International Journal of Management

INTERNATIONAL (IJM), ISSN 0976

JOURNAL – 6502(Print), ISSN 0976(IJM)
OF MANAGEMENT - 6510(Online),
Volume 6, Issue 5, May (2015), pp. 01-07© IAEME

ISSN 0976-6502 (Print)

ISSN 0976-6510 (Online)
IJM
Volume 6, Issue 5, May (2015), pp. 01-07
© IAEME: http://www.iaeme.com/IJM.asp ©IAEME
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EFFECT OF CUSTOMER RELATIONSHIP

MANAGEMENT ON CUSTOMER SATISFACTION AND
LOYALTY

Dr. E. B. KHEDKAR
Dean, Faculty of Management Sciences,
Savitribai Phule Pune University (Formerly University of Pune)
&
Director, D Y Patil Institute of Management,
Charholi, Lohegaon, Pune.

ABSTRACT

The Customer Relationship Management (CRM) is the highly valued in market for existing
and current customers. In this research we explore the effect of CRM on factors such as customer
satisfaction and customer loyalty. Since CRM is defined as an important key in business among
companies to maintain and increase their customers base. In this study we look for various factors
that are necessary for an effective CRM. In this research, we concentrate on these issues that are
fetching importance to higher level officials in an organization: is there a relationship between CRM
with customer satisfaction and loyalty in Indian organizations? If so then how we can relate CRM
with customer satisfaction and loyalty? With globalization industries are growing rapidly and with
ever growing industries, competition is also increasing. Further with appropriate statistical analysis
the hypotheses framed in this study is validated and the results shows high positive correlation
among the variables considered for the study.

Keywords: Customer Relationship Management (CRM), Customer Satisfaction, Customer Loyalty.

INTRODUCTION

In 1980s the concept of Direct Marketing was greatly dependent on customer databases that
were available with the organization. The concept of relationship centric marketing and the impact of
relationship with customers were first introduced by Christan Gronroos and Evert Gummesson of the
'Nordic School' and Theodore Levitt. Further to this they also provided the corresponding marketing
tools. Treacy and Wiersema (1995) described three Value Disciplines out of which familiarity with
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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 5, May (2015), pp. 01-07© IAEME

client was one which later depicted as Customer intimacy. These are few initial developments that
lead to the generation of concept CRM and customer relationship management came into existence.
With growing time and increase penetration of web based tools CRM again transformed into web
based contact management. The concept of CRM is defined in number of ways by many researchers.
Some of them discussed and highlighted the impact of information technology in CRM while some
emphasized CRM to be a preliminary concept of business strategy. Systematic efforts were made to
collate some of the definitions of CRM to identify the key areas in the Customer Relationship
Management.
Peelen (Customer Relationship Management, 2006) pointed out that the description by
Gartner Group (2004) about CRM is more convincing which describes CRM as IT enabled strategy
that if practiced will lead to profitability increasing the revenue of an organization. The IT part of
CRM helps in organizing the customer database in systematic manner and foster customer
relationship with the organizations through practicing quality services and delivering values. There
are a number of working definitions for CRM. In fact the letters CRM have been used to identify
Continuous Relationship Marketing, Customer Relationship Marketing and Customer Relationship
Management. Each term represents the same process. CRM can be defined as a process that
maximizes customer value through on-going marketing activity founded on intimate customer
knowledge established through collection, management and leverage of customer information and
contact history. CRM is about perfecting relationships to maximize customer’s satisfaction and
loyalty over time.
The concept of CRM changed the focus of the organizations. The significant impacts on an
organization through CRM were:

1. Changing the focus from product to customer.

2. Advocate proposition based on customer requirements.

NEED OF CRM IN AN ORGANIZATION

The definitive rationale of CRM, like any managerial inventiveness, is to augment income
through customer satisfaction. In that case, CRM accomplishment is mostly by providing a enhanced
quality services to your customers. Further the significant need of CRM is listed below:

a. To understand Customers' Expectations

b. To understand how to Manage Customers
c. To focus on building relationships
d. For generating a customer focused CRM solution
e. To understand and initiate Customers Need

CRM PRACTICES ADOPTED IN INDUSTRY

Maintaining relationships with customers and offering them absolute customer satisfaction
seems is the foremost agenda of industries these days. Customer Relationship Management (CRM)
seems to offer the much needed strategy and solution to keep customers happy, smiling and
connected with the organization across their lifetime. CRM has multiple facets and implications for
the organizations that always seem to be eager to go that extra mile in order to be able to retain their
customer base, prevent cannibalization from competitors and for keeping their loyal customers
coming back to them for more. The researcher broadly focuses on the effect of CRM strategy and
practices on customer satisfaction and loyalty. It was observed that customer satisfaction increased

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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 5, May (2015), pp. 01-07© IAEME

with the successful implementation of CRM practices across the organization. Repeat buying
through exchange schemes and loyalty additions were more accepted by the customers who were
happy with their previous buying experiences and post sales service from organization. It is also
experiential through the many studies that effective word of mouth contributed to higher sales and it
was easier to cross-sell new offerings to existing customers than to acquire new customers and
convince them about the product benefits and offerings. Listed below were few CRM strategies that
were adopted globally as well as in India by industries as a whole for an effective CRM process.

a. Better management of customers: As evident from various surveys, certain agencies/companies

do not conform with philosophy of customer care, leading to unsatisfied customers and bad
word-of-mouth. Much care is taken to ensure that each organization should fully understand
the importance of customer service and customer satisfaction and promptly deliver the same to
the consumers. A standardized policy of pricing, discount and incentive schemes should be
devised, so that there is no disparity in the deal received by the customers at different outlets.

b. Reducing Complaint Redressal Time: Continuous efforts were made by organizations to

reduce the complaint redressal time which is highly valued by the customers.

c. Regular communication with customers: The Company tries to keep in constant touch with its
customers through phone calls to understand the services provided by them regarding their
performance, satisfaction level, etc, and collect suggestions and feedback. This creates a
feeling of belongingness in the customers mind, and also an impression that the company
cares.

THEORETICAL BACKGROUND & LITERATURE REVIEW

Vasiliu (2012) in his research discussed that broadly customer relationship management
strategies include marketing, operations, sales, customer service, human resources, finance and
information technology and implementing CRM as strategic concept is a necessity as in recent times
our economy is “Customer centric” where the success of any company is based on customer
relationship, the authority provided by any company to the customer to decide and also the personal
experience of the customer with the company. Thus Customer Relationship Management (CRM) as a
strategy aims to satisfy and build long term relationship with clients/customers. He further discussed
that through CRM customers were much satisfied with their purchase and this strategy helps to
generate sales by contributing good service quality as expected by the customers. Thus it can be
clearly depicted that the concept of CRM is strongly and directly associated with Relationship
Marketing (Bull 2003, Payne and Frow, 2004). The Relationship marketing is further defined as
“the organizational development and maintenance of mutually rewarding relationships with
customers achieved via the total integration of information and quality management systems, service
support, business strategy and organizational mission in order to delight the customer and secure a
profitable lasting business” (Bennett, 1996).
Hasan et.al (2012) in their study defined CRM as customer centric managerial strategy that
aspires to establish long term relationship with profitable customers by employing all-inclusive
customer knowledge. This definition highlighted the need and significance of identifying customers’
to recognize their ever changing needs through appropriate management approaches. The key areas
in this definition were customer centric strategy, long term relationship and customer knowledge.

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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 5, May (2015), pp. 01-07© IAEME

Ryals (2005) in his research demonstrated that the implementation of CRM activities deliver
greater profits. The lifetime values of customers in two longitudinal case studies revealed that
customer management strategies changes with respect to the value of the customer. Thus CRM
works and a reasonably straightforward analysis of the value of the customer can make a real
difference. Here the concept of CRM brings better performance of the firm through appropriate
measurement and management of customer relationships. The comprehensive revenue and cost data
specific to individual customers or customer segments results the firms to adjust their CRM
strategies. The contribution of this article is to show that the correlation between the customer
revenues and values are sufficiently high suggesting that the value of customer majorly determines
the amount of revenue it generates which again can’t be generalized as it might be company specific
or more specifically to industry related with financial services.
Payne and Frow (2006) examined CRM from the perspective of strategy formulation and
implementation. They proposed a model that deals with both CRM strategy and implementation.
They critically identified four components of successful CRM programme i.e. CRM readiness
assessment; CRM change management; CRM project management; and employee engagement and
examined these components with five key cross functional CRM process which are strategy
development, value creation, multi channel integration, information management and performance
assessment. Further the effect of CRM is studied simultaneously with innovation and firm
performance. The result shows the positive impact of CRM towards firm performance, a finding
which is consistent with previous research (Hooley et al., 2005).
Kolis & Jirinova (2013) described in their research a link between CRM and company’s
financial performance. Four key dimensions of customer relationship management – customer
satisfaction, loyalty, value and equity were taken into consideration to undergo this research. Each
dimension is tested for correlation with financial performance indicators which described how
effectively the company transforms sales into profit, was chosen as the main financial performance
indicator. Cengiz (2010) in his working paper reviewed and studied on the importance of measuring
customer satisfaction. It has evolved through the study that customer satisfaction in this competitive
market is must and measuring it is not specially a onetime process. It will eventually leads to
consecutive processes to attain success. The satisfaction will play a vital role in customer
expectations and can create a customized marketing mix.
Employee orientation is implanted in the work culture of an organization which is visible
through its value elements behaviour and artifacts. CRM is based on four basic activities: calculated
planning, information, value creation, and performance measurement. These basic activities widely
hypothesize association between CRM accomplishment and employee orientation and the system
underlying this association clarify the interface of employee orientation and Customer Relationship
Management (Plakoyiannaki et. al, 2008). Thus the supportive literatures studied and existed all
defined CRM as customer centric and good CRM practices creates impact on satisfaction and loyalty
of customer. Further in this research, the researcher will attempt to validate it through quantitative
study that customer relationship management has positive impact on customer satisfaction and
loyalty.

OBJECTIVES OF THE STUDY

a. To analyze the impact of customer relationship management on customer satisfaction.

b. To analyze the impact of customer relationship management on customer loyalty.

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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 5, May (2015), pp. 01-07© IAEME

METHODOLOGY

The aim of the current study is to elucidate the association between variables of customer
satisfaction, and customer loyalty. This research is a descriptive research based on the method of
obtaining the data. The research further is described to be based on cross sectional method because
the data obtained is used to understand the distribution of statistical population. The data is collected
through survey with questionnaire as data collection tool. 20 questions are considered to evaluate
customer satisfaction and loyalty; 12 questions are considered to evaluate customer loyalty and 11
questions are considered to evaluate customer satisfaction. The responses to the questions are given
using by a five-point Likert scale. The first few questions tell the basic information about the
respondents. The statistical technique incorporated for analyzing data is regression and ANOVA
technique using SPSS 16.0. The sample size of this study is 104.
Reliability and Validity of the Study - For determining reliability of the tool Cronbach Alpha
Test is used. The result of reliability and validity is listed below:
For question related to customer satisfaction Cronbach Alpha coefficient of 0.881 was
calculated.

a. For question related to customer loyalty Cronbach Alpha coefficient of 0.874 was calculated.
b. For all questions Cronbach Alpha coefficient of 0.910 was calculated.

For determining validity of the questionnaire content credit was used (Harandi et al, 2008).
Content credit of this questionnaire has been justified by subject matter experts. It deals with
preliminary distribution of questionnaire among number of experts, scholars (working under similar
or related areas) and considering their counteractive comments and then validating the necessary
credibility.

Testing of Hypotheses using Regression Analysis and ANOVA

The hypotheses framed for the study below was used at 95% confidence interval.
H1: Customer relationship management has influence on customer satisfaction.
H2: Customer relationship management has influence on customer loyalty.

Table 2: Regression Analysis.

Adjusted Std of the
Hypothesis R R2 F Sign
R2 Estimate

H1 0.854 0.729 4.549 224.18 0.000

H2 0.882 0.772 4.305 0.034 134.412 0.001

The results Table 1 shows a very high R and R squared values Thus, we can clearly interpret
that there exists a very high correlation for variables considered. R-squared values should range from
0 to 1. The R squared values for these hypotheses are 0.729 and 0.772 respectively.

H1: Customer relationship management has influence on customer satisfaction.

The hypothesis is approved as the significance value is less than 0.05.
H2: Customer relationship management has influence on customer loyalty.
The hypothesis is approved as the significance value is less than 0.05.

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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 5, May (2015), pp. 01-07© IAEME

Further after approving and accepting both the hypotheses we will go for Analysis of
variance (ANOVA). ANOVAs are helpful because they possess an advantage over a two-sample t-
test. Doing multiple two-sample t-tests would result in an increased chance of committing a type I
error. For this reason, ANOVAs are useful in comparing two, three or more means.

Table 3: ANOVA Test

Mean
Models Sum of Squares df F Sig
Square
H1 Regression 4756.277 1 4766.277 226.182 .000
Residual 1643.673 51 21.073
Total 6409.950 52
H2 Regression 4982.735 1 2491.357 134.412 .000
Residual 1427.215 51 18.534
Total 6409.950 52

Table 4: Coefficients
Model Beta t- Value Sig
Constant - 5.10 .000
Customer Satisfaction 0.862 15.038
Constant - 6.361 .000
Customer loyalty 0.890 14.542

On the basis of statistical analysis performed in this segment the results designates that
customer relationship management has been influential on customer satisfaction as well as on
customer loyalty. There also exists a positive relationship between CRM and customer satisfaction
and CRM with customer loyalty.

CONCLUSION

Customer Relationship Management (CRM) is a process that integrates management of

customer groups, management heads of an organization and managing business in an effective way.
CRM act as tool to facilitate the business and thereby improving customer relationship with the
organizations. Finally after conducting this research and validating it through various data and
quantitative analysis it can be effectively stated that CRM is needed in any organization will result in
optimizing profitability, income and meeting the needs of customers. The utmost thing that CRM
provides is customer satisfaction. An effective CRM will lead to customer satisfaction and if the
customer is satisfied it drives towards positive word of mouth and loyalty. This in fact helps in
leveraging the business as well as generating more revenues and profits. Thus this research is an
attempt by the researcher to acknowledge two important variables that effect CRM i.e. Customer
satisfaction and Customer Loyalty.

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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 5, May (2015), pp. 01-07© IAEME

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