Customer relationship management (CRM) as an academic subject and a business tool is as relevant today as ever before. As part of the CRM model banks have implemented the concept of relationship banking. The retail banking industry has been troubled with the issue of customer loyalty as both personal and commercial customers have shown the tendency to utilise different products and services from different banks or financial institutions. The problem seems to be Customer Loyalty (or is it?), which as a field of research has been exploited in recent years. The aim of the research report will be to contribute to the existing research on Customer Loyalty and the effects of Relationship Banking (as part of a CRM model) thereon. / Relationship banking, as exemplified by retail banks, is a valuable enabling
strategy that promotes competitiveness and provides sustainable success. The
utilisation of relationship banking as a business strategy to increase customer
retention, create customer loyalty and ultimately increase long-term profits is a
relative young tactic, originating in the 1980s and gathering pace during the
1990s. The correct application of relationship banking could impact on the bottomline
of banks favourably. Hence the positioning of this research to investigate the
effect of the relationship banking offering on customer loyalty, and its use in
realising customer loyalty and long-term value from relationship banking
initiatives.
The retail banking industry in South Africa is a complex and very competitive
environment, which is dominated by the big four banks (ABSA, First National
Bank, Nedbank, and Standard Bank). It is a business imperative for the
management of the banks to ensure that they establish, develop and improve
relationships with their most important asset, their customers. Operating in such a
dynamic environment requires of banks to fully understand all the factors of
relationship banking that affect their success and market share. What is the
impact of relationship banking on customer loyalty, and what are the possible
results that can flow from a close relationship between bank and customer?
The main research hypothesis states that business customers who receive the
relationship banking offering from their retail bankers are more loyal towards their
bank than those business customers who do not receive the relationship banking
offering. With this in mind the research seeks to clarify specific primary objectives
based on the hypothesis:
• To investigate the impact that relationship banking has on the loyalty of
business banking customers in the retail banks in South Africa.
ii
• To identify the critical factors of relationship banking that can influence
customer loyalty.
• To identify the benefits of relationship banking and customer loyalty.
The research composed of a field study in the retail banking industry, with a
sample of 80 business banking customers with a close business relationship with
their banker or having a personal banker looking after the relationship, and 80
business customers without a close business relationship with their banker or no
personal banker looking after their relationship. The survey focused on the attitude
or perception of business customers based on relationship and loyalty
dimensions.
The research, in combination with the literature review provided valuable insight
into the factors influencing relationship banking, its value as part of a retail
business banking proposition, as well as the effect it has on customer loyalty. It
also provided insight into the importance of customer loyalty and its impact on
customer retention and long-term profitability. It is clear from the literature review
and research that a relationship banking offering adds value with regard to
customer retention and loyalty. The results and findings from the research and
literature review represent a remarkable difference between the perceived
levels of customer loyalty of the two groups. This is an indication that
relationship banking affects customer loyalty positively.
The critical factors of relationship banking that were found to influence customer
loyalty included the value proposition, service and quality, employee competency
(relationship banker), price, reward and recognition, and communication. The
benefits of developing and building customer loyalty included: retention of
customers and staff, customer satisfaction, trust, word of mouth referrals and
growth, cost reduction, cross-sales, profitability (relationship lifetime value) and
enhancing the bank’s competitive advantage.
iii
The researcher recommends that retail banks must continue to implement
relationship banking offerings across all business customer segments. A possible
consideration will be to divide the relationship banking offering on different levels:
high-touch; medium-touch; and low-touch. These different value propositions
should represent mutual (bank and customer) requirements and financial
feasibility for banks. Banks must place customer-centricity at the core of their
relationship banking strategy.
To support the relationship strategies banks need to understand the behaviour of
their customers and their buying habits. Market segmentation is a critical aspect of
relationship marketing and the segmentation of business customers must be in
line with the different levels of relationship offerings. Segmentation should also be
in line with customer value or customer profitability, complexity of financial
demands, annual turnover and industry. This segmentation will allow banks to
provide the correct relationship banking offering to the right customer. To support
the segmentation process banks need to be able to determine the individual
customer profitability. Management information systems must be developed and
used to determine the customer’s profitability. Once the segmentation has been
concluded banks must implement and use applicable CRM strategies and CRM
systems to complement the relationship banking offering. It’s about knowing their
customers well enough to determine the kind of relationship they would like to
have. Banks must also try to extend their CRM strategy across all customers. The
support from top management and understanding of the relationship banking
offering is critical as a lack of support can derail the success.
The main recommendations for further study that transpired from the research
included:
• Research on the calculation of relationship life time value.
iv
• Research on a model for appropriate market segmentation of business
banking customers in South Africa.
• Research on the importance of reward and recognition strategies to valued
customers, plus loyalty programmes.
• Research on the key characteristics of relationship bankers.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:umkn-dsp01.int.unisa.ac.za:10500/154 |
| Date | January 2005 |
| Creators | Ravesteyn, Louis Johannes van |
| Contributors | Ackermann, P.L.S. |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
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