Influence of Demographic Factors on Customers Perceptions towards CRM Practices among Banks

Influence of Demographic Factors on Customers Perceptions towards CRM Practices among Banks Zuliana Zulkifli, *Izah Mohd Tahir Faculty of Business Management and Accountancy, University Sultan Zainal Abidin, Gong Badak Campus, 21300 Kuala Terengganu, Terengganu, MALAYSIA *izah@unisza.edu.my Abstract The lack of understanding on Customer Relationship Management (CRM) is always a concern among the service providers especially banks. Banks have their own way of managing their relationships with the customers. However, the perception of customers on CRM practices among banks should also be taken into consideration. This is important as providing services to customers are their core business. The aim of this paper is to examine the relationship between customers perceptions on CRM practices and demographic factors (gender, age, education level, employment, and online banking usage). Data were gathered through survey method using a set of structured questionnaire distributed to bank customers. A total of 93 respondents participated in this study. Descriptive statistics will be employed to describe the sample and Pearson chi-square test will be used to test customers perceptions and the relationship with demographic factors. Using Pearson chi-square test, generally the results suggest that there are no significant differences in means between customers perceptions on CRM practices based on gender, age, education level, employment, and online banking usage. Keywords: Customer Relationship Management (CRM), customer perception, demographic factors 1. Introduction CRM is one of the strategies to manage customer as it focuses on understanding customers as individuals instead of as part of a group (Lambert, 2010). Managing customer relationships is important and valuable to the business. The effective relationship between customers and banks depends on the understanding of the different needs of customers at different stages. The ability of banks to respond towards the customers needs make the customers feel like a valuable individual rather than just part of a large number of customers. In getting the services provided by banks, customers can choose variety of services offered. For example, one customer might use multiple services such as maintaining several types of accounts, investment management, loan processing and mortgage while another needs only a basic service such as maintaining an account. Customers can use facilities such as automated machines to complete their transactions without dealing with the bank personnel. Banks continue to emphasize customer service and interaction just like it was decades ago. As an example, today banks provide 24-hour banking for customers convenience and the Automated Teller Machines (ATM) which can be accessed in many places such as in the shopping mall. Rapid advancements in technology and automation are quickly expanded in the banking services more than we expected. Thes study on understanding the demographics of customers and their perceptions towards CRM practices are essential. Today, the analysis of customers demographics plays a vital role in supporting innovative service concepts. Hence, this study is carried out to identify whether there are any significant differences in customers perceptions on CRM practices based on demographic factors (gender, age, education level, employment, and online banking usage). The 30

paper is structured as follows. The next section outlines the literature review, followed by data and methodology. Section 5 presents the findings and Section 6 concludes. 2. Literature Review CRM is a key to create a superior customer experience. It manages the customer relationship by creating a clear understanding (Know), by developing services and products based on the added value for target groups (Target), then enabling the actual sale and delivery of services and products through the selected channels (Sell), and developing long term profitable relationships with customers after sales services (Service) (Hussain, et.al., 2009). The term relationship marketing and CRM are used interchangeably in many of the previous research but the two concepts are different (Parvatiyar & Sheth, 2001; Leo, et al., 2005). According to Parvatiyar & Sheth (2001), CRM focuses on a cooperative and collaborative relationship between organizations and customers as an individual. Cooperative and collaborative relationship on the hand, refer to the interdependent and long term orientation that gives mutual benefits to both parties. Leo, et. al., (2001) suggest that CRM is a tool to identify, acquire, and retain the profitable customers by building the long term relationship among them. In the literature, the main difference among these definitions is technological and relationship aspects of CRM. The phrase CRM appeared in the literature after the evolution in the relationship marketing philosophy. Berry (1995) defined relationship marketing as attracting, maintaining and enhancing the customers relationships in multi service organization. After a few decades, the evolutions in relationship marketing philosophy changed the word relationship marketing to CRM. According to Brown (2000), CRM is a process of acquiring new customers, retaining the existence customers, and at the same time understands, anticipates, and manages the needs of an organization s current and potential customers. Furthermore, Mylonakis (2009) described CRM as an innovative process to create a long term relationship and gaining trust. Ryals & Payne (2001) defined CRM as management approaches that use information technology (IT) to build a long term relationship with customers and at the same time generate profits to the organizations. Chen and Ching (2004) described CRM as a long term relationship that use customer database to identify which customer can give more profit to the organizations. Up until now, there are still no specific definitions for CRM in the previous research. In this study, we refer to the definition given by Parvatiyar & Sheth (2001, page 5) as follows: Customer Relationship Management is a comprehensive strategy and process of acquiring, retaining, and partnering with selective customers to create superior value for the company and the customer. Its involves the integration of marketing, sales, customer service, and the supply chain functions of the organization to achieve greater efficiencies and effectiveness in delivering customer value. Thus, from the definition we can conclude that CRM is s strategy by banks to attract, retain and later be partners with their customers. 3. Data Data were gathered through survey method using a set of structured questionnaire distributed to bank customers. A total of 93 respondents participated in this study. In this study, respondents were chosen by using a purposive sampling technique in examining customers perceptions on CRM practices among banks. In addition, using this sampling technique is more convenient and appropriate for a study of this nature. According to Sekaran (2003) purposive sampling focuses on specific types of people who can provide the desired information, either because they are the only ones who have it or conform to some criteria set by the researcher. 31

The details of the measurement for demographic factors are as follows: gender, age, education level, employment and online banking usage. The respondents were asked to tick the respective boxes. Table 1 shows the result of respondents profile for this study. Majority of the respondents are female (62.4%), aged between 25 to 34 years old (63.4%). 34.4% of the respondents had degree qualifications. However, those having a master degree made up of only 25.8% of the sample. The result on the employment shows that 55.9% were from the government sector and 26.9% from the private sector. 11.8% of the respondents are postgraduate students and 5.4% are self-employed. From the aspect of using online banking or not, majority of respondents agreed that they used online banking with 63.4% of the respondents said yes and 36.6% said no. 4. Methodology This study which is descriptive in nature is designed to examine the relationship between customers perceptions towards CRM practices among banks and demographic factors (gender, age, education level, employment, and online banking usage). A Questionnaire with 31 statements was adapted from the work of Lu and Shang (2007) with modifications to suit the setting in the banking sector. Perceptions on CRM practices are measured by using seven point Likert scale as follows: 1= Strongly Disagree; 2= Disagree; 3= Somewhat Disagree; 4= Neutral; 5= Somewhat Agree; 6= Agree; and 7 = Strongly Agree. To examine the relationship between customers perceptions on CRM practices and demographic factors (gender, age, education level, employment, and online banking usage), chi-square was computed. This test was used to test whether there were any significant differences in perceptions, since there were different groups involved in the study. Table 2 presents the statements related to customers perceptions on CRM practices among banks. The result for Cronbach alpha value for 31 statements of CRM practices was 0.96. Thus, this is considered good and reliable (Sekaran, 2003). 5. Findings The reported chi-square is shown in Table 3. The reported chi-square results show that as an overall, there were no significant differences between customers perception on CRM practices based on gender, age, education level, employment, and online banking usage. This implies that customers perceptions on CRM practices among banks are similar, regardless of gender, age, education level, employment, and online banking usage. Thus, when banks want understand the perceptions of customers on their CRM practices, demographic factors did not influence what customers perceived. 6. Conclusion Based on the original work of Lu and Shang (2007) with modifications to suit the banking sector, this study was undertaken to examine the influence of demographic factors (gender, age, education level, employment, and online banking usage) on customers perceptions towards CRM practices among banks. Analysis of variance and chi-square were performed to test whether the means of the customers perceptions differ by gender, age, education level, employment and online banking usage. Our results indicate that there are no significant differences in means between customers perceptions on CRM practices among banks based on these demographic factors. This would imply that customers perceptions on CRM practices among banks are similar regardless of gender, age group, education level, employment, and online banking usage.mthis research has its limitations. One of the limitations is the sample. Further research is recommended incorporating more samples and covering wider areas. 32

References Berry, L. L. (1995). Relationship marketing of services-growing interest, emerging perspectives. Journal of the Academy of Marketing Science, 23(4), 236-245. Berry, L. L. (1983). Emerging Perspectives on Services Marketing, Chicago: American Marketing Association, cited in Ryals, L. & Payne, A. (2001) Customer Relationship Management in Financial Services: Towards Information-enabled Relationship Marketing. Journal of Strategic Marketing, 9, 3-27. Brown, S. A. (2000). Customer Relationship Management: Strategic Imperative in the World of E- Business. Canada: John Wiley and Sons. Chen, J.-S., & Ching, R. K. H. (2004). An empirical study of the relationship of IT intensity and organizational absorptive capacity on CRM performance. Journal of Global Information management, 12(1), 1-17. Hussain, I., Hussain, M., Hussain, S., & Sajid, M. A. (2009). Customer relationship management: Strategies and practices in selected banks of Pakistan. International Review of Business Research Papers, 5(6), 117-132. Lambert, D. M. (2010). Customer relationship management as a business process. Journal of Business & Industrial Marketing, 25(1), 4-17. Leo, Y. M. S., Tse, A. C. B., & Yim, F. H. K. (2005). CRM: Conceptualization and scale development. European Journal of Marketing, 39(11/12), 1264-1290. Lu, C.-S., & Shang, K.-C. (2007). An evaluation of customer relationship management in Freight Forwarder services. Paper presented at the 13 th Asia Pacific Management Conference, Melbourne, Australia. Mylonakis, J. (2009). Customer relationship management functions: a survey of Greek bank customer satisfaction perceptions. The Icfai University Journal of Bank Management, VIII(2), 7-31. Parvatiyar, A., & Sheth, J. N. (2001). Customer relationship management: Emerging practice, process and discipline. Journal of Economic and Social Research, 3(2), 1-34. Ryals, L., & Payne, A. (2001). Customer relationship management in financial services: towards information-enabled relationship marketing. Journal of Strategic Marketing, 9, 3-27. Sekaran, U. (Ed. 4). (2003). Research Methods for Business: A Skill Building Approach. United State: John Wiley & Sons Table 1: Demographic Profile of the Respondents Gender: Male Female Age: 25-34 years 35-44 years 45-54 years Education Level: Category Frequency (n) Percent (%) 35 37.6 58 62.4 59 63.4 24 25.8 10 10.8 33

Certificate of education Diploma Degree Master PhD Employment: Private Sector Government Sector Self-employment Student Online banking: Yes No 13 14 18 19.4 32 34.4 24 25.8 6 6.5 25 26.9 52 55.9 5 5.4 11 11.8 59 63.4 34 36.6 Table 2: CRM Constructs No Statements 1 My bank uses different measures to meet customers urgent requirements. 2 My bank uses different approaches to attract new customers. 3 My bank uses customer information to attract new customers. 4 My bank uses customer information to plan new products and services. 5 My bank provides a variety of service items and information. 6 My bank provides services to meet my specific requirements. 7 My bank fulfills its promises on time. 8 My bank is able to tailor its products and services to meet my needs. 9 My bank actively seeks to provide me a total financial solution. 10 My bank uses phone calls, e-mails, and personnel visits to communicate with me. 11 My bank rapidly responds to my problems, suggestions, and complaints. 12 My bank would initiatively understand my service requirements and expectations. 13 My bank offers me with convenient services. 14 My bank offers me with products that reflect my earnings and wealth. 15 My bank provides me with enough information to allow me to be well-informed when making choices. 16 My bank s operating hours are convenient to me. 17 My bank offers me with comprehensive range of investment products. 18 My bank offers me with innovative loan services. 19 My bank often encourages me to introduce other customers to purchase their products and services. 20 My bank often insists me in using bank s services and products. 21 My bank has clear objectives and strategies to meet my needs and the performance of my relationships. 22 The terms and conditions of my bank are better than others. 23 My bank s system allows me to perform my banking needs. 34

24 My bank has modern equipments and technologies. 25 My bank provides telebanking and internet banking facilities. 26 My bank uses new technologies to improve communication with me. 27 My bank always delivers superior services. 28 My bank offers me high quality services. 29 The services at my bank make me want to use banking services. 30 I feel relaxed using my bank services. 31 The services at my bank would help me to give a good impression towards other people. Table 3: Customers Perception towards CRM Practices and Demographic Factors (Pearson oneway ANOVA) Statements Number Gender Age Education Level Employment Online Banking χ² Sig. χ² Sig. χ² Sig. χ² Sig. χ² Sig. 1 3.15 0.79 15.33 0.22 31.79 0.13 7.77 0.98 4.08 0.67 2 3.85 0.57 11.48 0.32 17.37 0.63 12.25 0.66 3.26 0.66 3 2.84 0.83 25.61 0.01* 19.32 0.74 21.50 0.26 3.15 0.79 4 4.73 0.58 14.73 0.26 16.50 0.87 22.35 0.22 10.49 0.11 5 5.52 0.24 5.15 0.74 17.21 0.37 10.36 0.59 8.81 0.07 6 5.56 0.35 6.50 0.77 18.66 0.54 13.62 0.55 13.02 0.02* 7 4.49 0.48 18.45 0.05 17.98 0.59 10.83 0.77 4.12 0.53 8 7.47 0.19 22.77 0.01* 18.32 0.57 19.93 0.18 6.84 0.23 9 0.71 0.98 12.04 0.28 18.79 0.54 17.73 0.28 3.82 0.58 10 8.58 0.20 13.85 0.31 31.31 0.15 14.51 0.70 2.80 0.83 11 5.06 0.54 16.17 0.18 39.60 0.02* 15.03 0.66 5.52 0.48 12 7.45 0.28 19.00 0.09 33.05 0.10 15.22 0.65 8.51 0.20 13 8.85 0.12 12.88 0.23 20.53 0.43 17.40 0.30 5.49 0.36 14 6.67 0.35 22.35 0.03 45.78 0.01* 26.18 0.10 7.17 0.31 15 6.58 0.36 26.78 0.01* 30.28 0.18 23.01 0.19 6.31 0.39 16 4.34 0.63 18.69 0.10 20.58 0.66 17.07 0.52 3.95 0.68 17 6.14 0.41 24.88 0.02* 31.78 0.13 19.78 0.35 4.98 0.55 18 5.94 0.43 15.20 0.23 35.81 0.06 24.09 0.15 7.10 0.31 19 1.54 0.96 15.04 0.24 23.91 0.47 19.05 0.39 12.27 0.06 20 2.28 0.89 15.04 0.24 23.91 0.47 19.05 0.39 12.27 0.06 21 2.84 0.83 23.21 0.03* 19.53 0.72 21.29 0.27 2.43 0.88 22 7.33 0.20 23.45 0.01* 23.45 0.27 6.27 0.98 4.39 0.50 23 4.02 0.55 14.61 0.15 14.17 0.82 16.91 0.32 6.07 0.30 24 3.15 0.53 12.23 0.14 16.49 0.42 11.96 0.45 3.78 0.44 25 1.65 0.80 13.89 0.09 20.44 0.20 12.53 0.40 2.80 0.59 26 4.86 0.43 15.70 0.11 33.14 0.03* 11.67 0.70 2.68 0.75 27 5.14 0.40 17.80 0.06 23.87 0.25 20.76 0.15 2.58 0.77 35

28 1.93 0.86 12.40 0.26 16.41 0.69 14.57 0.48 3.45 0.63 29 3.22 0.52 11.42 0.18 13.80 0.61 4.852 0.96 1.20 0.88 30 0.28 0.99 10.59 0.23 22.25 0.14 19.94 0.07 5.97 0.20 31 5.10 0.40 4.00 0.95 13.34 0.86 5.69 0.99 3.58 0.61 *Significance level at 0.05 36