the use of customer relationship management information...
TRANSCRIPT
1
THE USE OF CUSTOMER RELATIONSHIP MANAGEMENT
INFORMATION SYSTEM IN GAINING AND SUSTAINING AN
ADVANTAGE IN THE NIGERIAN COMMERCIAL BANKING
INDUSTRY
A study submitted in partial fulfilment of the requirements for the degree of
Master of Science in Information Systems
at
THE UNIVERSITY OF SHEFFIELD
by
CHIOMA N. ONYECHI
September 2008
2
ABSTRACT
Information Systems has become an important tool for every organisation today and
its advantages cannot be over-emphasised. Relevant literature reveals the importance
of customers to the progress of a financial institution therefore the strategy employed
by financial institutions, such as banks, in the managing of customers plays a huge
impact on the institutions and also on its‟ competitive position. However, the focus of
this study is the use of a customer relationship management system in managing
relationships with customers and its advantages for financial services
Therefore the aim of this study is the investigation of the strategic use of a customer
relationship management system by the Nigerian commercial banks, to gain a
competitive advantage, while also understanding the meaning of a customer
relationship management from the point of view of the banks. The research also has
as an objective, the understanding of the specific areas in which the use of a CRM
system can be of great help to these banks.
The author employed a quantitative method of analysis and developed a structured
questionnaire which was used as an instrument for the collection of data. The
questionnaire was sent to twenty-four commercial banks in Nigeria but responses
were received from eighteen of the twenty-four banks
The results found from the research indicate that there is a strong use of information
technology in Nigerian banks today and these banks have the knowledge that in order
to survive in the competitive world of business the right information systems
strategies have to be in place. It was also found that these banks already implement
major CRM systems that assist in vital areas of customer relationship management.
In concluding the research, it was noted that the findings were in line with previous
literature on the phenomenon, however this does not deter further research in this area
as there are more things that can be discovered or revealed with a more in-depth study.
3
Acknowledgements
I would like to express my heartfelt gratitude to all the people who have contributed
immensely to completion of this work. I am particularly thankful to my parents with
whose financial and moral contributions made it possible for me to further my
education to this level. I would like to specially thank my husband who helped
maintain my sanity through the last one year and whose contribution to my work was
wonderful, my gratitude to him cannot be quantified. I would also like to thank my
siblings and my in-laws for their prayers and wonderful moral support.
I am especially indebted to my supervisor Dr Angela Lin, who made great effort in
supervising my work. Without her continued advise, guidance, critic and on-time
response this work would not have reached fruition.
4
LIST OF FIGURES
Figure 2. 1: The Information Systems Strategy Triangle (Pearlson and Saunders,
2006). ........................................................................................................................... 19
Figure 2. 2: Characteristics of CRM (Zeng, et al 2003) .............................................. 25
Figure 2. 3 Source: Chaudhuri and Shainesh (2004) cited in Shahin (2008) .............. 26
Figure 4. 1 Medium of Maintaining Customer Relationships ..................................... 54
Figure 5. 1Classification of Definitions ....................................................................... 67
LIST OF CHART
Chart 4. 1 Respondents by position ............................................................................. 49
Chart 4. 2 Approximate number of branches to a bank ............................................... 50
Chart 4. 3 Network of all Branches ............................................................................. 51
Chart 4. 4: Banks‟ Preferred Medium for marketing its Products ............................... 52
Chart 4. 5 Most effective medium of attracting customers .......................................... 53
Chart 4. 6 Use of Information Systems ....................................................................... 55
Chart 4. 7 Type of CRM systems used by Nigerian Commercial Banks .................... 56
Chart 4. 8 Importance of CRM system on Bank‟s Growth.......................................... 57
Chart 4. 9 Areas in which Nigerian banks use CRM systems in managing customer
relationships ................................................................................................................. 58
Chart 4. 10 Most Successful Areas .............................................................................. 59
Chart 4. 11 Number of years using a CRM system ..................................................... 60
Chart 4. 12 Areas which use of a CRM system has helped gained Competitive
Advantage .................................................................................................................... 61
Chart 4. 13 Degree on Competitive Advantage ........................................................... 62
Chart 4. 14 Extent to which CRM systems can be used to serve customers nationwide
...................................................................................................................................... 63
Chart 4. 15 Alignment of a bank‟s business strategy with customer relations strategy
...................................................................................................................................... 64
5
Contents
ABSTRACT .................................................................................................................................. 2
Acknowledgements ................................................................................................................... 3
LIST OF FIGURES ........................................................................................................................ 4
LIST OF CHART ........................................................................................................................... 4
1. INTRODUCTION ................................................................................................................. 8
1.1 Research Context ....................................................................................................... 8
1.2 Statement of Problem ............................................................................................. 11
1.3 Purpose of the study ............................................................................................... 11
1.4 Aims and Objectives ................................................................................................ 12
1.4.1 Aim ................................................................................................................... 12
1.4.2 Objectives ........................................................................................................ 12
1.5 Research Questions ................................................................................................. 13
1.5.1 General ............................................................................................................ 13
1.5.2 Specific ............................................................................................................. 13
1.6 Significance of Study ................................................................................................ 13
1.7 Definitions of Terms ................................................................................................ 14
1.8 Organisation of study .............................................................................................. 14
2. LITERATURE REVIEW........................................................................................................ 16
2.1 Introduction ............................................................................................................. 16
2.2 Information Systems and Competitive Advantage .................................................. 16
2.3 Customer Relationship Management Systems ....................................................... 20
2.3.1 History ............................................................................................................. 20
2.3.2 Definitions of CRM ........................................................................................... 21
2.3.3 Role of CRM ..................................................................................................... 23
2.3.4 CRM Business Cycle ......................................................................................... 25
2.4 Customer Relations Systems in Banking/Financial Institutions .............................. 28
2.5 Nigerian Banking System ......................................................................................... 29
2.5.1 General Background Information on Nigeria .................................................. 29
2.5.2 Historical Development of Nigeria’s Banking System ..................................... 30
2.5.3 Information Technology in Nigeria’s Banking System ..................................... 33
2.6 Integrative Summary ............................................................................................... 36
3. METHODOLOGY ............................................................................................................... 38
3.1 Introduction ............................................................................................................. 38
6
3.2 Research Methodology and Approach .................................................................... 38
3.3 Sample Population................................................................................................... 41
3.4 Data Collection ........................................................................................................ 42
3.4.1 Questionnaire .................................................................................................. 42
3.4.2 Questionnaire Design ...................................................................................... 44
3.4.3 Detailed Questionnaire ................................................................................... 46
3.5 Conclusion ............................................................................................................... 48
4. RESEARCH FINDINGS ....................................................................................................... 49
4.1 Introduction ............................................................................................................. 49
4.2 Respondents and Bank Profile................................................................................. 49
4.2.1 Respondents Categorized by Position ............................................................. 49
4.2.2 Banks Categorised by Branches ....................................................................... 50
4.2.3 Network of Bank Branches .............................................................................. 51
4.2.4 Banks’ Medium of Acquiring Customers ......................................................... 52
4.2.5 Most effective medium ................................................................................... 53
4.2.6 Banks’ Medium of Maintaining Customer Relationships ................................ 54
4.3 Information Systems use for Customer Relationship Management ....................... 55
4.3.1 Use of Information Systems ............................................................................ 55
4.3.2 Type of CRM systems used by the Banks ........................................................ 56
4.3.3 Importance of a Customer Relationship Management System ...................... 56
4.3.4 Areas in which CRM system has been used to manage customer relations ... 57
4.3.5 Areas in which a CRM system has being of ‘great help’ in managing their
customer relationships .................................................................................................... 58
4.4 CRM system and Competitive Advantage ............................................................... 59
4.4.1 Number of Years the Banks has used a Customer Relationship System ......... 60
4.4.2 Areas in which the use of a CRM system has led to a competitive advantage 61
4.4.3 Degree of Competitive Advantage received from using a CRM system.......... 62
4.4.4 Meeting the needs of Customers across the Country using a CRM system .... 63
4.4.5 Alignment of CRM strategy with Banks’ Business Strategy ............................. 64
4.5 Conclusion ............................................................................................................... 65
5. ANALYSIS AND DISCUSSIONS ........................................................................................... 66
5.1 Introduction ............................................................................................................. 66
5.2 What does a customer relationship management (CRM) mean in relation to banks?
66
7
5.3 How can a customer relations information system be used in achieving a
competitive advantage? ...................................................................................................... 68
5.4 What customer relations systems are Nigerian commercial banks using in
achieving a good customer relationship? ........................................................................... 69
5.5 In what areas of customer relationships (acquisition, retention and loyalty) is the
use of a CRM system more effective? ................................................................................. 71
5.6 How important is a Customer relationship management to the progress of a bank?
72
5.7 Conclusions .............................................................................................................. 72
6. CONCLUSIONS ................................................................................................................. 73
6.1 Limitations ............................................................................................................... 75
6.2 Recommendations ................................................................................................... 75
Bibliography ............................................................................................................................. 77
Appendix I : Letter of Introduction .......................................................................................... 85
Appendix II: Questionnaire ...................................................................................................... 86
8
1. INTRODUCTION
1.1 Research Context
Every organisation in every sector of the economy today thrive on having information
readily available, this is because information is the key to success, as Adekeye
(1997:318) states, „nothing moves without information and it is generally believed
that information is power and that he who has it has power‟, this therefore
characterises information as a critical resource.
The rapid growth of information technology has fuelled man‟s desire to apply
technology in solving complex problems. Therefore organisations have applied
information technology in developing information systems that assist in providing up-
to-date information – this information can be information on its customers, suppliers,
procedures and so on - on a regular basis. Due to this, Bocij et al., (2006:3) gave a
definition of information systems that reflects the use of information technology for
information systems, that is,
“Information systems are the means by which organisations and people, using
information technologies, gather, process, store, use and disseminate
information”
Therefore the apparent rise in technology has made information systems a major tool
for businesses today. The main function of an information system in an organisation is
to provide processes and information useful for its employees and customers (Avison
and Fitzgerald, 2003). Adekeye (1997:320) listed the main functions of an
information system as:
perception - initial entry of data whether captured or generated, into the
organization;
recording - physical capture of data;
processing - transformation according to the “specific” needs of the
organization;
transmission - the flows which occur in an information system;
storage - presupposes some expected future use;
retrieval - search for recorded data;
9
presentation - reporting, communication; and
decision making - a controversial inclusion, except to the extent that the
information system engages in decision making that concerns itself.
Information systems can refer to any of a wide range of computer-based systems,
providing that these systems‟ major input and outputs are information and that these
systems also help co-ordinate the work of different organisational functions (Sauer,
1993). Sauer, (1993) explains that information systems in an organisation can serve as
an administrative support (Payroll systems, sales order, and so on) and for industries
like the banking industry, they can serve as part of the „technical or operating core of
organisations‟ (pg 11) (for example a core banking service would be ATM –
automated teller machines). But whatever the information system might be, Avison
and Fitzgerald (2003:4) note that information systems of an organisation „will be
required to help it analyse the business, along with its environment, and formulate and
check that it achieves its goals.‟
Despite the varied types of information systems, this research mainly focuses on the
use of customer relationship management (CRM) information systems in the banking
sector and how it can be of an advantage to commercial banks. A definition of
customer relations management given by Payne and Frow (2005) is that „CRM is a
strategic approach that is concerned with creating improved shareholder value through
the development of appropriate relationships with key customers and customer
segments.‟ This definition goes on further to explain that CRM involves the union of
marketing strategies and Information technology in order to gain a long term
relationship with customers. Customer Relationship Management tends to focus a
great deal on the use of technology for customer solutions. However, there is no clear
cut definition of the term as it varies with different authors and organisations.
Notwithstanding, the effect of information systems such as a customer relations
system, in achieving competitive advantage cannot be over emphasized. Rackoff et al,
(1985), confirms this by noting that in the past information systems have played a role
as operational and management support, thereby enabling firms gain competitive
advantages. The financial sector, especially the banking system plays a very important
role in the development of any economy as they are the most important and vital
10
intermediaries in any economy (Eroke, 2008). Service quality is therefore imperative
in the creation of customers as it can lead to increased revenue and reduced cost
thereby leading to increased customer loyalty (Eroke, 2008). Banks today are
applying information systems strategically in improving the quality of customer
services while noting also that customer acquisition and retention could lead to a
competitive advantage for a company. As explained by Dawes and Worthington
(1996), customer retention is becoming increasingly significant for institutions within
the financial sector, strategies which provide them with competitive advantage are
becoming of paramount importance. Peppard (2000) observed that a lot of businesses
today realise the importance and potential of a customer relationship management
system in helping to achieve and sustain a competitive edge.
Despite the advantages of information systems, it should be noted that most of these
advantages that have been documented centre mostly around the effective use of such
information systems in organisations within the western countries and with very little
literature on its effect in organisations in less developed areas like Africa. It is quite
an obvious observation that the use of information technology in developed countries
surpasses its use in less developed countries, such as Nigeria. For example in 2003 the
United States reported 5,558 internet users per 10,000 persons, compared with 690
uses per 10,000 persons in Asia and 156 users per 10,000 persons in Africa (Ramilo et
al, 2005). Zappacosta (2001:522) explains that the influence of information
technology on the socio-economic development of any society varies in different
regions of the world. In industrialized countries information technology encourages
competition within organisations and also helps in establishing networks with other
institutions or country. Zappacosta (2001), also states that in developing countries,
information technology is considered as an important driver of change. This suggests
that information technology in developing countries serve as a window through which
opportunities can be seen.
Although the use of information technology in African countries is not as advanced as
its use in developed countries, there has been an increase in the application of
information technology within businesses in most industries in Nigeria today. This
increase is particularly visible in the banking sector as the banks offer more
technology based services such as ATMs, internet banking, mobile banking, etc.
11
Nigeria, one of the largest economies in Africa, is striving to develop a vibrant and
sophisticated financial services industry capable of meeting the challenges of the 21st
century. This huge country has a tiered financial structure, with diverse institutions,
ranging from commercial banks, foreign banks etc (Siddiqi, 2004). However, as a
result of the intensive reforms on financial institutions in Nigeria, the commercial
banks have been employing various strategies in other to assist in gaining more
customers and also in retaining them, as customers are the core of their business. This
situation has thereby led these banks to realise that a good customer service and the
strategic use of information about the customers can be used to provide quality
service which is imperative for the progress of the business, thus leading to an
advantage for the bank.
1.2 Statement of Problem
Information Technology is an area in which financial institutions in West Africa are
currently making large investments as a means to reduce costs and improve
operational efficiency. The impacts of information technology on the competitive
value of commercial banks in Nigeria have been well researched on and these banks
are aware of the effect information technology can have on competitive advantage,
however, there is currently little research on the use of information systems, such as
CRM, on the competitive value of the banks. This paper aims to investigate the
impact of information systems on customer relationship management in the Nigerian
commercial banking sector.
1.3 Purpose of the study
The purpose of this study was to understand the effect and use of information systems
on customer relationship management in achieving a competitive advantage in the
Nigerian commercial banks, while using a quantitative method of analysis. The
definition of Customer relationship management (CRM) would be a term used to
describe the methodologies, software and e-commerce capabilities used by companies
to manage customer relationships (Panda, 2003).
12
1.4 Aims and Objectives
1.4.1 Aim
The aim was to investigate the strategic use of information systems for customer
relationship management by commercial banks in Nigeria.
1.4.2 Objectives
To identify the link between a quality customer service and its advantages to
the banks: Customers are important assets for every organisation, they serve as
the core of an organisation‟s business especially financial services like banks,
hence one objective of this study is to understand how a good customer
service provides an advantage for these banks.
To understand strategic information systems use and competitive advantage:
Quite a number of research articles suggest that information systems serve as
important tools for organisations today and also, most banks are using various
information systems in order to provide quality service; therefore this research
aims to understand how the use of these various information systems can lead
to a competitive advantage.
To determine the importance of a customer relationship management:
To identify various information systems that can, and has been used for
managing and improving customer relationship in Nigerian commercial banks.
To find out the meaning of a customer relationship management to
commercial banks: Customer relationship management is a term which has no
specific definition but is defined by authors or organisations according to the
context in which it is being applied. As a result of this, the research also aims
to find out various definitions of customer relationship management from the
perspective of commercial banks.
To know the areas the use of a customer relationship information system has
been of great help as regards customer acquisition, retention and loyalty.
13
1.5 Research Questions
1.5.1 General
How can commercial banks use information systems strategically for customer
relationship management?
1.5.2 Specific
What customer relations information systems are Nigerian commercial banks
using in achieving a good customer relationship?
How can a customer relations information system be used in achieving a
competitive advantage?
How important is a customer relationship management to the progress of a
bank?
What does a customer relationship management mean in relation to
commercial banks?
In what areas of customer relationships management (acquisition, retention
and loyalty) is the use of a CRM system more effective?
1.6 Significance of Study
The application of information technology in developing countries such as Nigeria is
not as advanced as it is in developed countries. There have been researches carried out
on the emergence and acceptance of information technology in the banks in Nigeria.
However there is a dearth of research on the impact of information systems on the
management of customers within the banking sector. This research therefore aims to
fill this void. This research has the potential of determining the importance of a good
CRM system which can be beneficial to the banks.
The information derived from this study would be beneficial to the Nigerian
Commercial Banks. From the findings the banks can realise how really important a
CRM system is imperative for the competitive world. Also, this study can serve as a
start for other researchers who are interested in this area and who would like to extend
the study further.
14
1.7 Definitions of Terms
Information systems – a system within the banks which processes and
provides useful information to the staff of the banks as well as the
banks customers.
CRM – Customer Relationship Management refers to methodologies
used by the banks in acquiring and retaining customers.
Competitive advantage – an edge a bank has over its competitors.
Customer retention – strategies a bank uses to retain already existing
customers.
Customer acquisition – strategies employed by the bank to acquire
new customers.
Customer loyalty – a customer‟s continued relationship with the bank
Naira (N) – Nigerian currency
1.8 Organisation of study
This dissertation comprises six (6) chapters. The first, chapter which is the present
chapter, is the introduction of the dissertation; this chapter laid down the foundation
for the research, the aims, objectives and problem statement.
The second chapter is the literature review chapter and this chapter reviews past
research work which is relevant to this study, the review covers areas such as
Information system and competitive advantage
Customer relationship management
Information systems in financial institutions
Nigeria
The third chapter describes the methodology that was used in carrying out this
research, it explains the approach used and gives justification as to why the particular
approach was used while also stating the strengths and weaknesses of such an
approach. It also discusses the instrument used in the data collection and explains the
sample size.
15
The fourth chapter presents the findings received from the questionnaire survey and
explains them through the use of charts and tables.
The fifth chapter is the discussion and analysis chapter, this chapter discusses the
findings of chapter 4 in relation to the research questions.
The sixth chapter concludes the research and offers some recommendations.
16
2. LITERATURE REVIEW
2.1 Introduction
“The value of any single study is derived as much from how it fits with and expands
on previous work as from the study‟s intrinsic properties” (Cooper cited in Merriam
1988:61). Knight (2002:11) explained the importance of literature review by stating
that “knowledge of the literature gives you the ideas about what you would be alert
for; the changes that other people have had success with; the ways in which those
changes might best be introduced and methods for evaluating the outcomes.”
McMillan and Schumacher (2001:109) were also of the view that literature review
„reveals investigations similar to your own in historical perspective.‟ A literature
review for this research is important in order to get a deeper understanding into the
use of information systems in gaining and sustaining a competitive advantage in any
business.
This chapter therefore aims to give an understanding into information systems and its
importance in gaining a competitive advantage, information systems in the financial
industries, information systems and customer relations, while also giving a general
idea and understanding of banks and information technology in Nigeria.
2.2 Information Systems and Competitive Advantage
Every organisation today has as its main objective, the improvement of its
competitive position in its market; Porter asserts this by stating that “competition is at
the core of the success or failure of firms” (Porter, 1998:1). Competitive advantage
has traditionally been described in terms of the attributes and resources of an
organisation that allow it to outperform others in the same industry or product market
(Christensen and Fahey, 1984; Kay, 1994; Porter, 1980 as cited in Chaharbaghi and
Lynch, 1999).Competitive advantage is what most organisations aim to achieve over
their competitors. Ma (1999) defines competitive advantage as a “basis for superior
17
performance”. A firm is said to have a competitive advantage when it creates more
economic value than its rival firms (Barney, 2007). Porter (1988:3) also gives a
definition of competitive advantage by stating that “competitive advantage grows
fundamentally out of the value a firm is able to create for its buyers that exceed the
firms cost of creating it”. The size of this advantage can be measured as the difference
between a firm‟s economic value and the economic value created by its rivals. Barney
(2007) also identifies two types of competitive advantage, these types as he noted, are
„temporary competitive advantage‟, which is defined as competitive advantage that
lasts a short time, and „sustained competitive advantage‟, which is competitive
advantage that lasts for a long time. It is the desire of every organisation to achieve a
sustained competitive advantage.
Sustained competitive advantage can be achieved through different means and with
the aid of different factors, Mata et al, (1995), notes that a variety of factors could
lead to a sustained competitive advantage, these include the relative cost position of a
firm (Porter, 1980), the ability of the firm to differentiate its products (Caves and
Williamson), and the firm‟s ability to co-operate in strategic alliances, (Kogut, 1988).
However, the idea of information technology and information systems positive effect
on sustained competitive advantage has been documented for a long time now. In
confirming this, Johnston and Vitale (1988) observe that the notion that information
systems can help gain competitive advantage is now a cliché and has passed from
being a concept.
On the other hand, it is imperative to understand the general meaning of the term
information systems and its meaning as applied in the context of this research.
Hirschheim, et al (1995), observed that information systems have been described,
traditionally, in terms of two perspectives which are the structural perspective and the
functional perspective. Structurally, as described by David and Olson (1985) cited in
Hirschheim, et al (1995:11), information systems tend to “consist of a collection of
people, processes, data, models, technology and partly formalized language, forming
a cohesive structure which serves some organizational purpose or function”. The
functional perspective describes information systems as a technologically
implemented medium for the purpose of recording, storing and disseminating
linguistic expressions as well as for the support of inference making (Goldkuhl and
18
Lyytinen, 1982 as cited in Hirschheim, et al, 1995). Information systems in most
organizations tend to provide processes through which useful information can be
passed to its members and clients, thereby helping such organizations operate
effectively (Avison and Fitzgerald, 2003). For the purpose of this research,
information systems would be defined from the functional perspective as the focus is
computer-based information systems and its effectiveness in organizations.
Furthermore, information systems support has been noted as an integral factor in the
success of contemporary organisations (Ozkan, et al, 2007), therefore indicating that
the major role of information systems in organizations is that of a supportive nature.
Rackoff et al, (1985) confirm this by noting that in the past information systems have
played a role as operational and management support thereby enabling firms gain
competitive advantages. Some examples (cited in Rackoff et al, 1985) of firms who
used information systems to gain an edge in the market are American Hospital Supply,
being the first to install online order entry terminals in hospitals, now dominates the
medical supply business. Merrill Lynch, with its Cash Management Account,
dependent on database and laser printing technology, pre-empted the market with its
innovative product. American and United Airlines, through their computerized
reservation systems, Sabre and Apollo established an edge that other air carriers have
found impossible to overcome. These examples show that information systems can be
used to shape or support an organizations plan for gaining advantage. Information
Systems can therefore be seen as drivers or enablers used to push a business forward.
As mentioned in chapter one, the importance of the use of information systems to gain
competitive advantage cannot be over emphasized; however, being that information
systems play a supportive role means that just by having information systems in an
organisation do not guarantee an automatic edge over competitors. Laudon and
Laudon (2006), suggest that an organization should develop strategic information
systems for both „internal value chain activities and the external value activities‟ (pg.
93) of which would add the most value. In addition to maximising the use of strategic
information systems, there should be an alignment of an organisation‟s business and
organisational strategy with its information systems strategy, as it helps in gaining
advantages for an organisation. Alignment is the „degree to which the information
19
technology mission, objectives, and plans support and are supported by the business
mission, objectives and plans‟ (Reich and Benbasat, 2000).
In explaining the alignment process, Pearlson and Saunders, 2006, developed a
framework known as the „Information Systems Strategy Triangle‟.
Figure 2. 1: The Information Systems Strategy Triangle (Pearlson and Saunders, 2006).
With reference to the triangle, Pearlson and Saunders suggest that, for a firm to be
successful in its use of information systems, it would have to carefully balance the
three strategies (Business, organisational and Information Strategy) and furthermore,
position business strategy at the top of the triangle so that the Organisational Strategy
and Information Systems Strategy complement the business strategy as the business
strategy entails the core activities of the company, they go on further to explain that if
an organisation‟s business strategy is to use IS to gain an advantage, the leadership
position of IS can be sustained by constant innovation.
A reverse reaction can occur when this alignment is absent, that is, when information
systems have been employed to stand alone, this can lead to a competitive
disadvantage for a company. The lack of such alignment has been argued to cause
many businesses to fail to realize value from investments in IT (Henderson and
Venkatraman, 1993).
The case study below (as cited by Wilcocks and Mason, 1994) serves as an example:
Case: An Advertising Agency
In the mid-1980s, this agency installed accounting and market forecasting
systems at a cost of nearly £100,000. There was no real evaluation of the
Business Strategy
Organizational Strategy Information Strategy
20
worth of the IT to the business. It was installed largely because one director
had seen similar systems running at a competitor, its existing systems had
been perfectly adequate and the market forecasting system ended up being
used just to impress clients. At the same time as the system was being installed,
the agency sacked over 36 staff and asked its managers not to spend more than
£200 a week on expenses. The company was taken over in 1986. Clearly
there had been no integrated plan on the business, human resource,
organizational and IT fronts. This passed on into its IT evaluation practice. In
the end, the IT amplifier effect may well have operated. IT was not used to
address the core, or indeed any of the needs of the business. A bad
management was made correspondingly worse by the application of IT.
In the case study, (the use of the term information technology (IT) was used to mean
information systems (IS), this should not be confused), it is clearly apparent that there
was a lack of proper alignment. The information strategy was allowed to work
independently from the organization‟s business strategy and the resulting effect was a
total failure on the part of the organization. Therefore, information systems strategy,
is not to function independently or be the main organizational function, but should
work with the organizational strategies to serve as a support system.
2.3 Customer Relationship Management Systems
2.3.1 History
CRM is an acronym for „Customer Relationship Management‟. CRM is a type of
information system which firms apply today in order to manage customer relationship
which in the long run can lead to a competitive advantage over competitors. The term
which emerged in the mid-1990s has been linked to the Information Technology
vendor and practitioner community (Payne and Frow, 2005). The concept however,
has been traced back to the 1950s when Drucker (1954) as cited in Coltman (2006)
stated that customers should be the foundation and reason for the existence of an
organization. In a conference on information systems, Light (2001), with reference to
Ody (2000) offered to explain three views of the concept of CRM, the first concept is
21
concerned with „precision marketing‟ which is the matching of a product or service
with a customer‟s requirement in order to secure sales. The second concept is
concerned with creating a coherent view of customers, while the third concept is
aimed at consumer databases while driving investments into data warehouses.
Customer Relationship Management tends to focus a great deal on the use of
technology for customer solutions. To further understand the foundation of CRM,
Kutner and Cripps (1997), explain that CRM was founded on four tenets, which are
Customers should be managed as important assets
Customer profitability varies; not all customers are equally desirable
Customers vary in their needs, preferences, buying behaviour and price
sensitivity.
By understanding customer drivers and customer profitability, companies can
tailor their offerings to maximise the overall value of their customer portfolio
However, there is no clear cut definition of the term as it varies with different authors
and organisations. Light (2001) asserts that various definitions of CRM tend to stem
from the idea that “A tiny proportion of a company‟s customers will generate the bulk
of its profits. Identifying, collecting and keeping these clients is the very essence of
customer relationship management” (Clemons 2000:25 cited in Light 2001). The
specific definition which an organization holds on CRM, affects, to a large degree, the
way an organization accepts and practices CRM (Payne and Frow, 2005). This
therefore puts emphasis on the different perspectives held on CRM.
2.3.2 Definitions of CRM
Before going on further with the research, it is important to get a clear definition of
the term CRM and the definition that would be appropriate for use throughout this
work. As mentioned earlier, since its inception, CRM has been seen from different
perspectives by different authors. However, Valsecchi et al., (2007), were able to
define CRM in three approaches which are the „technology approach‟, the „conceptual
approach‟ and the „process approach‟. Therefore the different definitions of CRM
which was reviewed during this research would be classified in these three approaches.
22
The technology approach considers CRM to be a „data-processing instrument to
support marketing activities‟, (Valsecchi, et al 2007:756). Xu, Yen, Lin and Chou,
(2002 p.442) concur with this approach thereby defining CRM as „an information
industry term for methodologies, software, and usually internet capabilities that help
an enterprise manage customer relationship in an organized way.‟ This definition
regards CRM as a „how‟ or a „tool‟ in managing relationships. Twogood (1998) also
encourages this approach as he underlines operative tools, i.e. data warehouse, which
can assist a firm to create and maintain customer relationships.
In his article about „Return on Relationships‟ (ROR) Gummesson, 2004 p.137 defined
CRM as „the values and strategies of relationship marketing – with particular
emphasis on customer relationships – turned into practical application.‟ His definition
is based on marketing purposes or strategies as opposed to technology and is
particularly focused on the relationship aspect and the type of relationship. This
definition is consistent with the conceptual approach pointed out by Valsecchi, et al
2007. This approach considers CRM as a philosophy and as a complex strategy where
a firm organizes its structure in a way as to strengthen the relationship with its
customers while discarding the idea that CRM is only a data collection instrument.
(Valsecchi, et al 2007)
The final approach is the process approach and this approach involves the linking of
client knowledge and management (Valsecchi et al., 2007). A definition given by
Payne and Frow, 2005 is that „CRM is a strategic approach that is concerned with
creating improved shareholder value through the development of appropriate
relationships with key customers and customer segments.‟ This definition goes on
further to explain that CRM involves the union of marketing strategies and the
knowledge about customers so as to personalise services to satisfy individual
customers in order to gain a long term relationship with customers.
There are more varied definitions of CRM and each definition refers to the context in
which they are applied, for example Khanna 2001 as cited in Payne and Frow 2005,
simply defines CRM as an e-commerce application while Kutner and Cripps 1997
define it as data-driven marketing.
23
Nevertheless, there are two definitions of CRM which come of interest and of which
would be suitable for this study, one of these definitions was given by Swift, (2000)
which implies that CRM is an enterprise approach which aims to understand and
influence customer behaviour through meaningful communication in order to improve
customer acquisition, retention, loyalty and customer profitability. Glazer (19970, as
cited in Payne and Frow (2005) describes CRM as an attempt, which requires an
information-intensive strategy, to provide a strategic bridge between information
technology and marketing strategies with the aim of building long-term relationships
and profitability.
2.3.3 Role of CRM
Customer Relationship Management has become an important management tool for
most organisations today to increase corporate profit (Valsecchi et al., 2007) and also
because marketing models are changing from product-centred to a customer- centred
stage (Xu et al., 2002). Khalifa and Shen (2005), observed that in the past most firms
were focused more on „production, purchase and marketing‟ in order to provide
products to satisfy their various customers‟ needs, this strategy was adequate for the
firm‟s survival then. They also observed that the case is different now as customers
tend to be more demanding and require more attention therefore driving firms to
employ a Customer relationship system that assist the firms in being more customer-
centred.
To give more strength to the role of CRM, various authors have stipulated the
characteristics that may be associated with such a system. Knox and Ryals (2001)
summarised key characteristics of CRM into eight bulleted points as shown below:
A customer relationship perspective aimed at the long-term retention of
selected customers
Gathering and integrating information on customers
Use of dedicated software to analyse this information
Segmentation by expected customer lifetime value
Micro-segmentation of markets according to customers‟ needs and wants
Customer value creation through process management
24
Customer value delivery through service tailored to micro-segments,
facilitated by detailed, integrated customer profiles
A shift in emphasis from managing product portfolios to managing portfolios
of customers, necessitating changes to working practices and sometimes to
organisational structure
However, Xu et al (2002) grouped these characteristics into four main characteristics
thereby making it easier to understand. These four main characteristics are Salesforce
Automation, Customer Service and Support, field support and Marketing automation.
In the article by Zeng, et al (2003), these characteristics were further worked on but
with no major distinctions of those stated by Xu, et al (2002) thereby stating the
characteristics as:
Relationship Management: this characteristic is similar to Xu et al‟s
Customer service and support characteristic. Relationship management has to
do with instant service response based on customer input (Zeng, et al, 2003).
CRM improves the organisation‟s abandonment rate by configuring the
functions of tracking, monitoring and measuring customer service responses
(Xu et al 2002). This way, organisations can resolve customer problems
efficiently.
Salesforce Automation: with CRM a firm can automatically track a client‟s
history for repeated and future sales. In CRM systems, information on
customers, product, deals and competitor are stored in a central database for
Salesforce retrieval thereby making it easy to monitor and track a customer‟s
sales cycle (Xu et al, 2002).
Use of Technology: this also means marketing automation. By using CRM
and new technologies, it enables companies to better address customers‟
individual needs, this way companies can capture a market before competitors
(Xu et al 2002). CRM provides the most up-to-date information on customers‟
habits thereby making it easy for effective marketing.
Opportunity Management: this features the flexibility to manage
unpredictable growth and demand and also a good forecasting model to
integrate sales history with sales projections. (Zeng, et al, 2003).
The table below shows gives an easy view of the characteristics and the impacts each
characteristics has on an organisation.
25
Category Characteristics Impacts
Relationship management Instant service response Increase customers' satisfaction
One-to-one solutions to customers'
requirements Customize the service
Direct online communications with the customer Attract more customers
Customer service centres Maintain the customers
Salesforce automation Tracking client's account history
Provide info for future sales and
repeated sales
Automation of sales promotion analysis Increase sales and keep the customers
Use of technology Use technology to add value
Provide differentiated and customized
service
Data-warehousing technology needed Keep leading position in the competition
Opportunity management Manage unpredictable growth and demand To better meet the customers' needs
Forecasting method To optimize the supply and demand
Figure 2. 2: Characteristics of CRM (Zeng, et al 2003)
2.3.4 CRM Business Cycle
The implementation of a CRM can be seen as a cycle with different stages which are
independent but continuous. As companies move from stage to stage, they gain
insight and understanding about their customers and this in turn helps them succeed
better in managing their customer relations (Rask and Helokunnas). These four stages
are „Understand and differentiate‟, Develop and customize‟, „Interact and deliver‟ and
„Acquire and retain‟. The cycle begins with Understanding and differentiating,
however, Suresh (2002) argues differently saying that the cycle should begin with
acquiring and retaining being that it is a vital stage for building relationships with
customers. On the contrary, Nykamp (1999) argues that even though acquiring and
retaining of customers is the basis of all business, the most critical part of the cycle
may be to understand and differentiate customers. His argument holds being that
without understanding customers; it would be difficult to go through all the following
stages.
26
Figure 2. 3 Source: Chaudhuri and Shainesh (2004) cited in Shahin (2008)
Understand and Differentiate:
This stage is important in order to build a relationship with customers.
Companies need to know what their customers value, the type of services they
are interested in, products they are interested in buying and when they would
like to interact (Shahin, 2008). Suresh (2002) and Shahin (2008) note that two
main activities are involved in this stage. These activities are, first to profile
customers in order to understand „demographics, purchase patterns and
channel preferences‟ (Shahin, 2008:71). Second is segmentation and thirdly,
customer valuation in order to understand profitability (Suresh 2002).
Develop and Customize:
„In a customer – focused world, product and channel development has to
follow the customer‟s lead.‟ (Suresh, 2002:5). Today, organisations are
expected to develop products and services based on customers need and
27
expectation. Shahin (2008) explains that the extent of customization should be
based on the „potential value delivered by the customer segment.
Interact and Deliver:
This stage is very important for any customer relations systems. Organisations
are to be aware that interaction does not only take place through sales and
marketing but in all of customer touch points (Rask and Helokunnas). With
access to customer information, organisations would be well prepared to
deliver value to customers (Shahin, 2008).
Acquire and Retain:
Shahin (2008), states that organisations tend to clone a customer segments that
produce the greatest value for them and using a customer relations system can
make it easy for the organisations acquisition and prospecting efforts. This
task is particularly important for organisations being that acquiring customers
is more expensive than retaining them (Rask and Helokunnas). „If companies
want to succeed in customer retention they should support interaction
continuously, deliver value to the customers, and remember flexibility in
customers‟ definitions, because customers and their life situations change from
day-to-day‟ (Nykamp, 1999).
All the four stages require certain actions that lead to the next stage, information from
one stage can be utilised in the next stage and the business cycle develops all the time
into better actions and better customer relationships. (Rask and Helokunnas)
Despite all the possible benefits an organisation stands to achieve by the use of a
CRM system, Snyder and Davidson (2003) (cited in Xu and Walton, 2005) observed
that about 80 percent of CRM projects resulted in failure as a result of a lack of proper
understanding of CRM systems. Xu et al., (2002) also suggest that CRM is facing a
lot of challenges one of such challenges include the lack of appropriate network
infrastructure which is needed in providing network to support the system application,
they also note that a lack of such infrastructure is a leading cause of failure for CRM
systems. Apex IT inc., 2001 (cited in Xu et al., 2002:446) state that „to implement a
28
CRM system which does not meet the organization‟s goals or simply can not be
accepted by the users is a disaster to a company.‟
2.4 Customer Relations Systems in Banking/Financial Institutions
Panda (2003:162) observed that „globalization and deregulation, combined with
advances in information technology have radically changed the managerial context of
service industries‟. Watkins, (1992) stated that the financial services industry „is in a
transitional stage as the mission of Information Technology changes its emphasis
from administrative efficiency to the improvement of service quality and IT becomes
market-led‟ he also mentioned that it would involve the installation of new customer
administration, marketing information, point of sale and branch systems to provide
better customer service. Though his research is quite old, a number of researchers
today have observed that the financial services industry is in the middle of a structural
change (Geib et al., 2004). Panda (2003) explain that financial services today are
facing „fierce and aggressive competition‟ in both domestic and global markets
thereby forcing organisations to restructure in order to enhance their chances of
growth and survival.
The financial service industry is a sector which is generally held as being the most
advanced in customer relations management, as they are the traditional users of direct
mail and having extensive information on customers, (Foss and Stone, 2002). The
relationship which financial service companies such as banks, hold with their
customers is imperative for the growth and survival of such a business. Hence, the
need to adopt new ways of gaining an advantage over competitors becomes an
important part of the business. Geib et al., (2006) explain that due to increasing
competition and high customer demands‟ financial services companies are required to
focus on core competencies in order to deliver better value to customers.
Karakostas et al., (2005), asserts that financial services had a lead in implementing
CRM due to the nature of their business, as business transactions where information
technology based and contained important information about their customers. The
emergence of CRM in the financial services industry was as a result of three
29
fundamental factors which have been listed as “New technological opportunities”,
“Increasing competition from new market entrants”, and “Customers‟ changing
behaviour” (Walter, 2000; KrÖner and Zimmermann, 2000; Krishnan et al., 1999) as
cited in Geib et al., (2006). These factors therefore motivate financial services to
focus on the development of a good relationship between the business and its
customers.
The CRM strategy or implementation may vary as the definitions of CRM vary
amongst organizations. However, Panda (2003), states that for a successful CRM
implementation in the financial services sector, it has to incorporate four main areas
of business which include, „Strategy‟, „People‟, „Technology‟ and „Process‟. Panda
further explains that the enablers (people and technology) are moved by the
organisations‟ strategic processes, through their systematic interaction which
eventually results in a successful CRM implementation.
2.5 Nigerian Banking System
The financial institutions under investigation are the commercial banks in Nigeria,
due to this; a literature review was carried out on the country. Therefore this section
aims to give knowledge on the background information of the country, the
development of the banking system in Nigeria and also information technology in
Nigerian banks.
2.5.1 General Background Information on Nigeria
The Federal republic of Nigeria which gained its independence from Britain on
October 1, 1960 has been described as the most populous country in Africa with a
population (2006 est.) of 140 million (U.S. Department of State) and accounts for
over half of West Africa‟s population. Nigeria has a variety of customs, languages
and traditions which are spread across its 250 ethnic groups, thereby giving the
country a rich diversity. However the official language is English amongst other
languages like, Hausa, Igbo, Yoruba, Fulani, Kanuri and others. The main religions
30
are Muslim, Christian and indigenous African. According to a 2008 est., the life
expectancy for Nigerians is 47.81 years (CIA: The World Factbook).
Economically wise, the Nominal GDP (2007 est.) is $175 billion (2006 data:
agriculture 26.8%; industry 48.8%; services 24.4%). Real GDP growth rate (2007):
6.3%. Oil growth: -5.6%. Non-oil growth: 9.6%. Per capita GDP (2007 est.): $1,158.
Inflation (2008): 8.5%. Natural resources: Oil and natural gas (37% of 2006 GDP), tin,
columbite, iron ore, coal, limestone, lead, zinc. Agriculture: Products--cocoa, palm oil,
yams, cassava, sorghum, millet, corn, rice, livestock, groundnuts, cotton. Industry:
Types--textiles, cement, food products, footwear, metal products, lumber, beer,
detergents, car assembly. Trade (2005): Exports--$59 billion: petroleum (95%); cocoa;
rubber. Imports--$25 billion: machinery; chemicals; transport equipment;
manufactured goods; food; live animals. Foreign direct investment (FDI, 2007): 6.2%
of GDP. Currency: Naira (118 Naira = U.S. $1 as of July 3, 2008) (Figures from U.S.
Department of State).
2.5.2 Historical Development of Nigeria’s Banking System
“The history of Nigeria‟s banking and finance industry can be viewed as a story of
recurring changes in the nature of financial markets in response to economic, political
and, in particular, regulatory policy changes” (Oyejide 1990:20). The African
Banking Corporation, which was Nigeria‟s first bank, was established in 1892 (Beck
et al., 2005). No banking legislation was present at the time but came into existence in
1952 and at this point Nigeria had three foreign banks and two indigenous banks, the
foreign banks were, the Bank of British West Africa, Barclays Bank and the British
and French Bank while the indigenous banks were the National Bank of Nigeria and
the African Continental Bank (Library of Congress Country Studies). For decades
after 1952, the demand for deposits was slowed as Nigerians preferred cash and
distrusted checks for debt settlements (CIA World Factbook). The Central Bank of
Nigeria began operations on July 1, 1959 (Beck et al., 2005), it was statutorily
independent of the federal government until 1968 (Library of Congress Country
Studies).
31
The Central Bank of Nigeria (CBN) at this point was still young and inexperienced
and was struggling to assert its role in the financial system that had been in existence
for over 60 years before it. A major task for the bank then was enhancing the process
of financial intermediation through evolving organised money and capital markets for
a newly independent economy (Adekanye 1990). While in the process of asserting its
role, CBN introduced money market instruments such as treasury bills, call money,
produce bills, certificates of deposits, bankers‟ unit fund and stabilisation securities all
within 1960 and 1975, the effect of these was the domestication of the financial
markets (Adekanye 1990).
In the 1970‟s the Nigerian financial sector was largely controlled by the government
through to the early 1990‟s (Kane and Rice, 2001). However, by the end of 1988, the
banking system in Nigeria consisted of the Central Bank of Nigeria, forty-two (42)
commercial banks and twenty-four (24) merchant banks (CIA World Factbook). Both
commercial and merchant banks had 1,500 branches together. Merchant banks were
allowed to open checking accounts for corporations only and could only accept
deposits of N50, 000 and above (Library of Congress Country Studies). As at 1988
commercial banks had assets of N52.2 billion compared to merchant banks with
assets of N12.6 billion (CIA World Factbook).
During the 1970s, the Nigerian government introduced a number of direct controls in
the banking system, through ownership, as well as through interest rate and credit
controls (Beck et al., 2005). Since there were no Nigerian purchasers, foreign-owned
banks were nationalized and this was as a result of an “indigenous wave” which had
the goal of „securing domestic majority ownership of strategically important sectors‟
(Beck et al., 2005:2356).
Nigeria then undertook a broad program of financial liberalization in 1986 with the
Structural Adjustment Programme (SAP), this resulted in interest rates and entry into
the banking system being liberalized while credit allocation quotas were also loosened
(Beck et al., 2005). The consequence of this was the quick entry of many players into
the banking system, the number of banks increased from 40 to about 120 (Beck et al.,
2005) the contribution of the financial sector to GDP also increased (Lewis and Stein,
2002).
32
As at 1990, Adekanye (1990), observed that the money market was relatively
developed, offering a wide variety of financial assets with a flow of information
among participants however, treasury instruments remained the most dominant
market instrument implying that the government remained the principal borrower. In
1991, some banks were showing signs of weakness, in 1992; some banks were
included in a privatisation programme with 14 banks up for privatisation (Kane and
Rice, 2001). In 1996, there were 115 commercial banks and the government gave
these banks until to March 1997 to recapitalise, banks that did not meet the
recapitalization requirements were closed down (Kane and Rice, 2001). As at 1998,
26 banks were liquidated and an additional seven were liquidated in 1999. „Less than
half of the surviving banks were competitive‟. (Kane and Rice, 2001:47).
On the 6th
of July 2004, the Central Bank of Nigeria (CBN) announced a N25 billion
minimum capitalisation requirement for Nigerian commercial banks with effect from
December 31, 2005 (CBN, 2004). The objective was to produce mega banks which
would be more supportive of an emerging and vibrant private sector, enhance
competition on the global markets in addition to stemming the tide of distress in the
banking industry (Skye Bank, 2008). This implementation was the first phase of the
most extensive and intensive banking reforms since post-independence Nigeria
(Achua, 2008). This development was met with mixed reactions in the industry, most
banks were in agreement with the purpose of these reforms but felt that the timeline
was rather short for such a large increase in capital base. As a result of the reform, 89
commercial banks, which existed before the reform, where reduced to 25 commercial
banks. 76 banks of the 89 banks merged into 25 mega banks, while 13 banks were
liquidated and this took place in 2005 (Achua, 2008). In early 2008, two of the
twenty-five existing banks also merged thereby bringing the recent amount of
commercial banks to twenty-four (24) today.
Prior to the reforms, a lot of Nigerians were not satisfied with the poor quality of
services rendered by banks, the complicated procedures and poor documentation
process alongside the long queues in banking hall and the absence of technology
which were some of the factors that created dissatisfaction in the minds of the
customers (Eroke, 2008). However, as a result of the consolidation of banks, there has
been an increase in demand of customers to deposit their money with banks that offer
33
quality service. Idowu et al., (2002), state that the issue with banks in Nigeria today is
no longer the proximity of the bank but rather the safety and level of service, with
regard to quality, speed and efficiency has become the major imperative. However the
quality of service begins with the appropriate use of information technology and a
good relationship the bank has with its customers. There has however, been a growing
rate in the adoption of new technology by banks in Nigeria, the banks realise that one
way they can provide quality service is through the use of technology (Idowu et al.,
2002). However, the power of using such information systems like CRM, in the
banking sector has not been explored.
The banking sector is among the trendsetters in adopting IT and has been popularly
described as a “pocket of sophistication” in Africa (Jason, 1997; Jason and Thompson,
1995) as cited in Anandarajan et al., (2000). The use of computers was integrated into
the business operations in Nigeria during the 1980s, though the use of computers in
Nigeria dates back to the 1960s, (Anandarajan et al., 2000).
2.5.3 Information Technology in Nigeria’s Banking System
Historically, the environment in which the finance sector operated was highly
predictable, therefore there was little or no competition and there was little need for
marketing financial services (Usman 1990). Since then, the increase of banks and the
conduct of monetary policy which resulted in tight liquidity in the system led to a
highly competitive environment. The expansion of the banking system has led to stiff
competition, thereby bringing out the best of every practitioner. „A statement that the
financial system is about the most dynamic sector in the economy is hardly
contestable‟ (Adekanye, 1990). In order for most banks to be sustained in the
competitive environment, several new devices had to be employed by the banks.
Usman (1990) explained some of these tools:
Marketing – This has become a tool with which most banks in Nigeria cannot
be without for the success of the banks. As a result of these most banks have
developed aggressive marketing strategies. Usman (1990) observed that
though these strategies vary among banks, they all generally involve a
combination of the following:
Geographical expansion through branch networks
34
Market penetration
New markets/new products development
Market leader strategies and
Market challenger strategies.
Presently, the need for marketing goes beyond merely ensuring constant
contact with existing customer base but includes a constant search for new
avenues for acquiring and maintaining customers.
Heavy Investment in Technology, Database and Methodology – Almost all
financial institutions are at one stage or another in implementing an
automation programme, this has helped some banks improve on time delivery
and quality service.
Strategic Planning – The importance of strategic planning is for banks to have
a means of scanning the environment in order to identify opportunities and
threats, areas of strength and weaknesses and a means of staying ahead of
competition.
Weekend Banking – A number of commercial banks have introduced weekend
banking in an attempt to create specialised products.
Though Usman‟s article dates as far back as 1990, therefore making his observations
outdated, he however made notes of tools that were used then by Nigerian commercial
banks to remain in the competitive environment. However these tools are still
employed by Nigerian commercial banks today with slight changes and with
emphasis on the use of information technology as a strong weapon in the competitive
environment. Oboh (2005:2) asserts this by stating that „banking competition is now
largely dependent on technology and therefore a bank‟s survival and growth relate
directly to the adoption and implementation of appropriate technology‟
It would be useful however, to note that the use of computers in Nigeria started in the
1960‟s with the beginning of exploration work by the oil companies (Alegbeleye
1989). Alegbeleye also explained that in the 1970s, the expansion of the Nigerian
economy increased the demand for a variety of computer services and this was
evident in most of the sectors in the economy, the pioneer users of computers were the
oil companies, the banks, educational institutions, government ministries and
government-owned companies (Mursu et al., 2000). In giving a clear understanding of
35
the evolution of technology in the banking sector in Nigeria, Umar (2005) explains
this in stages:
Mechanization: in this stage, banks used mechanical adding and accounting
machines to improve the efficiency of individual workers. The result was that
prevailing work flow hardly changed though error rates fell and individual
productivity increased.
Computerization (back office): this involved automating the accounting
process and this caused volume of transactions to increase without a
corresponding increase in staff. This computerization was mainly a batch
oriented process which tickets were batched and processed at the end of the
day, the disadvantage of this was that account information was up to 24 hours
old.
Communications: this involved using communication lines to feed data from
branches to a central computing centre. This improved bank wide data
gathering thereby making it easy for a customer with several accounts in
different locations to have daily balances of these accounts even though the
balances were a day old.
Computerization (Management functions): this stage was a switch from data
processing to information processing. This change was characterized by the
use of real personal computers (PC) and real time processing. The production
of management report was automated using word processing, database and
spreadsheet processing thereby allowing information to be current. Customers
could have up to the minute balances.
Integration: Integration of all data in the banks marked a major stage in the
effective use of information technology. Prior to this stage there was a lack of
integration and data were not easily accessible to PC users.
Being that in today‟s current banking situations, banks have realised that they are not
making the best use of information technology (Umar 2005), hence there is a growing
rate of adopting new technologies in Nigerian banking operations (Idowu., et al 2002).
The growing decision for banks to deploy information technology stems from the
need to satisfy their customers, these banks realise that the difficulty in achieving
customer satisfaction without modern technology implies that the business would not
36
survive (Oboh 2005). Idowu, et al (2002) also made a similar observation when they
stated that banks customers tend to associate quality of service in a bank with the
bank‟s possession of an online, real-time system. The idea a customer has of a bank is
important as the revenue of the bank‟s business comes from effective satisfaction of a
customers‟ wants, thereby leading to an exploitation of information technology for
efficient service delivery (Oboh 2005).
Furthermore, even though the adoption rate of information technology in Nigeria is at
a slow rate (Oboh 2005), the commercial banks realise that customers no longer have
the patience to wait for a bank to get its use of IT right, therefore discarding efficient
service delivery as a matter of convenience but rather a necessity for any bank in
present Nigeria. In addition to this, Nigerian banks have noticed that the physical
branch is no longer the centre of customer relationship management thereby implying
that information can no longer reside or be restricted to physical branches alone but
must be held in a “virtual scenario electronically and available to all channels” (Oboh,
2005).
However, one of the challenges is the management of the sprawling database built on
customers so that information can be made readily, speedily and systematically
extracted, shared and reviewed to aid management decisions and most importantly to
satisfy customers (Oboh 2005).
2.6 Integrative Summary
The review highlights the importance of information systems on competitive
advantage while noting that in order to get a good competitive position with the use of
an information system; the information system strategy has to be aligned with the
organisation‟s overall business strategy.
It further talks about the use of a particular information system, that is, a customer
relationship management system and details the roles that a CRM system plays in a
financial institution such has its role in sales force automation, in acquiring and
retaining customers amongst others. It identifies that the role of a CRM system in
37
financial institutions such as banks, is imperative for the growth of the organisation as
customers are very important to their business, therefore a system that helps in
managing the relationship a bank has with its customers is a necessity for such a bank.
The literature review also gives insight into the banking system of Nigeria by
explaining the background information of the country and further explaining the
history of the banking system up to its present state. The review lets us know that
there has been a lot of progress in the banking system in Nigeria and due to the strong
financial reforms, competition amongst banks is on the increase therefore in order for
this banks to survive there has been quite an increase in the application of IT within
their operations. However the literature fails to enlighten on the use of a CRM system
by this banks and this is possibly due to a lack of research in this area.
The next chapter discusses the methodology of the study. Concepts such as the
methodology approach, sample population, description of the instrument used are
presented.
38
3. METHODOLOGY
3.1 Introduction
Polkinghorne (1983:5), defines methodology as the “examination of the possible
plans to be carried out – the journeys to be undertaken – so that an understanding of
phenomena can be obtained”. Graziano and Raulin (2004), explain that since
„research‟ involves a process of asking and answering questions that may lead to
interplay between inductive and deductive thinking, the methods used in answering
such questions can therefore depend on several factors.
The previous chapter reviewed the relevant literature which forms the framework for
this research, however most research require the most accurate methodology which
guides the study into achieving its aims and objectives, therefore this chapter would
give an insight into the research strategies which were chosen also the methods of
investigation used and would also give a detailed explanation of the questionnaire
instrument which was used in the collection of data.
3.2 Research Methodology and Approach
The aim of this research is the investigation of the strategic use of information
systems for customer relationship management by commercial banks in Nigeria.
Therefore the research methodology which was thought appropriate for this
investigation was a quantitative methodology with a deductive research approach.
Though different authors have different definitions of quantitative method, the
definitions however have the same meaning. Huysamen (1997) describes quantitative
research as a method which deals with formulating hypothesis, collecting data,
analysing them and making the appropriate interpretations. Creswell (1980) cited in
Sukamolson (2005), also gave a definition of quantitative research as a type of
research that explains a phenomena by collecting numerical data that are analyzed
using mathematically based methods (in particular statistics). However, the definition
which this research is more inclined to is the definition given by Sukamolson (2005),
39
who defines „quantitative research as the numerical representation and manipulation
of observations for the purpose of describing and explaining the phenomena that those
observations reflect‟.
The deductive approach which complements the quantitative methodology for this
research implies that already existing theory guides the research, in the case of this
particular research, the existing theory which is that „information systems can help
achieve a competitive advantage for an organization‟ is guiding this research into
achieving an understanding into how CRM can help achieve an advantage for
commercial banks. Ali and Birley (1999), explain that researchers who use this
approach usually start “... with an abstract, logical relationship among concepts then
move(s) towards concrete empirical evidence”, (Neuman, 1997, p. 46)
The quantitative and deductive approach is usually contrasted to the qualitative and
inductive methods where no existing theory guides the research, but, in order to get
clear justification for the use of the quantitative methodology, an explanation of the
differences between the quantitative and qualitative methodology would be explained.
An obvious difference is that quantitative data focuses mainly on measuring social
reality, that is, the aim of quantitative research is to establish a research numerically
(Sukamolson, 2005). Researchers who use this methodology view the world as
„reality that can be objectively determined‟ (Sukamolson, 2005:4). In contrast,
qualitative methodology is more concerned with extracting a meaning from a
phenomenon and is not interested in measuring or quantifying the phenomenon
(Cavaye, 1996), in other words qualitative data is based more on words rather than
quantity while quantitative data emphasizes quantity rather than words.
As a result of this major difference, there is also a difference in the way data for each
methodology is collected. The quantitative approach adopts a more structured process
in collecting data and this can be either through a survey research, correlational
research, experimental research or causal-comparative research (Sukamolson, 2005).
In the case of the qualitative research, the data collection adopts a more open
approach, that is, the method is associated with face-to-face contact with persons in
the research setting, with observation and verbal data (Van Mannen, 1989, cited in
40
Cavaye, 1996), hence qualitative methods use interviews, participant observation,
unstructured interviews, focus groups amongst others, in the collection of data.
Qualitative methods generally have more literature than does quantitative methods.
Some advantages of qualitative methods are that it has been observed to provide rich
data about situations and real life people while also gaining an understanding of
behaviour within its „wider context‟ (De Vaus, 2002). Also qualitative methods tend
to be more flexible and fluid as it lays emphases on discovering novel or
unanticipated findings (Bryman, 1984). However, a major disadvantage of the
qualitative research is that its findings cannot be generalised and also the collection
and analysis of data can tend to be time consuming, researchers can get overwhelmed
by the volume and the different types of data collected (Cavaye, 1996).
The disadvantages of the qualitative methods lead to the strengths of the quantitative
method. Bryman (1984) observed that one of the major reasons why qualitative
research is usually criticised is because of the difficulty in carrying our „replications
of its findings‟ that is to say that in a qualitative research the findings cannot be used
by another and can only apply to that particular research. This however, makes for the
major advantage of quantitative research being that it makes for generalisation
(Bryman, 2004). Bryman 1984 asserts this advantage by stating in his book that „the
quantitative researcher is invariably concerned to establish that the results of a
particular investigation can be generalized beyond the confines of the research
location‟ (pg 34).
Quantitative methods have also been observed to be very well suited in providing
„certain types of factual, descriptive information – the hard evidence‟ (De Vaus,
2002:5). Sukamolson (2005) in his paper noted that the number of phenomena that
can be studied using the quantitative method is almost unlimited thereby making
quantitative method quite flexible. Quantitative methods also adopt a structured
approach and the issues to be focused on are decided from the outset of the study
(Bryman, 1984). Even though the quantitative method has some notable advantages, it
also has its disadvantages one important disadvantage is that it does not give an in-
depth understanding into the phenomena, that is to say that it gives a rather shallow
understanding of the phenomena understand investigation (Knight, 2002), it also gives
a picture of just the current situation rather than why things are the way they are.
41
Despite the disadvantages attributed to the quantitative methodology, the
strengths/advantages of the methodology are very much in line with the aim and
objectives of this research which is to investigate the current situation and use of
information systems in achieving a competitive advantage. In order to achieve fully,
the objectives of this research, the instrument used for the collection of data is a
structured questionnaire.
3.3 Sample Population
Before proceeding to discuss the questionnaire design and the justification for the use
of the questionnaire instrument in this research, it is necessary to define the sample
population that was used for the study.
As discussed in chapter two, the result of the consolidation of banks in Nigeria which
took place in 2005, reduced the number of commercial banks in Nigeria to twenty-
four (24). For the cause of this research, all twenty-four (24) banks were proposed to
be participants in this study, however only eighteen (18) banks returned the
questionnaires. The researcher was aware that, for a more generalised result, the entire
twenty-four (24) banks would have been the best sample population but due to time
constraints, these twenty-four (24) banks could not participate and therefore eighteen
(18) was thought convenient for the research.
The banks were informed that the respondents could be any of the following: Head of
Information Technology (IT) department, Head of Marketing Department or the Head
of Customer Services. These executives were chosen as it was assumed that people
within these positions in the banks are equipped with vast information/knowledge on
the use of customer relationship management systems and very possibly work with
the system.
Data was acquired by the use of a well structured questionnaire in order to gain a
factual understanding of the phenomenon. The questionnaire contained eighteen
questions which were designed to meet the objectives and answer the research
questions of this research. The questionnaires were sent to the bank through a contact
42
in Nigeria. This method was chosen as opposed to sending e-mails because it was
assumed that there would be a higher response rate as e-mails could easily be ignored.
The questionnaire instrument is discussed below.
3.4 Data Collection
3.4.1 Questionnaire
As mentioned in the just concluded section, the method of data collection for the
research is a structured questionnaire. Apart from the time and money constraints
faced during the research, there were other advantages of this method that formed the
basis of a valid reason why the questionnaire method of data collection was used.
These advantages would be explained.
However, it should first be noted that there are several types of questionnaires which
have been cited by several authors. Bryman (2001) indicates that there are three types
of questionnaires which are „telephone survey’, „structured face-to-face interview‟
and „self-completion questionnaire‟. Oppenheim (1992) also indicates that
questionnaires can be understood to mean, „interview schedules‟, „postal
questionnaires‟, and also „group- or self-administered questionnaire‟ which has the
same meaning as Bryman‟s „self-completion questionnaire‟. However, the type of
questionnaire which applies in the context of this research is the self-administered
questionnaire.
The basic idea behind the self-administered questionnaire is that the respondents
answer the questions while completing the questionnaire alone, (Bryman, 2004) that
is, the purpose of the study is explained at the beginning of the questionnaire and the
respondent is left alone to complete the questionnaire (Oppenheim, 1992). The main
advantages and reasons why this method of data collection was used are that the
responses are gathered in a standardised way, thereby making questionnaires more
objective than interviews (Milne, 1999), self-administered questionnaires are also
quicker to administer and can be distributed in large quantities at the same time
(Bryman, 2001). With self-administered questionnaire there is the avoidance of
43
interviewer bias (Oppenheim, 1992) which implies that the presence of an interviewer
may affect the answers that respondents give, however with the use of self-
administered questionnaires, respondents give their opinions without being affected
somehow by the interviewer. Another advantage of the use of self-administered
questionnaire is that for the respondents it is more convenient as they can complete
the questionnaire when they want and at a comfortable speed (Bryman, 2001). Most
importantly this method is less expensive (Czaja, 2005).
However, there are weaknesses to this method of data collection, one main weakness
is that the respondents „cannot prompt‟ (Bryman, 2001) meaning that since
questionnaires are standardized it is not possible to explain the questions further due
to the absence of the researcher (Milne, 1999) therefore if the respondent is having
difficulties understanding or interpreting a question that question may be left
unanswered. There is also no opportunity to probe respondents to elaborate answers
or ask a lot of questions and no opportunity to also offer explanations to aid the
respondents (Oppenheim, 1992). There is also no control over the way questions are
answered, therefore respondents can read the questionnaire as a whole before
answering (Oppenheim, 1992) and a result of this is that the questions asked no longer
become independent of each other (Bryman, 2001).
Although there are quite a number of weaknesses or disadvantages to the use of self-
administered questionnaires, it still proves the most efficient method of data collection
for achieving the objective of this research being that it would help give a factual and
descriptive understanding of the use of information systems by organisations, it also
ensures a high response rate, accurate sampling and a minimum interviewer bias
(Oppenheim, 1992). It also seems an appropriate method for the sample population
chosen.
It should still be noted however, that the researcher was aware that for a more
effective research and a more in-depth understanding of the phenomenon it would
have been a lot stronger to combine the use of a questionnaire with face-to-face
interviews as this would aid more when it comes to generalising the results, but due to
geographical, time and money constraints, the use of the two methods were not
44
possible and so the research had to be carried strictly on self-administered
questionnaire.
3.4.2 Questionnaire Design
Being that the use of a self-administered questionnaire is the method of data
collection for this research, it follows then that the instrument (questionnaire) be
designed as appropriately as possible as the answers to the research questions depend
on the information received with the use of this instrument. From subsequent
literature on questionnaire designs there were certain measures that were taken in the
design of the questionnaire. Alasuutari (1998), Bryman (2001), Oppenheim (1992),
Czaja and Blair (2005) gave some points which a researcher should have in mind
when designing a questionnaire, some of these points are bulleted below:
The researcher must have in mind the context and circumstances of the
research situation, that is, the questions should be aligned with the aims and
objectives of the research.
There should be clear instructions on about how the respondents should
responds, for example indicating where the respondent is to tick one or two
answers or another example if question 6 is yes then move to question 7.
The questions should be neutrally worded, that is, using conventional language
which is easy to understand and does not arouse strong emotions.
The presentation of the questions should not be cramped; the questions should
be as short as possible in order to encourage respondents to answer while also
increasing the response rate.
Slangs and colloquialisms should be avoided.
Appropriate choice of closed and open question should be used.
Questions and answers should be kept together. Questions should not be
separated from its respective answers, that is, the question and answers should
follow each other on the same page as opposed to the question being on one
page and the answers on another page.
Each question should contain only one idea; two edged questions should be
avoided.
45
Classification and analysis of the data should be given thought to prior to
distributing the questionnaire.
Questions should be unadorned, uncomplicated and should be explicit and
single-minded
These guidelines were carefully applied and followed during the design of the
questionnaire in order to develop an effective instrument for the data collection for the
research.
In order to further explain the questionnaire it is also imperative to know the type of
questions that were use, this is in terms of the questions being either open questions or
closed questions. These types of questions would be explained for a better
understanding of the two terms.
With open questions, respondents can answer questions however they like (Bryman,
2001), that is to say that respondents are not given explicit answer choices (Czaja and
Blair, 2005) to select from, therefore the answers have to be recorded in full
(Oppenheim, 1992). Oppenheim explains further stating that the amount of space or
number of lines provided for the answer would determine the length of the answers
obtained. This sort of questions come with advantages, one being that respondents do
not have to answer in line with the options provided for them but can answer in their
own terms (Bryman, 2001) thereby allowing their thoughts flow freely. Also, open
questions allow unusual responses to be derived while helping the researcher explore
areas of which he/she has limited knowledge (Bryman, 2001). However, one major
disadvantage of open questions is that they are often difficult to analyse, the answers
have to be coded and this can be time consuming (Bryman, 2001, Czaja and Blair,
2005).
On the contrary, closed questions are questions that are presented with a set of fixed
alternatives of which respondents have to choose an answer they see as most
appropriate (Bryman, 2001). With closed questions, respondents are usually asked to
tick or underline their chosen answer(s) and questions of this sort can have simple
alternatives for example, „yes or no‟ Oppenheim (1992). Closed questions allow
researchers restrict questions to match the research objectives (Czaja and Blair, 2005).
46
The strengths of open questions are that answers received are easy to process while
also enhancing the comparability of answers (Bryman, 2001). Bryman also observes
that closed questions may help in clarifying the meaning of a question for the
respondents in a case whereby the question is not clear to the respondent, closed
questions are also quicker and easier to answer and „quantification is straightforward‟
(Oppenheim, 1992:114) On the other hand, a major drawback to this type of question
is that there may be a loss of rapport (Oppenheim, 1992), meaning that respondents
may feel irritated because they feel the available answers do not justly apply to how
they really feel. Also, with closed questions there is a loss of spontaneity and
expressiveness from respondents (Oppenheim, 1992 and Bryman, 2001).
For purposes of this research, closed type questions were mostly adopted mainly
because of the advantages outlined above. Some important considerations were taken
when developing the questionnaire, and the sample population was put in mind, due
to the chosen population, closed type questions were more appropriate in order to get
straightforward answers and to save time for the sample population being that their
work schedule is usually tight. However there was still the use of one or two open
type questions, this was necessary, for example, one of the objectives of the research
was to get a definition of CRM as it relates to the various banks, and this objective
can only be achieved with the use of open questions that allow the respondents give a
definition in their own words.
Overall, when designing the questionnaire all the above stated guidelines and types of
questions were seriously thought about in order to come out with the best possible
instrument that would help in achieving the research‟s aims and objectives. The
details of the questionnaire are discussed below.
3.4.3 Detailed Questionnaire
As mentioned earlier, the questionnaire consisted of eighteen (18) questions which
were aimed at achieving the objectives of the research. Seventeen (17) of these
questions were closed questions and one (1) was an open question, the open question
was designed in order to get an understanding of the definition of a customer
47
relationship management to the banks. A copy of the questionnaire can be found in
the Appendix however, it is imperative to discuss the content of the questionnaire.
Q1 – Q4 dealt with the background information of the banks and the position of the
respondent in the bank. These questions were designed to help understand the size of
the bank and also to find out if the banks adequately apply information technology in
their business. These questions are necessary because information systems in the
context of this research deal with computerised information systems, therefore for a
respondent to adequately answer questions on the use of customer relations system the
respondent‟s bank must use information technology and have a well networked
business.
Q5 – Q7 - these questions were asked with the aim of gaining an understanding as to
the means through which these banks acquire and retain their customers and which
medium they feel is the most effective. These questions (Q1-Q7) are classified under
section A which basically is about background information of these banks.
The next six (6) questions were set as the section B of the questionnaire. However Q8
–Q9 dealt specifically in finding out if these banks use information systems in the
general business activity and more specifically for customer relations. While
respondents gave answers to these questions, they were also expected to state what
type of information systems they used for customer relations. These set of questions
were aimed at answering the research question and objective of finding out what types
of information systems can be used in customer relations.
Q10 which can be classified as the only open question had the aim of getting a
definition of customer relations management from the bank, in order to know or
understand the context in which these banks use a customer relationship management
system.
Q11 – Q13 were designed in order to get the importance of a customer relations
system to the banks, that is, its importance in the growth of the bank as pertains to
customer acquisition, retention or loyalty and in which of these areas their customer
relationship system is of the utmost importance. However for Q11, a Likert scale was
48
used in order to assess the importance of customer relations system on the growth of
the bank. According to Bell (1999), the Likert scale is appropriate for measuring
attitudes. For this question a 5-point Likert scale was used (i.e. 1=not important,
2=little importance, 3=some importance, 4=great importance and 5=very great
importance).
The last 5 questions were classified under section C. This section was designed to
note the degree to which using a customer relation system can lead to a competitive
advantage. Q15 was aimed at identifying in which area of customer service
(acquisition, retention or loyalty) the customer relations systems have assisted the
bank in achieving an edge over other banks. Q16 was aimed at finding the degree to
which the CRM system has given the bank a general advantage of its rivals.
From the literature on information systems and competitive advantage in chapter two
(2), it was gathered that for an organisation to use information systems in gaining a
competitive advantage, its information system strategy must be aligned with its
overall business strategy. Therefore, Q18‟s aim was to find out if these banks
strategically align their information systems strategy with their bank‟s overall
business strategy and also to find out the degree to which the two are aligned, in
addition the respondents were asked to give an estimate percentage to indicate the
degree.
3.5 Conclusion
This chapter aimed at giving an understanding and justifications as to the
methodology used during the research study. The research methodology was that of a
quantitative nature with a deductive approach. The sample population were eighteen
(18) banks out of the 24 commercial banks in Nigeria and data was collected through
the use of a structured questionnaire instrument which consisted of mostly closed
questions that were designed to answer the research questions and meet the objectives
of the study. The next chapter focuses on the analysis of the data collected.
49
4. RESEARCH FINDINGS
4.1 Introduction
This chapter presents the findings of the small-scale survey administered to varied
respondents from eighteen (18) commercial banks in Nigeria in order to achieve the
objectives of this research and also to answer the research questions. As mentioned
earlier, the questionnaire could only be administered to eighteen (18) banks, as
opposed to the entire twenty-four (24) commercial banks in Nigeria, due to time
constraints.
4.2 Respondents and Bank Profile
4.2.1 Respondents Categorized by Position
All respondents were from the banking industry but not all respondents held the same
positions in the bank. As stated previously, there were particular positions which were
thought to hold more information about the use of information systems such as a
customer relationship system and these positions were the Head of the IT department,
Head of the Marketing department and Head of Customer Services department.
38.89%
22.22%
27.78%
11.11%
Head of IT department
Head of Marketing department
Head of Customer Services
Other
Chart 4.1 Respondents by Position
Chart 4. 1 Respondents by position
50
Chart 4.1 indicates that majority (38.89% (n=7/18)) of the respondents held the
position of Head of the IT departments while the least (11.11% (n=2/18)) consisted of
respondents who were not in any of the category but had knowledge about the
customer relationship system. These other respondents held positions such as
Electronic Banking Head and Head of Infrastructure Support.
4.2.2 Banks Categorised by Branches
Profiling the banks according to the number of branches attributed to each bank was
necessary as relates to information systems or information technology and also
imperative in getting an understanding as to how these banks deal with customers
across the nation.
Chart 4.2: Approximate number of branches to a Bank
Above 500Between 300 and 500
Between 200 and 300
Between 100 and 200
Between 50 and 100
Less than 50
Nu
mb
er
6
5
4
3
2
1
0
Chart 4. 2 Approximate number of branches to a bank
The chart above indicates that most banks in Nigeria today have branches between
100 and 200. This may possibly be as a result of the merger amongst most banks
which took place in 2005. Prior to the reforms in 2005 most of the existing banks had
limited branches across the nation. From the chart also, there is an indication of a
51
bank with branches above 500, the United Bank of Africa Plc (UBA) which was
established in 1961. UBA was before 2005, the third largest bank in Nigeria and after
the reforms, it formed a merger with the fifth largest bank (Standard Trust Bank) in
Nigeria therefore increasing the number of its existing bank branches (UBA group,
2008). The bank with the least number of bank branches, Citibank, is one out of the
few foreign banks which exist in Nigeria today and these foreign banks generally
don‟t have branches of up to thirty (30).
4.2.3 Network of Bank Branches
Chart 4.3: Network of all Branches
Yes
Nu
mb
er
6
5
4
3
2
1
0
Above 500
Between 300 and 500
Between 200 and 300
Between 100 and 200
Between 50 and 100
Less than 50
Approximate number of branches to a Bank
Chart 4. 3 Network of all Branches
Concerning the network of all bank branches, all respondents indicated that their
banks‟ branches were networked that is, all their bank branches are linked up with
computers, the internet and various IT equipment that can aid in communication and
the sharing of information between branches. This use of IT is consistent with
52
previous literatures that observe the increase in the use of IT for banking purposes in
Nigeria. The chart also shows that despite the number of branches a bank has, there is
still the availability of networking between branches.
4.2.4 Banks’ Medium of Acquiring Customers
On the banks‟ preferred medium of customer acquisitions, the respondents were asked
the preferred medium through which their bank was likely to market its product to
customers, the options were either through telephones, text messages, E-mails, face-
to-face communication, advertisement or other means, the chart below illustrates the
responses received
5.56%
38.89%
11.11%
16.67%
22.22%
5.56%
other
All of the above
Online advertisement
Advertisement (Radio, Television or newspaper)
Face-to-face communication
Telephones
Bank's preferred Meduim for
marketing its Products
Chart 4. 4: Banks‟ Preferred Medium for marketing its Products
The chart above indicates that majority (38.89% (n=7/18)) of the banks do not have
one preferred medium of marketing their products in order to acquire customers but
would rather use all the medium such as, Telephones, face-to-face communication,
advertisements (through radio, televisions or newspaper) as well as online
advertisements. Also, 22.22% (n=4/18) of the banks indicated that they used face-to-
face communication, while 16.67% (n=3/18) and 11.11% (n=2/18) indicated
53
Advertisements (through radio, television or newspaper) and online advertisement
respectively. However the least medium of marketing products utilized to acquire
customers was telephones and other (where „other‟ medium/means was stated as
Electronic Banking Channels).
4.2.5 Most effective medium
The respondents were then asked which medium could be classified as the most
effective medium in marketing its products and acquiring customers
Chart 4.5: Most effective medium of attracting customers
Online AdvertisementsGood Service DeliveryFace-to-Face Communication
Advertisement (Radio, Television or newspaper)
Nu
mb
er
8
6
4
2
0
Chart 4. 5 Most effective medium of attracting customers
From the chart, the effective medium identified by the banks in attracting and
marketing their products to prospective customers is through advertisements (radio,
television of newspaper), face-to-face communication, good service delivery and
online advertisements. However, the most effective medium according to the
54
respondents is face-to-face communication followed by online and offline
advertisements.
4.2.6 Banks’ Medium of Maintaining Customer Relationships
As regards the maintaining of customer relationships, the respondents indentified
similar ways through which their banks‟ maintain relationships with their acquired
customers. The table below illustrates this
Bank's medium of Maintaining
Customer Relationships
Number of Respondents
E-mails, Text messages and Telephones 7
Face-to-Face Communications 3
Use of Relationship Managers 8
Figure 4. 1 Medium of Maintaining Customer Relationships
The common medium of maintaining customer relationships by these banks are
through e-mails, face-to-face communications and the use of relationship managers.
However, the main medium of maintaining relationships is through the use of
relationship managers. Symons (2005) states that relationship managers are in a
„unique position that straddles IT and business‟ also they are to encourage an
atmosphere of trust, openness and communication and ensure that their clients feel
involved, that their views are important and acted upon. A relationship manager can
be seen as a customer‟s business best friend.
55
4.3 Information Systems use for Customer Relationship
Management
This section analyses the data received from the respondents based on the use of
information systems by the banks and also the type, role and importance of a
customer relationship management system.
4.3.1 Use of Information Systems
As a result of the growing rate in the use of IT and also the idea of well networked
branches, it was therefore imperative to find out if these banks applied information
systems in their general business activities and specifically in their customer
relationship management.
Chart 4.6 Use of Information Systems
Yes
Nu
mb
er
20
15
10
5
0
No
Yes
Use of a specific information systems
for customer relations
Chart 4. 6 Use of Information Systems
From the chart above it can be observed that all the banks stated that they used
information systems in their general business activities, however all but one bank said
they used a specific information system for managing customer relationships. These
banks were asked to identify what type of system they used in managing relationships
with customers, this would be categorised below.
56
4.3.2 Type of CRM systems used by the Banks
Respondents who indicated that their bank used a particular information system in
managing customer relationships were further asked to state the particular customer
relationship system which their bank uses. The question was asked in order to find out
the type of CRM systems which the Nigeria commercial banks use. The following
chart show the responses from the respondents
Chart 4.7: Type of CRM systems used by the banks
Sage CRMSAP CRMOracle SiebelFlexcube
Cou
nt
6
5
4
3
2
1
0
Chart 4. 7 Type of CRM systems used by Nigerian Commercial Banks
The chart above shows the four main CRM systems used by the commercial banks in
Nigeria. These are Flexcube, Oracle Siebel, SAP CRM and Sage CRM. The chart also
shows that the most popular system used amongst the seventeen (one respondent
indicated that his bank used no information system for its customer relationship
management) is the Oracle Siebel.
4.3.3 Importance of a Customer Relationship Management System
On the importance of the use of a customer relationship management system,
respondents were asked to rate how important the use of such a system is on the
growth of the bank, the tool used in rating this was a scale of one to five, 1 being „not
important „and 5 being „very great importance‟. The chart below illustrates the results
57
738.89%
738.89%
422.22%
Very Great Importance
Great Importance
Some Importance
Importance of CRM system in
Bank growth
Chart 4. 8 Importance of CRM system on Bank‟s Growth
From the above diagram, it can be observed that there was an equal balance of the
respondents who reported that a customer relationship management system is of a
„very great importance‟ (38.89% (n=7/18)) to the growth of their bank and those who
also reported that it was of „great importance‟ (38.89% (n=7/18)), while the other
respondents (22.22% (n=4/18) responded that it was of some importance. However
being that no respondent choose options 1 and 2 („Not important‟ and „little
important‟) may imply that the use of a CRM system in banks are on a high rate,
really advantageous for the banks.
4.3.4 Areas in which CRM system has been used to manage customer
relations
In order to find out how important a customer relationship management system is to
the growth of the bank, respondents were further asked the areas in which their CRM
system has being used by their bank in managing relations with their customers.
These areas were identified as Customer Acquisition, Customer Retention and
Customer Loyalty; the respondents could select more than one area as it applied to the
banks.
58
Chart 4.9 Areas in which the banks use CRM system in managaing relationships
Customer Retention and
Customer Loyalty only
Customer Aquisition and
Customer loyalty only
Cusotmer Acquisition
and Customer Retention only
All of the above
Customer loyalty
Customer Retention
Customer Acquisition
Nu
mb
er
8
6
4
2
0
Chart 4. 9 Areas in which Nigerian banks use CRM systems in managing customer relationships
From the chart above, it is evident that majority of the respondents said that CRM
system has being used to manage relationships with their customer in all three areas
(customer acquisition, customer retention and customer loyalty) while others (second
highest) also noted that it has being used in „customer retention‟ and „customer
loyalty‟ only.
4.3.5 Areas in which a CRM system has being of ‘great help’ in managing
their customer relationships
After finding out what areas these banks use their CRM system for customer
relationships, they were further asked which out of all the areas has the use of their
CRM system being of more success to them. That is, of all the areas identified
(customer acquisition, customer retention and customer loyalty) which area/s has the
use of a CRM system being of more benefit.
59
Chart 4.10 Most successful Area
Customer Retention and
Customer Loyalty
Customer Acquisition and
Customer retention
All of the aboveCustomer Loyalty
Customer Retention
Customer Acquisition
Nu
mb
er
6
5
4
3
2
1
0
316.67%
15.56%
633.33%
211.11%
422.22%
211.11%
Chart 4. 10 Most Successful Areas
The chart indicates that with most (33.33% (n=6/18)) of the banks in this survey, the
use of a CRM system has been very successful to them in all the areas of customer
acquisition, customer retention and customer loyalty, while following the majority are
those who identified that the use of a CRM system was more successful to their banks
in the area of „customer retention‟. For „customer retention‟ and „customer loyalty‟
only three respondents thought those areas to be the most successful to their banks,
while the number of those who believed that a CRM system was more successful to
their banks in the area of „customer acquisition‟ and those who also thought it to be
successful in the area of „customer loyalty‟ were equal at 11.11% (n=2/18 each).
4.4 CRM system and Competitive Advantage
This section is aimed at analysing the data received from the last section of the
questionnaire. The questions asked were designed in order to understand the areas in
which the use of a CRM system in these banks has given them an advantage over rival
banks, it also analyses the degree to which it (CRM system) has given the banks a
60
lead or an advantage over other banks. The degree to which the banks‟ information
systems strategy is aligned with the overall business strategy was also investigated.
4.4.1 Number of Years the Banks has used a Customer Relationship
System
As a result of gaining an understanding as to the use of a CRM system in achieving a
competitive advantage, respondents were asked to state the number of years in which
they have used a CRM system. The result of this finding can help in understand the
real importance of CRM as regards competitive advantage especially in the sense of
time, that is, how soon did these banks start using a CRM system and how soon were
the advantages noticed.
Chart 4.11 Number of Years using a CRM system
10 yearsbetween 5 years and 10 years
less than 5 years5 years
Nu
mb
er
6
4
2
0
Chart 4. 11 Number of years using a CRM system
It can be noted from the chart above that most Nigerian commercial banks from the
survey (n=7/18) have used a CRM system for less than five years, while the number
of banks that have used a CRM system for 5 years and between 5 and 10 years are of
61
equal number (n=5/18), however, one respondents identifies that his/her bank has
used a CRM system for 10 years. It should also be observed that none of these banks
has used a CRM system for more than 10 years thereby making the average number
of years less than five (5).
4.4.2 Areas in which the use of a CRM system has led to a competitive
advantage
Using the same variables used in the last section, which is, customer acquisition,
customer retention and customer loyalty, respondents were asked to identify in which
of those areas their bank had a competitive advantage while using a CRM system. The
chart below shows the findings.
741.18%
423.53%
529.41%
15.88%
All of the above
Customer Loyalty
Customer Retention
Customer Acquisition
Competitive Advantage
Chart 4. 12 Areas which use of a CRM system has helped gained Competitive
Advantage
The above chart also indicates that 41.18% (n=7/17) of the banks responded to the
fact that using a CRM system has helped them gain a competitive advantage in all of
the areas of customer acquisition, retention and loyalty, while only 1 of the banks
noted that the using a CRM system has given an advantage in the area of customer
62
acquisition. Amongst the other 9 banks, 29.41% (n=5/17) have gained an advantage in
customer retention while using the system and 23.23% (n=4/17) have gained an
advantage in the area of customer loyalty.
4.4.3 Degree of Competitive Advantage received from using a CRM system
Respondents were also asked to rate the degree to which using a CRM system has
given their bank a competitive lead. A scale of 1 to 4 was used in determining the
degree. 1 being „No degree‟ and 4 being „a very great degree‟
Chart 4.13 Degree on competitive advantage
A very great degreeA great degreeA minimal degree
Resp
on
den
ts
8
6
4
2
0
38.89%
44.44%
16.67%
Chart 4. 13 Degree on Competitive Advantage
From the results received, 44.44% (n=8/18) of the respondents agreed that using a
CRM system has, to „a great degree‟, assisted their bank in achieving a competitive
advantage, while only 38.89% (n=7/18) contested to the fact that using a CRM system
has to, „a very great degree‟, given their bank a lead ahead of competitors, while
16.67% (n=3/18) of the respondents indicated that using a CRM system gave them a
lead but only at „a minimal degree‟.
63
4.4.4 Meeting the needs of Customers across the Country using a CRM
system
Respondents were also asked to state the extent to which using a CRM system has
assisted their bank in serving customers in different parts of the country and
customers with different needs. The result was also necessary for assessing
competitive advantage due to the fact that a bank which is able to meet the needs of
its customers nationwide can achieve an advantage over its rivals.
27.78%
38.89%
33.33%
Very great extent
Great Extent
Some extent
Use of Information System in serving
customers nationwide
Chart 4. 14 Extent to which CRM systems can be used to serve customers nationwide
In serving customers nationwide a high percentage (38.89% (n=7/18)) of respondents,
as illustrated in the diagram above, agreed that the use of a CRM system by their
banks has to a „great extent‟ assisted their bank in serving customers across the
country, while 33.33% (n=6/18) of respondents reported that it has assisted their
banks to „some extent‟. Surprisingly only 27.78% (n=5/18) agreed that the use of a
CRM system has assisted their bank to a „very great degree‟ in the area of serving
customers nationwide.
64
4.4.5 Alignment of CRM strategy with Banks’ Business Strategy
As was reviewed in the literature, in order for an organisation to achieve a
competitive advantage, there has to be an alignment in the organisation‟s overall
business strategy and its information systems strategy. Therefore, this result was to
find out to what degree the banks‟ business strategy is aligned with their customer
relationship system strategy.
Chart 4.15 Alignment of a bank's business strategy with customer relations strategy
A very great degreeA great degree
Re
sp
on
den
ts
12
10
8
6
4
2
0
738.89%
1161.11%
Chart 4. 15 Alignment of a bank’s business strategy with customer relations strategy
From the above chart we note that 61.11% (n=11/18) of the respondents agreed that
an alignment between their bank‟s business strategy and its CRM system strategy,
existed to „a great degree‟ while 38.89% (n=7/18) said the alignment was to „a very
great degree.
65
4.5 Conclusion
This chapter presented the findings and gave an analysis of the result received from
the questionnaire survey but did not relate the results to the objectives or research
questions of this dissertation. However the following chapter aims to discuss the
findings.
66
5. ANALYSIS AND DISCUSSIONS
5.1 Introduction
The previous chapter presented the research findings. However, in order to address
the objectives of this research, the data findings would be applied systematically to
answer the research questions stated in chapter one, which entails finding out the type
of CRM systems the commercial banks in Nigeria use in managing customer relations,
the meaning of a customer relationship management given by the various banks in
order to understand the context in which these banks use CRM systems and also to
find out how important the use of such a system is to the competitive position of the
banks.
The literature review has given some insight to the general use of information systems
for competitive advantage and more specifically the importance and role of a good
customer relationship management system in any organisation. However there is no
literature yet on the use of a CRM system in the financial sector in the commercial
banks in Nigeria, hopefully the discussions from this chapter would help in bridging
the gap.
5.2 What does a customer relationship management (CRM) mean in
relation to banks?
While reviewing the literature on CRM it was observed that customer relationship
management has no clear cut definition but rather the definition attributed to the term
(CRM) varied amongst authors and organisations, the definitions given to the term is
usually based on the context in which it is used. As a result of this it was imperative to
find out the context in which the commercial banks use CRM. The definitions which
some respondents (not all respondents gave definitions) gave and also which
illustrates the context in which CRM is used by the banks, are stated below:
67
1. “It is an effective and efficient way by which the bank meets the expectations
of its customers at the appropriate time.”
2. “Customer relationship management refers to all efforts and activities geared
toward creating and sustaining relationships for mutual advantage.”
3. “CRM is a process of anticipating, analysing and meeting the needs of
customers to meet their perception of quality service.”
4. “CRM is the strategic use of technology in order to meet the needs of our
customers.”
5. “A system that helps us in managing our customers better and also helps in
creating products that meet their requirements.”
6. “CRM is an automated solution that helps the bank in managing its customers
more efficiently and effectively and also enabling cross-selling of products.”
Also, as mentioned in the literature review chapter, Valsecchi et al., (2007) classified
the different definitions of CRM into three approaches which are the „technology
approach‟, the „conceptual approach‟ and the „process approach‟. The technology
approach considers CRM to be a data-processing instrument to support marketing
activities; the conceptual approach considers CRM as a philosophy and as a complex
strategy where a firm organizes its structure in a way as to strengthen the relationship
with its customers while discarding the idea of CRM as a data collection instrument
only; the process approach involves linking of client knowledge and management.
Therefore in order to fully understand the meaning as relates to the Nigerian
commercial banks, these definitions would be classified according to Valsecchi et al‟s
three approaches.
Technology Approach Conceptual Approach Process Approach
Definitions 4 and 6 2 1, 3 and 5
Figure 5. 1Classification of Definitions
68
These definitions prove that there is no clear cut definition of CRM as the Nigerian
commercial banks differ in their context and use of the system. This it therefore in
line with what the literature says, which is that the term can only be defined in the
context in which it is to be used thereby have different meanings to different
organisations and authors as well.
5.3 How can a customer relations information system be used in
achieving a competitive advantage?
Previous research imply that having an information system that functions
independently of an organisation‟s overall business strategy can lead to a major
disadvantage for the organisation, which means that in order to get the most out of a
CRM system, every organisation has to align its business strategy with its CRM
system strategy. This research finding tends to support this.
Respondents were asked to indicate to what degree the use of their CRM system has
assisted in giving their bank a competitive lead, the indicators were either of the
following, „no degree‟, „a minimal degree‟, „a great degree‟ and „a very great degree‟.
The responses received on „a great degree‟ and „a very great degree‟ cumulatively,
was 83.33% (n=15/18). Also in affirming the alignment of the banks‟ business
strategy and its CRM system strategy, the responses received on „a great degree‟ and
„a very great degree‟ cumulatively, was a 100%
Chart 5.1 Responses on Degree of Competitive Advantage and Alignment
69
Therefore, in order for these banks to realise the full potential of an information
system such as a CRM system, their information system strategy should be positioned
in such a way that it complements the bank‟s overall business strategy as doing this
can lead to proper and quality performance which in turn can lead to a good
competitive positioning of the banks.
However, from the responses received, it is clear that these banks are aware that in
order to achieve a competitive advantage through the use of a CRM system, both
strategies have to run together. It also indicates that these banks identify that a quality
customer service has its advantages, being that customers are their most important
assets and in order to do well and be above their rivals, these banks ought to ensure
that their customers are treated very well.
5.4 What customer relations systems are Nigerian commercial
banks using in achieving a good customer relationship?
Having identified that an important key to the growth of any business is „customers‟,
acquiring or retaining customers is imperative but the critical factor is being able to
manage the relationship between an organisation and its customers. To this effect and
for a better understanding of the competitive nature of using an information system
such as a CRM system, it is highly important to understand what systems or
applications are available for managing relationships with customers.
As was observed earlier, information technology is relatively new to developing
countries like Nigeria but ever since it‟s advent into the country; most
organisations/financial institutions have been able to realise the advantages and the
power of using such technology as it makes work easier to conduct and in a more
organised way. From the last research question we realise that the concept of
information system or more specifically customer relationship management system is
no longer a new term to most commercial banks in Nigeria. This may be as a result of
the recent reforms on financial institutions made by the Nigerian government, which
70
has led these banks to being more innovative so as to increase competition amongst
rivals.
The findings show that in order for a bank to be competitive, its information system
strategy has to be aligned with its business strategy, however, that is not all. For these
banks, the type of customer relationship management system which they use plays a
huge role in also determining the competitive position of the banks. The findings in
the previous chapter indicates the four types of CRM system which these banks use
and these are, „Flexcube‟, „Oracle Siebel‟, „SAP CRM‟ and „SAGE CRM‟ with
Oracle Siebel and SAP CRM as the most used CRM applications.
Oracle Siebel can be seen as one of the top CRM applications globally. A report from
Datamonitor Survey (2007) confirms that oracle Siebel „is a clear market leader with
an impressively versatile and highly competitive CRM portfolio‟. Datamonitor further
explains that its lead in the market is particularly commanding in „analytics, strategy
and execution‟ and also leads in sales force automation and marketing all these make
its CRM solution particularly suitable for use on industries such as financial services
(Datamonitor, 2007).
Datamonitor also state that SAP „is also recommended as an automatic shortlist
choice due to the excellence of its CRM modules and dominant impact on the market‟.
With SAP its CRM system is usually deployed as part of its enterprise application
suite. It is a well rounded product, mature and its CRM strategy is executed very well,
though its marketing and sales force functionality could be improved (Datamonitor,
2007).
Therefore the findings indicate that as most banks realise the need to be competitive,
they are also ensuring to use the top CRM applications in the market. Also, with the
indication of the extent to which they have a competitive lead against rival banks, it
shows that these banks are making use of the right CRM systems and also applying it
strategically in order to reap its eventual advantages.
71
5.5 In what areas of customer relationships (acquisition, retention
and loyalty) is the use of a CRM system more effective?
Two of the main roles of a CRM system are customer acquisition and customer
retention. If a well implemented CRM system is successful in these two roles it can in
turn lead to customer loyalty (a customer‟s continued relationship with the bank).
In order to answer the above mentioned research question, Q12, Q13 and Q15 were
designed, (Questionnaire in appendix). From the research findings, the leading
response to all three questions were clearly „all of the above‟ (which were customer
acquisition, customer retention and customer loyalty).
However, when respondents were asked to indicate which area the use of a CRM
system has been most successful in their bank (chart 4.10), the second highest
response (after „all of the above‟) was „customer retention‟ (only) followed by
„customer retention and customer loyalty‟ (grouped together). When respondents were
also asked in what areas their bank uses CRM system in managing relationships (chart
4.9) the second highest response was in „customer retention and customer loyalty‟
(grouped together). Thirdly, when asked in what areas has the use of a CRM system
helped in achieving a competitive advantage, the second highest response was also on
„customer retention and customer acquisition‟ (as a group) and the lowest being
„customer acquisition‟.
The purpose of the above analysis is to indicate that despite the fact that all questions
received an answer of „all of the above‟ (which might have been influenced because it
was amongst the options) the following lead responses was not in the area of
„customer acquisition‟. An explanation for this would be in the result of „the most
effective medium of attracting customer‟ which was through „face-to-face
communication‟. Most banks indicated that face-to-face communication was the most
effective medium in which they use to market their products thereby acquiring
customers. As is the case with most financial institutions in Nigeria today, a lot of
contact with customers are still made through face-to-face communication and even
though the use of information technology is on the rise customers‟ sometimes feel
72
physical appearance is still a lot stronger than, for example, online-banking. Despite
this, banks are still growing strong in their use of information technology or
information systems in managing their customers, to this, respondents state that their
banks preferred use of maintaining relationship is through the use of relationship
managers and by using information technology such as e-mails, text messages and
telephones.
However, it is safe to say that with Nigerian commercial banks today their CRM
system is more useful in maintaining customer relationships (customer retention) and
in improving customer loyalty as opposed to acquiring customers.
5.6 How important is a Customer relationship management to the
progress of a bank?
From past research on CRM systems use in financial services institution, it was
gathered that these institutions are facing „fierce and aggressive competition‟ and as a
result financial organisations have to restructure in order to enhance their chances of
growth and survival. The relationship which these institutions hold with their
customers is imperative for the growth and survival of such a business.
From the findings it was observed that respondents attested to the fact that customers
are important to the growth of their banks, therefore on the importance of CRM
system (chart 4.8) respondents confirmed that it was of „very great importance‟ and
„great importance‟.
5.7 Conclusions
In conclusion of this chapter, it is quite apparent from the findings, that the use of a
CRM system by the Nigerian commercial banks is very impressive. These banks have
realised the advantages that can be gained by using such a system, and even more
encouraging is the use of top CRM applications in order to maximise the real benefits
that can be derived by use of a CRM system.
73
6. CONCLUSIONS
The main aim of this research was to understand the strategic use of information
systems in achieving a competitive advantage. Specifically, the research aimed to
providing an understanding of this through the use of a customer relationship
management system by commercial banks in Nigeria.
In reviewing the literature for this research it was observed that the commercial banks
in Nigeria are currently competing to gain and maintain market share as a result of the
changing nature of the financial sector in the country which took place in 2005. These
banks are constantly competing and devising plans that aim to put them above their
rivals. Customers as well tend to lean towards banks that offer quality services and at
the same time respond their needs. As a result, these banks are applying the use of
information technology in every area of their business in order to improve the quality
of service which they offer. Hence, the increase in the use of information technology
by these banks, as it is assumed to be a necessary tool for remaining in the
competitive scene.
The research also revealed that as financial institutions, their main assets are the
customers and therefore these customers are meant to be treated very well, and in a
way that services are structured and tailored to fit the varied needs of the customers
while also providing quality service. In this modern world of information technology,
CRM systems have been noted as admirable solution.
From what has been observed, CRM has no specific definitions but however, it plays
the same roles for any company or organisation that adopts it. These roles include
customer acquisition, customer retention, relationship management and sales force
automation. The characteristics of a well implemented CRM include its power to
„interact and deliver‟, „acquire and retain‟, „develop and customize‟ and „understand
and differentiate‟; these characteristics thereby classify CRM as an important system
for financial institutions whose business is mainly customer-related.
74
This research also employed a quantitative method which used a well structured
questionnaire as a tool for data collection. This data received from the respondents
well further analysed in order to reveal the findings.
From the definitions of CRM which respondents gave, it was observed that the
Nigeria commercial banks are well aware of the importance of a CRM system and its
advantages to the banks. Also these banks know that in order for a CRM system to
lead to a competitive advantage, its strategy has to work in line the banks‟ overall
business strategy. To this effect, the research findings show that these banks‟
endeavour to align their business strategy with their CRM strategy, thereby leading to
a competitive advantage for the banks.
In understanding the areas of customer acquisition, customer retention and customer
loyalty which the use of a CRM system is the most useful to these banks, it was
discovered that in the case of acquiring customers Nigerian commercial banks tend to
find face-to-face communication to be the most effective medium as opposed to using
technology, on the other hand, in the case of maintaining relationships and improving
customer loyalty with acquired customers, these banks make use of relationship
managers (one of the roles of CRM) and through the use information technology such
as e-mails and text messages.
The findings of this research also indicated the importance of a CRM system to the
progress of a bank while also identifying the link between a quality customer service
and its advantages to the banks. This was made clear in the role which CRM systems
play in these banks such as in assisting to manage customers‟ accounts and providing
useful information to customers so that there is a sense of loyalty from customers to
their bank and when this is achieved a bank can then be seen as competitive.
The findings also identified the main CRM systems which are used by these banks,
(Flexcube, Sage CRM, Oracle Siebel and SAP CRM) are also internationally used.
To an extent the research on a whole achieved some of the objectives it set out to
achieve and an understanding about information system in general and more
specifically CRM system‟s use in achieving a competitive advantage was made clear
75
to the researcher. The research was a learning process which clarified a lot of issues
which the researcher was not clear about before embarking on the study. However due
to certain limitations the findings may not be generalized, these limitations would be
explained below.
6.1 Limitations
The major limitation which was suffered by this research was that of time and
geographical constraint. Due to geographical constraints interviews could not be
conducted in order to bolster the findings received from the questionnaire instrument.
The inclusion of interviews would have strengthened the findings and given a more
in-depth understanding about the phenomenon. Also in relation to time, not all 24
commercial banks in Nigeria were used for this research as was the earlier plan, but
due to time and the low rate of response, only 18 banks were used for this research.
Also in order to make the study more comparative, it was thought to get the opinions
of all three banks personnel (Head of IT, Head of Customer Services and Head of
Marketing) which were thought to have more knowledge about the use of a CRM
system. However most of these bank personnel were not available at the time of this
research as most of them were on holiday, therefore this vision was not possible.
Another limitation could be noticed in the research instrument and overall
methodology. The questionnaire used could have included more questions that reflect
particular roles of a CRM system and also should have included more open questions
so as to get the true feelings of the respondents based on the phenomenon.
6.2 Recommendations
On the basis of the research, it has been observed that Nigerian commercial banks
have the requisite knowledge of information systems and its strategic use for
competitive advantage however; it is time these banks focus or tune and improve their
knowledge and use of information systems in a direction that enables them become
more competitive on the global front.
76
From previous research it can be deduced that information systems has been used
strategically in a way as to make organisations across the globe become more
internationally competitive. Today, the Nigerian commercial banks tend to have a
good track record nationally as opposed to previous years and this can be attributed to
the increase in the use of information technology, therefore applying this strategically
in order to become internationally competitive should become a priority for these
banks.
As a result of this and considering the limitations, further research on this study
should focus on the use or potential use of information systems by Nigerian
commercial banks, to achieve a competitive position on the global front.
Word Count: 18, 845
77
Bibliography
Adekanye, F. A. (1990) “Major developments and Innovations in the Nigerian
Financial Environment since 1960” Innovations, Technology and the Nigerian
Finance Sector 13-19
Adeoti-Adekeye, W.B. (1997) “The importance of management information
systems” Journal of the Library Review 46 (5), 318-327
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/Em
eraldFullTextArticle/Articles/0350460502.html [Assessed July 23, 2008]
Alasuutari, P. (1998). An Invitation to Social Research Sage Publications: London
Ali, H. and Birley, S. (1999) “Integrating deductive and inductive approaches in a
study of new ventures and customer perceived risk” Journal of Qualitative Market
Research: An International Journal 2 (2), 103 – 110
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/Em
eraldFullTextArticle/Articles/2160020205.html [Assessed July 25th, 2008]
Anandarajan, M. et al., (2000) “Technology acceptance in the banking industry: A
perspective from a less developed country”. Journal of Information Technology and
People Vol 13 (4), pg 298-312
Avison, D. et al., (2004) “Using and validating the strategic alignment model”
Journal of Strategic Information Systems Vol 13, pg 223 – 246 [Online]
www.elsevier.com/locate/jsis [Assessed January 7, 2008]
Avison, D. and Fitzgerald, G. (2003) Information Systems Development:
Methodologies, Techniques and Tools. McGraw Hill – United Kingdom.
Barney, J. B. (2007). Gaining and Sustaining Competitive Advantage. New Jersey:
Prentice Hall.
78
Beck, T. et al, (2005) “Bank privatization and performance: Empirical evidence from
Nigeria” Journal of Banking and Finance. 29 (8-9), 2355-2379
doi:10.1016/j.jbankfin.2005.03.018 [Assessed July 17, 2008]
Bocij, P. et al., (2006) Business Information Systems: Technology, Development and
Management for the E-Business. England: Pearson Education.
Bryman, A (1988) “Quantity and Quality in Social Research” Unwin Hyman Ltd –
London.
Bryman, A. (2001). Social Research Methods Oxford University Press: New York
Cavaye, A.L.M. (1996) “Case study research: a multi-faceted research approach for
IS” Information Systems Journal Vol 6, pg 221-242
Chaharbaghi, K. and Lynch, R. (1999) “Sustainable competitive advantage:
towards a dynamic resource-based strategy” Journal of Management Decision Vol. 37
(1), 45-50
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/Em
eraldFullTextArticle/Articles/0010370105.html [assessed 9, July 2008]
Chen, I. J. and Popovich, K. (2003) “Understanding customer relationship
management (CRM): people, process and technology” Business Process Management
Journal. Vol 9 (5), 672-688
Coltman, T. (2007) “Why build a customer relationship Management Capability?”
Journal of Strategic Information Systems 16 (2007) 301–320
www.elsevier.com/locate/jsis [Assessed May 14, 2008]
Czaja, R. and Blair, J. (2005) Designing Surveys. Pine Forge Press: London
Dawes, J. and Worthington, S. (1996) “Customer Information Systems and
Competitive advantage: a case study of top ten building society” International
Journal of Bank Marketing [Online] Vol 14, (4) pg 36-44.
79
www.emeraldinsight.com/10.1108/02652329610119300 [assessed 7, May 2008]
Eroke, L. (2008) “Between Banks‟ Products and Quality Service” ThisDay
Newspaper Vol 13 (4694), 33-34
Foss, B. and Stone, M. (2002) CRM in Financial Services: A Practical Guide to
Making Customer Relationship Management Work Kogan Page Publishers
http://books.google.co.uk/books?hl=en&lr=&id=r1YJ8pMioCUC&oi=fnd&pg=PR11
&dq=CRM+%22financial+services%22&ots=Cmx_OniZRV&sig=VDmRG9kt4DfM
K4fszLGMPMiPefk#PPP1,M1 [Assessed July 3, 2008]
Graziano, A. M. and Raulin, M. L. (2004) Research Methods: A Process of Inquiry
Pearson – United States of America
Gefen, D and Ridings, C.M. (2002) “Implementation Team Responsiveness and
User Evaluation of Customer Relationship Management: A Quasi-Experimental
Design Study of Social Exchange Theory” Journal of Management Information
Systems Vol. 19, (1), pp. 47–69.
http://mesharpe.metapress.com/openurl.asp?genre=article&issn=0742-
1222&volume=19&issue=1&spage=47 [Assessed July, 13, 2008]
Hart, C. (2005) Doing your Masters Dissertation Sage – Great Britain
Hirschheim, R. A et al (1995). Information Systems Development and Data
Modelling: Conceptual and Philosophical Foundations, Cambridge University Press.
Huysamen, G.K. (1997). “Parallels Between Qualitative Research and Sequentially
Performed Quantitative Research”. South African Journal of Psychology, 27, 1-8.
Idowu, P. et al (2002). “The Effect of Information Technology on the Growth of the
Banking Industry in Nigeria” Journal of Information Systems in Developing Countries
Vol 10 (2), 1-8 www.ejisdc.com [assessed 5 March, 2008]
80
International Year of Microcredit (2006)
http://64.233.183.104/search?q=cache:KHaSny0749EJ:www.yearofmicrocredit.org/d
ocs/countryprofiles/Nigeria.doc+background+information+on+Nigerian+banks&hl=e
n&ct=clnk&cd=5&gl=uk [Assessed July 6, 2008]
Johnston, H. R. and Vitale, M. R. (1988) “Creating competitive advantage With
Interorganizational Information Systems” MIS Quarterly Vol 12 (2), 153-165
http://www.jstor.org/sici?sici=0276-
7783(198806)12%3A2%3C153%3ACCAWII%3E2.0.CO%3B2-K [Assessed 9, July
2008]
Kane, E. J. and Rice, T. (2001) “Bank Runs and Banking Policies: Lessons for
African Policy Makers” Journal of African Economies, 10 (1), 36-71.
Karakostas, B. et al (2004) “The state of CRM adoption by the financial services in
the UK: an empirical investigation”
http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VD0-4F011CR-
2&_user=128590&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_acct=C00001
0619&_version=1&_urlVersion=0&_userid=128590&md5=9d6b7414b21df24078ea8
5e39afdcc0b [assessed 8, May 2008]
Khalifa, M. and Shen, N. (2005) “Effects of Electronic Customer Relationship
Management on Customer Satisfaction: A Temporal Model”
http://doi.ieeecomputersociety.org/10.1109/HICSS.2005.224
Knight, P.T. (2002) Small-scale research: pragmatic inquiry in social science and
the caring professions. London: SAGE.
Laudon, K. and Laudon, J. (2006) „Management Information Systems‟: Managing
the Digital Firm. Pearson Education Inc, New Jersey – USA.
Lynette, R. and Knox, S. (2001) “Cross-functional issues in the implementation of
relationship marketing through customer relationship management” European
81
Management Journal. Vol 19 (5), 534-542 doi:10.1016/S0263-2373(01)00067-
6 [Assessed July 14, 2008]
Ma, H. (1999) “Anatomy of competitive advantage: a SELECT framework” Journal
of Management Decision Vol 37 (9), 709-718.
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/Em
eraldFullTextArticle/Articles/0010370904.html [Assessed 9, July 2008]
Ma, H. (2000) “Competitive Advantage and Firm Performance” Journal of
Competitiveness Review Vol 10 (2), pg 15-32
http://www.emeraldinsight.com/Insight/viewContentItem.do;jsessionid=38EEB0D25
6F0A22BCEA1FD38EA13263A?contentType=Article&contentId=1669015
[Assessed 9, July 2008]
Mata, F. J, et al., (1995) “Information Technology and Sustained Competitive
Advantage: A Resource-Based Analysis”. MIS Quarterly. Vol 19 (4), pg 487-505
http://www.jstor.org/stable/249630?seq=1 [Assessed 9, July 2008]
Milne, J. (2002). Questionnaires: Advantages and Disadvantages [Online].
http://www.icbl.hw.ac.uk/ltdi/cookbook/info_questionnaires/ [Accessed 30 July 2008]
“Nigeria Banking, Finance, and Other Services” The Library of Congress Studies:
CIA World Factbook (1991)
http://www.photius.com/countries/nigeria/economy/nigeria_economy_banking_financ
e_an~10016.html
Oboh, G.A.T. (2005) “Developing an ICT-based service delivery in the Nigerian
banking industry: Union Bank experience” Union Digest Vol. 9 (1) pg 1-11.
Oppenheim, A.N. (1992). Questionnaire Design, Interviewing and Attitude
Measurement. London: Pinter.
82
Panda, T. (2003) “Creating Customer Life time value through effective CRM in
financial services industry” Journal of Services Research [Online] Vol. 2 (2) pg 157 –
171
http://dspace.iimk.ac.in/handle/123456789/86 [Assessed 8, May 2008]
Payne, A. and Frow, P. (2005) “A strategic framework for customer relationship
management” Journal of Marketing [Online] Vol 69 (4), 167-176
www.atypon-link.com/AMA/doi/abs/10.1509/jmkg.2005.69.4.167 [assessed 5, May
2008]
Pearlson, K. and Saunders, C. (2006) Managing and Using Information Systems: A
Strategic Approach. USA: John Wiley and Sons, Inc.
Peppard, J. (2000). “Customer Relationship Management (CRM) in Financial
Services” European Management Journal Vol. 18 (3), pg. 312-327
Polkinghorne, D. (1983) Methodology for the Human Sciences. State University of
New York Press – Albany
Porter, M. E. (1998). Competitive Advantage: creating and sustaining superior
performance. Free Press.
Rackoff, N. et al (1985). “Information Systems for Competitive Advantage:
Implementation of a Planning Process” MIS Quarterly, Vol, 9 (4), pg. 285 – 294
[Online] http://links.jstor.org/sici?sici=0276-
7783%28198512%299%3A4%3C285%3AISFCAI%3E2.0.CO%3B2-K [Assessed
January 11, 2008]
Reich, H. B. and Benbasat, I. (2000) „Factors That Influence the Social Dimension
of Alignment between Business and Information Technology Objectives‟ MIS
Quarterly, Vol. 24 (1), pg. 81 – 113 [Online] http://links.jstor.org/sici?sici=0276-
7783%28200003%2924%3A1%3C81%3AFTITSD%3E2.0.CO%3B2-Z [Assessed
January 8, 2008].
83
Sauer, C. (1993) Why Information Systems Fail: A Case Study Approach. Hollen
Street Press Ltd – Great Britain.
Shahin, A. and Nikneshan, P. (2008) “Integration of CRM and QFD: A novel model
for enhancing customer participation in design and delivery” The TQM Journal. Vol
20 (1), 68-86
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/Em
eraldFullTextArticle/Articles/1060200106.html [Assessed July 14, 2008]
Siddiqi, M. A. (2004) “Nigeria Banks on Growth” African Review of Business and
Technology, Pg 12 – 16 [Online]
http://66.102.9.104/search?q=cache:UKM7pPduBbwJ:unpan1.un.org/intradoc/groups/
public/documents/IDEP/UNPAN016363.pdf+foreign+banks+in+nigeria&hl=en&ct=c
lnk&cd=2&gl=uk [Assessed August 18, 2008]
Sukamolson, S. (2005) Fundamentals of Quantitative Research. Language Institute:
Chulalougkorn University
Suresh, H. (2002) “Customer Relationship Management: an opportunity for
competitive advantage” PGS Institute of Management.
Umar, S. D (2005) “Implications of technological innovations in the banking
industry” Papers and Proceedings of the Bank Directors’ Seminar pg 82-91
Usman, S (1990) “Responses of the finance sector to environmental changes: past,
present and future” Innovations, Technology and the Nigerian Finance Sector pg 30-
37
Valsecchi, M. (2007) “Mobile customer relationship management: an exploratory
analysis of Italian application” Journal of Business Process Management. Vol 13 (6),
755-750
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/Em
eraldFullTextArticle/Articles/1570130601.html [Assessed July 14, 2008]
84
WaterAid International Site: Human Development Report 2006, World Development
Report 2006
http://www.wateraid.org/international/what_we_do/where_we_work/nigeria/2604.asp
U.S Department of State: African Growth and Opportunity Act Forum, Bureau of
African Affairs (2008) http://www.state.gov/r/pa/ei/bgn/2836.htm
Xu, M. and Walton, J. (2005) “Gaining customer knowledge through analytical
CRM” Journal of Industrial Management and Data Systems 105 (7), 955-971
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/Em
eraldFullTextArticle/Articles/0291050707.html [Assessed July, 17 2008]
Zeng, Y. E. et al. (2003) “Customer relationship management (CRM) in business-to-
business (B2B) e-commerce” Journal of Information Management and Computer
Security 11(1), 39-44
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/Em
eraldFullTextArticle/Articles/0460110106.html [Assessed July 14, 2008]
85
Appendix I : Letter of Introduction
Department of Information Studies
The University of Sheffield
Regent Court
211 Portobello Street
Sheffield, S1 4DP
United Kingdom
Email: [email protected]
Dear Sir/Madam
I am a postgraduate student studying at the University of Sheffield, U.K. I am
conducting a research on the use of information systems in achieving a customer
relations competitive advantage in the Nigerian banking industry.
The research is in partial fulfilment of my Masters of Science degree in Information
Systems. I would be grateful if you could take time out to fill the questionnaire below
as it would take a few minutes to complete. All information collected would be used
anonymously and for purely research purposes.
Thank You for your anticipated co-operation.
Yours sincerely,
Chioma Onyechi
86
Appendix II: Questionnaire
SECTION A
Q1. What is the name of the bank you work in?
……………………………………………………………………………………..
Q2. What is your position in the bank?
a) Head of IT department
b) Head of Marketing department
c) Head of Customer Services
d) Others……………………………………….(Please specify)
Q3. Approximately how many bank branches does your bank have?
a) Less than 50
b) Between 50 and 100
c) Between 100 and 200
d) Between 200 and 300
e) Between 300 and 500
f) Above 500
Q4. Are all your bank‟s branches networked?
a) Yes
b) No
Q5. Through what medium is your bank most likely to market its product to
customers? (Please tick all that apply)
a) Telephones
b) Text messages
c) E-Mails
d) Face-to-face communication
e) Advertisement (Radio, Television or newspaper)
f) Online advertisements
g) Other……………………………………………..(please specify)
Q6. In your opinion which medium is most effective?
…………………………………………………………………………………………
Q7. Through what means does your bank maintain relationships with its customers?
………………………………………………………………………………………….
87
SECTION B
Q8. Does your bank make use of Information Systems in its general business
activities?
a) Yes
b) No
Q9.A customer relationship management is an enterprise approach which aims to
understand and influence customer behaviour through meaningful communication in
order to improve customer acquisition, retention, loyalty and customer profitability
(Swift, 2000). Does your bank employ a specific information system for use in
managing customer relations?
a) Yes
b) No (Please go to number 10)
Q9a. If yes, please specify what Information System your bank uses for its
customer relations.
……………………………………………………………………………………..
Q10. In your own words, how would you describe a customer relationship
management?
………………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………
Q11. How would you rate the importance of the use of information systems for
customer relationship management on the growth of a bank, using the scale below?
1 = Not Important,
2 = little importance,
3 = some importance,
4 = Great importance,
5 = Very great importance
……………………………………………………………………………………
Q12. In which of the following areas has your bank used information systems to
manage customer relations?
a) Customer Acquisition
b) Customer retention
88
c) Customer loyalty (A Customer‟s continued relationship with the bank)
d) All of the above
e) A and B only
f) A and C only
g) B and C only
Q13. In which of the following areas has the use of information systems been of great
help in managing customer relations?
a) Customer Acquisition
b) Customer retention
c) Customer loyalty (A Customer‟s continued relationship with the bank)
d) All of the above
e) A and B only
f) A and C only
g) B and C only
SECTION C
Q14. What is the number of years your bank has used a customer relationship system?
…………………………………………………………………………………..
Q15. Has the use of such a system given your bank a competitive advantage over
other banks in any of the areas below? (Pleas tick)
I. Customer Acquisition
II. Customer Retention
III. Customer loyalty
IV. All of the above.
Q16. To what degree has the use of your customer relationship management system
assisted in giving your bank a lead ahead of your competitors?
a) No degree
b) A minimal degree
c) A great degree
d) A very great degree
Q17. To what extent has information systems assisted in serving customers in
different parts of the country with different needs?
a) Little extent
b) Some extent
c) Great extent
d) Very great extent
89
Q18. To what degree is your customer relations strategy aligned with your bank‟s
overall business strategy? (Please give an estimate percentage to indicate the degree,
e.g. 10% for a minimal degree or 50% for a great degree)
a) No degree
b) A minimal degree
c) A great degree
d) A very great degree