Effects of Customer Relationship Management on the Performance of Selected Commercial Banks in Southern Malawi: An Employee Perspective

Abstract

The performance of business is a critical aspect of its continued existence in the competitive environment. Customer relationship management is one of the ingredients for enhancing performance in the banking industry and other sectors. The concept of customer relationship management (from a dimensional point of view) entails four dimensions: customer knowledge, customer orientation, complaint resolution, and customer empowerment. This paper aimed at investigating the relationship between customer relationship management and performance as measured by the four dimensions. After establishing the existence of the relationship, this information will help the bank managers and employees to take customer relationship management as a strategy for success. A cross-section causal study was used to enable the researcher to investigate the relationship between the variables in this study. The problem statement arises from the realization that banks in Malawi appear not to be in the best of terms with their customers. Considering the competitive environment in which the banks operate, there is a need for improvement in terms of managing customer relationships. The study was conducted in the southern region of Malawi. It involved all the commercial banks in the area. The study population consisted of all front line employees that had direct contact with customers in their daily duties. A sample was drawn from the population using the simple random sampling method. The instrument for data collection comprised a 5-point Likert scale questionnaire, and was tested for validity and reliability. The collected data was analyzed using SPSS statistical software. Descriptive analysis using the means, standard deviations, and averages were used to describe the demographic variables as well as measure the extent to which the customer relationship management components were being practiced. Furthermore, Pearson correlations and regression analysis investigated the relationship between the variables. Pearson correlations results showed that complaint resolution (r = .53, p<.05), customer empowerment (r = .50, p<.05), and customer knowledge (r = .52, p<.05) have a strong positive significant relationship with performance. Customer orientation presented the weakest relationship with performance (r = 0.38, p>.05). The regression analysis showed various findings that explained the relationship between the variables. The ANOVA results presented an F static of 21.640 and a p-value below 0.05 indicated a significant relationship between the independent and dependent variables. The standardized coefficient (Beta) for the independent variables: complaint resolution (β = .260, t = 2.93, p < 0.05), customer empowerment (β = .268, t = 3.19, p < 0.05), and customer knowledge (β = .294, t = 3.48, p < 0.05) shows that the three independent variables have a significant effect on performance, with customer knowledge showing a slightly higher effect than the two others. Customer orientation has the lowest standardized coefficient (Beta) of .14, t = 1.67 and was not statistically significant p>0.005. This indicates that customer orientation has no significant effect on performance. Since the findings indicated a p-value below the threshold of 0.05 for three independent variables (complaint resolution, customer empowerment, and customer knowledge), the null hypothesis was rejected at a 95% confidence interval. In this case, there is a significant relationship between customer relationship management and bank performance as measured by complaint resolution, customer empowerment, and customer knowledge. The other independent variable (customer orientation) had a p-value above 0.05; therefore, the null hypothesis for this aspect of customer relationship was accepted at a confidence interval of 95%. Therefore, there is no significant relationship between customer relationship management and bank performance in the case of customer orientation. The study recommends that managers of banks and other institutions should make use of customer relationship management as means of improving the organization’s performance. Customer knowledge management has to improve. The banks can achieve this by encouraging customers to give feedback. Knowledge for, about, and from the customer should be well-managed in the daily operations of the banks. Employees and managers of the banks have a role to play in ensuring that customer complaints are resolved timely and efficiently. Customers should be allowed to give suggestions for better service delivery, so that the customers feel empowered and co-create solutions to benefit both themselves and the organization. Employees are key players in enforcing good relationships with the customers. Employees should undergo the required training and necessary tools should be available for them to be effective in their roles. Bank managers can maximize bank performance by providing attractive deposit offerings to customers to increase deposit mobilization. Furthermore, by learning more from the customers, the banks’ innovation capabilities can be improved.