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CUSTOMER RELATIONSHIP

MANAGEMENT
RESEARCH PROPOSAL

TOPIC:
Relationship marketing and Customer loyalty

Haji Saif Ullah

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Relationship Marketing and Customer Loyalty

Table of Contents
1. INTRODUCTION...................................................................................................................................4
1.1. Significance of Study....................................................................................................................4
1.2. Research Objectives.....................................................................................................................4
2. LITERATURE..........................................................................................................................................5
2.1. Trust.............................................................................................................................................5
2.2. Commitment................................................................................................................................6
2.3. Conflict Handling..........................................................................................................................6
2.4. Communication...........................................................................................................................6
2.5. Competence.................................................................................................................................7
2.6. Bonding........................................................................................................................................7
2.7. Customer Loyalty.........................................................................................................................7
3. RESEARCH METHODOLOGY.................................................................................................................8
3.1. Type of the study.........................................................................................................................8
3.2. Time Horizon................................................................................................................................8
3.3. Population....................................................................................................................................8
3.4. Sampling Technique.....................................................................................................................8
3.5. Data Collection.............................................................................................................................8
3.6. Instruments and Scale..................................................................................................................8
3.7. Research Model...........................................................................................................................9
4. REFRENCES........................................................................................................................................10

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Relationship Marketing and Customer Loyalty

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Relationship Marketing and Customer Loyalty

Relationship Marketing and Customer Loyalty


Haji Saif Ullah
Ali Hassan Cheema

1. INTRODUCTION
Relationship marketing is very important in today’s business environment. Customers/
consumers become more sophisticated and have good amount of knowledge and they always
in search of better offers. This factor forces the marketers to move from push marketing to
pull marketing. So, in this competitive business environment businesses are more seriously
focusing on relationship marketing. Ndubisi (2004) reported that businesses are more
intensively focusing on building strong and long term relationship with customers about how
best they can be serve and how they can be protected from competing brands. Proper
relationship marketing practices may result in lower marketing costs, enhanced customers
satisfaction, customer’s loyalty and increased customers retention. (Bergeron, Roy & Fallu
2008; Eid 2007: 1021; Ackermann & Van Ravesteyn 2005; Baron and Harris 2003: 161;
Wilmshurst& Mackay 2002: 346; Mudie & Cottam 1999: 257). Hence relationship with
customer rewards both the businesses and customers.
With respect to banking sector, Stiff competition is found in banking sector in Pakistan. It is
difficult for banks to provide unique services to clients. To overcome this challenge banks can
benefit from relationship marketing. Here, it is important to understand and study the impact
of relationship marketing on customer loyalty. This understanding will help the banks in
managing the relationship with customers and will also help in achieving higher loyalty. Our
research study here reports the impact of six variables of relationship marketing – trust,
Commitment, communication, conflict handling.

1.1. Significance of Study


According to Ball (2004) there are many challenges faced by the managers regarding
customer retention and loyalty, in the world. There is more focus on maximizing customer
value and long-lasting relationship. Gaurav (2008) finds that customer needs can be better
und erstand through relationship marketing strategy. It provides a competitive edge to the
company. Relationship marketing strategy also leads to cost reduction because the cost of
handling loyal customers is much less than the cost of serving new customers. Loyal
customer are willing to pay higher prices which leads to higher sales and customer share.
This study about the impact of relationship marketing on customer loyalty will strengthens
the existing knowledge by giving tested results about the Gujrat commercial banking sector.

1.2. Research Objectives


 The main objective of this research is to check the effects of relationship marketing on the
customer loyalty in the commercial banking sector of Gujrat City.
 To find out the intensity and level of customer loyalty in commercial banks of Gujrat City
 To recognize the relationship between customer loyalty and relationship marketing

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2. LITERATURE
The concept of relationship marketing was emerged in the fields of services marketing
(Christopher et al., 1991; Gummesson, 1991; Lindgreen et al., 2004). As well, the term
relationship was first used by berry in 1983. And interprets the relationship marketing
concept as a strategy to attract, maintain and enhance relationship with customers (Berry
1983). Gummesson (1993) also interprets the relationship marketing as strategy in which the
management interaction, relationships and network is a fundamental issue. In the early stage
relationship marketing was a general theory about marketing and it was not important what
has gained today. When dynamics changes occurred in business environment, these changes
emphasize on close communications, services and well-being of customers. (Toivo 1996).
According to Gronroos(1993) there was a shift relationship marketing in services marketing.
According to Gronroos (1994) the main objective of marketing is to create, maintain and
enhance relationship with its valuable customers at profit. According to Levitt (1983) the
main objective of Relationship marketing is to attract the customers and to retain them, but
marketers in the past more emphasis on attracting rather than retaining. Rapp and Collins
(1990) said that relationship marketing goals are to create and maintain long lasting
relationship between firm and customers that are rewarding for both the firm and customers.
This can only be achieved by the fulfillment of promise and commitments by the firm
(Ndubisi 2003a, b). Baron and Harris (2003) summarized the seven key virtues to underpin the
relationship marketing approach. Such as higher level of trust between both the firm and customers, higher
level of commitment, time horizon, open communication with customers, customer interest at heart,
commitment to quality and attempt to retain customer. And Ndubisi (2006) summarized the four
indicators to underpinning the relationship marketing, such as communication, conflict
handling, trust and commitment. In this research, we also considered the four dimensions that
underpin relationship marketing, such as trust, commitment, communication, and conflict
handling to predict the customer loyalty.

2.1. Trust
The first and foremost aspect of relationship marketing is trust. Berry (1995) described trust as the basic
and important aspect of relationship marketing. Morgan and Hunt (1994), defined trust as the
willingness to rely on exchange partner. Schurr and Ozanne (1985) defined trust as belief on
the reliability of client’s word that he will fulfill his/her promise/obligation. (Proctor,
2000).defines trust “the confidence of customer on business reliability and integrity to deliver
valuable goods and services. Trust in banking context defined as customer’s confidence in
quality and reliability of services offered by the banking organization (Garbarino and
Johnson, 1999). Other authors defined trust as shared values (Morgan and Hunt, 1994),
mutual interest (Wilson, 1995), unexpected outcome (Crosby et al., 1990). (Morgan and
Hunt, 1994) said that trust helps to parties to feel secure, minimize the uncertainty and
making friendly environment. Peck (1993) said that trust helps in maintaining and strengthen
the relationship which ultimately results in success of relationship marketing. Relationship
marketing approach is a promising concept. The responsibilities of marketer is not only to
make promises and persuade customer to act in a prescribed way, but to keep them in
promises, which maintains and improve its relation. He also argued that fulfillment of

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promises is important for customers satisfaction, to retain and to make them loyal (Calonius
1988).

2.2. Commitment
Commitment is another determinant of relationship marketing. In marketing context,
commitment refers to the higher level of responsibility to make relationship successful and to
make it beneficial for the both. Psychologist defines commitment in term of decision that
binds the individual into behavioral disposition (Kiesler, 2004). According to Gundlach
commitment is important element to measure the customer’s loyalty and predication of future
purchases (Gundlach et al., 1995; Morgan and Hunt, 1994; Dwyer et al., 1987). Allen
concluded that effective commitment is a person’s emotional attachment with the
organization. This strong bonding help the company’s to retain customers (Allen and Meyer
1990, p. 2). Researchers interpreted that committed relation between both parties produced
mutual benefits (Allen and Meyer, 1990). Morgan concluded that commitment is important
determinant to measure the customer’s loyalty (Morgan and Hunt, 1994).

2.3. Conflict Handling


(Ndobisi & Wah, 2005) has defined conflict handling as efforts by the supplier to minimize
the negative effects and damages caused to the buyer. Through conflict handling potential
conflicts and negative consequences can be reduced (Kibeh, A. W. 2013; Chu, Kuo-Ming
2009). This depends upon conflict handling that voice raised or customer become loyal. A
customer whose problems and conflicts are resolved will leads to lower voice and switching
and more loyalty (Rusbult et al. 1988; Rahbarinia, S.A. (2011). Different studies have found a
positive correlation between conflict handling and customer loyalty. Many researcher have
suggested that a relationship between customer and supplier will be strong if there is a system
of conflict handling. Many banking studies have showed that customer compliant handling
and conflict solving ultimately leads to more retention and loyalty (Alrubaiee, L., & Al-
Nazer, N. 2010; (Jesri, P., Ahmadi, F., & Fatehipoor, M. 2013; Sivanandamoorthy, S., &
Achchuthan, S. 2012; Nelson Oly Ndubisi, 2007).

2.4. Communication
Communication is also an important aspect of relationship marketing. Here, communication
refers to the ability to discharge information to customer, but it is necessary that it should be
timely and trustworthy (Ranjbarian & Barari, 2009). In relationship marketing communication
is to keep in touch with customers and to provide true, accurate and beneficial information
about product and services. In the modern era, communication is a two way dialogue between
customer and the firm. This communication may be occurs before or after the purchase by the
customer (Anderson and Nanus, 1990, cited in Ndubisi, 2007). Ndubisi (2007) said that
communication is the best way to understand customer preferences, building awareness
among customers and motivate them to re-buy the product. Communication by the firm also
tells dissatisfied customers what the firm is doing to rectify the root cause of customer
dissatisfaction. Ndubisi (2007) said that effective communication between customer and the
firm helps the firm in building stronger relationship with customers that resulted in more
loyalty and improvement in performance (Mohr et al., 1996; Farrelly & Quester, 2003).

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2.5. Competence
Supplier’s technological and commercial capabilities with respect to the perception of buyer
are known as competence (Anderson and Weitz 1989). They express competence in four
ways: the first one is the knowledge of supplier for the buyer second on is the ability to give
good advice on running the business, third on is the help this buyer’s plan to purchase and
fourth is the ability to provide the material for effective sale promotion. The National retail
merchants Association/ in USA, reported that approximately 20 percent of the customers lose
by every business due to incompetent service delivery and of which customer switch are 40
percent (Raddon,1987). Customer satisfaction have the significant effect on the bank
profitability (Newman and Crowling ,1996). Increase in customer retention 5 percent adds
25-150 percent in bottom line (Rosenberg and Czepiel, 1983); 65 percent of the company’s
business is because of present customers (Vavra, 1992). Many studies have proved that there
is positive correlation between competence and customer loyalty (Zins, A. H. 2001; Ball, D.,
Simões Coelho, P., & Machás, A. 2004; Blut, M., Frennea, C., Mittal, V., & Mothersbaugh,
D. L. 2015) have also found this impact.

2.6. Bonding
(Callaghan et al., 1995) has defined bonding as the business relationship which caused by
buyer and seller (two parties) who act in a unified manner for achieving a desired goal.
Wilson (1995) explains that bonding is of two types’ i.e. structural bond and social bond. The
dimension of social bond includes friendship, closeness and interaction. In relationship
marketing the dimension includes develop0ing and enhancing customer loyalty. (Sin et al.,
2002) argued that bonding plays a vital role for customer loyalty through the sense of
belonging to a relationship and indirectly to the organization. (Yim et al., 2008) finds that
greater personal bonds between buyer and customer lead to greater commitment for
maintaining the relationship. Moreover customer loyalty is significantly correlated with
bonding.
2.7. Customer Loyalty
A lot of studies have been done which provide the evidence on tha Impact of relationship
marketing on loyalty which effects on customer retenion (Bolton, et al., 2000; De Wulf et al.,
2001; Verhoef, 2003). Loyalty is the commitment to re purchase or reuse a product in near
future and switching behavior is influenced by situational influence and marketing efforts
(oliver,1999). Inactive improvement in situation is known as loyalty. A loyal customer should
show tolerance to achieve the innovative situation. Satisfied customer is said to be loyal but
loyal customer may not be always satisfied (fornell, 1992). Loyalty is defined by the Kotler is
that permanent commitment to family, friends and country and believe that it enters in the
market by giving focus on brand loyalty (Ranjbaryan &Barari, 2009). Long term loyal
customers are profitable is the basic assumption in relationship marketing.(Bitner,1990)
describes the loyalty as a process in which at the end satisfaction effects on perceived quality
as a result cause intention to a specific behavior. According to Palmer customer relationship
is profitable which can be achieved through perceived value that creates customer satisfaction
and strengthens the relationship and Plmer also finds that relationship marketing is the reason
to become loyal (Plmer, 2005).

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Hypotheses
H1: There is positive correlation between Relationship marketing and customer loyalty
H1a: There is positive correlation between Trust and customer loyalty
H1b: There is positive correlation between commitment and customer loyalty
H1c: There is positive correlation between conflict handling and customer loyalty
H1d: There is positive correlation between communication and customer loyalty
H1e: There is positive correlation between competence and customer loyalty
H1f: There is positive correlation between bonding and customer loyalty

3. RESEARCH METHODOLOGY
3.1. Type of the study
This is qualitative study aimed at finding relationship between a bank’s relationship
marketing efforts and customer loyalty. This study is descriptive in nature.
3.2. Time Horizon
The study will be cross sectional study as the data will be collected once. All the customers
will be given questionnaire for analysis. They will be not consulted again after once the data
have been collected.
3.3. Population
This study is conducted on the private commercial banks of Gujarat city. Only customers of
these banks will be taken as unit of analyses.
3.4. Sampling Technique
A convenience sampling method is used for collecting data. Convenience sampling is
basically a non-probability method of sampling in which respondents are being selected just
because they are conveniently accessible (Joan Joseph Castillo, 2009).
3.5. Data Collection
The type of study is qualitative. The data is primary so data will be collected through
questioners. We will distribute questioners among the customers of Gujarat city banks only.
3.6. Instruments and Scale
We have adapted the questioner from the previous studies. The questions for data collection
about the research model are adapted from different research papers. Five Point Likert
Scalewill be used which has extreme begin with strongly agree to strongly disagree to
extreme end.
The questioner is adapted from previous studies. Trust dimension which is measured by 6
items, Commitment which is measured with 4 items, Conflict handling which is measured
through 3 items, Communication is measured with 4 items and Customer Loyalty is measured
with 2 items. All these 4 dimensions of relationship marketing and customer loyalty have
been taken from Nelson Oly Ndubisi, (2007). Bonding dimension is measured with 6 items
and adapted from LaithAlrubaiee and Nahla Al-Nazer (2010). Finally Competence is
measured through 5 items and adopted from Ndubisi, N. O and Wah, C. K. (2005).

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3.7. Research Model

Trust

Commitment

Conflict Handling
Customer
Loyalty
Communication

Competence

Bonding

The conceptual model guiding this research work is shown in figure 1. In this research work,
we used the Ndubisi model and make further extension in that model. We used six
independent and one dependent variable. As shown in figure 1, six independent variables
which we used in this study are Trust, commitment, Conflict handling, Communication,
Competence and bonding. These six variables are representing the relationship marketing.
And the dependent variable used in this study is loyalty. In this study we proposed the
relationship marketing as the significant determinant of customer loyalty and hypothesized
that positive relation exist between relationship marketing and customer loyalty.

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