosophy well will contribute
significantly in reducing the marketing cost of keeping existing customers and reach
new potential customers. This is also a right experience in the business culture because
any service provider who knows smart customer relationship management will be
customer-centered to meet customer needs and to improve awareness of the customer
value. Having many existing customers will attract more and more potential customers
under the influence of the mass rule.

2.4 Literature review
As mentioned in the sections above, CRM practices affect on customer satisfaction
in banking in many ways. Many relationships between CRM practices and customer
satisfaction were found in the CRM studies, but in this paper’s context, a few relevant
relationships would be discussed. Findings in Cho, et. al. (2013) study on the
relationship between CRM elements and customer satisfaction and loyalty showed that
employees’ behavior factor has impacted on customer satisfaction and loyalty more
significant than other ones such as interaction management, service quality and
relationship management. Kocoglue (2012) conducted an investigation on CRM and
customer loyalty in banking industry in Iran with a sample of 350 banking staffs. The
test results of major CRM variables pointed out customer database, understanding
customer needs and complaints and providing specific solutions to them are positively

related to customer loyalty. He suggested that CRM implementing in an enterprise to
decrease cost and raise company performance and profitability through customer

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