effects of customer service management on business...

IJDW Volume 4 • Number 1 • January-June 2012 • pp. 1-16

EFFECTS OF CUSTOMER SERVICE MANAGEMENT ON BUSINESSPERFORMANCE IN THE NIGERIAN BANKING INDUSTRYAwolusi, Olawumi Dele

Department of Business Administration and Marketing, School of Postgraduate Studies, Babcock University, Ilishan-Remo, Ogun State;P.M.B 21244, Ikeja, Lagos, Nigeria. E-mail: [email protected]

Abstract: The purpose of this study was to investigate the critical success factors (CSF) of Customer ServiceManagement (CSM) implementation, as well as, examines specific relationships between these Critical successfactors of Customer Service Management (CSM) and Perceived Business Performance Measure (PBPM) inthe Nigerian banking industry. The empirical study was conducted via a survey on (six) 6, out of the 22surviving banks post-2004 consolidation exercise of the Central Bank of Nigeria (CBN). Using the frameworkfrom Khong and Mahendiran (2006), factors manifesting PBPM were regressed on the critical success factors,manifesting successful CSM. However, the model contrived was estimated using Structural Equation Modeling(SEM). Using SEM, multivariate analyses was mathematically represented in a single equation, and thisequation is expected to be used by banks in composing strategies to optimize their management of CSMefforts and business performance. The model provides predictive implications on improved businessperformance, given the activities of CSF manifesting successful CSM. Hence, to improve business performance,banks could control their CSM programme.

Keywords: Customer Service Management, Business Performance, Structural equation modeling, Banking,Nigeria

1. INTRODUCTION

Banking industry consolidation in Nigeria oftenrepresents an attempt by the Central Bank of Nigeria(CBN) in solving the problem of bank distress andfailure, as well as, to reposition Nigerian banks fornational and global economic challenges. In most ofthe recapitalisation exercise, CBN often maintainedthat the increment in bank’s capitalization was toensure a strong and reliable banking sector; ensurethe safety of depositors’ money; and repositionNigerian banks to play active developmental rolesin both the local and the global economies (Ezeoha,2007). In addition, CBN often argued thatconsolidation was to solve the problems of poorlycapitalized banks to meet increasing customers’demands and expectations, in the present ‘globalisedworld’ (Gunu, 2009).

The importance of Customer Service Manage-ment (CSM) has now become very important in theNigerian banking industry. As noted by Ezeoha(2007), the banking industry is now confronted witha fundamental business challenges-survival andsuccess in a turbulent environment. As Nigerian

Banks face further deregulation, increasingcompetition, and continuously evolving customerdemand and expectations, they have to adoptproactive approaches in other to guarantee improvedperformance. Hence, building and maintaining astrong business reputation has become increasinglychallenging (Khong, 2005); the outcome of internalfragmentation that is observed and commented uponby customers is now visible to the rest of the worldin the era of the social customer. Addressing thefragmentation requires a shift in philosophy andmindset in an organization so that everyoneconsiders the impact to the customer of policy,decisions and actions ((Desbarats, 1995; Hart-Davidson et al., 2008; Kostelnick, 1998). Humanresponse at all levels of the organization can affectthe customer experience for good or ill, even oneunhappy customer can deliver a body blow to abusiness (Pennington, 2007).

1.1 Problem Analysis

The aftermath of the consolidation led to radicalchanges in the way these Nigerian banks conduct

2 Awolusi, Olawumi Dele

businesses. With the banking industry opened tomore foreign and local competition, throughconsolidation and globalisation, the rivalry in thebanking industry is expected to intensify dramati-cally. As the market begins to saturate, customerretention will be a key factor in determining thesuccess of these banks (Ezeoha, 2007). In short, undersuch intense competition the bank that has the largestcustomer base and highest customer retention ratewill be a market leader in the industry (Gunu, 2009).

Customers are the driving force of companiesstriving for success; hence, survival of thesecompanies evidently depends on their customers(Lewis, 2000; Kotler, 2000). As competitionintensifies, customers find themselves relishing theoptions and alternatives various companies can offerthem. If they are not satisfied with the currentproducts or services, they can easily switch to others.Since its now a buyers’ market, the need for goodCSM is imperative. An improved CSM can expediteand enhance customer re-buy, hence leading toimproved customer satisfaction, customer retentionand relationship management (Khong, 2005; Khongand Mahendiran, 2006). Ultimately the quality ofcustomer service becomes a driving force inascertaining business survival in the bankingindustry (Khong and Mahendiran, 2006).

The degradation of customer service level ishighly probable (Khong and Mahendiran, 2006).According to Gunu (2009), business performancewill be affected when customer service level iscompromised during bank mergers and acquisitions,due to the consolidation effort. Therefore mergedbanks are not assured immediate success albeit themerger plan is preparing them to meet the challengesof globalisation and liberalization (Khong andMahendiran, 2006). Although the rationalisation ofresources allocation and business processes such ascustomer service and productivity is inevitable, theseproblems can be resolved with proper integrationand management, through effective customer servicemanagement (CSM); hence, with effective CSM,business performance of Nigerian banks can beimproved (Ezeoha, 2007).

Consequently the aim of this paper is to examinethe effects of CSM on business performance inNigerian banks. This study aims to fulfill this inquiryby examining the CSF of CSM implementationsuccess, as well as, specific relationship betweenthese CSF and business performance. Since anextensive longitudinal study of the rise and fall of

CSM with respect to the relationship-factor of theimportant variables has hardly been done, in theNigerian context, this study also intends to bridgethis gap. In other word, this study will provide aholistic view of the CSM implementation process,by reviewing the hard and soft factors that causesuccess, as well as, examine the relationship betweensuccessful CSM and Perceived Business PerformanceMeasures (PBPM) in the Nigerian banking industry.

Based on the above objectives, the followingresearch questions were formulated:

1. What relationship exists between marketresearch and business performance inNigerian banking industry?

2. To what extent is the relationship betweencustomer assessment and businessperformance in Nigerian banking industry?

3. What relationship exists between customersatisfaction and business performance inNigerian banking industry?

4. To what extent is the relationship betweencustomer relationship management andbusiness performance in Nigerian bankingindustry?

The above research questions were investigatedfrom an empirical perspective by means of analyzingand discussing the existing literature as well asproposing an in-depth survey of selected Nigerianbanks in their implementation of CSM, as a strategicinitiative, post 2004 consolidation exercise of theCentral Bank of Nigeria (CBN).

2. REVIEW OF RELEVANT LITERATURE

2.1 Definition and Conceptual Analysis

Customers are the driving force of enterprisesardently desiring success. Likewise the survival ofan enterprise also depends on its customers (Lewis,2000; Kotler et al., 2001; Kotler, 2000). Consumersand customers are wise when selecting the rightproducts to fulfil their needs and wants. In addition,the intense competition prods them to switchproducts easily when they are dissatisfied. Thereforethere is a need for customer retention. In order toretain customers good customer service must bepresent, hence an effective CSM (Khong andRichardson, 2003). According to Kotler (2000, p. 45)customer service is “all the activities involved inmaking it easy for customers to reach the right partieswithin the company and receive quick andsatisfactory service, answers and resolutions of

Effects of Customer Service Management on Business Performance in the Nigerian Banking Industry 3

problems”. Consequently, customer service canprovide the basis for customer retention. Twoimportant constructs are highlighted in this paper,i.e. business performance and CSM. Businessperformance refers to how well an enterpriseperforms while CSM refers to how well theenterprise manages its customer service in terms ofeffectiveness, productivity and quality (Khong andMahendiran, 2006).

2.1.1 Customer Service Management (CSM)

CSM is reflected as the way organisations managetheir customer services to create value andsatisfaction (Kotler et al., 2001; Gabbott, 2004). It isconsidered as a way to deliver customer satisfactionthrough fulfilment of customers’ needs and wants.In the banking context, customer services areperformed to assist customers to achieve their needsand wants through tellers via banking counters,personal financial assistance, automatic tellermachines, telephone banking and internet banking(Khong and Mahendiran, 2006). In order to provideefficient CSM, several dimensions (CSF) of customerservices should be present. These dimensionsinclude: market research, customer assessment,customer satisfaction, and customer relationshipmanagement (Khong and Mahendiran, 2006; Kotleret al., 2001; Kotler, 2000). Details follow.

2.1.2 Market research

Market research is any organized effort to gatherinformation about markets or customers (Kotler,2000). Market research is a key factor to getadvantage over competitors. Market researchprovides important information to identify andanalyze the market need, market size andcompetition. Hence, market research is fordiscovering what people want, need, or believe. Itcan also involve discovering how they act. Once thatresearch is completed, it can be used to determinehow to market a company’s product. However,questionnaires and focus group discussion surveysare some of the instruments for market research.Through Market information, market research isoften conducted to know the prices of the differentbanking products in the market, as well as the supplyand demand situation. Market segmentation, iswidely used for segmenting on geographic diffe-rences, personality differences, demographicdifferences, technographic differences, use ofproduct differences, psychographic differences and

gender differences (Khong and Mahendiran, 2006).In addition, market trends are conducted todetermine the upward or downward movement ofa market, during a period of time. Besidesinformation about the target market, one also needsinformation about one’s competitors, customers,products, etc. (Khong and Mahendiran, 2006; Kotleret al., 2001; Kotler, 2000)

2.1.3 Customer Assessment

The first step is to gain a thorough and accurateunderstanding of what your customers specificallywant, need and expect from you and your business.Successful new products and services meet realcustomer needs. Because different products appealto different kinds of people, and because trulyinnovative products (those that offer dramaticchange in the way people live) attract small groupsof early adopters before going mass market, it isimportant to have a clear picture of who the end-user customers will be as early as possible. Havinga clearly defined customer target enables moreaccurate matching of product features and benefitsto the target and improves the ability to estimatemarket demand (Khong and Mahendiran, 2006).

Customer assessment is critical to determiningtarget market, as well as product/service offering,promotional support, CRM, and channel access.There are many tools used to evaluate customerpotential: Performance gap analysis, are usuallyconducted to determine objective view of clientperformance at key customers along major serviceparameters; Customer needs analysis are alsoconducted to explore priority needs/wants ofcustomers, notably unmet needs, as means todetermine penetration leverage by client; newproduct/service investigation is another tool fortesting acceptability of a new product or serviceamong targeted customer group to determineviability of new product introduction, specificationsof the product/service offering, and pricing;opportunity mapping is for identifying andquantifying most attractive customer targets; Voiceof Customer (VOC) helps in probing targetcustomers on various parameters to help shapeclient offering, CRM approach, competitivevulnerability, and extended service offerings; andlastly, benchmarking to develop strengths andweaknesses (Kotler, 2000; Desbarats, 1995; 1998;Pennington, 2007).


2.1.4 Customer Satisfaction

Customers are company’s most valuable asset. Intoday’s fiercely competitive marketplace, aconsistently high level of customer satisfaction iscrucial to developing and retaining customers andgrowing a business. Customer satisfaction can bedefined as “a person’s feelings of pleasure ordisappointment resulting from comparing aproduct's perceived performance (or outcome) inrelation to his or her expectations” (Kotler, 2000, p.36). To summarize, effective CSM has a positiveassociation with customer retention hence customersatisfaction. When there is high customer retentionrate, it indicates that these retained customers aresatisfied with the services offered by the enterprise.So, customer retention can indicate customersatisfaction (Kotler et al., 2001, pp. 665-73; Kotler,2000, pp. 44-9).

2.1.5 Customer Relationship Management (CRM)

Customer relationship management (CRM) is astrategy for managing a company’s interactions withcustomers, clients and sales prospects; it involvesusing technology to organize, automate, andsynchronize business processes, mainly salesactivities, marketing, customer service, and technicalsupport (Kotler, 2000). According to Kotler et al.(2001), the overall goals of CRM are to find, attract,and win new clients, nurture and retain those thecompany already has, entice former clients back intothe fold, and reduce the costs of marketing and clientservice. Successful development, implementation,use and support of customer relationship manage-ment systems can provide a significant advantageto the user, but often, there are obstacles that obstructthe user from using the system to its full potential(Khong, 2005). CRM software provides a businesswith the ability to create, assign and manage requestsmade by customers; recognizing that this type ofservice is an important factor in attracting andretaining customers, organizations are increasinglyturning to technology to help them improve theirclients’ experience while aiming to increase efficiencyand minimize costs (Desbarats, 1995). CRM softwarecan also be used to identify and reward loyalcustomers who in turn will help customer retention(Pennington, 2007).

Some developments and shifts have madecompanies more conscious of the life-cycle of acustomer relationship management system;companies now consider the possibility of brand

loyalty and persistence of its users to purchaseupdates, upgrades and future editions of software(Desbarats, 1995; 1998; Pennington, 2007). Afragmented implementation can negate any financialbenefit associated with a customer relationshipmanagement system, as companies choose not to useall the associated features factored when justifyingthe investment; instead, it is important that supportfor the CRM system is companywide, while thechallenge of fragmented implementations may bemitigated with improvements in late-generationCRM systems (Hart-Davidson et al., 2008). CRMsystems for marketing help the enterprise identifyand target potential clients and generate leads forthe sales team. A key marketing capability is trackingand measuring multichannel campaigns, includingemail, search, social media, telephone and directmail. Metrics monitored include clicks, responses,leads, deals, and revenue (Pennington, 2007).Alternatively, Prospect Relationship Management(PRM) solutions offer to track customer behaviourand nurture them from first contact to sale, oftencutting out the active sales process altogether (Hart-Davidson et al., 2008; Kostelnick, 1998).

2.1.6 Perceived Business PerformanceMeasures (PBPM)

Business performance refers to how well an enterpriseperforms, and is an important construct indetermining organizations success (Khong andMahendhiran, 2006). Business performance outcomescan be considered both in financial and non-financialterms (Bontis, 1998; Bontis et al., 2000). While businessperformance of the enterprise determine the objectivemeasures such as return on investment, profits andsales turnover, perceived measures of businessperformance of the enterprise relates to theproductivity in the context of the industry,department and individuals. In this paper, the latterwas used to measure because perceived measures canreplace objective measures of business performance(Dess and Robinson, 1984). Additionally thereliabilities and correlations between objectivemeasures and perceived measures are strong (Lylesand Salk, 1996).

Previous researches by Bontis (1998) and Bontiset al. (2000) indicate that the perceived measuresmentioned above are a feasible tool to measurebusiness performance. When measuring theperceived measures of business performance of theorganisation, the Bontis (1998) approach was used.


This approach involved the appraisal of an enterprisewithin the organisation, the departments andindividuals. In addition, Bontis (1998) suggest thatthe variables in the organisational level have positiveimpacts on objective business performance hence areimportant indicators of perceived businessperformance measures (PBPM). These variablesreflect the success of the enterprise, meeting ofcustomers’ needs, securing future performance andearning of respect within the industry. Bontis (1998)and Lyles and Salk (1996) suggest that the variablesin departmental level also have a positive impact onobjective business performance hence are importantindicators of PBPM. These variables reflect thedepartment’s contribution to the organisation,overall performance of the department and meetingof performance targets. Finally, Bontis and Fitz-enz(2002) and Bontis (1998) suggest that the variablesin individual level have a positive impact onobjective business performance. However, since thepurpose of this study was to examine the perceivedeffects of successful CSM on PBPM, it is expectedthat the former (CSM) will positively improve thelatter (PBPM) (Elmuti, 2003; Quinn, 2000).

2.2 Theoretical Framework

Customer Service Management can be related toexisting theories within three areas - Marketing,Organization theory and Informatics -. This is dueto the fact that much of CSM can be deduced fromexisting theories within these areas. Adding valuefor customers is, by all CSM methodologies,considered as being most of the most importantcontingencies. The concept of value adding wasoriginally developed by Michael Porter anddescribed in his book Competitive Advantage in 1980(Porter, 1980). In the classical value chain, anorganizations’ activities form a linear flow from thesupplier(s), through the business, to the customer(s).The value chain includes firstly the “primaryactivities”, i.e. the activities the company has toperform in order to justify its right to exist. Theseactivities are adding direct customer value to theproduct or service and the effective link of theseactivities has a major impact on the overallperformance of the organization. The “secondaryactivities” are supporting the former, in order toensure organizational and managerial control,coordination among primary activities, as well as fordeveloping and maintaining a corporate culture

within the organization, and a corporate imagetowards the environment. Their value-adding effectis indirect and only realisable through the results ofprimary activities.

Beyond that, the value chain approach adds anenvironmental dimension to business unit analysis,i.e. that a firm’s value chain does not exist in isolation,but is part of an industry value system. This set ofvalue chains is linking all companies involved in theprocess of product/service delivery, from the sourceof raw material to the final customer (for industrysystems). It has been mentioned above, that the valuechain analysis is independent from the analysis oforganizational structures. However, it provides aframework for considering business activities as thedetermining factor for organizational change, e.g.placing the focus of business activities andorganizational behavior on customer requirements,which are even the major process focus in CSM.

Organizational structure is the arrangement oforganizational subsystems, or sub-units into ahierarchy of authority relations. This processincludes the division of labour, the allocation ofresources needed to perform tasks and the definitionof areas of responsibility. Although the firsttheoretical foundations on the departmentalizationof organizations and the allocation of tasks tohumans can be found in Aristotle's writing “Politics”,the basic theoretical foundations about the problemof organizational structure and behavior in moderntime have been explicitly defined in the beginningof the 20th century. In 1911 Frederick Taylorpublished his work “The Principles of ScientificManagement” (Taylor, 1911), in which he investigatedthe effective use of human beings in industrialorganizations. He was most concerned with thekinds of tasks to be performed on the productionfloor and in clerical departments. These tasks arecharacterized by being largely repetitive and by notrequiring complex problem solving activities by theindividuals performing them.

However, many modern organizations havetaken measures towards job-enrichment and jobenlargement, which makes many of Taylor’sassumptions being anachronical. Even thoughorganizational structures are unique, they follow aphilosophy that describes the organizationsconsideration of aspects like control, sub-ordinationand management. We can, according to the classical


view which differs significantly from theorganizational view of CSM, divide organizationsinto two elements, the formal organization, whichmeans a combination of organizational “basicelements”, like function or department, and theprocess organization, dealing with the structure anddesign of activities, or work processes. Thisdifferentiation can be seen as a scientific “trick”,aimed to simplify the analysis, design anddescription of organizational behavior and inpractice, such a differentiation is almostunachievable, due to the mutual implication betweenthe charted institution and its activities.Organizational structure and processes are aimedto integrate all activities within the enterprisetowards the goals to be achieved. Classicalformalized, hierarchical structures are, within theCSM approach, considered as being one of the mainreasons for the disability of organizations to reactflexible on changing environmental implications andto satisfy customer requirements, as well as for lowproductivity, long cycle times and high costs.Therefore new ways of dividing organizations intosub-units and dividing labour within those areconceived as being a fundamental need forcompanies aiming to improve productivity andputting customers into the focus of theorganizational activities.

Since the use of Information Technology (IT) inadministrative organizations became common,different approaches for coping with architecturalproblems have been developed. The need forsupporting more and more complex organizationalstructures, combined with an accelerated pace oftechnology development has lead to differentsolutions over time. The use of shared databases,being proposed by many authors as being a solutionto the problem of global data access allows twoalternative architectures, either centralized ordistributed information systems. Most CSM theoristsand practitioners consider IT as being the essentialenabler for any CSM effort, even if there is a minorityclaiming, that CSM can be done without concerningIT (Yates, 1989).

2.3 Empirical Framework

In this paper, as depicted in figure 1, an empiricalframework was created to assess the effects of CSMon PBPM. When CSM effort is successful, customersare likely to be satisfied with their products or services.

Furthermore, customers are also likely to besatisfied with the customer services offered by acompany. In both instances, complaints are likely tobe lesser. A successful CSM effort can also enableNigerian banks to better manage its customerrelationship and the consequential increase inproductivity. Given the above submissions, it ispervasive that successful CSM efforts should resultin positive business performance.

Furthermore, Cravens and Piercy (2003) derivedmarket orientation as a philosophy contriving theprocess for delivering customer value. Superiorcustomer value will lead to superior performance(Slater and Narver, 1994; Mullins and Larreche,2006). Based on Figure 1, Slater and Narver (1994),Mullins and Larreche (2006) and Cravens and Piercy(2003) explain how CSM as part of the componentsof market orientation enhance customer value thatcan lead to improved business performance of theorganisation. Research methodology follows.

3. METHODOLOGY

According to Khong and Mahendhiran (2006), thephilosophical foundations of CSM implementationresearch rely on three underlying epistemologiesthat guide the studies, namely the positivist,interpretative and critical traditions. Positiviststudies are premised on the existence of relation-ships within phenomena which are typicallyinvestigated using structured instrumentation. Suchstudies pretend to test theory, in an attempt toincrease the understanding and prediction of suchphenomena. This study falls within Khong andMahendhiran’s positivist category because itemphases the testing of relationships by usingquantifiable variables, and deriving inferences abouta phenomenon from a sample of a stated population.

Figure 1: Effects of Successful CSM Efforts on PBPM

Source: Adapted from Khong and Mahendhiran (2006)


Surveys were the primary source of datacollection for field studies conducted in this research.As Mullins and Larreche (2006) claims, surveyresearch is an appropriate method to generalize froma sample to a population, allowing in this sense, toestablish inferences over the entire population. Thepopulation of the study consists of all permanentJunior and senior staff of Nigerian banks.Additionally, this study chooses using surveysbecause of their economy of design and quickturnaround of data collection. From a timedimension, this research adopted a one-time cross-sectional perspective. The unit of analysis of thisstudy is the firm.

3.1 Pilot Study and Test

During the pilot study, to get insights into theessential CSF of CSM implementation in the Nigeriancontext, all items representing CSF of CSM andPBPM were validated and accepted individuallyby three professors in Management studies and sixexperts in CSM implementation, specifically in theNigerian context. Recommendations from expertswere processed after effecting necessary modifica-tions and then, the final version was accepted. TwoNigerian banks were investigated at the pilot stageof the research, hence, convenience samplingtechniques was deemed desirable. In other word,given the visibility of participating banks and toreduce bias, the two banks at the pilot stage wereexcluded from the main research. In the pilot studies,convenience sample was used because it allowed theresearcher to obtain basic data and trends regardingthis study without the complications of using arandomized sample (Khong, 2005). The results of thepilot test was processed and analysed. From theresults of the pilot study, the mean cronbach's alphaof all the five constructs measuring successful CSMand PBPM yielded 0.89 and 0.91 respectively. Thiswere well above the recommended minimum of 0.70,hence, the set of variables are consistent in what it isintended to measure (Hair et al., 1998). In addition,a test-retest reliability was conducted within oneweek interval on the two banks selected at the pilotstage of this study. 80 questionnaires wereadministered, out of which 51 questionnaires werereturned. 10 questionnaires were discarded fromanalysis due to omission of vital variables byrespondents. In all 41 (51% response rate)questionnaires were accepted and analysed at thepilot stage. Finally, the test-retest reliability yieldeda peason moment correlation coefficient of 0.88,

meaning that the instrument is sufficient in itsmeasures.

A multi-stage sampling technique was adoptedin the main study. Since Nigeria is made up of sixgeo-political zones, the first stage involved the useof purposeful and cluster sampling method. Forequal representation, a state is expected to be pickedrandomly from each geo-political zone, hence, Lagos,Delta, Enugu, sokoto, Kogi and Borno states wereselected from south-west, south-south, south-east,north-west, north-central and north-east respecti-vely. Cluster sampling involves the division ofNigerian banks into two- ‘national and internationalbank’. ‘National banks’ are banks with nationallicenses, while ‘international banks’ are banks withinternational licenses. However, three banks fromeach namely, First bank of Nig.plc., United bank forAfrica, First city monument bank (international bankcluster) and IBTC-Chartered Bank plc., Sterling bank,Unity bank plc. (National bank cluster) weresubsequently selected. The second stage involves theuse of proportionate sampling method in theallocation of questionnaires to the participatingbanks. These banks are depicted in table 1, with theallotted questionnaires, based on the total staffstrength of each selected bank (Khong, 20095). Thelast stage involves the use of random samplingmethod, in selecting the final respondents for eachbank, based on the total allotted questionnaires.

In all, based on the CBN sample frame of 44,800permanent employees in Nigerian banks (Sanusi,2010), the sample size for this study was determinedusing the modified Yamane (1967:886) formula, asused by Khong (2005). This is given by the formularbellow:

n = N/[1+ N(e)2]

Where: n = the sampling size desired

N = population size

e = desired margin of error or the level ofprecision

A 95% confidence level and (variability) P = .5are assumed for this formular (Khong, 2005).

Given that N = 44,800 and e = .05 or 5%

Therefore the desired sampling size= 396Respondents

However, due to an average of 70% response ratefrom previous studies { Khong and Mahendhiran,


2006 (65%); Hart-Davidson et al., 2008 (70%);Kostelnick, 1998 (75%)}, the estimated response rateof 70% was used to calculate the final sample size.That is, given a base sample size of 396 respondents:

Total Sample size = 396/0.7 = 566 respondents.

Consequently, a total of 566 questionnaires wereadministered to all the participating banks. In thequestionnaire, participants were asked to answertwo important sections; one with regards tosuccessful CSM (CSFs) and the other to PBPM. In

successful CSM, they were asked to rate the degreeof usefulness of 20 variables (table 2) in associationwith their banks’ CSM strategies; in PBPM, they werealso asked to rate 10 variables (table 3) in relation totheir companies’ business performance. Each of thevariables contained questions with the rating basedon an interval scale from 1 to 5, where 1 is “stronglydisagree” while 5 is “strongly agree”. n/a (notapplicable or no comment) option was also included,so as not to force the respondents to select from theavailable options.

Table 1Participating Banks in the Survey

Name of bank Consolidating institutions Total Questionnaire

First city Monument bank plc. First city monument bank, cooperative development bank, and 80

Nig-American bank

First bank of Nigeria plc. First bank plc., MBC international bank and FBN (Merchant Banker) Ltd. 116

IBTC-Chartered Bank plc. IBTC, Chartered bank and Regent bank 92

Sterling bank Trust bank, NBM bank, Magnum bank, NAL bank and Indo-Nigerian bank 66

United bank for Africa plc. United bank for Africa and Standard trust bank 132

Unity bank plc. Intercity bank, First interstate bank, Tropical commercial bank, 80

Centre point bank, Bank of the north, New African bank, Societe

bancaire, Pacific bank and New Nigerian bank

Source: Ezeoha (2007)

The junior and senior staff respondents from theparticipating companies were expected to be an activeparticipant of the implemented CSM effort. Theserespondents were selected based on the premise thatthey are among the most knowledgeable informantson CSM efforts and the derived business success intheir respective organizations.

Questionnaire: Instrument Development andOperationalization.

Questionnaires are the essential functionalcomponent for survey research. They are among themost effective ways to operationalize the variables ofa study. The items used to measure the constructsincorporated in the model were corroborated by andadopted from previous research pieces. Neverthe-less,each survey items were discussed, evaluated andadapted by experts in CSM implementations inNigerian banking industry. The Khong andMahendhiran (2006) CSM success Model is one of themost widely cited CSM success models. The value ofthe Model is that it not only identifies four items(constructs) of CSM Success but also proposesrelationships among them. The Khong andMahendiran (2006) CSM success Model appears inFigure 2, and formed the model analysis for this study.

Figure 2: The Khong and Mahendiran (2006) Success Model

Given the background of the extensive literaturereviewed to identify dimensions contributing toCSM implementation success, this research focuseson identifying factors impacting the dimension ofImproved Business Performance Success as aconsequence of CSM efforts. In summary, the resultsfrom the reviewed literatures were used to constructa questionnaire, similar to the variables and factors(shown in Table 2 and 3) distilled from the previouswork of Khong and Mahendiran (2006), Elmuti(2003) and Khong (2005).


Items to operationalise CSM are shown in table 2.This framework was based on the fact that, anappropriate CSM should constitute importantvariables, like, market research into consumerbehavior and expectations, customer database andrecords, complaint and suggestion systems,management of service quality to meet customer

Table 2The Measure of CSM

Variable Description of factors

A1 Market research is conducted to discover customers' expectation or believe.

A2 Market research is conducted to monitor changes in customer satisfaction and marketing effectiveness

A3 Market research provides important information to identify and analyze the market need, market sizeand competition.

A4 Market research is conducted to know the prices of the different banking products in the industry, as wellas the supply and demand situation

A5 Through market segmentation, market or population is divided into subgroups with similar motivations.

A6 Market research is conducted to gather information about the target market, competitors, customers, products, etc.

B1 Customers are my company’s most valuable asset.

B2 There is a record of customers' requests, complaints and transactions for future reference

B3 Customers are requested to provide feedback on the products/ services future wants and needs

B4 Customers’ complaints and feedback are used to improve the products/ services

B5 There is a review of mistakes (post-mortem) when a customer is lost

B6 Distinct types of early adopters and right customer targets are identified appropriately

B7 Acceptability of a new product or service are usually tested among targeted customer group to determine viabilityof new product introduction, specifications of the product/service offering, and pricing

C1 Customers are satisfied with the products/ services; thus no complaints

C2 Customers are satisfied with the customer service; thus no complaints

C3 Customers are satisfied with the level of new product development and pricing

D1 Successful development, implementation, use and support of customer relationship management systems areprovided in my bank

D2 Customers are the most important factor in the organization

D3 Customer relationship is well managed by the enterprise

D4 CRM interface are easy to navigate and understand

Source: Khong and Mahendiran, 2006; Kotler et al., 2001; Kotler, 2000

expectations, product or service improvements,efficient customer handling, and lost customeranalysis (Khong and Mahendiran, 2006).

According to the framework of Bontis (1998) andKhong and Mahendiran (2006), the variablesmanifesting PBPM (improved businessperformance) are depicted in table 3.

Table 3The Measure of Business Performance

Variable Key factors manifesting Business Performance Level

E1 Enterprise is successful Organisational (strategic)E2 Enterprise meets its clients’ needs

E3 Enterprise’s future performance is secureE4 Enterprise is well respected within the industryE5 Department makes a strong contribution to the organization Departmental (functional)E6 Department performs well as a teamE7 Department meets its performance targetsE8 Individuals are satisfied working here Individual (operational)E9 Individuals are generally happy working hereE10 Individuals are satisfied with their own performance

Source: Khong and Mahendiran (2006)


According to Khong and Mehendiran (2006),CSM has a positive association with the perceivedmeasures of business performance. However, sincethe purpose of this study is to examine the perceivedimpact of successful CSM on PBPM, it is expectedthat the former (CSM) will positively improve thelatter (PBPM).

4. RESULTS AND FINDINGS

To analyse the data collected via the survey instrument,an appropriate statistical procedure was subsequentlyformulated using the methodologies recommended byHair et al. (1998) and Khong and Mehendiran (2006).From the formulated methodo-logies, specificrelationship between CSFs of CSM implementation andPBPM were established. In sequential order, therecommended methodologies are:

1. Reliability and Validity analysis2. Factor analysis3. Structural Equation Modeling (SEM)-

Regression Analysis

4.1 Reliability Analysis

Reliability is the “extent to which a variable or set ofvariables is consistent in what it is intended tomeasure” (Hair et al., 1998). Reliability analysis isconducted in order to measure the internalconsistency of variables, measured by interval scaleitems, in a summated scale. In this study, thesummated scales are CSFs of CSM and PBPM(Khong and Mahendiran, 2006). Using the regressiontool in SPSS (statistical package for social scientist),the robustness of Kaiser-Meyer-Olkin (KMO)measure of sampling adequacy (0.698); and theBartlett's test of sphericity (1002.911) were also usedto rejects/accept the fact that the populationcorrelation matrix is an identity matrix (table 5). Toassess internal consistency, Cronbach’s Alpha,composite reliability and average variance extractedcoefficients were used (Hair et al., 1998). Thecomposite reliability and AVE were calculated usingFornell and Larker’s (1981) formula.

Table 4Summary of Test Result- Reliability Analysis

Constructs Number of Ques- Cronbach’s Alpha Composite Reliability Average Variancetionnaire items (mean) (CR) Extracted (AVE)

Market Research 6 0.903 0.882 0.893

Customer Assessment 7 0.913 0.817 0.743

Customer Satisfaction 3 0.961 0.875 0.712

Customer Relationship 4 0.898 0.806 0.719Management

PBPM 10 0.904 0.842 0.753

From the results of the reliability analysis, shownin table 4, the cronbach's alpha of all the fiveconstructs measuring successful CSM implimen-tations are well above the recommended minimumof 0.70, hence, the set of variables are consistent inwhat it is intended to measure (Hair et al., 1998).The internal consistencies of variables, measured byinterval scale items, in a summated scale (CSFs ofCSM and PBPM) are adequate in measuring thevarious constructs (Khong and Mahendiran, 2006).Furthermore, all the calculated composite reliabilityscores are above the recommended 0.7, hence, theoverall reliability of the whole scale (compositereliability) is assured (Hair et al., 1998). Lastly, allthe calculated AVE were also well above 0.5 (Hair

et al., 1998), hence, the internal consistency of theconstructs are guaranteed.

Test Result for Validity analysis.

Different validity terms were used to demonstratevarious aspects of construct validity. This researchutilised convergent and discriminant validity toindicate the ability of the measurement items tomeasure accurately the constructs of the study (Hairet al., 1998). SEM is an appropriate statistical test toassess the construct validity using convergent anddiscriminant validity. Convergent validity isrecognised when the relationship betweenmeasurement items and the factor is significantlydifferent from zero.


Factor Analysis, via “Principal Componentsextraction”, was the technique used to testDiscriminant Validity of this study. Factoringmethod used was “Principal Components”, applyingan Orthogonal Varimax rotation with Kaiser’snormalization (Khong, 2005). Based on theseconditions, 5 Factors were obtained (Kaiser'scriterion of retaining factors with eigenvalues greaterthan 1), which was consistent with the 5 variablesused in the model. Since, AVE’s above 0.5 are treatedas indications of convergent validity, Dillon &Goldstein (1984) posit that, a variance extracted ofgreater than 0.50 indicates that the validity of boththe construct and the individual variables is high;indicating that each construct was a distinctconstruct. In addition, the results of external validitytests are shown in table 5. Tolerance and VIFcoefficients are also within the acceptable range(Hair et al., 1998) to maintain that there is noevident multi-colinearity problem. The assumptionof independent errors was tested with the Durbin-Watson, which monitors for serial correlationsbetween errors. A value of 2.437 complies with theassumption of no independent errors, since, a valueless than 1 or greater than 3 are definitely cause forconcern (Asteriou and Hall, 2007).

4.2 Factor Analysis

This analysis is used to reduce numerous variablesto a more manageable set of factors; hence, the

purpose of factor analysis, in this study, was toreduce the 30 variables, of which 20 were manifestingsuccessful CSM and 10 manifesting PBPM, to a moremanageable set of factors (Aaker and Day, 1986).Exploratory factor analysis was used to summariseand reduce the data. After exploratory factoranalysis, confirmatory factor analysis was alsoconducted. In order to define which factorsdetermine the Successful CSM efforts and PBPM,confirmatory factor analysis method was employed.When conducting confirmatory factor analysis,variables are assigned to specified factors. It iscommon that variables with high factor loadings willbe assigned to describe the respective factors.Therefore, variables that have low loadings onrespective factors are constrained to zero (Hair etal., 1998). According to Carmines and Zeller (1979),the acceptable threshold for factor loading is 0.7 orabove. Consequently, variables with loadings lessthan 0.7 were constrained to zero. Using SPSS, theresults of this factor analysis, with the assumptionof extracting via principal components method androtating via varimax, are shown in tables 6.

Table 5Summary of Test Result-Validity Analysis

Model Collinearity Statistics

VIF Tolerance

Durbin- Watson:

(Constant)

Market Research 1.081 .981

Customer Assessment 1.058 .973 2.437

Customer Satisfaction 1.035 .967

Customer Relationship 1.026 .975Management

KMO and Bartlett’s Test

Kaiser-Meyer-Olkin Measure of .698Sampling Adequacy.

Bartlett’s Test of Sphericity

Approx. Chi-Square 1002.911

df 435

Sig. .000

Table 6Rotated Factor Matrix

Factor

1 2 3 4 5

A3 .836

A2 .832

A4 .768

A1 .765

A5 .736

E6

E5

E4

E10 .884

E3 .852

E9 .849

E2 .815

E1

E8

A6

B6

B2 .830

B5 .793

B1

E7

B4

C3 .896Table Cont’d


The factor matrix for successful CSM and PBPMrevealed five significant factors, that is, Factor 1,2,3,4and 5 respectively; and the five factors wereextracted. Consequently, factors 1,3,4 and 5 willmanifest the constructs of successful CSM whilefactor 2 will manifest PBPM. From table 6, variablesA1,A2,A3,A4,A5; B2,B5; C1,C2,C3; D1,D2; andE2,E3,E9,E10 were retained for manifestingsuccessful CSM and PBPM respectively, becausetheir factor loadings were above the 0.7 threshold.The retained variables were used in estimating amodel via SEM method.

4.3 Structural Equation Modelling (SEM)

Generally, SEM is used to estimate “multiple andinterrelated dependence relationship and the ability torepresent unobserved concepts in these relationshipsand account for measurement error in the estimationprocess” (Hair et al., 1998, p. 584). SEM is particularlyuseful in this study because it can estimate “a series ofseparate, but interdependent, multiple regressionequations simultaneously” in a specified structural

model (Hair et al., 1998, p. 584). However, afterperforming factor analysis, regression analysis is asuitable path for analysis; in this study, the underlyinghypotheses were analyzed using regression analysis.According to Hair et al. (1998), multiple regressionanalysis is a convenient statistical technique to be usedwhen the researcher requires analyzing therelationship between a single dependent variable andseveral independent variables.

4.4 Hypothesis Testing

In order to examine the relationships between CSFof CSM (exogenous constructs) and the businessperformances of Nigerian banks (endogenousconstructs), the following hypotheses were tested:

H0: The respective exogenous construct has nopositive effects on the respective endogenousconstruct

OR

H1: market research has positive relationshipwith Business Performance

H2: customer assessment has positiverelationship with Business Performance

H3: customer satisfaction has positiverelationship with Business Performance

H4: customer relationship management haspositive relationship with Business Performance

H1,H2,H3 and H4 is set to examine the effects ofCSM on perceived business performance measures(PBPM). Failure to accept the null indicates that thealternatives are accepted. By testing these hypotheses,an overview of successful CSM towards businessperformance in Nigerian banks can be determined.

Table 6 Con’td

C2 .871

C1 .814

B7

D2 .817

D1 .788

D4

D3

B3

Extraction Method: Principal Component Analysis (5 compo-nents Extracted)

Rotation Method: Varimax with Kaiser Normalization.

Table 7Testing the Hypotheses

R2 = 0.6626 Sig <.0001

Durbin Watson = 2.437 PBPM

Construct Association ‘ ’ Level Beta -value Significant (yes/no) hypothesis Validation

Market research with PBPM 0.05 0.36 0.0004 Yes Accept H1 Yes

Customer assessment with PBPM 0.05 0.33 0.0402 Yes Accept H1 Yes

Customer satisfaction with PBPM 0.10 0.36 0.0502 Yes Accept H1 Yes

Customer relationship management 0.05 0.35 0.0311 Yes Accept H1 Yeswith PBPM

Note: level denotes significant level


4.5 Discussion of Findings

Findings based on the survey revealed thatsuccessful CSM can positively affect businessperformance. The results suggests the positive effectsof the CSFs of CSM (Market research- = 0.36, p =0.0004; Customer assessment- = 0.33, p = 0.0402;Customer satisfaction- = 0.36, p = 0.0502; Customerrelationship management- = 0.35, p = 0.0311) onimproved business performance in Nigerian banks,and were corroborated empirically in this study.Customer satisfaction was validated at = 0.10 levelof significance. However, not all of the manifestingvariables in successful CSM were positively affectingPBPM; referring to Tables 6, variables A6,B1,B3,B4,B6,B7,D3, and D4 were omitted from furtheranalyses due to the setting of 0.7 threshold. In short,based on the dataset, there was insufficient evidencethat these 8 variables had statistically significanteffect on PBPM; therefore, the factor should maintainthe fundamental nature of successful CSM.

However, the remaining 12 variablesmanifesting successful CSM were subsequentlyranked according to their importance in theconstruct. Hence, implementations of effective CSMto improve business performance in the Nigerianbanking industry should begin with A3,A2,B2,C3,C2,C1,D2 (Park 1) and A4,A1,A5,B5,D1 (Park 2). Park1 variables were the most influential in carrying outsuccessful CSM effort. Hence, for CSM implemen-tation to be successful in the Nigerian bankingindustry, market research must be conducted toprovide important information to identify andanalyze the market need, market size andcompetition. Market research must also beconducted to monitor changes in customersatisfaction and marketing effectiveness. In addition,there must be record of customers’ requests,complaints and transactions for future reference.Customers satisfaction with the level of new productdevelopment and pricing, customer service, existingproducts/ services must be paramount. Lastly,customers must be treated as the most importantfactor in the organization.

Other secondary prerequisite of a successfulCSM effort are: market research must be conductedto know the prices of the different banking productsin the industry, the supply and demand situation,customers' expectations or believe. In addition,through market segmentation, market or populationmust be divided into subgroups with similarmotivations, and lastly, there must be constant

review of mistakes (post-mortem) when a customeris lost, while successful development, implemen-tation, use and support of customer relationshipmanagement systems must be provided by Nigerianbank. Testing the model fit, the R2 coefficient =0.6626, implying that the 4 independent variablesexplain 66.26% of the variance of PBPM. In summary,it is pervasive that successful CSM should result inpositive PBPM, hence, a successful CSM effort canlead to improved business performance.

Model Fit

The final step in factor analysis involves thedetermination of model fit. After conducting thevalidity and reliability tests for all of the CSF of CSM,it is also necessary to demonstrate the overall fit ofthe measurement model. The overall fit of themeasurement model will be determined byconfirmatory factor analysis (CFA). The fit of thismodel was extremely important in that all possiblefactors were nested appropriately within it (Ho,2000). To evaluate the measurement model in thisstudy, a variety (multiple criteria) of “goodness offit” indices were used (Byrne 2001): the normed X2

or X2/df ratio, the root mean square Error ofApproximation (RMSEA), the comparative fit index(CFI), Tucker-Lewis Index (TLI)- also known as Non-Normed Fit Index (NNFI), Normed Fit Index (NFI),Incremental Fit Index (IFI), and the Relative Fit Index(RFI) (Hair et al. 1995, Schumacker & Lomax 1996,Baumgartner & Homburg 1996, Byrne 2001, Holmes-Smith, 2001). Table 8 shows the acceptable fit criteriaand the PBPM fit indices values. All of the statisticalvalues of the final measurement model indicated thatthe model fitted well in representing the data.

Table 8Goodness of Fit Indices for the PBPM Model

Goodness of fit indices Fit Criteria PBPM Model

X2 1002.911

df 435

X2/df = 3 2.305

RMSEA = 0.08 0.053

CFI = 0.9 0.96

TLI/NNFI = 0.9 0.95

NFI = 0.9 0.95

IFI = 0.9 0.96

RFI = 0.9 0.95

Adapted from Hair et a.l 1995, Schumacker & Lomax1996, Baumgartner & Homburg 1996, Byrne 2001,Holmes-Smith 2001


5. CONCLUSION AND IMPLICATIONSFOR PRACTICE

In this paper, an empirical framework was createdto assess specific relationships between the CSFs ofCSM and PBPM in the Nigerian banking industry.As a result, the measurement and structural equationcontrived offered a mathematical interpretation ofhow CSM can affect PBPM. Hence, to enhance theircompetitive position, Nigerian banks should givehigh priority to their CSM efforts. This equation isexpected to be used by banks in composing strategiesto optimize their management of CSM efforts andbusiness performance. The model providespredictive implications on improved businessperformance, given the activities of key factorsmanifesting successful CSM. This paper identifiesproper conduct of market research to provideimportant information to identify and analyze themarket need, market size and competition. Marketresearch must also be conducted to monitor changesin customer satisfaction and marketing effectiveness.In addition, there must be record of customers’requests, complaints and transactions for futurereference. The paper also posit the satisfaction ofcustomers with the level of new product develop-ment and pricing, customer service, existingproducts/ services as the key drivers of a successfulCSM effort. Lastly, customers must be treated as themost important factor in the organization. The paperalso associated the effects of successful CSM effortto improved business performance.

This research can help in demonstrating howsome CSF can determine CSM implementationsuccess, stimulating Nigerian banks to embrace CSMefforts that can impact their competitiveness.Moreover, the corroborated findings providevaluable implications for practice. Finally, this studyis expected to provide specific direction to companiescontemplating a CSM programme, hence, the studyis expected to be beneficial to Nigerian banks andother Nigerian companies alike, policy makers inprivate and public sectors of the Nigerian economyby, enabling better strategic and tactical judgmentswith regards to CSM implementations. It will helpNigerian banks understand CSM as a businessphilosophy, its key components and benefits. It willalso explore imperatives for successful implemen-tation. It will serve as a veritable source ofinformation for decision makers who need to commitresources to such a venture, project team membersand Consultants who seek to avoid implementationpitfalls, and professionals who work in this and otherrelated fields.

However, since only one perspective in eachorganization will be collected – junior and senior staffresponsible/actively participated in the CSMimplementation process; and for the fact that fewrespondents will be chosen from each participantbanks, it is not unreasonable to claim that a methodbias may limit the research findings. But even if theconstructs measured were conceived as “perceptual”ones identified by a rater (junior and senior staff),additional guidelines might be used in future studiesto minimize this potential limitation, including: (a)To use different methods to measure the inde-pendent versus dependent variables. (b) To call formultiple raters from different rater classes, such asconsultants and end-users/customers.

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