ANALYSIS OF IMPACT OF CUSTOMER KNOWLEDGE MANAGEMENT ON CUSTOMER LOYALTY (CASE STUDY: TEHRAN PRIVATE BANKS)

ISSN: 0976-2876 (Print) ISSN: 2250-0138(Online) ANALYSIS OF IMPACT OF CUSTOMER KNOWLEDGE MANAGEMENT ON CUSTOMER LOYALTY (CASE STUDY: TEHRAN PRIVATE BANKS) ALIREZA NODEHI a1 AND AFARIN AZAM b ab Master of Arts in Business Management From Islamic Azad University Qeshm Branch ABSTRACT Present research focuses on the impact of customer knowledge management on customer loyalty in Tehran private banks. First of all, after reviewing and applying the related literature to the research topic, a questionnaire which is compatible with Iranian culture is designed and distributed. Research population comprises of bank managers, bank tellers and customers in Tehran private banks. 450 questionnaires were randomly distributed and finally 430 questionnaires were collected. The collected data was analyzed applying SPSS 20 and Amos 20 softwares. Results indicate that customer knowledge management has effect on customer loyalty. This research results approved the previous researches done in the field. KEYWORDS: Knowledge, knowledge management, customer knowledge management, loyalty The for organizations which look for maintaining and developing their competitive status in market has been a strategic challenge and great costs has been paid for understanding and recognizing such a concept as well as finding practical solutions for improving them. One of the essential requirements for success in business in competitive arena is enjoying marketing skills and knowledge. Clearly, it is found out that scientific and practical marketing developments problems in businesses is one of the influential factors in being less competitive in business in international arenas. Nowadays, having information at disposal is assumed to be a competitive advantage in knowledgebased economics. In order to achieve a stable competitive advantage, paying attention to the available status, how to use it effectively, creating a structure for using new information and knowledge are crucial factors to which organizations should pay special attention (Gibbert et al., 2002). In recent years, companies have integrated management of the relation with customers and their own knowledge management as they have found out that knowledge management plays a significant role in customer relations management processes (Dous et al., 2005). In management of relations with customers, knowledge about customers is focused so as to communication with customers is managed. Knowledge management systems can manage this knowledge via ساختمند ( structuring,(فرآيندھاي خلق) creation processes diffusion and applying that for encouraging,(نمودن customers knowledge exchange in one organization, between one organization and its customers so that it can improve management of relations with customers including customers services, costumers maintenance and relations profitability (Rollins et al., 2005). Therefore, the present research aims at investigating the effect of customers' knowledge management on their loyalty. In the following sections, related literature concerning the concepts of customers knowledge management and loyalty is reviewed and then the research methodology is discussed and finally, the results are discussed and analyze. REVIEW OF THE RELATED LITERATURE Customers knowledge management Knowledge is strategic when organization can apply it in value creation activities and can use knowledge as a tool for actualizing available opportunities in competitive market. Since competitive advantage maintenance for companies is no longer possible but it is in only possible when things are done which cannot be imitated by others (Retna& Tee, 2011). Paying attention to the available knowledge, use it effectively and creating structure for using new knowledge is of prime importance in achieving a stable competitive advantage. Organizations ought to pay attention to all aspects. As knowledge management acts as a simultaneous strategy in the whole organization and it assumed to be the organization overall program progress tool (Bose, 2003). Davenport & Prusak believe that: Knowledge is a fluid combination of experiences, values, available information and systematic attitudes which presents a framework for evaluation and exploiting new experiences 1 Corresponding author

and information. Knowledge is formed and applied in the mind. Knowledge is imagined not only in archived documents but also in work procedures, organizational procedures, actions and norms in organizations (Davenport &Prusak, 1998). Desouza (2005) believes that knowledge management is coded as a method for transforming primary data into information and then as a method for interpreting the information into knowledge. Knowledge management systems can be developed using current and future informative technologies. Nevertheless, technology is needed for achieving knowledge management purposes but it is not enough. Knowledge management processes can be used in topics such as partnership, semantic interpretation and achievement(kheirandish, 2007, p. 75). Management of relations with customers is a process for gathering information and data about customers which its aim is recognizing and recording customers prominent features so as to marketing activities can be done according to customer s requirements(swift, 2001). Leavitt was the first one who presented the principled methods of vendee and vender relations in 1985. Management of relation with customers which sometimes called customers management, customers value management, customers orientation or customers oriented management, has been a common term for expressing companies tendency in establishing ongoing one to one relations with all customers (Greenberg, 2001). On one hand, it can be said that management of relations with customer includes a set of steps which aims at creation, development, maintenance, optimization of long term and valuable relations among customers and organization (Chalmeta, 2006). For being successful in present dynamic market, one should pay attention to one significant component which is called customer s knowledge. Customers knowledge has been increasingly recognized as a key strategic source for each company success. Customer knowledge is a crucial intangible asset for each organization; as it helps that organization to organize itself in line with value production. Marketing scholars suggest that organization employees should follow each opportunity of interaction with customer so as to enrich their own database about customers (Shami et al, 2008). Customer knowledge management is a solution for improving management of relations with customers which also uses knowledge management tools in the way of achieving it. Achieving the knowledge about customer is one means of management of relation with customers. Among which knowledge management is a certain process for collecting, organizing and applying such knowledge and as this knowledge is customer- dependent, therefore, management of relations with customers has a direct relation with customer knowledge management (Gibbert, 2002). Table 2.1: Substantial differences between management of relation with customer, knowledge management and customer knowledge management (Gibbert, 2002) Knowledge management Management of relation with customers Customer knowledge management Where to search knowledge Employees, team, company, business partners Customers data bank Customer experience, creativity, (dis) satisfaction from products/ services Principle If we only knew what we know Maintenance costs lower than discovering If we only knew what our customers know Explanation, integrating employees knowledge باز کردن about customers, sales processes and R&D Extracting knowledge about customers in company data bank Achieving knowledge directly from customer, sharing and expanding it Purposes Capital return, cost economy, omission of repeated processes Customer- orientation development, increase in customer loyalty Cooperating with customers for cocreating value Evaluation scale Efficiency against budget Efficiency according to customer s satisfaction Efficiency against competitors in creativity and growth, cooperation for customers (کاميابی??) success

Profits Customer satisfaction Customer maintenance,(کاميابی ) Customer s success creativity, organizational learning Customer role Passive, product receiver Bound, dependent on product and service by loyalty plans Active, cooperating in the process, value creation Organization role Employee encouragement to share their knowledge with their co- workers Establishing stable relations with customers Transforming customer from passive product receiver to active cooperator in value creation For making the concept of customer knowledge management more concrete, we determine three knowledge flows which play a crucial role in interaction between company and customers: knowledge for, from and about customer. In the first step, for supporting customers in their purchase cycle, an ongoing flow of knowledge which is guided from company to customer (knowledge for customer) is a prerequisite. Knowledge for customers includes information about products, markets and providers. It has effect on customer understanding about service quality after knowledge. At the same time, knowledge from customers should be linked for creativity in services and products, idea creation, and progressive improvement for services and products. Capturing ccustomers' knowledge and involving customers in creativity process is achievable using different methods. Collecting and analyzing knowledge about customer is certainly one of the oldest forms of knowledge management activity in the field of management of relation with customers. Customer s knowledge pay attention to the customers present requirements, future needs, communication, purchase activity and financial power, in addition to the customers primary data and previous deals (Saloman et al., 2005). Customers loyalty One of the important issue which marketing managers deals with recently is how to better understand structures such a customer loyalty. Keller (1998) asserts that in the past, loyalty was measured using purchase repeated behaviors. He also adds that customers loyalty can be studied in a broader sense than purchase repetition. In the past, loyalty was studied using consumers expectations or contexts that lead to re -purchase of a product or service (Auh and Johnson, 2005). According to Gounaris and Stathakopoulos (2004) loyalty can be studied from three different aspects of: behavioral, :(نظريه اقدام منطقی ( theory attitudinal and logical action 1. In behavioral point of view, Dic and Basu (1994) have defined loyalty as a relation between relative attitude to an entity and supportive behavior of that attitude. 2. In attitudinal point of view, Oliver (1997, 1999) defines four distinctive steps for creating customer loyalty to a service or product: cognitive, emotional,.(اقدام عملی) effort with no aim and action 3. Finally, logical action theory asserts that consumer behavior may be under social pressures. In this point of view it is explained that how consumers repeat purchasing a certain brand even when consumers' attitude toward a certain brand is undesirable ( Fishbein and Ajzen, 1975; Gounaris and Stathakopoulos, 2004). Concept of loyalty in customers and creating loyal customers in the business framework is described as "creating commitment for customers for dealing with a certain organization and purchasing products and services repeatedly" (Susanna and Larsson, 2004). If we are suppose to assume loyalty as a management and control indicator, then definition and classification of different types of interaction with customers who are called loyal, is fundamental and it provides a base for satisfying customers' needs. Some of the existing definitions are as follows: Loyalty occurs when customers strongly feel that the organization is capable of satisfying their needs most appropriately in such a way that competing organizations are put aside and they start purchasing from organization exclusively (Shomaker and Lewis, 1999). Customer' willingness for choosing a certain product or brand among other products for fulfilling a certain needs (Novo, 2004). Strong commitment for re- purchasing or becoming the customer of a certain product or service in future (Oliver, 1997).

RESEARCH METHODOLOGY Research Population and sampling It is a survey and descriptive research method according to its data collection methods. Its population comprises of managers, bank tellers and customers in Tehran private banks. Random sampling is used in this research. Sample size is determined according to required.(معادالت ساختاري) sample number of structural equations 450 2uestionires were distributed among which 430 acceptable questionnaires were selected for analysis. Two questionnaires were prepared. One was prepared for managers and bank tellers for measuring customers' knowledge management and another questionnaire was prepared for measuring. Research questionnaires are composed of two sections. First section includes demographic variables and second section is dedicated to measuring required variables in this research. Questions are rated 1-5 based on answers of quite agreequite disagree. Research variable measuring Questionnaires validity was confirmed by Tehran university professors and experts. For determining its reliability Cronbach's alpha method was applied. Cronbach's alpha for all questions related to all variables was 79% in the research analytical model which is a considerable percentage. In table 1 each variable Cronbach's alpha is expecified as follows: Variable Table 1: Cronbach's alpha Customer knowledge management Number of Cronbach's questions alpha 10 87% Customers loyalty 6 82% DATA ANALYSIS RESULTS Approved analytical results In the first step, measuring patterns are fitted. Patterns fitting indicators are presented in table 2. Table 2: Variables Customer knowledge Customers' loyalty Indicators management CMIN/DF 1.12 1.77 RMR 0.01 0.05 GFI 0.68 0.64 AGFI 0.67 0.61 IFI 0.78 0.65 NFI 0.68 0.64 CFI 0.68 0.65 Measuring patterns enjoy a good fitting and general indicators ھاي كلي) (شاخص confirm that data بارھاي ( loadings support the patterns well. Related factor are all more than 0.5% and the significance level is (عاملي 0/000. Table 3: Model fittings general indicators Structural equation modeling analysis results After studying and confirming measuring patterns in the first step, structural equations model main hypothesis are fitted and analyzed in the second step. In table 3 the model fittings general indicators are presented. RMR PCFI IFI CFI TLI NFI AGFI GFI RMSEA CMIN/df 0.02 0.61 0.98 0.98 0.97 0.97 0.94 0.95 0.03 1.10 Main model 0.04 0.53 0.93 0.93 0.95 0.93 0.90 0.92 0.05 2.13 Sub-model1 0.04 0.58 0.93 0.93 0.93 0.92 0.90 0.91 0.06 2.79 Sub-model2 0.04 0.65 0.98 0.98 0.95 0.98 0.95 0.97 0.02 1.43 Sub-model3 Approximately zero >0.50 >0.90 >0.90 >0.90 >0.90 >0.90 >0.90 0.08< >1 3< Acceptance ناحيه ( area (پذيرش

Results from data presented in table 3 are as follows: Amos output results in model standard estimation section indicates that مدل تحليل مسير is suitable مقدارکاي- sub-models. for the main model and the three is also in an acceptable range. Models اسکوئر بھنجار RMSEA rates are near zero and it is appropriate. The percentage of GFI and AGFI and three indicators of NFI, CFI, TLI and IFI are all more than 90 percent. And finally RMR percentage is approximately zero. Fittings indicators percentages for all patterns are in acceptance area and these indicators show a good fitting of patterns and the collected data support the patterns well. Hypotheses along with regression coefficients and the percentage of partial indicators related to each hypothesis are presented in table 4. Table 4: Hypotheses testing results Hypotheses Sample size Significan ce code The correlation coefficient Testing result Customer knowledge 430 0.000 0.68 approved management Knowledge from customers 430 0.005 0.34 approved Knowledge about customer 430 0.03 0.18 approved Knowledge for customers 430 0.000 0.45 approved Figure 1: Structural equation main model DISCUSSION AND CONCLUSION According to the relation between customer knowledge management and, organizations can identify the required knowledge about customers, creating a knowledge bank from internal and external sources and they can share it with other sections in the organization. Organizations can also prepare an appropriate base for knowledge exchange among managers, bank tellers and customers and they can also provide the base for new and creative ideas in line with and satisfaction. Therefore, improving the management system of relation with customers and creating a good relation between sections in an organization for sharing customers' knowledge is suggested. Researcher encountered limitations while carrying out the research, some of which are listed below: 1. Time limitations 2. Limitation in sample generalization due to using a limited sampling which is restricted to banking industry. 3. Using questionnaire for data collection: other data collection means are not applied here, only questionnaires are used. Researchers can carry this research out in different time periods and they can finally compare the results. This

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