Industrial Engineering Letters www.iiste.

org
ISSN 2224-6096 (Paper) ISSN 2225-0581 (online)
Vol.4, No.10, 2014

Impact of Customer Relationship Management on Customer

Retention in the Telecom Industry of Pakistan
Saima Tauni
Research Scholar, Department of Management Sciences,Islamia University of Bahawalpur, Pakistan
E-mail: [email protected]

Rabia Inam Khan

Research Scholar, Department of Management Sciences,Islamia University of Bahawalpur, Pakistan
E-mail: [email protected]

Maira Khan Durrani

Research Scholar, Department of Management Sciences, Islamia University of Bahawalpur, Pakistan
E-mail: [email protected]

Sumaira Aslam
Adjunct Faculty, The Islamia University of Bahawalpur, Pakistan
E-mail: [email protected]

Abstract
Contemporary marketing paradigm relies on developing long term relationships with the customers and
providing them value and satisfaction to retain them. This study has been conducted with an aim of examining
the relationship between customer relationship management and customer retention. This study uses survey
method and regression analysis for the purpose of hypothesis testing.. The study has been conducted in the
telecom industry of Pakistan. A sample size of almost 60 customers was taken. According to the results,
maintaining sustainable relationships with the customer can promote to retain customers and can be propitious
for the companies. CRM and customer retention are significantly related. This study can be used in the future
researches conducted in this area.
Keywords: Customer relationship management, customer retention, telecom industry, customers

1. Introduction
In todays competitive and turbulent environment the number of competitors and intensity of competition is
amplifying. As a result, the power is shifting towards the customer. Customer are becoming the focal point and
organizations are trying to satisfy the needs of their customers through customized production with the aim of
retaining the customers and sustaining the long term and flourishing relationships with their customers.
Customer relationships management (CRM) is a strategy for retaining customers and earning high profits. To
survive in this competitive environment, companies need to analyze customers needs and wants and fulfill them
so that customer loyalty and satisfaction can be created (Wu et al., 2009).

The ultimate objective of customer relationship management is to better cater the customers by knowing them
and creating customer loyalty. Ryals and Knox (2001) emphasized that "CRM is a relationship orientation,
customer retention and superior customer value created through process management". Customer relationship
management is also known as a managerial approach which works on a customer driven strategy in which
different information systems provide all the necessary information which ultimately leads to superior customer
satisfaction and loyalty. Customer relationship management helps companies to create customer-oriented
strategies which results in customer retention. CRM is a customer retention strategy of using a variety of
marketing tactics that leads to customer bonding or staying in touch with the customer after a sale is made.
Creating one to one relationships with the customers help companies to retain their valuable asset that is
customers. The utmost aim of all relationship marketing perspectives and customer relationship management is
to create and sustain cooperative and mutual relationship among the organization and customers. These
relationships are two way relationships and are long-term oriented. Companies are now focusing on the adaption
and integration of new technologies, new processes, people and relationship marketing to benefit them and to
deliver value and satisfaction to their customers in order to retain them for life time.

This paper aims to discuss customer relationship management and its significance and impact on customer
retention. Some other variables that help to retain the customers are also being discussed in this paper. The
paper seeks to elaborate the improved focus on managing relationships and retaining customers in todays
competitive market.

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Industrial Engineering Letters www.iiste.org
ISSN 2224-6096 (Paper) ISSN 2225-0581 (online)
Vol.4, No.10, 2014

2. Literature Review
2.1 Customer Retention
In previous times no proper attention was given to customers and customers were neglected. Customers were
unable to find any replacement of their current seller/producer or may be the suppliers others were also deprived
of quality and service aspects and the rapid growing market did not bother their customers and the utmost
satisfaction of needs and wants of customers. Increasing competitions and increase in competitive trends in
todays market environment increases the likelihood to retain customers as to safeguard the company against the
raising competitions. To achieve this goal customer retention is required. Ramakrishnan, (2006:1) defines
customer retention as the marketing goal of preventing customers from going to the competitor. Organizations
make existing customers their focal point in order to put efforts to retain them and to carry on their business
relationship with them through customer retention. (Mostert et al., 2009:120). However, the number of
customers who continue their relationship with the service provider in the specific time duration such as a year is
also referred to as customer retention. (Dawes, 2009: 232). The success of businesses in todays competitive
environment is mainly based on customer retention. Fluss (2010) observes that competitors are always looking
for ways to capture customers by offering them better deals.

Retention is the process of having close & long relationship of customers with service provider. Many studies
report that it is more expensive for the organization to attract new customers as compared to adopting strategy to
retain existing customers. (Kelley Gilbert, & Mannicom, 2003). F. F. Reichheld & Schefter, 2000, found that it is
more economical to maintain relationship with existing customers because they are fewer prices responsive than
new customers existing customers are not only less price responsive. Customer retention directly influences
extended lifetime values and benefits which is more beneficial opportunity for organizations that look for
enhancement and prolong business activities and those that are looking for ways to protect them from market
decline which is the consequence of reducing economy. (Gee et al., 2008).

In support of this argument, Lombard (2009) states that the companies are pushed by the market to retain
customers where the possession of customers is low. When loyalty of customer is diminishing and sales are
worsening the business environment, customer retention becomes the most essential part of that business
environment. In such scenarios, if a key customer is shifted towards the competitor organizations profitability
and growth would be considerably affected.

2.2 Customer Relationship Management

With the advent of time and technology, the marketing practices are also changing. The new and modern
marketing is based on acquiring knowledge regarding customers and knowing their experiences (McKenna, 1991,
Payne et. al, 2005, Payne et. al, 2006). The term CRM is being used widely these days. Customer relationship
management is a two way process, also known as interactive process that utilizes the information of customers to
maintain relationships with customers. CRM is considered as a cycle consisting of important activities like
finding knowledge, market planning, enhancing the interaction with the customers and analysis refinement
(Buckinx et. al, 2007, Swift, 2001). Ryals and Knox (2001) are of the view that the fundamental aspects of
CRM are strong relationships, customer retention, and delivering superior and high quality services to the
customers with the help of process management. Those companies who want to implement the CRM strategy
should create integration between different departments of the organization. The walls between every unit should
be broken down, especially marketing department should closely work with the IT department so that customer
information can be retained and utilized for the purpose of customized production and relationship management.
Since late 1980s the trend of database marketing is amplifying which shows the influence of IT on marketing. It
facilitates the firms to maintain long term propitious relationships (McKenna, 1991).

Customer relationship management (CRM) is a latest idea in all forms of businesses that has showed its
importance quickly over the preceding last years, and will expected to prolong in upcoming future with addition
of latest technologies & value added services. CRM focus on the concept of marketing mix variables the
including 'four Ps' of marketing (product, price, place and promotion (E. Xevelonaki, 2005).CRM provides
organization with the chance to employ relationship marketing on a company ample basis successfully. CRM is
basically technique of relationship marketing and process that enables a firm to identify, evaluate, analyze and
serve customers to improve customer relationship, so organization may able to retain market share through
existing customers, and may help to provide retaining capabilities of existing customers(Z.S. Dimitriades, 2006).
With the initiation of internet and new technology advancement, the idea of CRM has been transformed to
electronic CRM (e-CRM). E-CRM is a combine process of hardware, software technology process, its useful
applications in enhancing technology for customer services and organization commitment to improve deficiency
in customer service & to retain customer (D. Norton, 2007). Ab Hamid, 2005, focused on the Electronic

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ISSN 2224-6096 (Paper) ISSN 2225-0581 (online)
Vol.4, No.10, 2014

Customer Relationship Management is a procedure to maintain its customer relations by using the Internet and
the advantages which are obtained by using the idea & successful implementation of eCRM in an organization.
The Internet technology has changed CRM into electronic CRM (eCRM), because now organizations can use
Internet technologies to attract new consumers, analyze their preferences and behaviors, and customize support
and services by providing customized services (Chan & Lam, 2009).The focus of e-CRM systems is to increase
customer service, retain consumers, increase customer value benefits and use the proper strategies to encourage
customers to remain loyal (M. Zineldin, 2006).

E-CRM is intended for people at all levels in businesses that are willing to build up interaction with consumers
by electronic & technology means. It is significant to realize the main role that e-CRM plays within
contemporary & dynamic marketing organizations. By Implementing CRM successfully can provide a lot of
benefits and profits to the companies and help to get mutual benefits for customers & service provider.( M.
Almotairi,2008) .This indicates that CRM could bring many benefits for companies to enhance their ability in
the competitive market, increase profits and profit rate, reduce costs, reduce times of implementation of new
sales activities, increase awareness of small-sized target marketing and increase knowledge about customers.
This research examines the affect of CRM performance on customer retention. The aim of this study is to
estimate the influence of customer relationship management in creating loyalty and retention of customers. As
there is the dynamic environment and often changing technology, mobile telecommunication service provider
think about the importance of customer loyalty and customer retention as considerable management decision
and attempt to broaden the concept of eCRM by keeping in focus CRM. With the help of ECRM, the
information can significantly flow into the organization & would use to retain strong customers relationship
through extraordinary services.

The crucial reason for the surfacing of CRM exhibits the changing nature of the markets and environment.
Organizations are now shifting from product-oriented strategy to customer-oriented strategy and that is
becoming the reason of their success. Customer profile and customer participation have a major influence on
CRM. Companies develop customer profiles. They collect all the necessary information about the customer that
assists them knowing their customers and also helps them to determine on which customers they should invest
more. Companies also get benefit through the process of customer participation. Customers participate through
number of different ways like interacting with the company, sharing their experiences and information (Wu et al.,
2009).

Ho: There is a significant relationship between Customer relationship management and Customer retention
.
3. Theoretical Framework

CRM CUSTOMER
(E-CRM) RETENTION

Figure 1: Theoretical Framework

4. Research Methodology
This study was carried out using descriptive research. We adapted survey method to understand the relationship
between customer relationship management and customer retention. We measured the causal relationship of one
independent variable i.e. CRM on dependent variable i.e. customer retention. For the purpose of testing the
hypothesis and developing the relationship between both variables, we used regression analysis technique
through SPSS.

4.1 Sample
The population of our study is confined to the customers of telecom industry of Pakistan. In Pakistan there are
total five organizations that are catering telecommunication services to the customers. We distributed self
designed questionnaires among the customers of ufone, warid, mobilink, zong and telenor in Punjab. For the
purpose of data collection, we opted non-probability sampling method.

4.2 Instruments/Measures
In our study, we used questionnaire as an instrument of survey method. This questionnaire has two main parts.

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Industrial Engineering Letters www.iiste.org
ISSN 2224-6096 (Paper) ISSN 2225-0581 (online)
Vol.4, No.10, 2014

The first part consists of demographic questions regarding the gender, age, income, education level and telecom
network which they use. The second part of the questionnaire comprises of 16 items to assess the customers
attitude towards their mobile network. The items of the questionnaire are assessed by using 5-point Likert Scale.
The items are graded from 1 5 ranging from 1 - Strongly Agree, 2 - Agree, 3- Neutral, 4 - Disagree and 5 -
Strongly Disagree. The scales which we used in our questionnaire were taken from already existing research
papers.

4.3 Procedure
We distributed 60 questionnaires among the customers of telecommunication sector in Bahawalpur and Rahim
Yar Khan. Out of 60 questionnaires, 50 were returned. So the response rate is 83.3 % which is above the
average response rate.

4.4 Reliability Analysis

Scales Items Cronbach Alpha

Customer Relationship Management 11 0.822
Customer Retention 5 0.808
Table 1: Reliability of the Measurement Instruments

5. Hypothesis Testing
5.1 Profile Of The Respondents

Variables Category Frequency Percentage

Gender Male 17 34.0
Female 33 66.0
Age 43 86
5 10
0 0
2 4
0 0
Income Below 15000 21 42.0
15000-25000 10 20.0
25000-35000 6 12.0
35000-45000 3 6.0
45000-50000 3 6.0
Above 50000 7 14.0
Qualification 0 0
7 14
11 22
16 32
16 32
Ufone 32 64
Mobile Service Mobilink 8 16
Telenor 7 14
Warid 3 6
Zong 0 0

5.2 Hypothesis Testing

5.2 .1 Customer Relationship Management and Customer Retention
The results of the regression analysis show that there is a significant relationship between customer relationship
management and customer retention. Customer relationship management shows a significant relationship with
(=0.686) and (p> 0.001). These results prove that CRM has a great impact on customer retention. CRM
contributes more than 68% on customer retention. On the basis of these results, we authenticate Ho.

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ISSN 2224-6096 (Paper) ISSN 2225-0581 (online)
Vol.4, No.10, 2014

Table 2: Regression Results

Hypothesis Model Variable S.E P Results
H0 CRM CR 0.151 0.000 Supported

6. Discussion and Conclusion

This study examines the influence of CRM (E-crm) on customer retention; CRM is very important concept in
relationship marketing because it can be used for generating long term relationship with customers. Developing
effective relationship with customers through provision of excellent services must be considered as a highly
priority decision by the management of organization. The findings of the study show that CRM has significant
impact on customer retention & it contributes more than 68% on retaining the customers. The organization
should focus on CRM while developing organization strategy for the purpose of implementing successful CRM
initiatives.CRM focus on the retaining customers & consumer loyalty with the aim of gaining large market
share.CRM is basically the processes of building strong customer relationship through providing value added
services which match with customer needs. We have taken data from the users of telecommunication in Pakistan.

Firms that focus on CRM and long term planning can enhance their organizational performance. Through
collecting customer information, companies generate customer loyalty which in turn creates customer retention.
CRM assists organizations to develop a customer responsive culture. Such organizations gain competitive
advantage and van serve their customers in a better way. CRM helps firms to identify, locate and retain their
profitable customers.

7. Research Limitations and Future Research

The following limitations have been observed in this study. The first and foremost limitation in that this research
focuses only one service sector i.e. telecommunication sector and the second limitation is a very limited sample
size is taken to conduct the research. We have selected the telecommunication sector to check the switching
behavior of the customers according to the services provided by the network provider. We can also focus on
other service sectors, like banking, transport sector, hotel services etc., through which we can judge that the
CRM has a significant impact on customer retention. Due to limited sample size, the behaviors of the customers
are not observed up to an optimum level. Thus, the results are not generalized to the total population. Thus, there
is a need to cover a reasonable population to conduct this study. Further research could include the dimensions of
CRM like service quality, customer profile, and organizational policies to measure the impact of CRM on
customer retention in service sector.

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