CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The banking sector is becoming increasingly competitive around the world. Today, many businesses such as banks, insurance companies, and other service providers realize the importance of Customer Relationship Management (CRM) and its potential to help them acquire new customers, retain existing ones and maximize their lifetime value. Customer Relationship Management is a sound business strategy to identify the bank’s most profitable customers and prospects, and devotes time and attention to expanding account relationships with those customers through individualized marketing, repricing, discretionary decision making, and customized service-all delivered through the various sales channels that the bank uses.Further, the core and actual product being offered to business customers could be considered reasonably homogenous. Consequently, there is an increased need for banks to differentiate themselves from competitors at the augmented product level. One way that this might be achieved is to develop longer-term relationships with their key customers (Heffernan et al., 2008). The purpose of a business is to create customers. This statement is predicated on importance of keeping those same customers and growing the depth of their relationship with you. Initially, new customers cost you money-money spent on advertising and marketing and money spent learning what they want and teaching them how best to do business with you.
Customer relationship management (CRM) is currently under active consideration by organizations across the globe, parading itself in the open market in the disguise of new technology and software applications. Past market analyses concluded and predicted that the CRM software market was set to grow by 700% over the years 2001 to 2004 and generate total revenues of approximately $3 billion (Fox, 2001). This research works from the premise that the real purpose of business is to create and sustain mutually beneficial relationships, especially with selected customers. With the main proposition which assume that successful relationships is the two-way flow of value(Christopher, M., et al., 2002). Trust key is a component of organizational relationships, and management approach to the issue of trust is of academic and practical significance. A rapidly growing body of literature recognizes that trust represents a significant variable that influences organizational productivity (Kramer & Tyler,2006; Lewickiet al., 2008; Mayer et al., 2005; Mayer &Davis, 2009; Prusak& Cohen, 2010).
In competitive consumer markets, customer choice decisions are at the root of business survival, focusing attention on the attraction and retention of customers through personalized service. Rosenberg and Czepiel (2004) estimate that the cost of winning a new customer is five times higher than that of maintaining an existing customer, while Reichheld and Sasser (2000) estimate that the retention of an additional 5% of customers, can increase profit by nearly 100%. Maintenance of the customer relationship is therefore cost-effective marketing, and has become a key aspect of most firm’s business strategy, prompting extensive deployment of Customer Relationship Management (CRM) systems (Morgan & Hunt, 1994; Kim et al., 2003). The nature of CRM aims to maximize customer value in the long term, by focusing business processes, marketing and customer service on client relationship maintenance, through the coordinating agency of an information technology (IT) system. Implementation of such a system is not a panacea, and is not, of itself, sufficient to transform a production oriented organization into a customer-oriented one (Kanji, 2002; Chang, 2005), which will require a wide-ranging overhaul of organizational structures, employee training and reward system, as well as appropriate IT support (Chen &Popovich, 2003). This study therefore examines the impact of customer relationship management and bank performance in Rivers State, Nigeria.