The roles of customer relationship management on the performance of MFIs: Case study of Mutengene savings and loans cooperative society

CHAPTER ONE

1.1.      INTRODUCTION

The objective of this study is to work out the customer relationship management and the commercial performance of the institutions of microfinance (IMF) in Cameroon with the case study being MUTENGENE SAVINGS AND LOANS COOPERATIVE SOCIETY. To achieve this goal we have simultaneously apply different methods in other to complete the study.

This study is organize into five chapters, chapter one deal with the introductory part of the project study, followed by the background of the study, statement of the problem, objective of the study, the hypothesis of the study, and the scope of the study. Chapter two deals with the literature review of the project chapter three looks at the methodology of the research which comprises of research method, research design, sampling procedure size and technique, instrument of data collection and procedure. Chapter four deals with research findings, analysis applied and results and the recommendation and conclusion is being done in chapter five.

1.2   BACKGROUND  OF THE STUDY

Customer relationship management started in the early 1970s when customer’s satisfaction was evaluated using annual surveys or by front line asking. At that time business had to rely on standalone mainframe system to  automates  sales  but  the  extend of technology allowed them to 3

Categorize customers in spreadsheet and list. One of the best known precursors of the modern day customer relation management is the  Farley  file  develop   by  franklin rossevelt campaign manager.

In 1982, kate and Robert d. kestenbaum introduced the concept of database marketing, namely applying statistical methods to analyze and gather customer data. By 1986 pet sulivan and mike muhney released a customer evaluation system called act, based on the principle of digital rolodex, which offered a contact management service for the first time. The strength was followed by numerous companies and independent developers trying to maximize lead potential, including tom Siebel of Siebel system who designed the first CRM product known as Siebel customer relationship management.

Today, there is fierce competition in the banking sector of Cameroon due to the influx of new commercial banks and micro-finance agencies such as the cooperative societies not leaving out telecommunication companies like MTN which also offers banking services. From 1990 to 210, the banking sector of Cameroon had experienced bank liquidation, acquisition, and mergers due to the high competitive forces arising from globalization of the economy and the frequent changing of monetary rules in Cameroon impose by World Bank, the bank of central African States (BEAC), the banking commission for the six central Africa states (COBAC), and parliamentary enactments. For banks to cope with these pressures, they need to secure reasonable profits that will ensure their sustainability through the creation of a larger customer base. As a result, banks in Cameroon in general and those of the Buea municipality, in particular, are setting themselves strategies to ensure customer satisfaction and loyalty to raise reasonable profits that will ensure their sustainability (Mohsan et al., 2011). The bank’s vision is to achieve profitability, and a high degree of customer satisfaction is a necessary condition for achieving this lofty objective in the face of competition. This is why banks listen to customers’ requirements and complaints to provide them with the quality of products and services that will meet their satisfaction (Haridasan and Venkatesh, 2011). Commercial banks offerings to their customers are similar and customer satisfaction remains the sole tool that differentiates between one bank market share and another, as such measuring customers satisfaction is important (Zopounidis, 2012, Beard, 2014).

For financial institutions to fulfill their primary objective of profit maximisation, banks ought to have a large pool of reliable customers who can stay with the institution for the near future. To maintain these customers, customer relationship management is the bond that keeps them together to improve business relationships with customers better, specifically focusing on their satisfaction.

Customer relationship management plays an essential function in driving customer satisfaction. Satisfied customers are profitable to the firm not only because they are likely to make repeat purchases but because they promote the firm through words of mouth. Therefore, customer relationship management improves the firm’s market share by bringing in more customers ( Urehman and Jam, 2010). However, proper implementation of customer relationship management is a must for customer satisfaction. For customer relationship management to be implemented successfully, the policies of the firm’s strategy structure ought to be flexible and explicit particularly the pricing policies. These are vital issues that increase customer satisfaction and firms profit (Khaligh et al.2012). Customer relationship management prescribes that to satisfy the customers, it is essential to understand the customers. Customers should be well understood for their tastes, attitudes, preferences and decision making factors. This helps the firm in identifying their target customers and coin out measures to provide them with the quality of services they desire thereby leading to satisfaction. That is why this study tries to assess the impact of customer relationship management on customer’s satisfaction in the banking sector of Cameroon.

Moreover, the customers of each bank constitute one of the most important assets that a banking institution should preserve and continuously expand on. As customers are of such significant importance, it is necessary for banks to satisfy their needs and wants so as to establish and

Maintain long term relationship with the customers to enable them to combat the increasing competition in the global market. As a result, customer relationship management has become a fulcrum in the programs and practiced of banking services (Tamilarasan, 2011).

Customer relationship management was popularized in 1997, due to the work of Siebel , gartner and between 1997 and 2000. Leading CRM products were enriched with shipping and marketing capabilities. Siebel introduce the first mobile CRM app called Siebel sales handheld in 1999.  The idea of a stand alone, cloud hosted customer base was soon adopted by other leading providers at the time.

The first open source CRM system was developed by sugar CRM during this period, CRM was rapidly migrating to the cloud as a result of which it became accessible to sole entrepreneurs and small teams. This increase in accessibility generated a huge wave of price reduction. Around 2009, developers began considering the options to profit from social medias momentum and designed tools to helpb companies become accessible on all users favorite networks.  

Customer relationship management has become the most dynamic technology topic of the millennium. According to Chen and Popovich, (2003) customer relationship management (CRM) is not a new concept rather due to current development and advancement in information and enterprise software technology, it has assume practical importance. The root of customer relationship management is relationship marketing which has the objective of improving the long term relation and hence profitability of customers by moving away from products.

According to Mohamand Hossein and Zakaria, (2012), managers have at least basic understanding and knowledge of customer relationship management benefits. They identified seven core benefits of customer relationship management that is to enhance ability to target profitable customers such as integrated assistance across channels, also enhances sales force efficiency and effectiveness, improve pricing, and customize products and services and individual marketing message.

Furthermore, recently customer relationship management has become an attractive area of research for academias because of its relative novelty and exploding growth. Because of customer relationship management developing innovation and capability and competitive advantage it attracts not only industry professionals, but also motivates academicians as a scope for research. Academic research generally stresses customer relationship management as a fundamental business process having a significant impact (Laundry, Arnold, and Arindt, 2005).

In addition the term customer relationship management emerged in the information technology (IT) vendor and fractioned community in the mid 1990s ( Payne and Frow, 2005). Interest in CRM began to grow in the 1990s (Ling & Yen, 2001). In the academic community the terms “Relationship marketing and CRM are often used interchangeably.

The economic expansion of all the nation generally depends on the health and the dynamism of their financial system. The strong development of this sectors as well as the numerous innovations in the financial market during the last two decades are based on the privatization of the key sectors combine with the process of liberalization of the capital movement and on the acceleration of the technological process linked to the communication and to the transmission of information in real time (Pereira, 2011). This phenomenon   develop in the developed capitalist economy (Waoto,2011) has ended in Cameroon from outset of the 1990s by the hardening of the access conditions to credit and this is due to restructuring of banks following failure of the structure adjustment program (SAP)

As the case study continues, we observe that there is a shift of transaction marketing to relationship marketing due to the emergence of direct marketing in today business. When manufacturers and consumers, there is a sense of emotional binding that supersedes that of the economic transaction. They are more inclined to cooperate with one another and thus become more relationship oriented.

1.3 PROBLEM STATEMENT

Customer relationship management strategy of any financial organization should focus on integrating people, process and technology to maximize the value of exchange.

Many microfinance institutions have not understand the reason why customers save with them. Possible reasons may include words of mouth referrals, provision of goods and quality products and or services, competitive pricing or just being the only institution found in that locality. Dwindling the client, low return on investment and the need for sustainability within tense competition has necessitated the institution to adopt CRM as against transactional marketing. This is as a result of the fact that it cost five times more to gain a new customer than to maintain existing one. Although customer RM has been implemented by the microfinance, customers are switching to other competitors because the practice is inadequate, hence the need for this study.

In relation to these, the performance of organization and customer interaction has been the focus of intensive research effort in recent times. How well does MUTSLCS staff interact with it customers in other to maintain the relationship between them (intrinsic or extrinsic) in order to achieve their mission and vision of paramount concern.

Transparency matters in CRM, how well does MUTSLCS staff have knowledge on each department about what the others are doing? Having centralized location for information can break down the silos in your business and better align your dept. One CRM is only as successful as the data you have in your system thus data adequacy is a major problem in CRM.

1.4       RESEARCH QUESTIONS

• What is the current level of CRM practiced in MUTSLCS
• Are staffs equipped to implementation of CRM at MUTSLCS
• Are customers expectation being met with current performance of MUTSLCS
• What are the challenges associated with CRM implementation at MUTSLCS

FURTHER READING: BANKING AND FINANCE PROJECT TOPICS WITH MATERIALS