Customer Relationship Management and Competitive Advantage of Commercial Banks in Kenya

Abstract

To meet the changing needs of their customers, commercial banks have been diversifying their services and product offerings. However, increased competition from other financial institution and telecommunication companies has caused commercial banks to fall short of their targets. Therefore, this study sought to investigate the influence of customer relationship management on competitive advantage of commercial banks in Kenya. The specific objectives of the study were to examine the influence of technology, customer orientation, stakeholder involvement and product customization on competitive advantage of commercial banks in Kenya. The study was guided by resource-based view theory, Ansoff matrix theory, diffusion of innovation theory and stakeholder theory. The research used descriptive research design. The target population for this study was four selected commercial banks in Kenya namely, Kenya Commercial Bank, Equity Bank, Cooperative bank, and Family bank. In respect of this study, the total number of respondents was 183 respondents comprising of 145 sales and marketing staff and 38 management staff. The respondents in this study were stratified according to their respective responsibilities. A simple random sampling technique was used to choose the respondents from each stratum. The sample size was 126 respondents. A structured questionnaire was used as data collection instrument. Questionnaires were piloted to 12 respondents from the National bank of Kenya because it is one of the commercial banks in Kenya. Content validity was used to measure research instrument validity. Reliability was measured using Cronbach alpha test. Qualitative data was analyzed qualitatively by organizing data into themes based on study objectives and the results will be presented in narrative form. Quantitative data was analyzed using descriptive statistics such a mean and standard deviation. In addition, inferential statistics was applied using multiple regression analysis because there is more than one explanatory variable involved in this study. The analyzed data was presented using tables and figures. The study found from the regression analysis results that technology, customer orientation, stakeholder involvement and product customization had a positive significant influence on competitive advantage of commercial banks in Kenya. The study concluded that introduction of technology change’s organizational structure and, in so doing, alters the rules of competition, creates competitive advantage by giving companies new ways to outperform their rivals and changes whole new businesses, often from within a company’s existing operations. When customers feel that they are valued and their needs are being met, they are more likely to remain loyal to the bank. Effective engagement helps translate stakeholder needs into organizational goals and creates the basis of effective strategy development. Product customization leads to better customer insights because gaining customer insights provides businesses with a competitive advantage and helps them create products that customers are interested in. The study recommended that commercial banks in Kenya should increase automation of processes to increase efficiency and productivity while reducing costs. Commercial banks should put the customer at the very center of its values and goals and every department must be based on this philosophy. The commercial banks should have a clear vision derived from a robust strategic planning process, and an effective strategic plan or marketing plan can only come from stakeholder engagement. The commercial banks should understand their customers’ desires, preferences, and transaction habits to gain customer loyalty.