Customer Relationship Management is a concept encompassing the strategies, technologies and practices used by companies to analyze and manage their interactions with the customers in the course of the client lifecycle. The ultimate goal of customer relationship management is to improve the business relationship while driving sales growth and improving customer retention. It is a compelling aspect in the management of company’s interaction with its current and future clients. The idea of employing customer relationship management is driven by the need to analyze data and information about the history of customers with a company thus improving the business relationships with the customers. Ideally, customer relationship management is an integrative approach encompassing people, technology as well as processes in maximizing the relationships of a company with its customers. It is a philosophy that orientates the management of a company towards potential and current relationships with customers.

The systems used in customer management relationships are designed in a manner that compiles information regarding customers through different channels. These channels could be the contact points between the company and the customers. The channels of compilation could include live chat, social media, marketing materials, telephone as well as the enterprise’s website.Also, the systems in use could provide the front office staff or those serving customers with data on the customers thereby improving the experience of the client. It is a regular occurrence for team to source for detailed information regarding the customers including their personal information, buying preferences and purchase history. In so doing, the system aids in creating a personalized experience for the customers as they are remembered by their names and their preferences suggested to them before buying products.

In the past, the task of recording data for CRM systems was reserved for the sales and marketing departments of companies. The sales team further worked in liaison with contact center agents in maintaining and updating the information regarding customers. The sales team would source for leads and then refresh the system with the acquired information through the customers’ lifecycle. In contrast, the contact centers would gather would use technical support interactions and service call to revise the history records of customers. However, with the emergence of social media, CRM providers have upgraded their systems to incorporate new features that provide opportunities for use of the available technologies.

Research Motivation

This research was motivated through insights gained from the class work taught in my university. The reason for conducting this research is partly due to the interests gained from teachings on customer relationship management. In particular, managing customers and personalization of the customer experience has always been exciting for me. The idea of having happy customers through better services is a key motivation in the assessments of the application of this management tool in the banking industry. Moreover, the dullness with which most banks treat their clients is a vital motivation in the study as I wish to see a change in how customers are treated. My hope of bringing change through this research is also a motivation as it is the only way I can impact on the people. Finally, this research is driven by the emerging challenges regarding the retention of customers and the attraction of new customers. Specifically, the competition in the banking industry is a motivation for conducting this research.

Research Questions

1. To explore the requirements for having strong relationships with customers in Islamic banks.
2. To find out the practices of CRM that increase customer relationship.
3. To identify the level of implementation of CRM in Islamic banking.

Literature Review

Customer relationship management is defined as a business approach integrating people, processes and technology ion maximizing relationships with customers (Goldenberg, 2008). Besides, it is also a management philosophy that is aligned towards existing and potential customer relationships within a company (Raab et al, 2008). In view of the important role that customer relationship management plays within companies, it has been characterized as a business aspect that is highly dynamic (Mueller, 2010). Moreover, businesses have no option but to adopt proactive approaches to their processes of dealing with customers. In achieving these relationships, companies must devise feasible initiatives as well as programs in a bid to maintain their industrial competitiveness (Goldenberg, 2008).

The importance of customer relationshipmanagement cannot be underestimated as various studies have pointed out in the past. Indeed, the necessity for maintaining a positive relationship with customers has been attributed to the improved sales volume among different companies (Sinkovic & Ghauri, 2009). In truth, the application of customer relationship management relates to the intensified competition levels in the industries as well as the ballooning cost of direct sales. However, there is a general requirement for the acquisition of information regarding the nature of businesses and the behavior of customers. The attainment of these operational requirements is a prerequisite for the improvement of sales and companies can only pursue such ideologies through the application of the concept of customer relationship management.

Peppers & Rogers (2011) explore the existence of a global tendency in the concept of customer relationship management regardless of the industry of the business. As thus, there is a homogenous approach to the concept of CRM. Over the recent past, the world has shifted from focusing on transactional models to the now popular relationship models.Primarily, satisfying the needs of customers is not restricted to the incidence of on time transaction in today’s world. Rather, the attainment of long term business growth is dependent on the retention and sustenance of customers through establishment of healthy relationships.

The advantage of maintaining strong customer relationships is that it maintains an aura of flexibility in meeting the increased expectations and achieving the long term loyalty of the customers. In reality businesses that do not adapt to the current market requirements face the danger of losing their market share and potential future growth (Peppers & Rogers, 2011).The role of information technology in maintaining and sustaining customer relationship management is widely acknowledged (Brink & Berndt, 2009).

Mathur (2010) contributes significant insights into the workings of customer relationship management. There are a wide range of specific customer relationship management nprinciples and techniques used by international companies. In effect, most of these multinational organizations have unique but yet similar approaches to utilization of customer relationship management. The findings of Mathur (2010)contribute to the current study through the provision of primary data findings.

The concept of customer relationship management is further exploited by companies for its advantages. This revelation is not to say that the concept has no disadvantages however as Khurana (2010) points out in his study. In essence, the wide array of relevant software techniques in use in the application of the concept provides both benefits and drawbacks in equal measure. According to Pradan (2009) customer relationship management is increasingly becoming a marketing tool for retail and wholesale businesses. The importance of the concept in the long term growth of different businesses across the world is gaining widespread application. Recently, researchers have delved into the comparison between customer relationship management principles and the other principles in use by other multinational corporations in the international market.

Customer relationship management identifies new avenues for expansion of the organization through improvement of customers’ retention, values and satisfaction (Grant & Anderson).The concept when in business utilizes the latest technology in maintaining intense rapport with customers, both current and future (Schermerhorn, 2008). The concept is a process of understanding customers and working towards satisfying and exceeding customer expectation through the provision of customer needs and desires (Nickels, 2008). The concept is important in that it helps the company in anticipating customer needs and wants and thus building strong customer relationships (Schermerhorn, 2008).

The concept conceals the boundary between sales and service thus unifying the activities of the company around the satisfaction of the customer. The ideal goal for any company therefore derives from the need to use customer satisfaction as a means of increasing customer retention and market share. Eventually, CRM is effective in provision of strategic concepts through improved efficiency, customer retention and market development (Shao & Yu, 2004). The application of CRM is beneficial to the companies including the incidence of innovation, value enhancement and service improvement. Potentially, company goals regarding the use of CRM are aligned towards creating value for the customers, customization of products and improving customer profitability (Kim et al, 2003).

Over the recent past, the manner in which companies approach their customers has been changing owing to the emergence of new dynamics in the handling of customers. It is therefore necessary to differentiate the business approaches towards customer and product orientation. The inclination towards customer orientation is gaining more prominence among companies for the ability to improve customer relationships. Eventually, the adoption of such approaches creates more satisfied and loyal customers thereby resulting in better organizational effects both in the short and long term (Chen & Popovich, 2003). In the wake of these revelations, most corporations have developed relationship management programs to aid in the enhancement of customer relationships.

The improvement of customer relationships can be achieved through the use of loyalty programs and direct mailings as has been suggested by Verhoef (2003). The execution of such instrument is however dependent on the involvement and adaptation of internal organizational factors (Lindgreen et al, 2006). Keramati et al, (2010) assert that alignment of processes, people as well as technology in an enterprise is effective in the attainment of holistic approaches to customer relationship management models. Customer relationship management is a lifelong business ideology that incorporates a variety of component in achieving business success. The proper understanding of the most efficient combination of these components as well as their interrelationship is vitally important to the successful implementation of the concept.

Research Methodology

In the course of the research, the study employed the analytic hierarchy process (AHP) model in organizing and analyzing decisions from the results in the study. The assumption in the application of this model is that no single decision is right in all aspects. Rather, the research identified the most suitable decision and used the same in making inferences and conclusions regarding the results from the study.

In this study, the main component of the research was primary data which was collected by means of questionnaires. The questionnaire was structured according to recommendations from Lu & Shang (2007) for effective data collection. However, owing to the uniqueness of the particular study, the questionnaire was modified to suit the requirements of this particular study. The questionnaires for the study were personally distributed to the respondents with each answering the questions in real time. As thus, no questionnaires were left with respondents to be answered at their own free time. The advantage of this and the main reason for the adoption of such an approach is the prevention of spoilt questionnaires and this is evident in the high validity of the questionnaires collected from the field.

As it is impossible to collect data from large populations or even every member of a target population, it is important to reduce the number of respondents through sampling. The sampling technique in use for the study was the purposive sampling where only the relevant stakeholders were interviewed. As such, the research was able to avoid redundancy in the process of data collection by limiting the information gathered to the confines of the study realms. Personal data including the level of education and the gender and ages of the respondents were captured using ticks on the boxes. However, most of the other data including the customer information system as well as the customer responses were recorded in writing on the available spaces provided on the questionnaires.

After data collection, the analysis of the same was conducted through examining and structuring collected data to test the hypothesis of the study. However, not all data was used in the analysis as some of the data was not reliable and valid for the particular study. In order to improve the validity of the data, the questionnaires were administered in person thereby reducing the probability of having spoilt questionnaires in the process. In cases where the respondents had issues with the interpretation of the questions, the administrator explained the questions to the respondents in detail.

The research has worked towards improving the reliability of the study by using only scholarly journals and published work in the literature review. Many different authors have been assessed with a view of critically analyzing the inferences made in the work. In reducing the bias occasioned by the person of the interviewer, the questionnaires had been structured beforehand. In addition, the uniformity of the questionnaires further reduces the chances of having biased responses or those that the interviewer wishes to have.

Data source and Discussion

The research was based on both primary and secondary data sources at the different research levels. The study incorporated primary, secondary and tertiary data sources to achieve the three objectives relating to the application of customer relationship management practices in Islamic banking. In the process of collecting data and its discussion, the research used the analytic hierarchy process based questionnaire. The main source of data was from the literature review as well as the interviews conducted through questionnaires.

Tertiary data sources were first used in the research to gain a general knowledge of the customer relationship management concept. However, since the researcher is well versed in the specific subject, most of the data was from the coursework. However, websites such as Wikipedia and skimming of publications was particularly helpful in attaining a general understanding of the subject matter. In the use of tertiary sources of data, the researcher was able to identify the various research areas and the nature of past researches on the same topic. In fact, it is through tertiary data sources that the topic of the research was identified.

The next data source involved the use of secondary data which formed a large part of the literature review. In this, the researcher was able to identify the various research areas regarding the subject area. It is through the use of this secondary data that the researcher was able to identify the research gaps and settle on the Islamic banking sector. Data from the same sources was also helpful in understanding the many researches done regarding the same topic and the outcomes of such studies. Moreover, definition of terms and understanding of the research process was also achieved through insights from secondary data. Lastly, the use of secondary data helped in the selection of the methodology for the research.

After a thorough review of the available literature and the existing researches, the research embarked on collection of primary data to test the hypothesis of the research. The primary data included sources such as the management of Islamic banks and the employees of such bank. Primary data sources were effective in identifying new aspects of the research topic emanating from the study. The primary sources further helped in identifying gaps in the research field and to point out areas that have not been exploited in the past. In addition, the research explored areas that have been consulted by researchers but inferences drawn in the wrong manner.

Data Analysis and Discussion

Data collected was analyzed through a combination of techniques to test each of the three hypotheses. The qualitative data was analyzed through the use of a Likert scale to measure their degree against a scale of five. The different perceptions were assigned numbers from one to five depending on their degrees in an ascending order. The analysis of the data was restricted to Microsoft excel software where raw data was converted into results. Demographic data was analyzed for percentages and ratios to identify the relationship between the respondents. Majority of the respondents were between the ages of 20 and 35 years with most of them having undergraduate degrees. In addition, about 55% of the respondents visited their banks more than three times in a month. Analysis of the data was done independently analyzed for each of the different dimensions.

Demographic data such as age, gender, and occupation and education level of respondents were thought to affect the general perceptions towards customer relationship management practices. Moreover, the different practices in the use of customer relationship management were tested for their effectiveness in maintaining customer relationships. The link between each of the different practices of customer relationship management and customer satisfaction was analyzed to test their degree of efficiency. In addition, the general perceptions of customers towards customer relationship management practices were analyzed using Microsoft excel software.

Each of the three objectives of the research study was independently tested to validate or disapprove the claims in the statements. The information on customer retention and sustenance was analyzed through Microsoft Excel software to determine the ratios of each of the different variables.

Results and Discussion

Customer relationship management is not widely practiced in the Islamic banking sector. In fact, only the headquarters of such banks are involved in the application of the concept as evidenced by the number of banks with customer relationship management departments. Moreover, most of the customer relationship management was housed under the research and development departments which are mainly centralized in the headquarters. As such, most of the banks do not practice effective customer relationship management. Even when they do practice the concept, it is only at the bank headquarter therefore limiting the application of the said systems.

Figure 1: Purpose of maintaining customer relationship.

A= for retaining customers

B= to utilize valued customers as opinion leaders

C= to maintain profitability

D= lowing cost

E= others

 

The level of implementation of customer relationship management practices can be described as semi level owing to the fact that there was no single department across the many Islamic banks that were studied. The full implementation of customer relationship management is dependent on four aspects: CRM strategies, customer services, sufficient human resources, customer database and back up. These four aspects were either missing totally in the banks under study ore they were partially implemented. For instance, most of the banks did not have the right structures for recording and updating of customer information. As thus, it is quite common to come across members of staff not referring to loyal customers by their names.

The results from the study do not confirm that the banks under study did not have any level of customer relationship management. Rather, they had some of the four aspects but lacked some of them including the absence of sufficient human resource. It is logical to state that most of these banks appreciated the importance of customer relationship management but lacked the general knowledge on the best practices to achieve the same. This can be attributed to the high level of ignorance and the assumptions that the systems and technology can substitute the absence of human personnel. In truth, customer relations are only enabled through the human interface for its ability to personalize service.

The research further found out that most of the Islamic banks offered the highest level of customer service to their clients. The incidence of these results could be attributed to the emergence of the online platform including social media. Therefore, most Islamic banks have adopted the use of mobile banking to improve the quality of their interaction with customers. This has come at an advantage to both the banks and the customers as the banks save money while the customers are offered self service at personalized and customized terms. The effectiveness of these practices in improving retention of customers is a widely accepted among the different banks.

Most of banks with the exception of two banks were using updated and easy database system for customer relationship management. The details of the customers including their names, phone link and other communication data were captured in the database. In addition, for every transaction including deposits and withdrawals, the details of the customers were updated. Most of the banks have automated processes where details of the customers are automatically captured in the relevant fields for every successive transaction. In addition, data retrieval for the different customers is a click away and customers’ details can be traced by keying in their names. This is particularly helpful as staff can trace the saving history of different clients and advice the customers in case of any problems or issues.

The majority of Islamic banks used the systems to differentiate between valued customers and non valued customers. Although the criteria for such differentiation vary across different banks, there is general consensus on the effectiveness of having the differentiations. Most of the banks considered active customers as valued while those with non performing accounts were classified as none valued. The systems in these banks were effective in the classifications depending on the variables that were keyed in into the system. In addition, about 55% of the respondents visited their banks more than three times in a month. At the initial stage of implementation, the configuration settings applied dictate the interpretation of system regarding the status of the customers.

Figure 2: Level of contact

Across all the banks, new customers were classified as valued customers due to their potential for being lifelong members. Automatically, the system captures the details of the new clients under a different spreadsheet thus initiating the process of proper retention within the customer relationship management process. Overall, majority of the banks had similar factors for evaluating their customers depending on certain set variables. Most of the banks had their emphasis on deposits to increase their liquidity and therefore valued customers who made more deposits over those that had dormant accounts. In addition, most of the customers confided that their banks encouraged them to bring along new customers therefore ascertaining the importance that banks attribute to new customers. As part of customer relations, most of the banks provided their customers with relevant information to help them in the process of decision making. Moreover, the channels social media were widely used in disseminating information to customers regarding the availability of new products and offers on existing products.

Conclusion and Managerial Implications

In the world of competitive brands, most organizations particularly those in the Islamic banking sector value the importance of orientating their practices towards their customers. Organizations in today’s world must remain responsive to the dynamic needs of the customers if they harbor any chances of success in the banking industry. The customer relationship management concept is a sure way of not only providing the customers with their needs and desires but also helps companies in anticipating the same needs and desires of their future customers.

The objectives of the research were to identify the application of customer relationship management practices in Islamic banks. The questionnaires were drafted based on past available models to incorporate aspects relevant to the current study. The results from the study suggest that most of the banks incorporate most of the aspects of customer relationship management thereby enhancing retention and sustenance. In addition, most banks value the incidence of new customers and are keen on attracting new customers either through referrals or marketing strategies.

Clients are a company’s largest asset without which the company would be ruled out of business. Customer relationship management is a continuous learning process aimed at increasing the understanding and knowledge of a company’s clients. It is a complex issue which requires a holistic approach in the transformation of the culture of customers. In the Islamic banking sector, the issue of customer relationship management is an increasingly important aspect. The benefits of the approach are that it improves the company’s chances of retaining and attracting new customers. The study found significant evidence to prove that customer relationship management is essential in the satisfaction of customers.

Study Limitations

The study did not cover every aspect identified in the literature gap but was confined within specific realms due to such factors as time constraints and impracticality. The first limitation is that the study was conducted for a limited time period. Essentially, part of the research done in this study could have been conducted in the past and literature for the same not identified due to limited time. However, this drawback was averted through the inspection of previous studies on customer relationship management.

In addition, the research was limited in terms of the number of past journals examined in the literature review. In addition, it only focused on the application of the concept in Islamic banking therefore availing loopholes in the study. It is possible that other aspects have been studied in great detail in other sectors of the banking industry that could not be adequately captured in the Islamic banking sector.

 

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