an assessment of customer centric strategy on the
TRANSCRIPT
AN ASSESSMENT OF CUSTOMER CENTRIC STRATEGY ON THE
PERFORMANCE OF COMMERCIAL BANKS IN KENYA
BY
GIKUHE TIMOTHY WAITITU
UNITED STATES INTERNATIONAL UNIVERSITY - AFRICA
SUMMER 2014
i
AN ASSESSMENT OF CUSTOMER CENTRIC STRATEGY ON THE
PERFORMANCE OF COMMERCIAL BANKS IN KENYA
BY
GIKUHE TIMOTHY WAITITU
A Project Report Submitted to the Chandaria School of Business in Partial Fulfillment
of the Requirement for the Degree of Masters of Business Administration (MBA).
UNITED STATES INTERNATIONAL UNIVERSITY - AFRICA
SUMMER 2014
ii
DECLARATION PAGE
I, the undersigned, declare that this is my original work and has not been submitted to any
other college, institution or university other than the United States International University in
Nairobi for academic credit.
Signed: ________________________ Date: _________________________
Gikuhe Timothy Waititu
This research report has been presented for examination with my approval as the appointed
supervisor.
Signed: ________________________ Date: _________________________
Dr. Peter Kiriri
Signed: _______________________ Date: ___________________________
Dean, Chandaria School of Business
iii
COPYRIGHT
GIKUHE TIMOTHY WAITITU © 2014
All rights reserved. This report may not be copied, replaced, recorded or transmitted by any
electronic or mechanical means without the consent of the copyright owner.
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ACKNOWLEDGEMENTS
I am greatly obliged to my supervisor, Dr. Kiriri, whose perceptive comments, scholarly
supervision and assistance reinvigorated and saw me through this research report. His
awareness and direction was also very helpful during my report writing and I would not have
achieved without his direction and patience.
My appreciation also goes to all the library personnel at USIU-A and fellow students who
provided me with direction on the proposal. The library staff who offered me journals and
textbooks and other sources of information that were used in the collecting of this proposal, I
will not forget to be gratifying for your support during this research study.
No research is complete without the help of the respondents from the population. I extend my
sincere gratitude to all the members of the banking industry that took part in this research
study and for taking your time and filling the questionnaires.
Thank you all for all your help for this research study would not have been possible without
your help.
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ABSTRACT
This study focused on the assessment of customer centric strategy on the performance of
commercial banks in Kenya. It was driven to determine the impact of customer centric
strategy on acquisition and retention of customers in commercial banks; the impact of
customer centric strategy on the profitability of commercial banks; and the challenges facing
customer centric strategies in commercial banks and a way forward for improving these
strategies.
The research design that was used for this study was descriptive research design. The
descriptive technique aided in creating priorities definite to areas under research. The target
population for this study was all commercial banks in Nairobi - Kenya. This population
included all banks that operate in Nairobi. The total number of the population was 43 banks
in Nairobi. The sample size was determined using a census which covered all banks. The
researcher selected three respondents from each bank to bring the sample size to 129
respondents.
Primary data for the study was collected using a structured questionnaire that was developed
by the researcher on the basis of research objectives. The questionnaires were estimated to
take forty five minutes to complete. A letter of introduction was attached to the questionnaire
explaining the purpose of the study. The researcher sought for an approval to conduct the
study within the organization before the questionnaires were administered. Data was
analyzed using descriptive statistics. Data was run through the Statistical Package for Social
Science (SPSS) for a thorough statistical analysis. Analyzed data was presented using tables
and pie charts in order to give a clear picture of the research findings. Percentages, means
and standard deviations were used to discuss the data meaning and correctional analysis was
done based on the feedback from the respondents in order to ensure objectivity and efficiency
of the process.
The study has determined that customer centric strategy creates trust between the
organizations and customers and this trust built in customers‟ leads to continued patronage
between them and the organizations. It has also been determined that customer centric
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strategy used in financial institutions ensures that customers are satisfied. From the study, it
can be concluded that building trust in customers is the main drive that enables the
organizations to retain them and this evokes positive feelings from customers leading to their
long-term commitment with the organizations.
The study determined that customer centric strategy enables banks to develop better
relationships with existing clients as well as acquire new customers. The study concludes that
customer centric strategy enables organizations to serving the customer‟s needs and hence
increase customer satisfaction and thus strengthen the organization in terms of growth and
profitability. The study has determined that customer centric strategy creates boundary
conditions for banks to serve their niche markets profitably since the customer centric
strategy offers a clear-cut attitudinal segmentation which is formed on the basis of
identifying attractive segments and it gives a detailed knowledge about the market segments
which allow the banks to determine segment profitability.
The study has determined that the current banks do not face challenges of linking all
accounts associated with customers and neither do they have a difficulty in achieving an
integrated view of accounts due to the different operating platforms and systems. The
challenge of capturing secondary or co-signer accounts is not a daunting task and neither is
identifying parent/child accounts across affiliated businesses and handling probable customer
matches. The study concludes that Kenyan banks have enough agents who have the
appropriate level of knowledge of all products and that customer centric strategy in the
Kenyan banks offers customer-level treatment and not account-level treatment.
This study recommends the adoption of competitive intelligence practices in the banks. The
main four competitive intelligence practices that should be considered for greater
profitability are market intelligence, product intelligence, technology intelligence and
strategic alliance intelligence. In applying competitive intelligence the banks and the rest of
the banking sector will stand to be more profitable and competitive in the international
market.
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TABLE OF CONTENTS
DECLARATION PAGE ........................................................................................................ ii
COPYRIGHT ......................................................................................................................... iii
ACKNOWLEDGEMENTS .................................................................................................. iv
ABSTRACT ............................................................................................................................. v
TABLE OF CONTENTS ..................................................................................................... vii
LIST OF TABLES ................................................................................................................. ix
LIST OF FIGURES ................................................................................................................ x
LIST OF ABBREVIATIONS ............................................................................................... xi
CHAPTER ONE ..................................................................................................................... 1
1.0 INTRODUCTION............................................................................................................. 1
1.1 Background of the Study .................................................................................................... 1
1.2 Problem Statement .............................................................................................................. 5
1.3 General Objective ............................................................................................................... 6
1.4 Specific Objectives ............................................................................................................. 6
1.5 Importance of the Study ...................................................................................................... 6
1.6 Scope of the Study .............................................................................................................. 7
1.7 Definition of Terms............................................................................................................. 8
1.8 Chapter Summary ............................................................................................................... 8
CHAPTER TWO .................................................................................................................. 10
2.0 LITERATURE REVIEW .............................................................................................. 10
2.1 Introduction ....................................................................................................................... 10
2.2 Impact of Customer Centric Strategy on Acquisition and Retention of Customers ......... 10
2.3 Impact of Customer Centric Strategy on the Profitability ................................................ 14
2.4 Challenges Facing Customer Centric Strategies in Commercial Banks ........................... 18
2.5 Chapter Summary ............................................................................................................. 22
CHAPTER THREE .............................................................................................................. 23
3.0 RESEARCH METHODOLOGY .................................................................................. 23
viii
3.1 Introduction ....................................................................................................................... 23
3.2 Research Design................................................................................................................ 23
3.3 Population and Sampling Design ...................................................................................... 24
3.4 Data Collection Methods .................................................................................................. 25
3.5 Research Procedures ......................................................................................................... 26
3.6 Data Analysis Methods ..................................................................................................... 26
3.7 Chapter Summary ............................................................................................................. 27
CHAPTER FOUR ................................................................................................................. 28
4.0 RESULTS AND FINDINGS .......................................................................................... 28
4.1 Introduction ....................................................................................................................... 28
4.2 Demographics ................................................................................................................... 28
4.3 Impact of Customer Centric Strategy on Acquisition and Retention of Customers ......... 32
4.4 Impact of Customer Centric Strategy on the Profitability ................................................ 39
4.5 Challenges Facing Customer Centric Strategies in Commercial Banks ........................... 45
4.6 Chapter Summary ............................................................................................................. 49
CHAPTER FIVE .................................................................................................................. 50
5.0 DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS ........................... 50
5.1 Introduction ....................................................................................................................... 50
5.2 Summary ........................................................................................................................... 50
5.3 Discussions ....................................................................................................................... 52
5.4 Conclusions ....................................................................................................................... 59
5.5 Recommendations ............................................................................................................. 60
REFERENCES ...................................................................................................................... 63
APPENDIX I: COVER LETTER ....................................................................................... 68
APPENDIX II: QUESTIONNAIRE ................................................................................... 69
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LIST OF TABLES
Table 4.1: Respondents Organization ..................................................................................... 29
Table 4.2: Impact of Customer Centric Strategy on Customer Relation ................................ 33
Table 4.3: Impact of Customer Centric Strategy on Building Customer Trust ...................... 34
Table 4.4: Impact of Customer Centric Strategy on Understanding Customers..................... 35
Table 4.5: Impact of Customer Centric Strategy on Customer Satisfaction from Products and
Services ................................................................................................................................... 36
Table 4.6: Impact of Customer Centric Strategy on Data Mining .......................................... 37
Table 4.7: Pair wise Correlation Matrix ................................................................................. 38
Table 4.8: Impact of Customer Centric Strategy on Organization Profitability ..................... 39
Table 4.9: Impact of Customer Centric Strategy on Creating Niche Segments ..................... 41
Table 4.10: Impact of Anchoring Customer Centric Strategy on Organization‟s Values ...... 42
Table 4.11: Impact of Customer Centric Strategy on Growth in Returns .............................. 44
Table 4.12: Pair wise Correlation Matrix for Profitability Attributes .................................... 44
Table 4.13: Challenges of Customer Data .............................................................................. 45
Table 4.14: Challenges of Treatment and Workflow .............................................................. 46
Table 4.15: Contact Channels in the Organizations................................................................ 47
Table 4.16: Organizational Challenges ................................................................................... 48
Table 4.17: Core Banking Systems ......................................................................................... 49
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LIST OF FIGURES
Figure 4.1: Respondents Gender ............................................................................................. 28
Figure 4.2: Level of Education ............................................................................................... 29
Figure 4.3: Management Level ............................................................................................... 31
Figure 4.4: Involvement in Customer Centric Strategy .......................................................... 32
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LIST OF ABBREVIATIONS
ATMs: Automated Teller Machines
CBK: Central Bank of Kenya
CCS: Customer Centric Strategy
CRM: Customer Relationship Management
FMCG: Fast-Moving Consumer Goods
ICB: Independent Commission on Banking
KBA: Kenya Bankers Association
NAB: National Australia Bank
NSE: Nairobi Securities Exchange
RBC: Royal Bank of Canada
SPSS: Statistical Package for Social Sciences
UK: United Kingdom
US: United States
VIP: Very Important person
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CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
Intensifying competition and growing customer expectations have made it increasingly
difficult in recent years for companies to keep their customers and do it profitably. Now, new
economic concerns pose new threats to break down the bonds of customer loyalty even
further. Trust is an essential component of loyalty; as consumer confidence wanes, so too
does the basis on which loyalty can be fostered (Bhattacharya, 2011).
To survive and even thrive in today‟s difficult economic environment, many organizations
should take a fresh look at their strategies and methods for retaining customers - and if
necessary renew their commitment to customer centricity (Izquierdo et al., 2005). The threat
of declining customer revenues and defection is real and must be addressed - at the same
time, however, the economic climate creates new opportunities to strengthen market position
and position for growth by building customer trust, providing meaningful brand
differentiation, tailoring offers in light of new customer needs and, if appropriate, negotiating
new terms (Lindgreen et al., 2006). Companies that not only keep but deepen relationships
with their best customers during this weak phase of the economic cycle will be well
positioned to eclipse their rivals when the economy reignites.
Customer Centricity has been defined as an approach to doing business in which a company
focuses on creating a positive and consistent consumer experience at the point of sale,
through the call center, online and via all communications, including mobile, email and print
(Galbraith, 2011). A Customer Centric approach can add value to a company by
differentiating themselves from competitors who do not offer the same experience. A
Customer Centric framework requires connectivity across every channel of the organization,
allowing the consistent delivery of the most appropriate level of service, benefits, and
customer care to each segment of the customer base (Fader, 2012; Kaufmann & Mohammed,
2012).
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To become customer centric, companies must first become expert in their target markets,
understanding the specific needs of different customers and being clear about how to
combine core products with new services to add value to their customers. This means
recognizing that customers want individual solutions, not generic responses (Wang & Lo,
2004). As one investment bank told a market leading technology supplier, “Your products
and people were great – but your competitor knew more about applying them in an
investment banking environment” (Rogers, 2005).
The second requirement for companies moving to become customer centric is to restructure
to respond to customer needs. In traditional companies, resource deployment, management
controls, core processes and profitability measures are all aligned to products (Christopher et
al., 1991). By contrast, customer centric businesses align all these elements to adding value
to customers, and measure how this converts into profit for the business.
The third requirement recognizes that customer centric businesses need a very different
culture to product centric businesses. Selling and delivering new solutions often means
recruiting new people with different mindsets – who think less „plan and build‟ and more
„sense and respond‟ to react to customer needs. Customer centric companies must reward
people for creating value for customers rather than simply following agreed plans (Fader,
2012).
Retail banks today face significant challenges to growth and profitability. The erosion of
customer trust, the slow economic recovery and margin pressure stemming from a variety of
sources are among the many factors that account for the current difficulties (Wang & Lo,
2004). In search of growth opportunities, many banks are focusing on deepening their share
of wallet with existing customers. In all regions – the United States, Europe, Asia-Pacific and
Africa – financial institutions are launching marketing campaign slogans such as reinventing
the banking industry and deepening customer relationships (Szczepańska & Gawron, 2011).
The goal is to make customers feel that their needs are being looked after – to become in a
nutshell, more „customer centric.‟
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In the UK, the government has fully accepted the findings of the Independent Commission
on Banking (ICB), set up to investigate the possibility of permanently separating retail from
investment banking. Many banks have already begun the process of transforming their
operating models by decentralizing operations, slashing costs and introducing more cost
efficient processes and technologies (Mohsan et al., 2011).
In Asia-Pacific, authorities are developing a stricter regulatory approach and encouraging
local banks to develop stronger standalone capabilities. With lower labor costs, the major
focus for banks here is on process standardization and efficiency. In the US, banks are
repositioning their products and routes to market to replace lost revenues. Central to this is
moving more low-value transactions to self-service channels such as ATMs, online banking
and mobile. More flexible and user-friendly treasury management systems are also being
introduced to support a renewed focus on corporate in place of retail banking. Australia,
meanwhile, has seen banks looking to customer-centric industries such as fast-moving
consumer goods (FMCG), with beginning-to-end lines of responsibility (Gee et al., 2008;
Mohsan et al., 2011). Staff must accept new skills, training, cultures and behaviors; otherwise
it is the banks which will suffer.
The banking sector in Kenya is facing many challenges posed by the competitive
environment in the industry. The banking sector was liberalised in 1995 and exchange
controls lifted. The Central Bank of Kenya (CBK), which falls under the Minister for
Finance‟s docket, is responsible for formulating and implementing monetary policy and
fostering the liquidity, solvency and proper functioning of the financial system. The CBK
publishes information on Kenya‟s commercial banks and non-banking financial institutions,
interest rates and other publications and guidelines (Thuo, 2010).
The banks have come together under the Kenya Bankers Association (KBA), which serves as
a lobby for the banks‟ interests and addresses issues affecting its members (Kenya Bankers
Association annual Report, 2008). There are forty-six bank and non-bank financial
institutions, fifteen micro finance institutions and forty-eight foreign exchange bureaus in
Kenya. Thirty-five of the banks, most of which are small to medium sized, are locally owned
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(Central Bank of Kenya annual report 2007). The industry is dominated by a few large banks
most of which are foreign-owned, though some are partially locally owned. Nine of the major
banks are listed on the Nairobi Stock Exchange (NSE). The commercial banks and non-
banking financial institutions offer corporate and retail banking services but a small number,
mainly comprising the larger banks, offer other services including investment banking,
insurance services and custodial services among others (Dikken & Hoeksema, 2001).
Despite the intense growth in the acquisition of CCS in the last 10 years and widely accepted
conceptual underpinnings of CCS/ CRM strategy, critics point to the high failure rate of
implementations as evidenced by commercial market research studies (Foss, Stone & Ekinci,
2008; Petty, 2008). For instance, in one survey of senior executives across five continents
(North and South America, Europe, Asia and Africa), Bain and Company found that the use
of CRM tools had increased from 35 to 78 percent between the years 2000 and 2002, but
satisfaction with the performance of CCS/ CRM was below 50 percent (Ang & Buttle 2006).
An equally elaborate international survey by CSO Insights of 1,337 companies who have
implemented CRM systems to support their sales force has estimated that only 25 percent
reported significant improvements in their performance (Raman, Wittmann & Rauseo, 2006).
According to Jain et al., (2007), 60-70 percent of CCS/ CRM programs have resulted in
either losses or no bottom line improvement in company performance.
However, much as CCS/ CRM initiatives at many companies have failed, more and more
organizations worldwide continue to implement CCS/ CRM strategy (Young 2003).
Conflicting opinions and increased pessimism about the value of CCS/ CRM abound the
marketing literature. Given that CRM is widely adopted by many organizations as a strategic
orientation, the conflicting academic and practitioner opinions on the performance of CRM
strategy adversely affects the development of CCS/ CRM theory and strategic marketing
practice. It is therefore important to study the phenomenon of CCS/ CRM in greater depth
and especially its contributions to organizational performance.
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1.2 Problem Statement
The retail banking industry is in the midst of a seismic shift. But it‟s not the ups and downs
of the markets that cause the shift. It is the rising power of the customers and changing
regulatory conditions across the globe (Ryals & Payne, 2001). Customers now hold the
power in their relationships with banks. They are more connected, vocal, and on the lookout
for stronger relationships than ever before. They do not just want a place to put their money.
Today‟s consumers want to be understood as people. They are looking for financial advice
and guidance, as well as transparency and trust in these turbulent times. And if they do not
find that in one bank, they simply move on to another. It is much easier for consumers to
switch banks or use multiple banks for their monetary needs than it was in the past (Kotler &
Armstrong, 2011). This newly empowered customer base makes for an uncertain future for
many banks, which in the past were primarily focused inward.
Regulators are also defining new rules for banks about controlling leverage of individuals,
limiting the amount of fees and commissions levied by banks and reinforcing more
transparent communication (Sivadass & Baker-Prewitt, 2000). This time of uncertainty is
also a time of opportunity. Consumers will reward banks with their loyalty and
recommendations if they meet their needs and help them as advisors. Banks can increase
their profitability by balancing their customers‟ needs and expectations with the costs of
doing business. This means providing better products, services, and prices, while also
improving cross-sell ratios and internal efficiencies. This makes being relevant more
important than ever (Hanley & Leahy, 2008). Customer management became one of the most
critical components to economic survival and sustainable growth.
In this time of volatility and unpredictability among financial services companies, the one
constant is customers (Kotler & Armstrong, 2011). Companies that have aligned their
businesses to get, keep, and grow customers have weathered the recent economic turmoil.
The connection between customer centricity and economic strength is no coincidence
(Dikken & Hoeksema, 2001; Sivadass & Baker-Prewitt, 2000; Ryals & Payne, 2001). The
retail banking space is shifting to focus on building relationships with existing customers
through customer-focused operating models.
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Done right, revenue shall increase while costs decrease, creating sustainable growth. The
following study assesses the effect of customer centric strategy on the performance of
commercial banks in Kenya. It indicates how CCS/ CRM affect customer retention,
organization profitability and the challenges that exist in CCS implementation.
1.3 General Objective
The general objective of this study was to assess customer centric strategy on the
performance of commercial banks in Kenya.
1.4 Specific Objectives
This study focused and was guided by the following specific objectives:
1.4.1 To determine the impact of customer centric strategy on acquisition and retention of
customers in commercial banks.
1.4.2 To examine the impact of customer centric strategy on the profitability of commercial
banks.
1.4.3 To determine the challenges facing customer centric strategies in commercial banks and
a way forward for improving these strategies.
1.5 Importance of the Study
1.5.1 Organization
This research gives an insight on how CCS/ CRM affect organizations when implemented.
The results of the study show organizations the importance of focusing on consumers/
customers and hence will encourage organizations that do not employ CCS/ CRM to adopt
the strategy.
1.5.2 Policy Makers
This research is beneficial to the entire banking industry as it has elicited a need for being
proactive in managing and adapting to the changing environment. The industry is
characterized by intense competition among the market players. It may enable them move
away from the wait and see attitude, which reduces most of them to playing second fiddle. As
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a result, there may be increased competition originating from all the banks as opposed to the
current top five in the country.
1.5.2 Academicians
This research has added to the immense pool of research work that is already available. To
the academicians, this may be a source of new knowledge in terms of further research to the
one already available. They may use this research for reference and as a motivator for more
or new research on issue not covered.
1.6 Scope of the Study
The study was conducted in all the banks in Kenya, according to the listing that was obtained
from Central Bank of Kenya (CBK) and Kenya Bankers Association (KBA) in April 2014.
This gave a good outlook of how banks are managed change. This study sought to find a link
between CCS/ CRM and performance of banks. The results of this study were therefore
limited to the financial institutions in Kenya given the fact that the study was carried out in
Kenya. The results are limited to all commercial banks that operate in Nairobi since the study
was limited to the capital city geographically.
The researcher targeted the operations managers, financial managers, and customer care
representatives in all banks. This population was selected by the researcher since they had the
idea of what CCS/ CRM strategies they employed and were best placed to give information
in the outcome of their strategies. The collection of data presented a lot of challenges since
getting the targeted population was difficult. The researcher used appointments, some of
which were cancelled at the last minute. To mitigate the challenge, the researcher called in
advance and informed the respondents that questionnaire(s) had been dropped off in their
office in cases where the respondents were not available.
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1.7 Definition of Terms
1.7.1 Customer Centricity
This is an approach to doing business in which a company focuses on creating a positive and
consistent consumer experience at the point of sale, through the call center, online and via all
communications, including mobile, email and print (Galbraith, 2011).
1.7.2 Customer Relationship Management
This is a model for managing a company‟s interactions with current and future customers. It
involves using technology to organize, automate, and synchronize sales, marketing, customer
service, and technical support (Fader, 2012).
1.7.3 Customer Satisfaction
This is a measure of how products and services supplied by a company meet or surpass
customer expectation (Lindgreen et al., 2006). Customer satisfaction can also be defined the
number of customers, or percentage of total customers, whose reported experience with a
firm, its products, or its services (ratings) exceeds specified satisfaction goals (Bhattacharya,
2011).
1.7.4 Customer Loyalty
Customer loyalty is both an attitudinal and behavioral tendency to favor one brand over all
others, whether due to satisfaction with the product or service, its convenience or
performance, or simply familiarity and comfort with the brand (Fader, 2012).
1.7.5 Customer Retention
Customer retention is the activity a company undertakes to prevent customers from defecting
to alternative companies. Successful customer retention starts with the first contact and con-
tinues throughout the entire lifetime of the relationship (Galbraith, 2011).
1.8 Chapter Summary
This chapter brings out a clear and elaborate overview of the background of the study. The
main highlights brought out in this chapter are the key elements involved in analyzing CCS/
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CRM. The chapter has introduced readers to what CCS/ CRM is and it has shown the gap the
study aims to fill. The chapter also highlights the scope and importance and finally gives
readers the definition of key terms. The next chapter discusses the literature review of the
study. The third chapter discusses the research methodology adopted for the study. The
fourth chapter presents the results and findings of the study. The fifth chapter gives the
discussions of the study and it gives the study conclusion and offers recommendations for
improvement and further studies.
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CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
This chapter deals with the literature review of past studies on the study topic. The literature
discusses the assessment of customer centric strategy on the performance of commercial
banks in Kenya. It discusses the impact of customer centric strategy on acquisition and
retention of customers in commercial banks; the impact of customer centric strategy on the
profitability of commercial banks; and the challenges facing customer centric strategies in
commercial banks and a way forward for improving these strategies.
2.2 Impact of Customer Centric Strategy on Acquisition and Retention of Customers
One of the basic elements of modern marketing understanding is customer satisfaction
(Fader, 2012). Businesses can survive as long as they can meet the customers‟ needs and
enable customer satisfaction. Determining the consumer‟s wishes and needs and meeting
them is one of the ways of enabling consumer satisfaction. For this reason, it is pretty
important in our intensively competitive environment to be in regular contact with the
customers and to follow the changes in them closely (Gee, Coates & Nicholson, 2008).
One of the sectors in which competition is experienced intensively is that of banking. Banks
are the finance institutions that meet the economic needs of the individuals and businesses
and that perform such economic activities as collecting bank deposits, giving credits,
providing capital, and etc. In recent years there have appeared important developments in the
understanding of modern banking. With the transition to automation, customer satisfaction
and management of customer relationships have taken place among the subjects spoken of in
the banking sector (Fader, 2012).
Customer satisfaction means that customer needs, wishes and expectations are met or
overcome during the product/service period, giving way to re-purchasing and customer
loyalty. In other words, customer satisfaction is the assessment of the pre-purchasing
expectations from the product, with the results reached after the act of purchasing (Mohsan et
al., 2011). A highly satisfied customer according to Kotler and Armstrong (2011) continues
11
his shopping for a long time, buys more as long as the firm produces new products and the
existing products are improved, speaks of the firm and its products with praise, keeps
indifferent to the trademarks that are in competition with the products of the firm and does
not place the emphasis on the price, and offers the firm suggestions and ideas about products
and services.
It is possible to secure the customer loyalty through customer satisfaction. However, the fact
that there are many enterprises that offer products and services of the same quality and at the
same price interval makes it difficult for the enterprises to secure customer satisfaction. It
may even be easy to let the satisfied customer go to the rival enterprises. Today the most
important thing to do about the reduced customer satisfaction is the customer-centred
practices adapted to each customer‟s needs and values. By treating different customers in
different manners, firms can achieve customer loyalty. Customer loyalty is the long and
uninterrupted retention of the relationship by offering service that meets and even goes
beyond the customer needs (Mohsan et al., 2011).
Whether enterprises can make their current customers loyal depends on whether they can
manage the customer relationships well. As customers have grown to be more conscious
consumers, enterprises have had to pay the prices of the errors and faults they do in customer
relationships. The most important quality of the 1990s is that customers revealed their power
then. They realized that they themselves had something to say and have themselves listened
to. The firms, then, understood that they had to listen to their customers so as to be able to
sustain their presence in the market (Raman, Wittmann & Rauseo, 2006). After the 2000s,
with the increased use and effect of the internet and such platforms as discussion groups,
customers had the opportunity to be more powerful and effective against the enterprises.
Thus, enterprises noticed that they could only be successful if they adopted customer-based
marketing.
To retain customers, organizations must focus on customer satisfaction. Organizations must
work at creating and maintaining an ongoing relationship with their customers (Kotler &
Armstrong, 2011). Customer expectations are always high. According to Horowitz, (2004) to
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keep a customer, you need to get close to the customer and understand his or her wants and
needs. CCS offers organizations the ability to understand their customers and therefore,
enhance retention.
2.2.1 Building Trust
The first strategy employed by CCS is to create trust between the buyer and the organization.
Customer trust plays a major role in customer retention but it does not always guarantee
continued customer patronage (Jones & Sasser, 1995). According to Crosby et al. (2002)
customer satisfaction is a main driver of customer retention and it evokes positive feelings
from the customer. Even though the customer is satisfied it does not mean that they
automatically assume that they will receive the same service or product at all times - it takes
time to build the trust.
Ranaweera & Prabhu (2003) state that satisfaction neither may nor ensure a long-term
commitment, but that organizations who look beyond satisfaction for the customer and allow
the customer to develop trust in the organization do establish long-term relationships with the
customer. Once the trust had been placed, the relationship formed, the likelihood of either
party ending the relationship decreases (Morgan & Hunt, 1994).
2.2.2 Handling Complaints
Research has shown that customers who perceive their complaint has been dealt with
satisfactorily are amongst the most loyal thereafter. Addressing a customer‟s grievance with
honesty and integrity is as good a path to retaining customers (Crosby et al., 2002). A
growing number of customer complaints are caused by fragmentation within a large
organization. According to Gale (1994), there is nothing more annoying that ringing up to
complain and being passed onto another department, it immediately causes a customer to get
angry before they even give their complaint.
Most dissatisfied customers do not complain - they just leave - taking their business with
them. Organizations will not even know they have disappeared until they notice a decrease in
profit. After this the customer will inform business partners and other customers of their
13
experience, about how incompetent the organization is (Gale, 1994). The idea put forward is
to set up a link on a web page, or even something as simple as a grievances box in store to
allow customers vent their annoyances and complaints about the organization, the product or
the service.
2.2.3 Specify Products for Specific Customers
Another strategy presented is to create a specific product for a specific customer (Wyner,
2002). Organizations would identify a niche in the market, and produce the service or
product (Porter, 1995). The difference with this approach is that organizations would find it
easier to retain their customers due to the fact that nobody else would be selling the product
or service in that particular area – it must be noted that organizations should not let their
standards drop because customers will always find an alternative (Conlon, 1999).
2.2.4 Prioritizing the Needs of Key Customers
Another strategy that may be put forward is to ensure that the organization prioritizes the
needs of key customers. Focusing on these customers‟ needs, is not about giving them
everything they want or need, it is about understanding what they are willing to pay for,
delivering that efficiently and capturing the value back through the price (Jamieson, 1994).
The researcher puts forward that it must be clear to the organization who the key customers
are and what exactly they want, this could be achieved through data mining.
2.2.5 Data Mining
Data mining is the process of exploration and analysis by automatic or semiautomatic mean,
of large quantities of data in order to discover meaningful pattern and rules (Berry et al.,
1999). Data mining digs down through data until it finds a certain pattern or occurrence
which will help the organization get to know their customers better through CCS (Story,
1998). Data mining extracts information from a database that the organization did not know
existed. Relationships between customer patterns and customer behaviors that are non-
intuitive are the jewels that data mining hopes to find (Thearling et al., 2000).
14
Through the use of data mining organizations can learn critical information about their
customers. It allows them to identify market segments containing customers or prospects
with high potential (Au et al., 2003). Because organizations can see what customers want
before the customers know themselves, they are able to present this to the customer and
therefore increase satisfaction; this leads to the customer trusting the organization to know
what they want followed by customer retention (Lejeune, 2001).
2.2.6 Securing Loyal Customers
The strategy of securing loyal customers is about locking in valuable customer relationships
(Kale, 2004). He also suggests that it will not be enough to satisfy customers satisfied
customers may leave or switch for no good reason, and loyalty must be built through getting
customers to trust the organization. According to Kendrick and Fletcher (2002), getting
customer relationships correct leads to loyalty; this should ensure that competitors will not
get the organizations customers. Loyalty has a direct link to customer satisfaction and
customer trust. It can be seen that each of these strategies mentioned is unique but they do
require the support of other suggested strategies in order to achieve an overall strategy when
retaining customers (Bowden, 1998).
Despite the apparent absence of an empirical link between satisfaction and behavioral
customer loyalty, several studies show that satisfaction affects customer retention (Bolton,
1998; Bolton, Kannan & Bramlett, 2000). The underlying rationale is that customers aim to
maximize the subjective utility they obtain from a particular supplier (Oliver & Winer,
1987). This depends on, among other things, the customer‟s satisfaction level. As a
consequence, customers who are more satisfied are more likely to remain customers. Thus,
satisfaction positively affects customer retention.
2.3 Impact of Customer Centric Strategy on the Profitability
Becoming customer centric should be a means, not an end. A customer-centric
transformation needs an agenda to further develop existing clients and acquire new ones
(Petty, 2008). Better serving customer needs enables a bank to increase the satisfaction and
loyalty of its customers as well as strengthen the bank‟s economics, both in terms of growth
15
and profitability. It is therefore essential that banks translate all their customer activities into
clear actions that boost revenues (Bohling et al., 2006). When resources are limited, banks
need to give priority to customer segments with the greatest profit potential. Interestingly, it
is not the case that there are just a few large segments that are attractive. The largest profit
potential often resides in smaller niche segments.
2.3.1 Niche Segments
Coulter and Coulter (2002) research has shown that there are many niche segments that may
be financially attractive but cannot currently be served due to their small size. McKinsey has
developed an approach to tap the potential of these segments despite their small size. The
approach is not about enlarging the segments or merging them, but accepting their size and
creating boundary conditions to serve them profitably. This requires market segment
specialists who continuously seek out new niche segments in the market, as well as modular
systems that can rapidly tailor products to the needs of segments (and without additional IT
capacity) (Hanley & Leahy, 2008). Brand management is a further element that is vital for
developing concepts on how to address individual customer segments at low cost. Agile sales
staff is also needed who can swiftly identify and adapt to the needs of niche segments
(Khaligh, 2012).
Clear-cut attitudinal segmentation represents the basis for identifying attractive segments.
Quantitative market research derives this kind of segmentation (Sivadass et al., 2000;
Zineldin, 2006; Gee et al., 2008). Banks can use this to decide which segments are
particularly financially attractive or strategically relevant for the future. Detailed knowledge
about the segments allows you to determine segment profitability, and which marketing and
sales concepts are most suitable for each segment.
Royal Bank of Canada (RBC) pursues this kind of a niche strategy with great success. After
identifying attractive customer groups via micro-segmentation, RBC tailors products for each
group. Their approach comprises three layers of segmentation. First, “basic segmentation”
defines five customer groups using demographic criteria (Foss et al., 2008). Next, “strategic
segmentation” cuts the customer base into a multitude of sub-segments by factors such as
16
profitability, risk profile, or customer life time value. Finally, “tactical segmentation” focuses
primarily on product sales, drawing on parameters such as probability of purchase, risk of
cancellation, or frequency with which products are used (Ang & Buttle, 2006).
2.3.2 Micro-Segments
This micro-segmentation helped RBC detect a previously neglected customer segment:
senior citizens spending the winter in Florida. The bank developed a “VIP Banking” account
for this segment that includes a senior rebate for eligible clients above 60, travel discounts,
easy access to Canadian funds, a consolidated account review online, ability to leverage a
Canadian credit history for mortgages in the US, and a toll-free number for cross-border
banking questions. As a result, over the last five years sales per customer have more than
doubled, the attrition rate has dropped by nearly 50 percent, and net income has grown by 75
percent. Other examples are the Swiss Bank Coop‟s financial advice for women, the Dutch
Rabobank‟s package for the divorced, or Wells Fargo‟s offer for soldiers. Managing all these
opportunities systematically will create a sustainable development agenda (Rogers, 2005;
Ryals & Payne, 2001; Kaufmann & Mohammed, 2012).
2.3.3 Anchoring Customer Centricity Deep within the Company
Customer centricity needs anchoring within the organization to last. This is vital for the
paradigm shift to unfold its full impact. To achieve this, banks need to install customer-
centric core functions, align their governance and adapt their incentive systems accordingly
to initiate real change (Kendrick & Fletcher, 2002).
Key to a higher degree of customer centricity within a bank is having an excellent customer
insights unit. Profound knowledge of customer needs and preferences is an essential input for
decisions. One best-practice example is the National Australia Bank (NAB Europe), which
has pursued a CRM strategy for over 10 years, and has won numerous awards for its efforts
(Morgan & Hunt, 1994). One of the main takeaways from this long-term project has been the
importance of educating the front line to drive employee buy-in. NAB considers a
partnership approach crucial for driving adoption via a staged approach. This includes
gaining executive buy-in by embedding the concept within the group strategy, introducing
17
rigorous measurement and coaching/mentoring, and pursuing a carefully planned process of
cultural change. NAB also understands that this cannot be a “one-off” effort: it requires
continual focus and development (Zineldin, 2006).
To drive and support this task, NAB developed a central Customer Knowledge and
Analytical Marketing team that worked closely with all parts of the organization to develop
and implement its strategy. This customer perspective is applied right up to senior executive
level, with a scorecard that includes customer and community as well as employees and
culture metrics (Szczepańska & Gawron, 2011). A Customer Council (chaired by the Group
Chief Executive Officer) also meets on a monthly basis to ensure an ongoing focus on
customer relations and service.
The core functions need to be designed to represent customer focus within the organization.
It is important that they have the power to implement solutions to the customer‟s benefit. If
this is not the case, there is a danger they will become just an appendage, which could
quickly weaken the newly won trust of the customer (Raman et al., 2006). Besides such
powerful core functions, banks also need overarching customer and product management.
Only interface functions of this kind can ensure that the voice of the customer will be
integrated in all core business processes. Last but not least, anchoring customer centricity in
employees‟ hearts and minds is crucial. A transformation can only be successful if staff live
and breathe this dedication to the customer (Jain et al., 2007). To support this, the balanced
scorecard and incentive systems for each employee need to be targeted towards customer
centricity. Anchoring customer centricity deep within the company implements the
transformation consistently, from the vision and operational processes through to individual
targets for every employee (Bohling et al., 2006; Brown & Gulycz, 2002).
2.3.4 Growth and Returns
Customer centricity, when conceived and implemented correctly, is not just a sentiment – it
makes a clear difference to the bottom line. McKinsey experience and research show that a
customer-centric view leads to greater loyalty, higher cross-selling, less attrition, and
ultimately to higher sales and profits.
18
It will come as no surprise that a lack of public and client trust is one of the biggest
challenges this industry is facing, although a recent McKinsey survey conducted in 2008
shows that customer intimacy and trust are the most important loyalty drivers (77 percent),
ahead of staff (though still rated extremely high, at 75 percent), service (66 percent), and
price (57 percent). Related surveys (Coulter & Coulter, 2002; Khaligh et al., 2012; Wang &
Lo, 2004; Zineldin, 2006) also revealed that improved customer knowledge and a 360°
customer perspective correlates with an increase in money in balances and accounts of 150
percent, four times the improvement in customer experience scores and almost twice the
number of referrals and leads to branches/financial advisers (Baker, 2003). In total, a
customer-centric structured needs assessment leads to 30 percent higher cross-selling of non-
deposit products. As a result, bank branches that use a customer-centric structured needs
assessment; derive profits 2.5 times above those with a minimal needs assessment. Banks can
achieve sustainable growth and above-average profitability by embarking on a customer-
centric transformation (Gee, 2008).
Successful transformation towards a customer-centric company starts with a diagnosis of the
status quo. McKinsey‟s customer-centric transformation framework can provide a first grid
for a thorough assessment. The “timeless tests of customer centricity” can serve as an
objective discussion platform for such an endeavor. The answers provide clear indications of
the bank‟s current status on the way to its customers‟ hearts and minds. McKinsey has
developed a short three-week diagnostic tool along these questions to determine the answers
using a sound fact base. Having this diagnostic in place could be the starting shot to
embarking on a both exciting and profitable journey into the future.
2.4 Challenges Facing Customer Centric Strategies in Commercial Banks
There are a number of the key challenges that banks face in developing and implementing
customer-centric operations. Difficulties are focused in the areas of customer data,
treatment/workflow, contact channels and organization. While they are addressing these
challenges to some degree, there is significant opportunity for further improvement.
19
2.4.1 Customer Data Challenges
The ability to link all accounts associated with a customer is essential to customer centricity
because it allows lenders to manage interactions holistically. Zineldin (2006) states that, an
integrated view of accounts is difficult to achieve due to different operating platforms and
systems. He also states that capturing secondary or co-signer accounts, identifying
parent/child accounts across affiliated businesses, and handling probable customer matches
were among their key challenges.
In response, some companies are addressing this procedurally by asking customers for other
accounts and then linking them to customer IDs, while others are using automated matching
algorithms. There is also a trend toward moving to a single default management platform for
collections, recovery and loss mitigation, allowing organizations to interact with the
customer from a single, integrated source (Galbraith, 2011).
2.4.2 Treatment and Workflow Challenges
Determining the right actions to take for multi-account customers requires access to
customer-level account information, agents with an appropriate level of knowledge of all
products, and treatment strategies that are executed using customer-level, rather than
account-level, workflows (Berry, 1999; Conlon, 1999).
Multiple platforms make it difficult for organizations to get a full view of the customer
relationship. Kale (2004) states that, such a view is available only through a separate system,
which slows down collector responsiveness. Where companies attempt to collect in a
customer-centric manner, different accounts are routed to different work queues, resulting in
disjointed or redundant treatments. In addition, collecting across multiple accounts and
products at once presents the challenge of how to allocate available dollars to pay the various
accounts.
Organizations these challenges by starting with a customer-centric approach across a subset
of related products (for example mortgages and home equity), which reduces the training
challenge. Another first step is to work around the limitations of account-level workflow with
20
procedures such as checking for accounts already in treatment before contacting the customer
(Kendrick & Fletcher, 2002; Story, 1998; Wyner, 2002). It should be noted that several
organizations have moved beyond these initial approaches to make more fundamental
changes, including agents trained on all products, customer-level workflow, cross-product
negotiation and payments, and an integrated default management platform (Gale, 1994;
Bolton et al., 2000). In most cases, payment allocation determination is being left to the
customer.
2.4.3 Contact Channel Challenges
As consumers seek greater ease of access and higher levels of personalization from their
creditors, they are moving their transactions to an ever-growing spectrum of channels - and
the providers that best support their preferences. Ryals and Payne (2001) identified a lack of
prime channels for younger customers, capturing and using customer preferences and
permissions, measuring channel effectiveness, and regulatory compliance as their main
customer contact challenges.
As the market shifts, these organizations are adding channels such as e-mail, text, mobile and
web-based services including chat and virtual agent, making self-service options available,
and focusing on making the best use of each contact (Kaufmann & Mohammed, 2012). To
that end, they are using experimental design and business intelligence tools to understand the
impact of these contact methods for different customer segments.
2.4.4 Organizational Challenges
A siloed organization creates inconsistencies in customer treatment and misalignment with
customer needs. Organizational challenges for customer-centric default management include
recent regulatory changes and senior managers who are more focused on revenue generation
(Izquierdo, 2005). Another frequently raised issue was lines of business with “siloed
thinking” and misaligned incentives. The lines of business are incented to focus on
maximizing collections on their products, as opposed to the entire relationship.
21
To address these challenges, some companies are conducting focus groups with customers to
determine the target experience and then tracking performance vs. target. Additionally, they
are trying to prove relationship concepts by starting with a subset of similar products. Finally,
some managers are aligning their initiatives with enterprise-level, customer-centric projects
to raise visibility and priority with senior management (Ang & Buttle, 2006).
2.4.5 Core Banking Systems
Today, several banks in the US are bleeding due to their rigid legacy systems. It has been a
challenge for the banks to live with these systems because the process is painful, right from
accessing information to integrating new channels, products and services. Maintaining these
systems (finding and retaining the skill set to maintain outdated technology platform) is
another challenge for the banks (Raman et al., 2006). Considering all these factors, several
banks are moving on to new core banking platforms.
Given the magnitude and nature of such transformations, many a time key issues such as
customer-centricity are overlooked or compromised. In several cases, decision makers are
under the impression that core banking replacement will enable them to achieve customer-
centricity (Coulter & Coulter, 2002; Gee et al., 2008). The reasons why core banking
applications fall short of achieving customer-centricity are: though core banking allows
banks to consolidate their deposits, loans, transfers, payments, liquidity and other lines of
business, they prefer specialized product processors for specialized businesses such as FX
Trading, Wealth Management, Trade Finance, and so on. Due to the multiplicity of
applications, banks are unable to get a single view of the relationships with their customers;
and core banking applications do not provide the capability to create and manage
relationship-based offerings (Baker, 2003).
2.4.6 Integrated Data Hub / Data Warehousing
In most banks, each business line operates in a silo, and even within each line of business
there are multiple product processors. A classic example would be the Payments business.
Almost each department in the bank deals with Payment and most of them (if not all) have
their own payment processing applications. This leads to the creation of disparate silos of
22
information inside the organization (Brown & Gulycz, 2002; Wang & Lo, 2004). With deep-
rooted legacy systems and resistance to change, it is not easy to replace these systems to
create a homogeneous infrastructure.
Several banks have created, or are in the process of creating an integrated data hub to get
information in the de-normalized form, to support the decision making process. With an
integrated data hub combined with state-of-the-art business intelligence solutions, banks may
have the answer to their immediate requirements, but are still far from implementing
customer centric strategies. In order to extend this approach to customer centricity, banks
need to translate the intelligence assembled into customized product offerings with
personalized pricing (Sivadass & Baker-Prewitt, 2000; Hanley & Leahy, 2008).
2.4.7 Price Optimization
Price Optimization is the method of finding the right price for a specific customer by
channel, segment, geography, market or product. With predictive capabilities such as price
elasticity of customer segment, price optimization systems have proved to be good decision
support tools. The scope of these systems has by far been restricted to the retail lending
business (Rogers, 2005).
According to Gartner research, out of the 34 banks surveyed worldwide (more than half were
based in the US), 55 per cent have adopted some form or the other of price optimization
systems. Price optimization is a very specialized tool for deciding the price of a particular
product for a target customer segment (Petty, 2008). However, it is only a small component
in the implementation of overall customer-centric strategies.
2.5 Chapter Summary
This chapter has relied on secondary data to explain in detail the opportunities provided by
CCS to organizations as well as showing how CCS is profitable to organizations. The chapter
has highlighted the challenges that exist in implementing CCS and the various strategies that
various banking units around the world are coping with these challenges. The next chapter
discusses the research methodology.
23
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This section presents the tactics of research methodology that were embraced by the
researcher during the study. It comprises of a blue print for the collection, measurement and
analysis of data. It therefore analyses the research design, population and sampling design,
data collection methods, research procedures and data analysis methods.
3.2 Research Design
Kumar (2008) outlines research design as methods used in conducting research. The
appropriateness of a research technique depends on numerous issues including but not
limited to the research problem and the complexity of knowledge necessary for the
phenomena in question. Allyn and Bacon (2007) define research design as the overall
strategy that you choose to integrate the different components of the study in a coherent and
logical way, thereby, ensuring one effectively addresses the research problem; it constitutes
the blueprint for the collection, measurement, and analysis of data. They also state that the
research problem determines the type of design one can use, not the other way around.
The research design that was used for this study was descriptive. Descriptive research is
intended to obtain data that defines the features of the topic of concern in the research (Hair,
Money, Samouel & Page, 2007). The descriptive technique aided in creating priorities
definite to areas under research such as assessing customer centric strategy on the
performance of commercial banks in Kenya. The investigation design was suitable as it gave
decisive results on the objectives of the study as well as enabled the researcher to use the
survey method. The design enabled the researcher to determine how customer centric
strategy (independent variable) impacted the performance of commercial banks (dependent
variable).
24
3.3 Population and Sampling Design
3.3.1 Population
Population is a collection of knowledgeable persons also known as universe (Hair et al.,
2007). According to Cooper and Schindler (2003), a population is the entire collection of
fundamentals about which a researcher needs to make implications. The target population for
this study was all commercial banks in Nairobi - Kenya. The total number of the population
was therefore, all 43 banks in Nairobi.
3.3.2 Sampling Design
3.3.2.1 Sampling Frame
Sampling is a way of choosing some part of the group to symbolize and represent the entire
group of the population of concern (Yin, 2003). It decreases the research period required to
complete the study, it is controllable, cut costs, and it is virtually a mirror to the population.
Sample frame is a broad list of the elements from which the trial is drawn (Hair et al., 2007).
It is a goals list of the population from which the researcher can create a selection. Allyn and
Bacon (2007) define a sample frame as a set of information used to identify a sample
population for statistical treatment. A sampling frame includes a numerical identifier for each
individual, plus other identifying information about characteristics of the individuals, to aid
in analysis and allow for division into further frames for more in-depth analysis. The
sampling frame for this study was the list of all licensed commercial banks in Kenya that
operate in Nairobi; the listing that was obtained from Central Bank of Kenya (CBK) and the
Kenya Bankers Association (KBA) in April 2014.
3.3.2.2 Sampling Technique
According to Coopers and Schindler (2003) a census is an attempt to collect data from every
member of the population being studied rather than choosing a sample. Kumar (2008), states
that some populations can be easily identified, such as every member participating in a
particular event at a particular time. However, censuses can also be taken of less obvious
groups such as research that collects data from every person entering a specified supermarket
between 2 pm and 4 pm on a specified day would be a form of census (Coopers and
25
Schindler (2003). In this study, the researcher employed a census study where all commercial
banks in Nairobi were sampled.
3.3.2.3 Sample Size
Meredith (2008) defines a sample as a small part of anything or one of a number, intended to
show the quality, style, or nature of the whole; specimen. In statistics, a sample is defined as
a subset of a population to study a sample of the total population (Ronet, 2007). Cooper and
Schindler (2003) poised that, the sample must be warily selected to be representative of the
population and the researcher also desires to certify that the subdivisions involved in the
analysis are correctly catered for. The researcher selected three respondents from each bank
to bring the sample size to 129 respondents. The distribution was as shown in the table.
3.4 Data Collection Methods
The choice of research tools hinge on the kind of data to be composed. This study comprised
of both primary and secondary data. Secondary data was used to form the foundation of the
study while primary data was gathered by questionnaires in order to successfully achieve the
set objectives. Instruments like observations interviews, and document reviews are good for
qualitative studies while questionnaires standardized measuring schedules and observation
schedules are valuable in quantitative studies (Stake, 1995; Stillwell & Clarke, 2011). Data
was collected using a structured questionnaire that was developed by the researcher on the
basis of research objectives.
According Wilkinson and Birmingham (2003), questionnaires are fairly low-priced to
administer, can be established with slight training and are easy to examine and analyze once
they are finished. The questionnaire was divided into various parts that were guided by the
study objectives. The questionnaire had a five point like scale that contained a series of
statements that expressed the various impacts observed by the respondents. A likert measure
permits the respondent to ratio a question on a gauge of ranges given. A likert scale is
boundless for consenting respondents to rate a precise item (Cargan, 2007; Silver et al.,
2012). The likert scale was used by the researcher since the researcher wanted the
26
respondents to give a view on specific items of the study. The likert measure was specific for
graphical control and comfort of analysis.
3.5 Research Procedures
The questionnaire that was used in the study based on the research objectives was pre-tested
to establish the appropriateness of the tool before the real administration. According to
Mugenda and Mugenda (2003), pre-testing enhances the reliability of the data collected for
the research. This was done by administering the questionnaire to three different respondents
who were selected randomly from the population of the study but were not be part of the
final study sample.
The questionnaires were estimated to take forty five minutes to complete. A letter of
introduction was attached to the questionnaire explaining the purpose of the study. The
researcher sought for an approval to conduct the study within the organization before the
questionnaires were administered. The researcher then administered the refined
questionnaires to the target population. The questionnaires were administered through a drop
and pick format. Follow up reminders were sent through emails, text messages and phone
calls in order to achieve a high response rate.
3.6 Data Analysis Methods
The quantitative technique of data analysis is supported by statistical tools which are
beneficial when the researcher seeks to generalize the results after collection of data is
organized and analyzed (Splitzlinger, 2006). According to Mugenda and Mugenda (2003),
expressive statistics includes a procedure of changing a mass of underdone data into charts,
tables, with frequency distribution and fractions which are a vital part of making logic of the
data. To ensure easy analysis, the questionnaires were coded according to each variable of
the study to ensure the margin of error was minimized and to ensure accuracy during
analysis.
The data was run through a computer program known as Statistical Package for Social
Sciences (SPSS) for computation of the mean, standard deviation, and frequency distribution
27
for analysis. Data was analyzed using descriptive statistics. Analyzed data was presented
using tables and figures in order to give a clear picture of the research findings at a glance.
3.7 Chapter Summary
The chapter describes the methodology that was used in carrying out the study. The research
design was descriptive in nature. The population of the study was the staff members working
in the various commercial banks in Kenya. The sample size was 129, the sampling
techniques used was census. The chapter has also indicated that, data was analyzed with the
help of a computer programme SPSS for statistical computations such as the mean and
standard deviation and presented in inform of charts and tables. The next chapter presents the
findings of the research.
28
CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1 Introduction
This chapter presents the results and findings of the study on the „assessment of customer
centric strategy on the performance of Commercial Banks in Kenya. The first section
presents the background information of the respondents, while the second section presents
findings in the impact of customer centric strategy on acquisition and retention of customers.
The third section looks at the relationship between Customer Centric Strategy and the
profitability of the organization while the forth section focusses on the challenges facing
customer centric strategies in Commercial Banks in Kenya.
The researcher gave out 129 questionnaires to the selected respondents for the study. The
researcher received a total of 98 questionnaires that were completely filled. This gave the
research a response rate of 75.9% which is above the required threshold of 51% for a study
research.
4.2 Demographics
4.2.1 Respondents Gender
The researcher wanted to determine the gender divide of the respondents and as shown in
Figure 4.1, 64.3% were male and 35.7% were female; this showed that majority of the
respondents were male.
Figure 4.1: Respondents Gender
63
35
29
4.2.2 Level of Education
The researcher wanted to determine the level of education of the respondents and their
response was as shown in Figure 4.2. From the figure most of the respondents had attained
their degree and masters since 44.9% had degrees and 36.8% had a master‟s degree. The
figure also shows that 12.2% had their diploma and 6.1% had their PhD. The results indicate
that the respondents were well educated and could easily understand the questions making
them practical for the study.
Figure 4.2: Level of Education
4.2.3 Organization Worked
The respondents were asked to indicate the organizations they worked for and the results
received indicated that all banks were represented in the study. Majority of the banks had at
least two representatives while some had all three representatives. These results go hand-in-
hand with the initial target set by the researcher where a representative was selected from all
banks in the country.
Table 4.1: Respondents Organization
Banks
Distribution
Number Percent
Victoria Commercial Bank 2 2
Prime Bank (Kenya) 2 2
Oriental Commercial Bank 2 2
PhD 6
Masters 36
Degree 44
Diploma 12
30
Jamii Bora Bank 2 2
Gulf African Bank 4 3.6
Guaranty Trust Bank 2 2
First Community Bank 2 2
Equatorial Commercial Bank 2 2
Development Bank of Kenya 4 3.6
Citibank 2 2.4
ABC Bank (Kenya) 2 2
Bank of Baroda 4 3.6
FINA Bank 4 3.6
NIC Bank 1 1.6
Imperial Bank Kenya 4 3.6
Ecobank 1 1.6
Consolidated Bank of Kenya 2 2
CFC Stanbic Holdings 4 3.6
Housing Finance Company of Kenya 1 1.6
Equity Bank 4 3.6
Family Bank 2 2
Commercial Bank of Africa 1 1.6
I&M Bank 4 3.6
Giro Commercial Bank 2 2
Cooperative Bank of Kenya 2 2
Bank of Africa 1 1.6
Barclays Bank (Kenya) 1 1.6
Diamond Trust Bank 4 3.6
Habib Bank 1 1.6
Bank of India 4 3.6
Credit Bank 2 2
Fidelity Commercial Bank Limited 2 2
Chase Bank (Kenya) 2 2
Paramount Universal Bank 1 1.6
United Bank for Africa 2 2
Kenya Commercial Bank 2 2
Dubai Bank Kenya 1 1.6
Guardian Bank 2 2
K-Rep Bank 4 3.6
Middle East Bank Kenya 1 1.6
National Bank of Kenya 2 2
Standard Chartered Kenya 2 2
Trans National Bank Kenya 2 2
31
4.2.4 Management Level
The respondents were asked to indicate their level of management within their various
organizations and from the results were as shown in Figure 4.4. Forty-two percent were in
middle-management, 37.8% were in low-management level and 19.4% were in senior-
management level. The study results show that majority of the respondents were in middle
and low levels of management.
Figure 4.3: Management Level
4.2.5 Customer Centric Knowledge
The researcher asked the respondents whether they had knowledge of the customer centric
strategy and the customer relationship management and the results showed that all
respondents were aware of the strategy in their organization and this made them suitable for
the study.
4.2.6 Involvement in Customer Centric Strategy
The researcher wanted to determine whether the respondents were involved in the strategy
formulation in their organizations and the results showed that 55.1% were involved directly
in the customer centric strategy while 44.9% were still involved but indirectly. The study
results showed that those that were not involved in strategy formulation were still involved in
the implementation bit of the strategy.
Senior-Level 19
Middle-Level 42
Low-Level 37
32
Figure 4.4: Involvement in Customer Centric Strategy
4.3 Impact of Customer Centric Strategy on Acquisition and Retention of Customers
4.3.1 Impact of Customer Centric Strategy on Customer Relation
The respondents were asked to indicate how customer centric strategy had impacted their
organization in terms of customer relations. Their results are in Table 4.2. The study results
had a mean of >3.0 and a standard deviation of <1.0 which showed that customer centric
strategy had a great impact on the organizations‟ customer relations and the responses did not
differ across the financial institutions.
Table 4.2 shows that customer centric strategy has enabled the organizations to focus on
customer satisfaction and it has also enabled the organizations to work at creating and
maintaining an ongoing relationship with customers. The table shows that customer centric
strategy has enabled the organization to get close to the customers and facilitated a better
understand the customers‟ wants and needs and this has enabled the organizations to build
trust with their customers.
54
44
33
Table 4.2: Impact of Customer Centric Strategy on Customer Relation
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
I feel that customer centric strategy
in the organizations has enabled us
to focus on customer satisfaction
4.1 9.2 16.3 42.9 27.5 3.05 0.552
I feel that the customer centric
strategy in the organization has
enabled us to create and maintain an
ongoing relationship with our
customers
3.1 13.3 13.3 46.9 23.4 3.98 0.666
I feel that our customer centric
strategy has drawn us closer to our
customers
4.1 7.1 11.2 57.1 20.5 3.76 0.164
Our customer centric strategy has
made us enabled us to understand
our customers‟ wants and needs
better
6.1 7.1 16.3 60.2 10.3 3.05 0.282
I feel that the customer centric
strategy we have has made us build
trust with our customers
2.0 7.1 15.3 52.0 23.6 3.98 0.968
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
4.3.2 Impact of Customer Centric Strategy on Building Customer Trust
The respondents were asked to indicate how customer centric strategy had impacted their
organization in terms of building customer trust. Their results are as shown in Table 4.3. The
study results had a mean of >3.0 and a standard deviation of <1.0 which showed that
customer centric strategy had a great impact on the organizations‟ ability to build trust with
their customers and the responses did not differ across the financial institutions.
Table 4.3 shows that customer centric strategy has created trust between the organizations
and customers and the trust built in customers has led to a continued patronage between them
and the organizations. The table also shows that customer centric strategy that is used in the
financial institutions ensures that customers are satisfied and that has become the main
customer retention strategy. From the table, it can be deduced that building trust in customers
is the main drive that enables the organizations to retain them and this has evoked positive
34
feelings from the customers and this has facilitated their long-term commitment with the
organizations.
Table 4.3: Impact of Customer Centric Strategy on Building Customer Trust
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
Our customer centric strategy has
created trust between us and our
customers
4.1 9.2 19.4 33.7 33.6 3.05 0.362
The trust built in our customers has
led to a continued patronage
between them and the organization
2.0 7.1 23.5 41.8 25.6 3.12 0.588
The customer centric strategy that
we use ensures that our customers
are satisfied
3.1 5.1 21.4 51.0 19.4 3.96 0.917
I feel that customer satisfaction is
our main customer retention
strategy
0.0 0.0 7.1 50.0 42.9 3.05 0.444
I feel that building trust in our
customers is the main drive that
enables us to retain them
5.1 12.2 21.4 36.7 24.6 3.74 0.209
By building customer trust, we have
been able to evoke positive feelings
from our customers
3.1 13.3 13.3 46.9 23.4 3.98 0.666
I feel that customer‟s trust has
facilitated their long-term
commitment with the organization
7.1 10.2 15.3 36.7 30.7 3.62 0.301
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
4.3.3 Impact of Customer Centric Strategy on Understanding Customers
The respondents were asked to indicate how customer centric strategy had impacted their
organization in terms of understanding customers. Their results are as shown in Table 4.4.
The study results had a mean of >3.0 and a standard deviation of <1.0 which showed that
customer centric strategy had a great impact on the organizations‟ ability to understand their
customers and the responses did not differ across the financial institutions.
35
Table 4.4: Impact of Customer Centric Strategy on Understanding Customers
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
Our customer centric strategy
enables the organization to address
customer‟s grievance with honesty
and integrity
6.1 7.1 16.3 60.2 10.3 3.05 0.282
I feel that most of our customer
complaints come from the
fragmentation within the company
4.1 9.2 16.3 42.9 27.5 3.05 0.552
We usually transfer customers who
call with complains to the
departments in charge for them to
be helped
29.6 42.9 21.4 6.1 0.0 3.72 0.740
We have provided customers with
the grievances box so as to capture
their complaints
0.0 0.0 0.0 26.5 73.5 3.98 0.323
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
Table 4.4 shows that customer centric strategy enables the organizations to address
customer‟s grievance with honesty and integrity and that most of the customer complaints
come from the fragmentation within the company. Table shows that most of the
organizations did not transfer customers who called with complains to the departments in
charge for them to be helped but rather handled their complaints and the organizations had
provided customers with the grievances box so as to capture their complaints.
4.3.4 Impact of Customer Centric Strategy on Customer Satisfaction from Products
and Services
The respondents were asked to indicate how customer centric strategy had impacted their
organization in terms of customizing their products and services to satisfy customers. Their
results are as shown in Table 4.5. The study results had a mean of >3.0 and a standard
deviation of <1.0 which showed that customer centric strategy had a great impact on the
organizations‟ ability customize products and services; and that the responses did not differ
across the financial institutions.
36
Table 4.5: Impact of Customer Centric Strategy on Customer Satisfaction from
Products and Services
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
We have used customer centric
strategy to create a specific product
for a specific customer
4.1 6.1 16.3 42.9 30.6 3.16 0.655
Through the customer centric
strategy we have identified a niche
in the market, and produce the
service or product for that market
0.0 7.1 21.4 54.1 17.4 3.54 0.208
I feel that our customer centric
strategy enables us to produce
services and/ or products for our
niche market
0.0 7.1 21.4 54.1 17.4 3.54 0.208
We are able to prioritize the needs
of our key customers because of the
customer centric strategy we use
2.0 8.2 18.4 36.7 34.7 3.76 0.549
I feel that the customer centric
strategy has helped us to understand
what customers are willing to pay
for services and products
9.2 15.3 19.4 39.8 16.3 3.05 0.167
I feel that our customer centric
strategy has enabled us to deliver
services efficiently to our customers
5.1 10.2 16.3 41.8 26.6 3.69 0.458
I feel that our customer centric
strategy enables us to capture data
and hence give value back to our
customers through price
3.1 5.1 21.4 51.0 19.4 3.96 0.917
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
Table 4.5 shows that customer centric strategy is used to create specific products for specific
customers and through the customer centric strategy the organizations identified a niche in
the market, and produced the services and/ or products for that market. The customer centric
strategy also enables the organizations to prioritize the needs of their key customers as well
as understand what customers are willing to pay for services and products. The table shows
that the customer centric strategy employed by the banks has enabled them deliver services
efficiently to their customers and it has facilitated the ability of the banks to capture data and
hence give value back to their customers through price.
37
4.3.5 Impact of Customer Centric Strategy on Data Mining
The respondents were asked to indicate how customer centric strategy had impacted their
organization in terms of data mining. Their results are shown in Table 4.6. The study results
had a mean of >3.0 and a standard deviation of <1.0 which showed that customer centric
strategy had a great impact on the organizations‟ ability to use data mining and that the
responses did not differ across the financial institutions.
Table 4.6: Impact of Customer Centric Strategy on Data Mining
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
Our customer centric strategy
identifies certain patterns or
occurrences with our customers
8.2 13.3 26.5 39.8 12.2 3.02 0.303
I feel that our customer centric
strategy enables us to extract
information from our database
3.1 16.3 23.5 41.8 15.3 3.97 0.422
We have identified customer
behaviors that are non-intuitive
from our customer centric strategy
8.2 10.2 16.3 48.0 17.3 3.62 0.612
We have identified market
segments that contain customers or
prospects with high potential
through our customer centric
strategy
1.0 3.1 4.1 55.1 36.7 3.41 0.454
I feel that our customer centric
strategy enables us to forecast
customer needs properly
4.1 9.2 16.3 42.9 27.5 3.05 0.552
I feel that our organization uses the
customer needs forecast to increase
satisfaction
2.0 7.1 23.5 41.8 25.6 3.12 0.588
I feel that our customer centric
strategy has enabled us to develop
customer loyalty
7.1 10.2 15.3 36.7 30.7 3.62 0.301
As an organization, we have been
able to get our customer
relationships correct guided by our
customer centric strategy
6.1 7.1 16.3 60.2 10.3 3.05 0.282
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
38
Table 4.6 shows that customer centric strategy has enabled Kenyan banks to identify certain
patterns or occurrences with their customers and it has enabled the banks to extract
information from their databases. The table also shows that CCS has facilitated the ability of
the banks to identified customer behaviors that are non-intuitive and also identify market
segments that contain customers or prospects with high potential. Table also shows that CCS
enables banks to forecast customer needs properly and thus increase customer satisfaction.
The table shows that customer centric strategy has enabled the banks to develop customer
loyalty and it has also enabled the banks to gain the ability to get customer relationships
correctly through the guidance of the customer centric strategy.
4.3.6 Pairwise Correlation Matrix for Acquisition and Retention Attributes
The respondents were asked to indicate how customer centric strategy had impacted their
organization in terms of acquisition and retention of customers. Table 4.7 presents the results
of correlation analysis which establishes the relationship between customer centric strategy
and the various attributes for acquisition and retention of customers. Correlation results as
seen in the table show that customer relations has 0.781 correlations at significant level <0.01
customer trust. These findings show a 78.1% correlation among the attributes.
Table 4.7: Pair wise Correlation Matrix
Customer
Relations
Customer
Trust
Customer
Understanding
Products &
Services
Satisfaction
Data
Mining
Customer
Relations
1 0.781** 0.616** 0.646** 0.619**
Customer
Trust
0.781** 1 0.694** 0.541** 0.613**
Customer
Understanding
0.616** 0.694** 1 0.413** 0.531**
Products
& Services
Satisfaction
0.646** 0.541** 0.413** 1 0.539**
Data Mining 0.619** 0.613** 0.531** 0.539** 1
** Correlation is significant at p= 0.01
* Correlation is significance at p=0.05 level
39
Component wise, Table 4.7 shows that components such as customer understanding, product/
service satisfaction and data mining had a positive significant relationship with correlations
of 0.616, 0.646 and 0.619 respectively at a significant level < 0.01.
4.4 Impact of Customer Centric Strategy on the Profitability
4.4.1 Impact of Customer Centric Strategy on Organization Profitability
The respondents were asked to indicate how customer centric strategy had impacted their
organization in terms of profitability. Their results are as shown in Table 4.8. The study
results had a mean of >3.0 and a standard deviation of <1.0 which showed that customer
centric strategy had a great impact on the organizations‟ profitability and that the responses
did not differ across the financial institutions.
Table 4.8: Impact of Customer Centric Strategy on Organization Profitability
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
I feel that the customer centric
strategy has enabled us to develop
better relationships with our
existing clients
3.1 13.3 13.3 46.9 23.4 3.98 0.666
I feel that the customer centric
strategy has enabled us to acquire
new customers
4.1 7.1 11.2 57.1 20.5 3.76 0.164
I feel that by serving our customer
needs, we have been able to
increase their satisfaction
3.1 5.1 21.4 51.0 19.4 3.96 0.917
I feel that our customer centric
strategy has strengthened the
organization in terms of growth
4.1 9.2 16.3 42.9 27.5 3.05 0.552
I feel that our customer centric
strategy has strengthened the
organization in terms of
profitability
4.1 9.2 16.3 42.9 27.5 3.05 0.552
I feel that our customer centric
strategy gives priority to customer
segments with the greatest profit
potential
8.2 10.2 16.3 48.0 17.3 3.62 0.612
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
40
Table 4.8 shows that customer centric strategy has enabled Kenyan banks to develop better
relationships with their existing clients and it has also enabled the organizations to acquire
new customers. The table also shows that, by serving the customer‟s needs, the organizations
have been able to increase their satisfaction and this has strengthened the organization in
terms of growth. The table shows that customer centric strategy has strengthened the
organizations in terms of profitability and customer centric strategy has enabled the
organizations to be able to give priority to customer segments with the greatest profit
potential.
4.4.2 Impact of Customer Centric Strategy on Creating Niche Segments
The respondents were asked to indicate how customer centric strategy had impacted their
organization in terms of creating niche segments. Their results are as shown in Table 4.9. The
study results had a mean of >3.0 and a standard deviation of <1.0 which showed that
customer centric strategy had a great impact on the organizations‟ ability to create niche
segments and that the responses did not differ across the financial institutions.
Table 4.9 shows that customer centric strategy has created boundary conditions for the banks
to serve their niche markets profitably. It also shows that the organizations have market
segment specialists who continuously seek out new niche segments in the market and
customer centric strategy used in the banks have modular systems that tailors products to the
needs of market segments and sales staff in the banks are agile and they swiftly identify and
adapt to the needs of niche segments. The table also indicates that customer centric strategy
offers clear-cut attitudinal segmentation which form the basis for identifying attractive
segments and the detailed knowledge about their market segments allow the banks to
determine segment profitability. The table also shows that the detailed knowledge of the
market enables the banks to come up with marketing and sales concepts that are suitable for
each market segment.
41
Table 4.9: Impact of Customer Centric Strategy on Creating Niche Segments
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
Our customer centric strategy has
created boundary conditions for us
to serve our niche markets
profitably
2.0 8.2 18.4 36.7 34.7 3.76 0.549
Organization has market segment
specialists who continuously seek
out new niche segments in the
market
4.1 9.2 16.3 42.9 27.5 3.05 0.552
Our customer centric strategy has a
modular systems that tailors
products to the needs of our market
segments
7.1 10.2 15.3 36.7 30.7 3.62 0.301
Organization has agile sales staff
who swiftly identify and adapt to
the needs of niche segments
3.1 5.1 21.4 51.0 19.4 3.96 0.917
Our customer centric strategy offers
clear-cut attitudinal segmentation
which form the basis for identifying
attractive segments
6.1 7.1 16.3 60.2 10.3 3.05 0.282
Our detailed knowledge about our
market segments allow us to
determine segment profitability
4.1 6.1 16.3 42.9 30.6 3.16 0.655
Our detailed knowledge of our
market enables us to come up with
marketing and sales concepts that
are suitable for each market
segment
0.0 7.1 21.4 54.1 17.4 3.54 0.208
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
4.4.3 Impact of Anchoring Customer Centric Strategy on Organization’s Values
The respondents were asked to indicate how anchoring customer centric strategy on
organization‟s values impacts the adoption of customer centric strategy. Their results are as
shown in Table in 4.10. The study results had a mean of >3.0 and a standard deviation of
<1.0 which showed that the organizations had anchored their customer centric strategy on the
organization‟s values; and that the responses did not differ across the financial institutions.
42
Table 4.10: Impact of Anchoring Customer Centric Strategy on Organization’s Values
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
I feel that our organization has
installed customer-centric core
functions
11.2 13.3 17.3 37.8 20.4 3.73 0.566
I feel that the organization has
aligned its governance to adapt to
the customer centric strategy
8.2 8.2 14.3 36.6 32.7 3.05 0.367
I feel that the organization has an
excellent customer insight unit
0.0 0.0 28.0 31.6 40.4 3.21 0.886
I feel that the organization uses
customer needs and preferences in
its decision making
0.0 0.0 19.4 46.9 33.7 3.67 0.686
I feel that we are educated and
trained to drive employee buy-in in
the organization
4.1 19.4 22.4 31.6 22.5 3.89 0.996
I feel there is enough training done
to the front-line employees in
driving customer buy-in
4.1 19.4 22.4 31.6 22.5 3.89 0.996
I have noticed that the organization
a rigorous coaching/ mentoring
programs to measure customer
needs
12.2 16.3 21.4 35.7 14.4 3.12 0.941
I feel that the organization pursues a
planned process of cultural change
5.1 10.2 16.3 41.8 26.6 3.69 0.458
Our customer centric strategy has a
continual focus and development
programme
2.0 7.1 15.3 52.0 23.6 3.71 0.968
The organization has a central
Customer Knowledge and
Analytical Marketing team that
implements the organization
strategy
3.1 5.1 21.4 51.0 19.4 3.96 0.917
I feel that our organization‟s
customer and product management
is overarching
4.1 6.1 16.3 42.9 30.6 3.16 0.655
The voice of the customer is
integrated in our core business
process through interface functions
1.0 3.1 22.4 40.8 32.7 3.03 0.765
I feel that customer centricity has
been anchored in all our employees‟
hearts and minds
8.2 10.2 16.3 48.0 17.3 3.62 0.612
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
43
Table 4.10 shows that Kenyans organization had installed customer-centric core functions in
their organizations and they had aligned their organizational governance to adapt to the
customer centric strategy. The table also showed that the organizations had an excellent
customer insight unit and the banks used customer needs and preferences to make decisions.
The table also shows that employees in these organizations had been educated and trained to
drive employee buy-in in the organization and the front-line employees had received enough
training to drive customer‟s buy-in. The table also shows that the organizations had rigorous
coaching/ mentoring programs to measure customer needs and they pursued a planned
process of cultural change. The table also indicated that customer centric strategy in these
organizations had continual focus and development programme. The table also showed that
the organizations had central customer knowledge and analytical marketing team that
implements the organization strategy and that the banks‟ organization customer and product
management were overarching. The table also shows that the voice of the customer is
integrated in the organization‟s core business process through interface functions and
customer centricity had been anchored in all their employees‟ hearts and minds.
4.4.4 Impact of Customer Centric Strategy on Growth in Returns
The respondents were asked to indicate how customer centric strategy had impacted their
organization in terms of growth in returns. Their results are as shown in Table 4.11. The
study results had a mean of >3.0 and a standard deviation of <1.0 which showed that
customer centric strategy had a great impact on the growth in returns and that the responses
did not differ across the financial institutions.
Table 4.11 shows that improved customer knowledge has led to an increase in profits in
Kenyan banks and the perception of customers towards the banks had led to an increase in
profits and that customer-centric structure had led to the organizations increasing their
overall profits.
44
Table 4.11: Impact of Customer Centric Strategy on Growth in Returns
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
Our improved customer knowledge
has led to an increase in profits
5.1 12.2 21.4 36.7 24.6 3.74 0.209
The perception of our customers
towards us as an organization has
led to an increase in profits
0.0 7.1 21.4 54.1 17.4 3.54 0.208
I feel that our customer-centric
structure has led to the organization
increasing its overall profits
0.0 0.0 28.0 31.6 40.4 3.21 0.886
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
4.4.5 Pairwise Correlation Matrix for Profitability Attributes
The respondents were asked to indicate how customer centric strategy had impacted their
organization in terms of profitability and growth. Table 4.12 presents the results of
correlation analysis which establishes the relationship between customer centric strategy and
organization profitability. Correlation results as seen in the table show that organization
profitability had 0.596 correlations at significant level <0.01 niche segment creation. These
findings show a 59.6% correlation among the attributes. Component wise, Table 4.12 shows
that components such as customer centric strategy anchoring to organizational values and
growth in returns had a positive significant relationship with correlations of 0.557, and 0.630
respectively at a significant level < 0.01.
Table 4.12: Pair wise Correlation Matrix for Profitability Attributes
Organization
Profitability
Niche
Segments
Creation
CCS
Anchoring to
Values
Growth
in Returns
Organization Profitability 1 0.596** 0.557** 0.630**
Niche Segments Creation 0.596** 1 0.501** 0.523**
CCS Anchoring to Values 0.557** 0.501** 1 0.431**
Growth in Returns 0.630** 0.523** 0.431** 1
** Correlation is significant at p= 0.01
* Correlation is significance at p=0.05 level
45
4.5 Challenges Facing Customer Centric Strategies in Commercial Banks
4.5.1 Challenges of Customer Data
The respondents were asked to indicate the challenges they faced when dealing with
customer‟s data. Their results are as shown in Table 4.13. The study results had a mean of
>3.0 and a standard deviation of <1.0 which showed that the organizations did not have a
challenge in handling data and that the responses did not differ across the financial
institutions.
Table 4.13: Challenges of Customer Data
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
We are challenged when it comes to
linking all accounts associated with
a customer
11.1 14.3 32.7 23.5 18.4 3.71 0.848
We do have a difficulty in
achieving an integrated view of
accounts due to the different
operating platforms and systems
that we have
27.0 36.7 18.4 16.3 1.6 3.44 0.306
Capturing of secondary or co-signer
accounts is a daunting task
29.6 32.6 18.5 12.2 7.1 3.02 0.109
We face a slight challenge in
identifying parent/child accounts
across affiliated businesses
14.3 41.8 26.5 8.2 9.2 3.16 0.419
We face slight challenges in
handling probable customer
matches
23.5 27.6 13.2 19.4 16.3 3.34 0.570
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
Table 4.13 shows that the banks did not face a challenge when it came to linking all accounts
associated with customers and they did not have a difficulty in achieving an integrated view
of accounts due to the different operating platforms and systems that they had. The table also
shows that capturing of secondary or co-signer accounts was not a daunting task and the
organizations did not face challenges in identifying parent/child accounts across affiliated
businesses and neither did they face challenges in handling probable customer matches.
46
4.5.2 Challenges of Treatment and Workflow
The respondents were asked to indicate the challenges they faced when dealing with work
treatment and workflows. Their results are as shown in Table 4.14. The study results had a
mean of >3.0 and a standard deviation of <1.0 which showed that the organizations did not
have a challenges in work treatments and workflows and that the responses did not differ
across the financial institutions.
Table 4.14: Challenges of Treatment and Workflow
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
We are currently challenged in
determining the right actions to take
for multi-accounts
16.3 39.8 19.4 15.3 9.2 3.05 0.167
I find there is a challenge in
accessing customer-level account
information
30.6 42.9 16.3 6.1 4.1 3.16 0.655
I feel that we do not have enough
agents who have appropriate level
of knowledge of all products
23.4 46.9 13.3 13.3 3.1 3.98 0.666
I feel that our customer centric
strategy has customer-level
treatment and not account-level
treatment
16.3 39.8 19.4 15.3 9.2 3.05 0.167
Our customer centric strategy has
multiple platforms
30.7 36.7 15.3 10.2 7.1 3.62 0.301
Our customer centric strategy is
disjointed as a result of the various
platforms
23.6 52.0 15.3 7.1 2.0 3.98 0.968
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
Table 4.14 shows that the banks in Kenya were not challenged in determining the right
actions to take for multi-accounts and they did not have difficulties in accessing customer-
level account information. The table shows that Kenyan banks have enough agents who have
appropriate level of knowledge of all products and that customer centric strategy has
customer-level treatment and not account-level treatment. The table shows that customer
centric strategy in Kenyan banks did not have multiple platforms and it was not disjointed as
a result of the various platforms.
47
4.5.3 Contact Channels in the Organizations
The respondents were asked to indicate their rating on the various contact channels that they
had and their results are as shown in Table 4.15. The study results had a mean of >3.0 and a
standard deviation of <1.0 which showed that the organizations had well established contact
channels and that the responses did not differ across the financial institutions.
Table 4.15: Contact Channels in the Organizations
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
I feel that we do not have better
channels for our younger customers
24.6 36.7 21.4 12.2 5.1 3.74 0.209
I feel that the permission levels
given to employees are not
adequate in capturing customer
preferences
23.4 46.9 13.3 13.3 3.1 3.75 0.674
I feel that we cannot measure
channel effectiveness completely
30.7 36.7 15.3 9.2 8.1 3.45 3.412
I feel that employees face a lot of
regulatory compliance when
dealing with customer channels
4.1 9.2 28.5 32.7 25.5 3.61 0.258
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
Table 4.15 shows that Kenyan banks have better channels for the younger customers and the
permission levels given to employees are adequate in capturing customer preferences. The
table also shows that the banks can measure channel effectiveness completely and that
employees face a lot of regulatory compliance when dealing with customer channels.
4.5.4 Organizational Challenges
The respondents were asked to indicate their rating on the various organizational challenges
they faced. Their results are as shown in Table 4.16. The study results had a mean of >3.0
and a standard deviation of <1.0 which showed that the organizations were well structured
thus minimizing most of the organizational challenges faced and that the responses did not
differ across the financial institutions.
48
Table 4.16: Organizational Challenges
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
Most of our regulatory changes are
focused on revenue generation
9.2 15.3 19.4 39.8 16.3 3.05 0.167
I feel that management is focused
on revenue generation and
profitability of the organization
4.1 9.2 16.3 42.9 27.5 3.05 0.552
Most of our business lines are
grouped together “group targeted”
5.1 10.2 16.3 41.8 26.6 3.69 0.458
Our business incentive is more
focused on organization growth and
profitability
2.0 7.1 23.5 41.8 25.6 3.12 0.588
I feel that our lines of business are
driven to focus on maximizing
profits on products as opposed to
the entire relationship
3.1 5.1 21.4 51.0 19.4 3.96 0.917
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
Table 4.16 shows that most of the regulatory changes in the banks were focused on revenue
generation and that management was focused on revenue generation and profitability of the
organization. The table also shows that most of the banks‟ business lines were grouped
together “group targeted” and their business incentive was more focused on organization
growth and profitability. The table also shows that the lines of business were driven to focus
on maximizing profits on products as opposed to the entire relationship.
4.5.5 Core Banking Systems
The respondents were asked to indicate their rating on the various core banking systems and
their results are as shown Table 4.17. The study results had a mean of >3.0 and a standard
deviation of <1.0 which showed that the organizations‟ core banking systems were well
structured and that the responses did not differ across the financial institutions.
Table 4.17 shows that most of the systems in the Kenyan banks were rigid in some areas but
employees never found it difficult to access customer information. The table shows that it
was not difficult to integrate new channels and that banks did not retain and maintain
49
outdated technology platforms. The table also shows that the core banking applications were
focused on creating and managing relationship-based offerings.
Table 4.17: Core Banking Systems
S.D D N A S.A STATISTICS
%
%
%
%
%
MEAN
STD.
DEV
I feel that our systems are rigid in
some areas
4.1 19.4 22.5 22.4 31.6 3.76 0.996
I feel that employees at times find it
difficult to access customer
information
14.4 35.7 21.4 16.3 12.2 3.12 .0458
I feel that it is difficult to integrate
new channels
26.6 41.8 16.3 10.2 5.1 3.69 0.458
I feel that the organization retains
and maintains outdated technology
platforms
2.0 15.3 7.1 52.0 23.6 3.71 0.769
I feel that our core banking
applications are not focused on
creating and managing relationship-
based offerings
4.1 6.1 18.4 41.8 29.6 3.16 0.755
(Key: S.D = Strongly Disagree; D= Disagree; N= Neutral; A= Agree; S.A= Strongly Agree)
4.6 Chapter Summary
In this chapter, the findings with regards to the information given by the respondents have
been. The first section presents the study findings based on the respondent‟s demographics
followed by the statistical analysis of the responses and finally using Pearson‟s Correlation
Coefficients. This was done following the specific objectives of the study. The next chapter
provides the conclusion, summary as well as the discussions and the recommendations.
50
CHAPTER FIVE
5.0 DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
This chapter is divided in various sections that conclude the study. Section 5.2 is the
summary bit that gives readers the summary of the study; section 5.3 gives the readers the
discussion of the study findings; section 5.4 concludes the study findings. Section 5.5 offers
the study recommendations. It offers recommendations for improvement and for further
studies due to the limitations of the study.
5.2 Summary
This study focused on the assessment of customer centric strategy on the performance of
commercial banks in Kenya. It was driven to determine the impact of customer centric
strategy on acquisition and retention of customers in commercial banks; the impact of
customer centric strategy on the profitability of commercial banks; and the challenges facing
customer centric strategies in commercial banks and a way forward for improving these
strategies.
The research design that was used for this study was descriptive research design. The
descriptive technique aided in creating priorities definite to areas under research. The target
population for this study was all commercial banks in Nairobi - Kenya. This population
included all banks that operate in Nairobi. The total number of the population was 43 banks
in Nairobi. The sample size was determined using a census which covered all banks. The
researcher selected three respondents from each bank to bring the sample size to 129
respondents.
Primary data for the study was collected using a structured questionnaire that was developed
by the researcher on the basis of research objectives. The questionnaires were estimated to
take forty five minutes to complete. A letter of introduction was attached to the questionnaire
explaining the purpose of the study. The researcher sought for an approval to conduct the
study within the organization before the questionnaires were administered. Data was
analyzed using descriptive statistics. Data was run through the Statistical Package for Social
51
Science (SPSS) for a thorough statistical analysis. Analyzed data was presented using tables
and pie charts in order to give a clear picture of the research findings. Percentages, means
and standard deviations were used to discuss the data meaning and correctional analysis was
done based on the feedback from the respondents in order to ensure objectivity and efficiency
of the process.
The study has determined that customer centric strategy creates trust between the
organizations and customers and this trust built in customers‟ leads to continued patronage
between them and the organizations. It has also been determined that customer centric
strategy used in financial institutions ensures that customers are satisfied. From the study, it
can be concluded that building trust in customers is the main drive that enables the
organizations to retain them and this evokes positive feelings from customers leading to their
long-term commitment with the organizations.
The study determined that customer centric strategy enables banks to develop better
relationships with existing clients as well as acquire new customers. The study concludes that
customer centric strategy enables organizations to serving the customer‟s needs and hence
increase customer satisfaction and thus strengthen the organization in terms of growth and
profitability. The study has determined that customer centric strategy creates boundary
conditions for banks to serve their niche markets profitably since the customer centric
strategy offers a clear-cut attitudinal segmentation which is formed on the basis of
identifying attractive segments and it gives a detailed knowledge about the market segments
which allow the banks to determine segment profitability.
The study has determined that the current banks do not face challenges of linking all
accounts associated with customers and neither do they have a difficulty in achieving an
integrated view of accounts due to the different operating platforms and systems. The
challenge of capturing secondary or co-signer accounts is not a daunting task and neither is
identifying parent/child accounts across affiliated businesses and handling probable customer
matches. The study concludes that Kenyan banks have enough agents who have the
52
appropriate level of knowledge of all products and that customer centric strategy in the
Kenyan banks offers customer-level treatment and not account-level treatment.
This study recommends the adoption of competitive intelligence practices in the banks. The
main four competitive intelligence practices that should be considered for greater
profitability are market intelligence, product intelligence, technology intelligence and
strategic alliance intelligence. In applying competitive intelligence the banks and the rest of
the banking sector will stand to be more profitable and competitive in the international
market. The study also recommends that the banks make use of technology intelligence
among other intelligences to increase their profitability and competitiveness in terms of
product innovation, customer satisfaction and market orientation. These intelligences will
ensure that internal strengths of the banks are utilized for the betterment of the firm which
will lead to profitability.
5.3 Discussions
5.3.1 Impact of Customer Centric Strategy on Acquisition and Retention of Customers
The study findings showed that customer centric strategy has created trust between the
organizations and customers and this trust built in customers has led to a continued patronage
between them and the organizations; Jones and Sasser (1995) state that the first strategy
employed by CCS is to create trust between the buyer and the organization although they
state that, customer trust plays a major role in customer retention but it does not always
guarantee continued customer patronage.
The study showed that customer centric strategy that was used in the financial institutions
ensured that customers are satisfied and that had become the main customer retention
strategy. Ranaweera and Prabhu (2003) state that satisfaction neither may nor ensure a long-
term commitment, but that organizations who look beyond satisfaction for the customer and
allow the customer to develop trust in the organization do establish long-term relationships
with the customer.
53
The study revealed that customer centric strategy enabled the organizations to address
customer‟s grievance with honesty and integrity; Crosby et al. (2002) notes that addressing a
customer‟s grievance with honesty and integrity is as good a path to retaining customers and
that customers who perceived their complaints had been dealt with satisfactorily were
amongst the most loyal thereafter.
According to Crosby et al. (2002), a growing number of customer complaints are caused by
fragmentation within a large organization, this was also the case in Kenyan banks since the
study revealed that most of the customer complaints come from the fragmentation within the
company.
Gale (1994) states that there is nothing more annoying that ringing up to complain and being
passed onto another department, it immediately causes a customer to get angry before they
even give their complaint. The study results, however, showed that most of the organizations
did not transfer customers who called with complains to the departments in charge for them
to be helped but rather handled their complaints.
Gale (1994) notes that a good idea is to set up a link on a web page, or even something as
simple as a grievances box in a store to allow customers vent their annoyances and
complaints about the organization, the product or the service and the study revealed that the
organizations had provided customers with the grievances box so as to capture their
complaints.
Wyner (2002) states that the best strategy presented is to create a specific product for a
specific customer and Porter (1995) states that organizations would identify a niche in the
market, and produce the service or product for that market and the study showed that
customer centric strategy was used to create specific products for specific customers and the
CCS in the organizations identified a niche in the market, and they produced the services
and/ or products for that market.
54
According to Jamieson (1994) focusing on customers‟ needs, is not about giving them
everything they want or need, but understanding what they are willing to pay for, delivering
that efficiently and capturing the value back through the price and the study revealed that
customer centric strategy had enabled the organizations to prioritize the needs of their key
customers as well as understand what customers were willing to pay for services and
products and this enabled them deliver services efficiently to their customers and it had
facilitated the ability of the banks to capture data and hence give value back to their
customers through price.
Thearling et al. (2000) notes that data mining extracts information from a database that the
organization did not know existed. Relationships between customer patterns and customer
behaviors that are non-intuitive are the jewels that data mining hopes to find and the study
results showed that customer centric strategy had enabled Kenyan banks to identify certain
patterns or occurrences with their customers and it has enabled the banks to extract
information from their databases.
Lejeune (2001) states that data mining can organizations to see what customers want before
the customers know themselves, they are able to present this to the customer and therefore
increase satisfaction; this leads to the customer trusting the organization to know what they
want followed by customer retention and the study results indicated that customer centric
strategy enabled the banks to forecast customer needs properly and thus increase customer
satisfaction as well as gain the ability to get customer relationships correctly.
5.3.2 Impact of Customer Centric Strategy on the Profitability
Kale (2004) states that securing a loyal customer is about locking in valuable customer
relationships. He also suggests that it will not be enough to satisfy customers satisfied
customers may leave or switch for no good reason, and loyalty must be built through getting
customers to trust the organization and the study revealed that customer centric strategy had
enabled Kenyan banks to develop better relationships with their existing clients and it had
also enabled the organizations to acquire new customers.
55
Bohling et al. (2006) states that better serving customer needs enables a bank to increase the
satisfaction and loyalty of its customers as well as strengthen the bank‟s economics, both in
terms of growth and profitability and the study results showed that, by serving the customer‟s
needs, the organizations had been able to increase their satisfaction and this had strengthened
the organization in terms of growth.
Bohling et al. (2006) also states that when resources are limited, banks need to give priority
to customer segments with the greatest profit potential and that the largest profit potential
often resides in smaller niche segments. The study showed that customer centric strategy had
strengthened the organizations in terms of profitability and CCS had enabled the
organizations to be able to give priority to customer segments with the greatest profit
potential.
McKinsey developed an approach to tap the potential niche segments despite their small size
and his approach was about accepting the size of these segments and creating boundary
conditions to serve them profitably (Sivadass et al., 2000). The study results revealed that
customer centric strategy had created boundary conditions for the banks to serve their niche
markets profitably.
Hanley and Leahy (2008) state that the McKinsey approach requires market segment
specialists who continuously seek out new niche segments in the market, as well as modular
systems that can rapidly tailor products to the needs of segments and the study showed that
the organizations had market segment specialists who continuously sought out new niche
segments in the market and CCS used in the banks had modular systems that tailored
products to the needs of market segments.
Banks can use clear-cut attitudinal segmentation to decide which segments are particularly
financially attractive or strategically relevant for the future as the basis for identifying
attractive segments and having detailed knowledge about the segments allows one to
determine segment profitability, and which marketing and sales concepts are most suitable
for each segment (Sivadass et al., 2000; Zineldin, 2006; Gee et al., 2008). The study
56
indicated that customer centric strategy offered clear-cut attitudinal segmentation which
formed the basis for identifying attractive segments and the detailed knowledge about their
market segments allowed the banks to determine segment profitability. The results also
showed that the detailed knowledge of the market enabled the banks to come up with
marketing and sales concepts that were suitable for each market segment.
Kendrick and Fletcher (2002) states that for customer centricity to unfold its full impact,
banks need to install customer-centric core functions align their governance and adapt their
incentive systems accordingly to initiate real change. The study showed that Kenyan
financial organizations had installed customer-centric core functions in their organizations
and they had aligned their organizational governance to adapt to the customer centric
strategy.
Kendrick and Fletcher (2002) further state that the key to a higher degree of customer
centricity within a bank is having an excellent customer insights unit. Profound knowledge of
customer needs and preferences is an essential input for decisions. The study also showed
that the organizations had an excellent customer insight unit and that the banks used
customer needs and preferences to make decisions.
Zineldin (2006) states that one of the main takeaways is the importance of educating the front
line to drive employee buy-in and gaining executive buy-in by embedding the concept within
the group strategy. The study showed that employees in the banks had been educated and
trained to drive employee buy-in in the organization and the front-line employees had
received enough training to drive customer‟s buy-in.
Jain et al. (2007) states that banks need overarching customer and product management since
and that it is only this kind of interface functions can ensure that the voice of the customer is
integrated in all core business processes and that anchoring customer centricity in employees‟
hearts and minds is also crucial. The study showed that the voice of the customer was
integrated in the organization‟s core business process through interface functions and
customer centricity had been anchored in all employees‟ hearts and minds.
57
5.3.3 Challenges Facing Customer Centric Strategies in Commercial Banks
Zineldin (2006) states that the ability to link all accounts associated with a customer is
essential to customer centricity because it allows lenders to manage interactions holistically
and an integrated view of accounts is difficult to achieve due to different operating platforms
and systems. The study showed that the banks did not face a challenge when it came to
linking all accounts associated with customers and they did not have a difficulty in achieving
an integrated view of accounts due to the different operating platforms and systems that they
had.
Zineldin (2006) also states that capturing secondary or co-signer accounts, identifying
parent/child accounts across affiliated businesses, and handling probable customer matches
are among their key challenges. The study results revealed that capturing of secondary or co-
signer accounts was not a daunting task and the organizations did not face challenges in
identifying parent/child accounts across affiliated businesses and neither did they face
challenges in handling probable customer matches.
Berry (1999) and Conlon (1999) note that determining the right actions to take for multi-
account customers requires access to customer-level account information, agents with an
appropriate level of knowledge of all products, and treatment strategies that are executed
using customer-level, rather than account-level, workflows. The showed that the banks in
Kenya were not challenged in determining the right actions to take for multi-accounts and
they did not have difficulties in accessing customer-level account information. The study also
revealed that Kenyan banks had enough agents who had the appropriate level of knowledge
of all products and that customer centric strategy had customer-level treatment and not
account-level treatment.
Multiple platforms make it difficult for organizations to get a full view of the customer
relationship. Kale (2004) states that, such a view is available only through a separate system,
which slows down collector responsiveness. The study showed that customer centric strategy
58
in Kenyan banks did not have multiple platforms and it was not disjointed as a result of the
various platforms.
Ryals and Payne (2001) identified a lack of prime channels for younger customers, capturing
and using customer preferences and permissions, measuring channel effectiveness, and
regulatory compliance as their main customer contact challenges. The study showed that
Kenyan banks had better channels for the younger customers and the permission levels given
to employees were adequate in capturing customer preferences. The study also showed that
the banks could measure channel effectiveness completely and that employees faced a lot of
regulatory compliance when dealing with customer channels.
Izquierdo (2005) states that organizational challenges for customer-centric default
management include recent regulatory changes and senior managers who are more focused
on revenue generation and the study showed that most of the regulatory changes in the banks
were focused on revenue generation and that management was focused on revenue
generation and profitability of the organization.
Izquierdo (2005) also noted that having lines of business with “siloed thinking” and
misaligned incentives as well as having lines of business are incented to focus on maximizing
collections on their products, as opposed to the entire relationship were a challenge and the
study revealed that most of the banks‟ business lines were grouped together “group targeted”
and their business incentive was more focused on organization growth and profitability.
Raman et al. (2006), notes that several banks in the US were bleeding due to their rigid
legacy systems. It has been a challenge for the banks to live with these systems because the
process is painful, right from accessing information to integrating new channels, products
and services. The study showed that most of the systems in the Kenyan banks were rigid in
some areas but employees never found it difficult to access customer information.
In most banks, each business line operates in a silo, and even within each line of business
there are multiple product processors. A classic example would be the Payments business.
59
Almost each department in the bank deals with Payment and most of them (if not all) have
their own payment processing applications. This leads to the creation of disparate silos of
information inside the organization (Brown & Gulycz, 2002; Wang & Lo, 2004). With deep-
rooted legacy systems and resistance to change, it is not easy to replace these systems to
create a homogeneous infrastructure.
Raman et al. (2006) also states that finding and retaining the skill set to maintain outdated
technology platform is another challenge for banks, the study showed that it was not difficult
for the Kenyan banks to integrate new channels and that the banks did not retain and
maintain outdated technology platforms and that the core banking applications in the banks
were focused on creating and managing relationship-based offerings.
5.4 Conclusions
5.4.1 Impact of Customer Centric Strategy on Acquisition and Retention of Customers
The study has determined that customer centric strategy creates trust between the
organizations and customers and this trust built in customers‟ leads to continued patronage
between them and the organizations. It has also been determined that customer centric
strategy used in financial institutions ensures that customers are satisfied. From the study, it
can be concluded that building trust in customers is the main drive that enables the
organizations to retain them and this evokes positive feelings from customers leading to their
long-term commitment with the organizations. The study has determines that customer
centric strategy is and can be used to create specific products for specific customers and the
CCS in the organizations can help organizations to identify niche markets, and thus produce
the services and/ or products for that particular market by prioritizing the needs of these
customers as well as understand what customers are willing to pay for services and products.
5.4.2 Impact of Customer Centric Strategy on the Profitability
The study determined that customer centric strategy enables banks to develop better
relationships with existing clients as well as acquire new customers. The study concludes that
customer centric strategy enables organizations to serving the customer‟s needs and hence
increase customer satisfaction and thus strengthen the organization in terms of growth and
60
profitability. The study has determined that customer centric strategy creates boundary
conditions for banks to serve their niche markets profitably since the customer centric
strategy offers a clear-cut attitudinal segmentation which is formed on the basis of
identifying attractive segments and it gives a detailed knowledge about the market segments
which allow the banks to determine segment profitability. The study also has determined that
customer centric strategy comes up with marketing and sales concepts that are suitable for
each market segment since it ensures that the voice of the customer is integrated in the
organization‟s core business process through interface functions.
5.4.3 Challenges Facing Customer Centric Strategies in Commercial Banks
The study has determined that the current banks do not face challenges of linking all
accounts associated with customers and neither do they have a difficulty in achieving an
integrated view of accounts due to the different operating platforms and systems. The
challenge of capturing secondary or co-signer accounts is not a daunting task and neither is
identifying parent/child accounts across affiliated businesses and handling probable customer
matches. The study concludes that Kenyan banks have enough agents who have the
appropriate level of knowledge of all products and that customer centric strategy in the
Kenyan banks offers customer-level treatment and not account-level treatment. The
challenge noticed in the Kenyan banks as determined by the study were that most of the
regulatory changes in the banks are focused on revenue generation and that management is
focused on revenue generation and profitability of the organization; and that these banks‟
business lines were grouped together “group targeted” and their business incentive was more
focused on organization growth and profitability. The study also concludes that most of the
systems in the Kenyan banks are rigid in some areas and some of the core banking
applications in the banks was focused on creating and managing relationship-based offerings.
5.5 Recommendations
5.5.1 Recommendations for Improvement
5.5.1.1 Impact of Customer Centric Strategy on Acquisition and Retention of
Customers
61
Customer centric strategy has a significant impact on the acquisition and retention of
employees, but behavior of the employees and relationship development between employee
and customer contributes most to customer satisfaction. Kenyan Banks therefore, must put
emphasis in the two elements which are behavior of employees and relationship
development. The banks need to ensure that their employees are trained to respond to the
customers‟ needs in an appropriate speed. They must also able to show concern and care to
the customers. Behavior change can only be done if management team is serious in investing
in their human capital and thus management in the banks needs to invest in their human
capital. The organization must also constantly keep their employees motivated because
highly motivated people would definitely able provide better services.
5.5.1.2 Impact of Customer Centric Strategy on the Profitability
This study recommends the adoption of competitive intelligence practices in the banks. The
main four competitive intelligence practices that should be considered for greater
profitability are market intelligence, product intelligence, technology intelligence and
strategic alliance intelligence. In applying competitive intelligence the banks and the rest of
the banking sector will stand to be more profitable and competitive in the international
market. The study also recommends that the banks make use of technology intelligence
among other intelligences to increase their profitability and competitiveness in terms of
product innovation, customer satisfaction and market orientation. These intelligences will
ensure that internal strengths of the banks are utilized for the betterment of the firm which
will lead to profitability.
5.5.1.3 Challenges Facing Customer Centric Strategies in Commercial Banks
The researcher recommends that Kenyan banks should have a clear vision of their desired
strategic position and should clearly recognize the strategic role that customer centric
strategy has to play, as reflected in current investment levels, as well as the increased
importance ascribed to CCS in the future. The study also recommends that through CCS
systems; the banks need to recognize the diversity of experience and needs of different
customers and develop the propositions both relevant and practical, but not too complex.
With the help of the system, the banks should launch customer education programmes to
62
improve understanding of bank‟s procedures and decision making and increase comfort
levels.
5.5.2 Recommendations for Further Studies
This study sought to run an assessment of customer centric strategy (CCS) on the
performance of all Commercial Banks in Kenya. The study was concentrated on the
commercial banks that operate within Nairobi and thus further studies need to be conducted
on other commercial banks that are not within Nairobi for evaluation of results. Similar
studies may also be conducted on other industries so as to add on the pool of research that is
focused on customer centric strategy.
63
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APPENDIX I: COVER LETTER
GIKUHE TIMOTHY WAITITU,
UNITED STATES INTERNATIONAL UNIVERSITY,
P.O BOX 14634-00800,
NAIROBI.
March 10, 2014.
Dear Respondent,
RE: REQUEST FOR YOUR PARTICIPATION IN MY RESEARCH PROJECT.
I wish to request you to kindly participate in a management research project that I am
currently undertaking on “the assessment of customer centric strategy (CCS/ CRM) on the
performance of commercial banks in Kenya”.
The objective of this study is to determine the impact of customer centric strategy on
acquisition and retention of customers in commercial banks; to examine the impact of
customer centric strategy on the profitability of commercial banks; and to determine the
challenges facing customer centric strategies in commercial banks and a way forward for
improving these strategies. The sample population for the study has been narrowed to your
organization as a case study. I would appreciate if you spare some of your time to kindly
complete the attached questionnaire. I will collect the questionnaire from your office as soon
as it is ready
The information you will provide is strictly for academic purposes. The identity and
information of your organization will be treated confidentially.
Yours Sincerely,
Gikuhe Timothy Waititu.
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APPENDIX II: QUESTIONNAIRE
The following questionnaire has been developed to help the researcher gather information
necessary to meet the research objectives that have been highlighted in the cover letter.
Kindly fill in are required.
A: Demographics
1. Gender
Male [ ] Female [ ]
2. Level of Education
Primary [ ] Secondary [ ] Tertiary [ ] Masters [ ]
Other [ ]……………………………….
3. What organization do you work for?
…………………………………………………………………………………………
4. What management position do you hold in the organization?
Senior-level [ ] Middle-level [ ] Low-Level [ ]
5. Do you understand what customer centric strategy (CCS)/ customer relationship
management (CRM) is all about?
Yes [ ] No [ ]
6. How are you involved in the customer centric strategy (CCS)/ customer relationship
management (CRM) implementation in tour organization?
Directly [ ] Indirectly [ ] Other [ ]
B: Impact of Customer Centric Strategy on Acquisition and Retention of Customers
7. Using a five-point scales ranging from 1=„totally disagree‟ to 5= „totally agree‟,
kindly rate how customer centric strategy in your organization has enabled you to
achieve the following?
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1 2 3 4 5
I feel that customer centric strategy in the organizations has enabled
us to focus on customer satisfaction
I feel that the customer centric strategy in the organization has
enabled us to create and maintain an ongoing relationship with our
customers
I feel that our customer centric strategy has drawn us closer to our
customers
Our customer centric strategy has made us enabled us to understand
our customers‟ wants and needs better
I feel that the customer centric strategy we have has made us build
trust with our customers
8. By using the five-point scales ranging from 1=„totally disagree‟ to 5= „totally agree‟,
how would you rate the customer centric strategy in your organization and building
customers‟ trust?
1 2 3 4 5
Our customer centric strategy has created trust between us and our
customers
The trust built in our customers has led to a continued patronage
between them and the organization
The customer centric strategy that we use ensures that our customers
are satisfied
I feel that customer satisfaction is our main customer retention
strategy
I feel that building trust in our customers is the main drive that
enables us to retain them
By building customer trust, we have been able to evoke positive
feelings from our customers
I feel that customer‟s trust has facilitated their long-term
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commitment with the organization
9. How has customer centric strategy in your organization enabled you to understand
your customers and improve the ways in which you handle customer complaints? Use
the five-point scales ranging from 1=„totally disagree‟ to 5= „totally agree‟, to rate the
following statements.
1 2 3 4 5
Our customer centric strategy enables the organization to address
customer‟s grievance with honesty and integrity
I feel that most of our customer complaints come from the
fragmentation within the company
We usually transfer customers who call with complains to the
departments in charge for them to be helped
We have provided customers with the grievances box so as to capture
their complaints
10. How has customer centric strategy in your organization enabled you to understand
your customers and the customer satisfaction in your products? Using the following
five-point scales ranging from 1=„totally disagree‟ to 5= „totally agree‟, how would
you rate the following statements.
1 2 3 4 5
We have used customer centric strategy to create a specific product
for a specific customer
Through the customer centric strategy we have identified a niche in
the market, and produce the service or product for that market
I feel that our customer centric strategy enables us to produce
services and/ or products for our niche market
We are able to prioritize the needs of our key customers because of
the customer centric strategy we use
I feel that the customer centric strategy has helped us to understand
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what customers are willing to pay for services and products
I feel that our customer centric strategy has enabled us to deliver
services efficiently to our customers
I feel that our customer centric strategy enables us to capture data
and hence give value back to our customers through price
11. How has customer centric strategy in your organization enabled you to use data
mining? Using five-point scales ranging from 1=„totally disagree‟ to 5= „totally
agree‟, how would you agree to the following statements.
1 2 3 4 5
Our customer centric strategy identifies certain patterns or
occurrences with our customers
I feel that our customer centric strategy enables us to extract
information from our database
We have identified customer behaviors that are non-intuitive from
our customer centric strategy
We have identified market segments that contain customers or
prospects with high potential through our customer centric strategy
I feel that our customer centric strategy enables us to forecast
customer needs properly
I feel that our organization uses the customer needs forecast to
increase satisfaction
I feel that our customer centric strategy has enabled us to develop
customer loyalty
As an organization, we have been able to get our customer
relationships correct guided by our customer centric strategy
C: Impact of Customer Centric Strategy (CCS) on the Profitability
12. How has customer centric strategy in your organization enabled you to enhance the
firm‟s profitability? Using the five-point scales ranging from 1=„totally disagree‟ to
5= „totally agree‟, rate how to agree/ disagree with the following statements.
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1 2 3 4 5
I feel that the customer centric strategy has enabled us to develop
better relationships with our existing clients
I feel that the customer centric strategy has enabled us to acquire new
customers
I feel that by serving our customer needs, we have been able to
increase their satisfaction
I feel that our customer centric strategy has strengthened the
organization in terms of growth
I feel that our customer centric strategy has strengthened the
organization in terms of profitability
I feel that our customer centric strategy gives priority to customer
segments with the greatest profit potential
13. How has customer centric strategy in your organization enabled you to create niche
segments for the organization? Using five-point scales ranging from 1=„totally
disagree‟ to 5= „totally agree‟, rate the following statements.
1 2 3 4 5
Our customer centric strategy has created boundary conditions for us
to serve our niche markets profitably
Organization has market segment specialists who continuously seek
out new niche segments in the market
Our customer centric strategy has a modular systems that tailors
products to the needs of our market segments
Organization has agile sales staff who swiftly identify and adapt to
the needs of niche segments
Our customer centric strategy offers clear-cut attitudinal
segmentation which form the basis for identifying attractive
segments
Our detailed knowledge about our market segments allow us to
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determine segment profitability
Our detailed knowledge of our market enables us to come up with
marketing and sales concepts that are suitable for each market
segment
14. How has the organization facilitated the adoption of customer centric strategy by
anchoring customer centric strategy in its values? Kindly rate the following
statements using the five-point scales ranging from 1=„totally disagree‟ to 5= „totally
agree‟.
1 2 3 4 5
I feel that our organization has installed customer-centric core
functions
I feel that the organization has aligned its governance to adapt to the
customer centric strategy
I feel that the organization has an excellent customer insight unit
I feel that the organization uses customer needs and preferences in its
decision making
I feel that we are educated and trained to drive employee buy-in in
the organization
I feel there is enough training done to the front-line employees in
driving customer buy-in
I have noticed that the organization a rigorous coaching/mentoring
programs to measure customer needs
I feel that the organization pursues a planned process of cultural
change
Our customer centric strategy has a continual focus and development
programme
The organization has a central Customer Knowledge and Analytical
Marketing team that implements the organization strategy
I feel that our organization‟s customer and product management is
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overarching
The voice of the customer is integrated in our core business process
through interface functions
I feel that customer centricity has been anchored in all our
employees‟ hearts and minds
15. How has the organizations adoption of customer centric strategy enhanced growth in
returns for the organization? Using the five-point scales ranging from 1=„totally
disagree‟ to 5= „totally agree‟, indicate your rating of the following statements.
1 2 3 4 5
Our improved customer knowledge has led to an increase in profits
The perception of our customers towards us as an organization has
led to an increase in profits
I feel that our customer-centric structure has led to the organization
increasing its overall profits
D: Challenges Facing Customer Centric Strategies in Commercial Banks
16. What customer data related challenge does the organization face in terms of
implementing the customer-centric strategy? Kindly use the following five-point
scale ranging from 1=„totally disagree‟ to 5= „totally agree‟ to indicate your level of
agreement to the following statements.
1 2 3 4 5
We are challenged when it comes to linking all accounts associated
with a customer
We do have a difficulty in achieving an integrated view of accounts
due to the different operating platforms and systems that we have
Capturing of secondary or co-signer accounts is a daunting task
We face a slight challenge in identifying parent/child accounts across
affiliated businesses
We face slight challenges in handling probable customer matches
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17. How would you rate the following factors in terms of treatment and workflow in your
organization? Use the five-point scales ranging from 1=„totally disagree‟ to 5=
„totally agree‟ to express your level of rating.
1 2 3 4 5
We are currently challenged in determining the right actions to take
for multi-accounts
I find there is a challenge in accessing customer-level account
information
I feel that we do not have enough agents who have appropriate level
of knowledge of all products
I feel that our customer centric strategy has customer-level treatment
and not account-level treatment
Our customer centric strategy has multiple platforms
Our customer centric strategy is disjointed as a result of the various
platforms
18. How would you rate the following factors in terms of contact channels in your
organization? Use the five-point scales ranging from 1=„totally disagree‟ to 5=
„totally agree‟ to rate the statements.
1 2 3 4 5
I feel that we do not have better channels for our younger customers
I feel that the permission levels given to employees are not adequate
in capturing customer preferences
I feel that we cannot measure channel effectiveness completely
I feel that employees face a lot of regulatory compliance when
dealing with customer channels
19. How would you rate the following factors in terms of organizational challenges in
your organization? Use the five-point scales ranging from 1=„totally disagree‟ to 5=
„totally agree‟ in your rating.
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1 2 3 4 5
Most of our regulatory changes are focused on revenue generation
I feel that management is focused on revenue generation and
profitability of the organization
Most of our business lines are grouped together “group targeted”
Our business incentive is more focused on organization growth and
profitability
I feel that our lines of business are driven to focus on maximizing
profits on products as opposed to the entire relationship
20. How would you rate the following factors in terms of core banking systems in your
organization? Use the five-point scales ranging from 1=„totally disagree‟ to 5=
„totally agree‟ to rate.
1 2 3 4 5
I feel that our systems are rigid in some areas
I feel that employees at times find it difficult to access customer
information
I feel that it is difficult to integrate new channels
I feel that the organization retains and maintains outdated technology
platforms
I feel that our core banking applications are not focused on creating
and managing relationship-based offerings
THANK YOU