Customer relationship management in financial services: A study on some selected private commercial banks in Bangladesh

Abstract

The financial service industry is facing immense competition across the world and, in Bangladesh, the scenario is not different. The banks in Bangladesh are operating their business in a highly competitive business environment. It is an accepted fact that acquiring a new customer is three to six times costlier than retaining an existing customer. The researcher has developed the purpose of this study following this established fact. The study investigates the factors that influence Customer Loyalty, the main focus of Customer Relationship Management (CRM) in the financial service industry of Bangladesh. The main objectives of the study are to explore antecedents of Customer Loyalty and to develop a model of Customer Relationship Management for financial services industry especially for Private Commercial Banks (PCBs) in Bangladesh. Though there are many facets of Customer Relationship Management (CRM) in the financial sector such as banks, this study focuses on its customer part only. Understanding customers is the key to success of any financial service provider. To achieve the objectives, this study has looked into the available literature and conducted an empirical study on the causal relationships among different factors such as services quality, customer trust, customer perceived value, customer satisfaction, customer switching barrier, customer culture, and customer loyalty which are directly and indirectly related to CRM. The current study has also checked the effects of three moderating variables such as Generation of the Banks, Mode of Operations, and Ownership Structure on the relationships of different factors in the model of CRM, which have not previously been given much attention by academics and practitioners. This study has methodically adopted both qualitative and quantitative approaches. The model of CRM has been developed here based on comprehensive literature review, focus group discussion, and an extensive survey of the customers of some selected PCBs. The survey has been administered on 450 respondents with a structured questionnaire and the response rate has been 89.44%. In the first step, the researcher has checked the scale reliability and KMO. The Alpha and KMO values are .881 and .864 respectively which are highly acceptable. Then, multicollinearity of the items considered for this study has been checked. The study has not found any item which exceeds the threshold value of Variance Inflation Factor (VIF) 3.30. Initially, an Exploratory Factor Analysis (EFA) has been performed using SPSS (Version-21). In EFA, the study has explored seven factors which are related to CRM namely services quality, customer trust, customer perceived value, customer satisfaction, customer switching barrier, customer culture, and customer loyalty. Confirmatory Factor Analysis (CFA) has been performed to ensure the validity of the constructs. Except for one factor namely Customer Culture, all other factors have ensured the convergent and discriminant validity. The study has taken initiatives to check the relationships and significance of the relationships among the seven constructs by performing correlations and linear regression analysis with the forward method. AMOS based Structural Equation Modeling (SEM) approach has been applied to test the 13 hypotheses in the research model. In addition, multi-group analysis has been performed to check the effects of the moderating variables on the relationships of different factors in the model of CRM. Out of 13, the study has found 10 relationships statistically significant. The factors Customer Culture and Services Quality do not have a direct influence on Customer Loyalty, but Service Quality has a direct effect on Customer Satisfaction and Customer Satisfaction influences Customer Loyalty. The study has revealed that Customer Satisfaction is the most important determinant of Customer Loyalty whereas Services Quality, Customer Trust, and Customer Perceived Value act as significant antecedents of Customer Satisfaction. The moderating effects of the Generation of Banks and Mode of Operations in the model of CRM have been found significant whereas the moderating effects of Ownership Structure have been found insignificant. In case of the path to path relationships in the model of CRM, some differences have been observed in the first two moderators. This study makes a significant contribution to the existing literature by showing the influences of different factors on Customer Loyalty and by developing a model of CRM in the financial service industry of Bangladesh. In addition, the multi-group analysis with the help of the three moderators definitely enhances the literature of CRM in the financial service industry especially in Private Commercial Banks of Bangladesh.