THE EFFECT OF CUSTOMER RELATIONSHIP MANAGEMENT ON CUSTOMER

LOYALTY: A CASE STUDY OF AMHARA CREDIT AND SAVING INSTITUTION

(ACSI)IN ANGOLELA ENA TERAWOREDA CHACHA BRANCH
By: HAYMANOT SHIFERAW

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT
DEBRE BIRHAN UNIVERSITY

JUNE, 2021
DEBRE BIRHAN, ETHIOPIA
THE EFFECT OF CUSTOMER RELATIONSHIP MANAGEMENT ON CUSTOMER
LOYALTY: A CASE STUDY OF AMHARA CREDIT AND SAVING INSTITUTION
(ACSI)IN ANGOLELA ENA TERAWOREDA CHACHA BRANCH
By: HAYMANOT SHIFERAW
ADVISOR: BIRHANU MOLTOT (ASS. PROFFECER)

A THESIS SUBMITTED TO DEBRE BIRHAN UNIVERSITYCOLLEGE OF BUSINESS

AND ECONOMICS, DEPARTMENT OF MANAGEMENT IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF MASTERS OF BUSINESS
ADMINISTRATION
DEPARTMENT OF MANAGEMENT
COLLEGE OF BUSINESS AND ECONOMICS
DEBRE BIRHAN UNIVERSITY

JUNE, 2021

DEBRE BIRHAN, ETHIOPIA

 DEBRE BREHAN UNIVERSIY
SCHOOL OF GRADUATE STUDIES
APPROVAL OF THE THESIS
As members of Board examiners of the final Master of Art (MA) thesis open defense
examination, we certify that we have read and evaluated the thesis prepared by Haymanot
Shiferaw Tariku entitled “the effect of customer relationship management on customer
loyalty within the ACSI,” and examined the candidate. We recommend that thesis be
accepted as fulfilling the thesis requirement for the degree of master in master of business
administration (MBA).

Board of Examiners
Name Signature

External Examiner _________________ _________________

Internal Examiner ______________ _________________

Chair person ______________

Date: ______________
 DECLARATION
I, the undersigned, declare that this thesis is my own original work and has not been
presented in any other university. All sources of materials used for this thesis have been
properly acknowledged.
Name: -HAYMANOT SHIFERAW TARIKU
Signature: ---------------------
Date: -----------------------
 DEBRE BREHAN UNIVERSITY
SCHOOL OF GRADUATE STUDIES
As thesis Research advisor, I hereby certify that I have read and evaluated this thesis
prepared, under my guidance, by Haymanot Shiferaw Tariku “the effect of customer
relationship management on customer loyalty within the Amhara Credit and Saving
Institution (ACSI) in Angolela enaTera woreda chacha branch”. I recommended that it be
submitted as fulfilling the thesis requirement for the degree of masters of Art in master of
business administration (MBA).

NAME:-BIHANU MOLTOT (Assistance Proffecer)

Signature _________________Date ____________

 ACKNOLEDGEMENTS
First and foremost, “Glory is to be God” who helped me to carry all the burdens throughout
my study and reach completion.
Next, I would like to thank Birhanu moltot(assistance proffecer)who was assisting me in
writing the research from the very beginning up to the end. To be honest, this project paper
would not have materialized within this short period of time without his professional and
personal commitment.
I am also greatly indebted to the manager and employees of ACSI in chacha branch who has
cooperated and helped me in the process of data collection. They were cooperative in
arranging the interview with them and the clients for questioners.
Finally, I am also thankful for all my family (shiferaw,abeba,sola,tinsu,2jo,amenu) ,ato
mekuanint guade,ato tekliye negash and friends who were around and supported me in any
way during my studies.

i
Table of Contents
CHAPTER ONE ........................................................................................................................ 1

1. INTRODUCTION ................................................................................................................. 1

1.1 Background of the study .................................................................................................. 1

1.2 Statement of the problem ................................................................................................. 3

1.3. Objective of the study ..................................................................................................... 4

1.3.1. General objective ..................................................................................................... 4

1.3.2. Specific objectives ................................................................................................... 4

1.4. Hypotheses ...................................................................................................................... 4

1.5. Research question ........................................................................................................... 4

1.6 Significance of the study.................................................................................................. 4

1.7 Scope of the study ............................................................................................................ 5

1.8 Limitations of the Study................................................................................................... 5

1.9 Organization of the Study ................................................................................................ 5

CHAPTER TWO ....................................................................................................................... 6

2. Review of related literatures .................................................................................................. 6

2.1 Introduction ...................................................................................................................... 6

2.2 Theoretical review ........................................................................................................... 6

2.2.1 Customer Relationship Management (CRM) ........................................................... 6

2.2.2 CRM dimensions ...................................................................................................... 7

2.2.3 Elements of CRM ..................................................................................................... 9

2.2.4 Perspectives of CRM .............................................................................................. 10

2.2.5 Types of CRM......................................................................................................... 11

2.2.6 The effect of Customer Satisfaction on Customer Loyalty .................................... 12

2.2.7 CRM Effect and Evaluation Dimensions ................................................................ 13

2.2.8 Customer loyalty ..................................................................................................... 13

2.1.9 Customer loyalty in the service provider organizations ......................................... 14

ii
 2.2.10 CRM and customer loyalty ................................................................................... 15

2.2.11 Microfinance in Ethiopia ...................................................................................... 15

2.2.12 Empirical review ................................................................................................... 16

CHAPTER THREE ................................................................................................................. 19

3. RESEARCH DESIGN AND METHODOLOGY ............................................................... 19

3.1 Research Design............................................................................................................. 19

3.2 Research Approach ........................................................................................................ 19

3.3 POPULATIONOF THE STUDY .................................................................................. 19

3.3.1Target Population ..................................................................................................... 19

3.4 Sampling technique ........................................................................................................ 19

3.5 Sample size .................................................................................................................... 20

3.6. Data collection instrument and methods of data collection .......................................... 20

3.6.1 Source of Data......................................................................................................... 20

3.6.1.1 Primary Data source ............................................................................................. 20

3.6.1.2 Secondary Data Source ........................................................................................ 21

3.6.2ToolsofdataCollection .................................................................................................. 21

3.6.2.1 Questionnaire ....................................................................................................... 21

3.6.2.2 Interview .............................................................................................................. 21

3.7. Reliability and Validity of data ..................................................................................... 21

Table 3.1 Reliability test ...................................................................................................... 22

3.8. Methods of Data analysis .............................................................................................. 22

3.9 Methods of Presentation ................................................................................................ 22

3.10 Ethical Considerations ................................................................................................. 23

3.11Conceptual Framework of the study ............................................................................. 23

CHAPTE FOUR ...................................................................................................................... 24

4. RESULTS AND DISCUSSION .......................................................................................... 24

4.1 Introduction .................................................................................................................... 24

iii
 4.1.1 Descriptive Statistics for Demographic Data .......................................................... 24

4.2.1 Gender of respondents ............................................................................................ 24

4.2.2 Age of Respondents ................................................................................................ 25

4.2.3 Occupational status of respondents ......................................................................... 26

4.2.4 Educational level of the respondents ...................................................................... 27

4.2.5 Monthly income of Respondents ............................................................................ 27

4.2.6 Respondents time length as customer of the ACSI. ................................................ 28

CHAPTER FIVE ..................................................................................................................... 38

5. SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS ................ 38

5.1. Introduction ................................................................................................................... 38

5.3 Conclusion ..................................................................................................................... 40

5.4. Recommendations ......................................................................................................... 41

Reference ................................................................................................................................. 44

Appendix I ............................................................................................................................... 47

Appendix II .............................................................................................................................. 52

iv
 List of Table

Table 3.1Reliability test…………………………………………………………………. 22

Table 4.1 Correlation between independent and dependent variables……………………..29

Table 4.2 test of homogeneity table………………………………………………………...32
Table4.3Model summary table………………………..………….………….…………… 33
Table 4.4 ANOVA Table (F-test)…………………………………………………………..33
Table 4.5Regression table…………………………………………………………….…...34
Table 4.6 Hypothesis table ………………………………………………………………..34

v
 List of Figure
Figure 3.1Conceptual Model …………………………………………………………….. 23
Figure 4.1: Gender of respondents………………………………………………………… 25
Figure: 4.2 age of respondent……………………………………………………………… 26
Figure 4.3 occupational status of respondents……………………………………………...26
Figure 4.4 Educational level of the respondents……………………………………………27
Figure 4.5 Monthly income of Respondents………………………………………………...28
Figure 4.6 respondents time length as customer of the ACSI……………………………….28
Figure 4.7 linearity test result…………………………………………….…………………30
Figure 4.8 Normality test result…………………………….………………………………..31

vi
ACRONYMS
ACSI Amhara credit and saving institution
ANOV Analysis of Variance
SPSS Statistical Package for Social Science
CRM customer relationship management
MFI micro finance institution
NBE national bank of Ethiopia
CBE commercial bank of Ethiopia
MF micro finance

vii
 ABSTRACT
The survival of any organization depends on its customers. Customers are the source of
profits to be earned by a profit making organization. Due to the more and more fierce
competition in todays’ business, many companies are required to build long-term profitable
relationship with customers and to achieve customer loyalty. Therefore, customer
relationship management has become more and more important since last decade of 20th
century, especially in service industry. There are many different customer relationship
management dimensions implemented for retaining customers. Therefore, this study was
aimed to explore the effect of customer relationship management dimensions (trust,
commitment, communication, conflict handling, and competence) on customer loyalty, by
focusing on the ACSI. A theoretical framework was used as a guideline to test the
relationships between customer relationship management dimensions and customer loyalty. A
quantitative method which is cross-sectional study with deductive approach were chosen in
this research. In order to collect primary data, a self-completed questionnaire was designed
and convenient sampling technique was used to the customers of the ACSI. In addition to
questionnaire, semi structured interview questions were prepared to get information from the
organization which is analyzed qualitatively. The SPSS version 21 for windows was used to
process the primary data which is collected through questionnaire. The findings show that
customer relationship management dimensions have effect on customer loyalty. All the
independent variables are positively and directly related to customer loyalty particularly in
MFI of ACSI in chacha town. The relationship between customer relationship management
and customer loyalty is significant. Therefore, ACSI shall make the whole system on work
with customers, not in opposite of customers. And also they are expected to invest more on
attracting new customers and retaining the existed ones with regard to customer relationship
management to increase customer loyalty.
Key words: -customer Relationship management, Trust, Commitment, Conflict Handling,
communication, competence and Customer Loyalty.

viii
 CHAPTER ONE
1. INTRODUCTION
1.1 Background of the study
The survival of any business depends on its customers, and the most important goal of an
organization is to maintain customer loyalty and focus on customer centric approach in their
organizational and marketing strategies (Jain & Singh, 2002). In today‟s business many
companies are required to build long-term profitable relationship with customers and to
achieve customer loyalty. Bowen and Chen (2001) argue that having a satisfied customer is
not sufficient, because customer satisfaction needs to have direct effect to customer loyalty.
There is significant pressure on the financial sectors in all over the world; the market place is
very dynamic, vibrant and competitive. The customers are smarter, more informed, and have
an access to many channels and choices which they take little time to exercise. Customer can
easily defect to competitors who promise better offerings at lower prices (Bhardwaj, 2007).
Technological advancement has contributed a great deal in empowering customers by
equipping them with the information they want at their fingertips. This has given customers
the liberty to demand better services, reduced loan rates, higher deposit rates, timely and
special customer service and many more financial offerings possible. Therefore, it‟s a
challenge to have good customers let alone having loyal ones to our brand.
Customer relationship management (CRM) is a concept for managing a company‟s
interactions with customers, clients, and sales prospects. It involves using technology to
organize, automate, and synchronize business processes in order to enhance profitability,
income, and customer satisfaction and finally loyal customers to the specific brand.
Customer loyalty is one of the most important customer metrics in marketing due to the profit
effect of maintaining a loyal customer base (Oliver, 1997), When a consumer develops
loyalty towards a brand develops a favorable attitude towards the brand resulting in
commitment. When the customer becomes emotionally rather than merely intellectually
vested in a brand, loyalty to the brand becomes cemented.
ACSI is a financial institution characterized by high customer contact with individually
customized service solutions where customer satisfaction has been an increasing focus of
research (Molina et al., 2007).
Handful of scholars showed that CRM components have direct effect on customer loyalty,
each were mentioned in different studies as a significant element. They have suggested that
customers‟ Trust has a significant role in building long-term relationship and achieving

1|Pa
customer loyalty (Berry, 1983; Kotler& Armstrong, 2010). The ability of the product or
service provider to handle conflict well will also directly influence customer loyalty. Clow&
Kurtz (2003) Commitment is another important determinant of the strength of a customer
relationship management, and a useful construct for measuring the likelihood of customer
loyalty and predicting future purchase frequency (Morgan and Hunt, 1994). The findings of
Ndubisi (2007) suggested that the greater the trust in the bank, the higher the level of the
bank‟s commitment, the more reliable and timely its communications and the more
satisfactorily it handles conflicts, the more loyal its customers will tend to be. Effective
communication affects customers to stay with a provider of ACSI services. Loyalty can be
nurtured by providing timely and reliable information.
Micro finance is recognized as an effective tool to fight poverty by providing financial
services to those who do not have access to bank or are neglected by the commercial banks
and financial institutions. Financial services provided by Micro Finance institutions (MFIs)
generally include savings, insurance and credit (DulaAbebe, 2012).
Micro finance is created in the economy for the economic benefit of the poor and to alleviate
poverty. Microfinance has come to include new in broader range of service and the poor and
very poor, that lack access to traditional formed financial institutions require a variety of
financial product.
Amhara Credit and Saving Institution (ACSI) started its operation in 1992. The institution is
registered as a business entity under the Ethiopian Commercial Law and Proclamation No.
40/1996 to undertake delivery of financial and non-financial services to the able poor who are
willing and able to be engaged into productive economic activities. Currently, ACSI operates
in four regional states of the country, namely, Amhara, Oromia, SNNPR, and Addis Ababa
through its 471 branches. ACSI has reached over 843169 active clients as of January 2020
with outstanding loan balance of over 20.9 billion. ACSI MFI Chacha branch started its
operation in 2001 and by now it has 38357 active clients who are getting microfinance
services from one main branch. The branch is giving microfinance service for both rural and
urban clients and performing its microfinance service to clients However, the institution is
facing an aggressive competition since emerging other saving and credit financial institution
joined the industry. As the result, customers have now more options and are shifting to the
competitors, ACSI has different business Strategy to become bank called tsedey, and it began
its operation in the coming year. So it focused on customer coverage, by spreading its
branches all over the country. Tsedey Bank adjusted their operating hour, add their focus on

2|Pa
technology, efficiency and customer service, this were the main reasons to pick this
institution.
1.2 Statement of the problem
CRM in micro finance institution entirely different from other sectors, because it is related to
financial services, which needs to create the trust among the people, that results in customer
loyalty. It is an industry that has a huge opportunity to engage people in experiences that
build lasting and mutually rewarding relationships (Doherty, 2012)
A clear and positive relationship exists between CRM and customer satisfaction, (Yao
&Khong, 2011). But, Having CRM software installed or introducing the strategy does not
ensure a successful result. One of the most important studies conducted in this field is by
Reichheld and Sasser (1990), cited on Ali study (2007:16), which showed the large impact on
profitability of small increases in customer retention rates, which made the marketing
community more conscious of the need to manage customer relationships in the long term as
well as prior to the first sale.
The emergence of new saving and credit financial institution in the industry makes
competition intense. However, in Ethiopia, there appears to be limited effort to engage to
CRM practices for securing long-term growth and profitability. For any given service sector,
the growth and survival of companies is highly dependent on how loyal their customers are.
Customer loyalty has been found in the literature to be a competitive tool for many
companies; here application of CRM practices comes as a solution. This is even much more
pronounced in today‟s highly globalized, industrialized and competitive markets. Loyalty has
been widely researched in the domain of marketing (Bose &Rao 2011). A relative handful
study of Ndubisi (2006) has specifically examined that CRM such as trust; commitment and
conflict handling have a direct effect on customer retention. The evidence is almost uniformly
consistent in indicating that customers are loyal when the institutions relationship marketing
is good.
Accordingly, this study seeks to empirically examine the effect of customer relationship
management on customer loyalty within the context of the micro finance institution
considering the absence of in depth study. By addressing the question of whether there is a
link between higher application of CRM practices and higher customer loyalty specific to the
practices exercised. This study can provide a valuable information and knowledge base for
financial institution as they seek to acquire and retain the loyal customers needed for their
long-term success.

3|Pa
 1.3. Objective of the study
1.3.1. General objective
The general objective of this study is to explore the effect of customer relationship
management on customer loyalty within the ACSI, by analyzing the relationship of every
construction the theoretical framework.
1.3.2. Specific objectives
The research has the following specific objectives focusing on components of CRM.
 To find out the level of effect, trust has on customer loyalty in MFI of ACSI?
 To determine the level of effect, commitment has customer loyalty in MFI of ACSI?
 To examine the effect of communication on customer loyalty in MFI of ACSI?
 To investigate the effect of conflict handling on customer loyalty in the MFI of ACSI?
 To determine the effect level of competence has customer loyalty in the MFI of
ACSI?
1.4. Hypotheses
Based on the conceptual model described above, these alternative null hypotheses were
formulated:
H0: Trust has no a significant positive effect on customer loyalty.
H0: Commitment has no a significant positive effect on customer loyalty.
H0: Conflict handling has no a significant positive effect on customer loyalty.
H0: Communication has no a significant positive effect on customer loyalty.
H0: Competence has no a significant positive effect on customer loyalty.
1.5. Research question
The research give answers to the following research questions.
1. To what extent does trust influence customer‟s loyalty in the MFI of ACSI?
2. To what extent does commitment influence customer loyalty in the MFI of ACSI?
3. To what extent does communication influence customer loyalty in the MFI of ACSI?
4. What is the level that conflict handling influence customer loyalty in the MFI of ACSI?
5. What is the level of competence influence customer loyalty in the MFI of ACSI?
1.6 Significance of the study
Once a company develops a loyal customer base, marketing is easier, sales rate and profit
margin are higher, premium pricing were exercised, overall it‟s a key to long term success.
To get all done one needs to know what affects customer loyalty and the level of effect CRM

4|Pa
has on customer loyalty and to what extent the CRM components determine its existence.
Therefore, this study focuses on such relation in the case of ACSI in chacha town.
The research also provides managers insights into development and implementation of
CRM activities based on customers‟ evaluation and enables the organization to identify the
dimension that have effect on customer satisfaction and those which needs further
enhancement. By doing so, this research will have implication on MFI managers and will
contribute to the CRM literatures
1.7 Scope of the study
This study focuses on micro financial institution of ACSI. by evaluating CRM, by using
convince sampling techniques, that the researcher believes the sample were representative of
the population considering; wide customer range, technological advancement and adopting
CRM activities. The study gives emphasis on customer relationship management along with
its components‟ level of effects on customer loyalty, taking four CRM components i.e. Trust,
commitment, conflict handling, competence and communication as independent variables by
applying all on the dependent variable i.e. customers‟ loyalty.
1.8 Limitations of the Study
Some of the limitations that face in the preparation of this research was scope of the study
area, time constraint, unavailability of data and the respondents understanding of filling the
questionnaire was not satisfactory.
1.9 Organization of the Study
This paper has five chapters. The first chapter deals about background section, statement of
problem, the research questions/hypothesis, the research objectives, significance of the study,
scope of the study and limitation of the study and organization of the study. The second
chapter contains review of related literatures. The third chapter explains the research
methodology and design. The fourth chapter, deals about discussions of results and fifth
chapter deals summary, recommendations and conclusion.

5|Pa
 CHAPTER TWO
2. Review of related literatures
2.1 Introduction
This part of the paper tries to cover the relevant literatures resulted from various scholars on
the topic that customer relationship management and its impact on customer loyalty.
Covering theoretical, empirical and conceptual models & issues associated with the issue
such as; definitions, terms, perspectives, and empirical studies, components namely (Trust,
commitment, conflict handling, and communication and competence) and their impact on
customer‟s loyalty in the case of Amhara credit and saving institution ( ACSI ).
2.2 Theoretical review
2.2.1 Customer Relationship Management (CRM)
Customer Relationship Management (CRM) “is the core business strategy that integrates
internal processes and functions, and external networks, to create and deliver value to
targeted customers at a profit. It is grounded on high-quality customer data and enabled by
IT” (Buttle, 2004). CRM is a business strategy to identify, cultivate, and maintain long-term
profitable customer relationships. It requires developing a method to select your most
profitable customer relationships (or those with the most potential) and working to provide
those customers with service quality that exceeds their expectations (McDoKeeping in mind
the above definition, the term CRM is not clear. There is confusion about what it stands for
and how to implement it. As a result, CRM has different meanings depending on who you ask
(Payne &Frow, 2005). There are various opinions about CRM and from which aspects one
can see it.
Among the several definitions that have been developed so far, the following are some of the
popular ones;
• „CRM is the core business strategy that integrates internal processes and functions, and
external networks, to create and deliver value to targeted customers at a profit. It is grounded
on high-quality customer data and enabled by information technology‟ (Buttle, 2004:29).
• „CRM is a process designed to collect data related to customers, to grasp features of
customers, and to apply those qualities in specific marketing activities‟ (Swift, 2001:33).
• „CRM is an integration of technologies and business processes used to satisfy the needs of a
customer during any given interaction‟ (Bose, 2002:89).
• CRM is building customer loyalty, not merely relationship management, using a 360degree
view of the customer.

6|Pa
An analysis of the above different definitions shows that they all have common concepts of:
Customer focus (customer satisfaction, loyalty and retention), technology, knowledge
management, change management and leadership.
2.2.2 CRM dimensions
MahshidTofigh, Hossein Salimian, and Mahmood Nasrollahi have defined the components of
Relationship management as given below
CRM components
Trust
Trust is your tendency towards a transaction company which you trust. Trust has been
defined as one of the aspects of a business relationship which is the level at which each party
feels that he can trust the promises of the other. High level of customer trust in the service
provider leads to long term and more constant relationships. Trust has been defined as
understanding the good reputation, credibility and support provided by the other party. In
fact, the success of a relationship to a large extent depends on the amount of trust between the
customer and the service provider. Moorman et al., (1992)
Commitment
Commitment is the constant tendency to maintain a valuable Relationship. Commitment is
one of the significant variables for understanding marketing strength, and also a useful tool
for measuring the probability of loyalty and predicting customer‟s future purchases.
Moorman et al., (1992) Vasudevan et al., (2006)
Communication
Communication, especially timely communication, means helping to resolve the disputes and
aligning the conceptions and expectations in order to enhance mutual trust in a relationship.
Regarding the relationship between the customer and the provider, communication means
providing information that is trustable Sin et al. (2002) Ndubisi (2007)
Conflict handling
Conflict handling refers to the ability to minimize the negative and obvious consequences of
potential conflicts of course prior to their leading to any problems.
Conflict in relationships is predictable and its consequence is wrong conceptions of the
parties about their aims and roles in the relationship. Conflict handling is the ability of the
provider to avoid potential conflicts. Dwyer et al., (1987) Aydin et al., (2005)Clow& Kurtz
(2003) identified and explained the four types of conflict faced by customers.

7|Pa
 1. Employee-Customer conflict

Conflict can occur between employees and customers when either party does not follow
the expected role. Conflict also occurs between the employee and the customer if the
customer does not take care of the facility the way the employees feels. Both customers
and service personnel are expected to behave in accordance with their role scripts. When
behavior deviates from scripts, a conflict will arise. To reduce employee-customer
conflict, both customers and service providers must understand their roles. Company
personnel should instruct new customers about their roles and may need to remind current
customers occasionally. Teaching employees how to deal with different types of
customers and their behaviors can also be beneficial.
2. Customer-Role conflict

Occasionally there is a conflict between the customers and their expected roles. In these
situations, the service provider must provide instructions to the client on his or her role
without insulting the customer. The service provider should also attempt to give the client
a sense of cognitive control through providing information about the service to be
provided.
3. Customer-Organization conflict

Conflict between the customer and the organization is common. Most of these situations
occur as a result of policies of the service organization. In most cases, the individuals
conflict is with the organization and not with the service personnel. Dealing with
customer-organization conflict is difficult to alleviate because most organizations do not
want to change policies. When conflict occurs, service providers should analyze their
policies and decide if it is time to modify or eliminate the policy.
4. Customer-Customer conflict

Conflicts sometimes arise among customers when they are served simultaneously or
when one customer is served in the presence of other customers. Conflicts also sometimes
occur among customers who have different expectations. A customer who wants quick,
speedy service may be aggravated at the customer in front of him who wants to talk and
wants personalized service. Handling conflict among customers is difficult. Employees of
all types of services should be trained to handle conflicts among customers and how to
minimize such conflict. Yekuno amlak (2004) conducted survey and proved that to
maintain good relationship with customers, the way customers are handled such as proper

8|Pa
 acts of frontline employees and proper customer service are significantly important for
customer loyalty. He also suggested that proper complaints handling and efficient service
failure recovery procedures are considered as very important factors for customer
satisfaction by many customers. This author argued that having clear and easy procedures
to handle customers complaints and communicating it to the customers properly is
equally important to get customer loyalty. Complaint handling is a special case of
customer interactions. Customers tend to be loyal to banks that handle customer
complaints which will always happen and other conflicts satisfactorily (Ndubisi, 2007). It
is therefore important that effective conflict resolution mechanisms are not only in place
but are proactive, so as to identify potential sources of conflict and address them before
problems become manifest. Effective reactive solutions should also be organized
decisively and in time to resolve problems and protect customers from avoidable losses.
Sometimes, what may cause a customer to defect is not so much the occurrence of a
problem but how it is handled. Clow and Kurtz (2003) suggested that customers follow a
different sequence in handling conflicts. The most common technique is avoidance. They
do this through patronizing another firm. In addition to the avoidance strategy, customers
will often use retaliation in the form of negative word-of-mouth. Customers also will use
direct confrontation in the way that they are treated. planning to switch venders and they
have nothing to lose. Psychological withdrawal and automatic behavior is used by
customers only when they are forced to stay with the service firm. By understanding these
methods of dealing conflict, managers can recognize conflict at an early stage and can
find the source of conflict. Information should be gathered from all parties concerned as
well as others who are familiar with the situation. Once the source has been identified,
efforts can then be initiated to eliminate or reduce the conflict.
Competence
Competence has been defined by perceptions of customers on the amount of skills, abilities
and knowledge needed by the opposite party to effective function/service (Smith and Barclay,
1996)
2.2.3 Elements of CRM
CRM is a combination of people, process and technology that seeks to understand a
company‟s customer. It is an integrated approach to managing relationships by focusing on
customer retention and relationship development.
People

9|Pa
People are involved in developing CRM strategy, choosing and implementing the IT strategy,
hence people must be able to work cross functionally to ensure CRM meets its goals of
customer satisfaction and retention by creating and maintain customer database to design
appropriate marketing programs for the appropriate segments of customers (Buttle, 2009:87)
Process
Process is how operations are completed within an organization which leads to the
importance of developing processes and implementing it across all functions so as to create
value for the customer and meet the CRM goals and objectives. Optimizing customer
relationships requires a complete understanding of all customers; profitable as well as non-
profitable, and then to organize business processes to treat customers individually based on
their needs and their values (Renner, 2000:62).
Technology
Information technology (IT) has long been recognized as an enabler to radically redesign
business processes in order to achieve dramatic improvements in organizational performance
(Davenport and Short, 1990; Porter, 1987). Information is critical for product tailoring,
service innovation, consolidated views of customers and calculating customer lifetime value.
Among others, data warehouses, enterprise resource planning (ERP) systems, and the Internet
are central infrastructures to CRM applications. (Chen &Popovich 2003:49)
2.2.4 Perspectives of CRM
As presented in the above section, several researches have made attempts to define CRM, and
these definitions of CRM adopted from different sources refer to the different perspectives of
CRM which ranges from narrowing IT enabling solutions to a broadly and strategically
approach to managing customer relationship. Consequently, Payne and Frow (2005:68) use a
continuum to define CRM from three perspectives
The first perspective takes a narrow and tactical outlook where CRM is accomplished
through a defined technology initiative project. CRM is described as using data to drive
marketing activities (Kutner& Cripps, 1997). CRM is also look upon as a marketing
promotional activities linked to marketing database (Bickert, 1992; Winer, 2001).
The second perspective view CRM as implementing a combination of customer focused
technology solutions. CRM is defined as using ecommerce to drive relationships with
customer (Stone & Woodcock, 2001) and web-based methods and internet technology to
drive organization to become more customer-centric (Gosney& Boehm, 2000).
The third and last perspective takes a broader and strategic approach where CRM applies a
holistic or wholesome approach to customer relationships management and to develop value

10 | P a
for shareholder. CRM applies 1-to1 relationship marketing to respond to customer
requirement supported by what the customer says they prefer and other known information
related to the customer (Peppers, Rogers, &Dorf, 1999). It employs process oriented view by
combining all the functions of an organization (Parvitiyar & Sheth, 2001) and uses an
organized process by managing customer relationship touching on all customer touch points
to develop value for the customer and profitability for the organization (Reinartz et al., 2004).
2.2.5 Types of CRM
Regarding the types of CRM, to help in compiling an extensive picture of the CRM business
model, many authors including Buttle (2009:91) divide CRM into four main types, namely
Strategic CRM, Operational CRM, Analytical CRM, and Collaborative CRM. The researcher
acknowledges the literature that Analytical CRM has become an essential part of many CRM
implementations, and base for Operational CRM difficulties to reach its full effect depending
on analytical information about customers, this study will be conducted mainly focusing on
the operational and analytical CRM related activities in the micro finance of Ethiopia.
Strategic CRM; is a core customer-centric business strategy that aims in winning and
retaining profitable customers. Basically it is about creating customer-centric business
culture. Customer centric business approach requires changing behavior from regular
business models such as product-orientation, production-orientation or selling-orientation.
(Buttle, 2009:91) In a customer-centric organization resources should be allocated where they
increase customer value, for example in reward programs to promote employee behavior that
have positive impact on customer satisfaction and retention, as well as capturing, sharing and
applying customer information across the organization. (Buttle 2009) This is the approach,
which should be examined in very early stage of CRM strategy development.
Operational CRM; Operational CRM focuses on customer-involving processes such as
selling, marketing and customer service. It is about automating some of the marketing, selling
and service functions of an organization. (Buttle, 2009:92)
Analytical CRM; Analytical CRM focuses on collecting, processing, interpreting and
exploiting of the customer-related data for strategic or tactical purposes. It is highly involved
with the customer-related data (Buttle, 2009). It enables the value creation to both, the
customer and the organization, by capturing, storing, extracting, processing, interpreting and
reporting the data. Customer-related data may include information about purchasing history,
payment history, credit score, marketing campaign response, loyalty scheme data and service
data. In addition to internal data, organizations may gather and analyze demographic and
lifestyle data from external sources as well (Buttle, 2009:95).

11 | P a
Collaborative CRM; Collaborative CRM applies technology across organizational
boundaries aiming to optimize company, partner and customer value. It is concerned with
enabling better customer value delivery within entire value chain by improving cooperation
and customer related data sharing across organizational boundaries. Some vendors have
developed own applications for partner relationship management (PRM) for managing
complex value chains. In some organizations collaborative CRM is used to describe
information systems designed to enhance communication just internally. (Buttle, 2009:95)
Acknowledging the literature that Analytical CRM has become an essential part of many
CRM implementations, in addition to the fact that Operational CRM difficulties to reach its
full effect without analytical information about customers, this section will discuss
operational and analytical CRM further.
Operational CRM; refers to services that provide support for various „front office‟ business
processes in helping organization to take care of their customers. Focus on customers‟ value
is important for a successful operational CRM strategy (Buttle, 2009:92). On the other hand,
analytical CRM supports organizational back-office operations and analysis. It deals with all
the operations and processes that do not directly deal with customers. Hence, there is a key
difference between operational CRM and Analytical CRM. Unlike from operational CRM,
where automation of marketing, sales-force and services are done by direct interaction with
customers and determining customer‟s needs, analytical CRM is designed to analyze deeply
the customer‟s information and data and unwrap or disclose the essential convention and
intension of behavior of customers on which capitalization can be done by the organization
(Buttle, 2009:95). Analytical CRM is a solid and consistent platform which provides
analytical applications to help predict, scale and optimize customer relations (Buttle
2009:95). Advantages of implementing and using an analytical CRM are described below
2.2.6 The effect of Customer Satisfaction on Customer Loyalty
Customer satisfaction is a judgment of the service brand‟s capability to provide “a
pleasurable level of consumption related fulfillment, including levels of under or over
fulfillment” (Oliver, 1997, p. 13). Customers are satisfied if the performance meets or
exceeds their expectations prior to consumption. Likewise, they are dissatisfied if the brand
does not meet their expectations. According to Garbarino & Johnson, 1999, customer
satisfaction is considered as one of the most important factors contributing for customer
loyalty. If customers evaluate the brand as being one that meets and even exceeds their
expectation, it is presumed they are satisfied with the brand. Once they are satisfied with the
brand, they will prefer it for their subsequent travel.

12 | P a
Customer satisfaction is further assumed to positively influence customers‟ commitment to
their relationship with the airline brand. A high level of satisfaction resulting from the
interaction with the airline brand provides repeated positive reinforcement, thereby creating
positive emotional commitment bonds with the brand (Hennig-Thurau& Klee, 1997, p. 753).
2.2.7 CRM Effect and Evaluation Dimensions
Only few studies have investigated and measured CRM effect despite the practical relevance
of operational and measuring CRM effect for business performance variables (Padmavathy et
al., 2012). Mithas, Krishnana & Fornell (2005) argued that marketing has moved from a
brand-centered focus to a customer-centered approach. Hence, managing customer
relationships is important and valuable to businesses. The effective implementation of CRM
requires a cross-functional integration of marketing, sales, customer service and supply chain
to enhance value delivered to customers (Parvatiyar and Sheth, 2001, p.5). As noted by Das
(2012) the effective relationship between customers and banks depends on the understanding
of different needs of customers at different stages.
2.2.8 Customer loyalty
Customer loyalty has been defined and measured in many various ways over the past
decades. Oliver (1997) defines customer loyalty as “a deeply held commitment to re-buy or
re patronize a preferred product or service consistently in the future, despite situation
influences and marketing efforts having the potential to cause switching behaviors”.
According to the literature on loyalty, customer loyalty has several distinct dimensions. The
two most important dimensions are the behavioral and attitudinal components (Day 1969; Yi
1991). Earlier research conceptualized customer loyalty as a behavior (Dick and Basu 1994).
Behavioral loyalty signifies actual repeat purchasing behavior, or the likelihood of repeat
product/service purchases from the same supplier. Yet, recent research seems to measure
loyalty attitudinally (including cognitive and/or affective components). Using this
perspective, customer loyalty is perceived as future intention-to-repurchase or commitment
that reflects the cognitive and emotional attachment associated with customer loyalty.
Each of these dimensions has pros and cons. Academics find fault with the behavior-based
loyalty measure, so far as it can fail to distinguish between true and spurious loyalty. Dick
and Basu (1994) assert that if behaviorally loyal customers with spurious loyalty locate a
superior alternative, they will probably switch to the alternative.
Day (1969) blames behavior loyalty by stating, “These spuriously loyal buyers lack any
attachment to brand attributes, and they can be immediately captured by another brand that
offers a better deal,” which means that actual repurchase behavior is not always due to a

13 | P a
psychological and/or emotional commitment with respect to a product or service (i.e., true
loyalty). Bowen and Chen (2001) state that an individual may reside at a hotel because it has
the most convenient location, Nevertheless, an individual may also change to a new hotel
when it is located across the street and provides better deals. As this example illustrates,
repeat purchase behavior does not always indicate commitment; rather, it may signify a
random actual repeat purchase, or spurious loyalty. Yet, this spurious loyalty can be
disregarded when attitudinal loyalty is the construct of interest.
Shankar and his colleagues (2003) also maintain that attitudinally loyal customers are not
likely to change to an incrementally more attractive alternative, in that they have a certain
degree of attachment or commitment to the product or service.
Interaction of attitude and behavior such that the behavior (loyalty) is determined by the
strength of relationship between relative attitude and repeat patronage. Extending this, the
loyalty dimensions or concepts are to include behavioral, attitudinal and cognitive processes.
The attitudinal dimensions of loyalty were to include attributes such as word-or-mouth,
complaining behavior and purchase intention. The behavioral loyalty measures include
attributes such as brand allegiance, price elasticity, share of category (number of times a
brand is purchased in a given period) and price until switching. The cognitive loyalty
component includes attributes like preference to the service organization, the belief that the
service organization provides best offer and suiting customer needs. Dick and Basu (1994)
Customer loyalty is one of the most important customer metrics in marketing due to the profit
impact of maintaining a loyal customer base (Oliver 1997). The literature points out that
customer loyalty leads to firm profitability because customer loyalty positively influences
firm product-marketplace performance and financial performance and creates shareholder
wealth.
2.1.9 Customer loyalty in the service provider organizations
Customers remain loyal, not because of promotions and marketing programs, but because of
the value they receive (Payne et al., 1995). Key findings of Gee et al (2008) indicates that
organizations must understand what drives both value and delight for their customers and
adopting a customer centric vision enables an organization understand their customers,
deliver customer delight and drive for loyalty. They also pointed out different customers have
different requirements and were delighted in different ways and appropriate monitoring of
customers is important to ensure that customer defections are not masked by customer
acquisitions. This is essential for the sustainable growth of an organization. Analysis of

14 | P a
defecting customers allows an organization to profile at risk customers where appropriate
preventive measures can be put in place to reduce customer defection (Gee et al., 2008).
2.2.10 CRM and customer loyalty
Today the most important thing to do about the reduced customer satisfaction is the
customer-centered practices adapted to each customer‟s needs and values. By treating
different customers in different manners, firms can achieve customer loyalty (Tarhan, 2004:
77). Customer loyalty is the long and uninterrupted retention of the relationship by offering
service that meets and even goes beyond the customer needs (Acuner, 2001: 89). Customer
loyalty is defined with consideration paid to the amount of buying for a given trademark. The
level of loyalty is measured by the watching of the frequency of buying (Javalgi and Moberg,
1997: 165). With the increase in the amount of accessible information in recent years, the
conscious level of customers has improved continually. Today‟s customers are aware of the
power they have on the market and that every activity is realized for them. It is now easier to
reach the products and services. Before choosing a given trademark, consumers look at the
price, newness, accessibility of the product and the additional services offered. As the
alternatives increased, consumers‟ loyalty to the products and services decreased (Tekinay,
2002: 129). Today firms have entered into an effort to present at a lower cost than their rivals
the products and services that can meet the customer wishes and expectations fully, so that
they can render customers more loyal.
2.2.11 Microfinance in Ethiopia
The concept of microfinance is not new in Ethiopia but, as an industry it is relatively new
phenomenon. Traditionally, people have saved with and taken small loans from informal
channels for unexpected events from the so called Iqub i.e. an association of people share
common objective mobilizing finance and distribute it to members through rotating and Idir
i.e. a funeral insurance established and operated by the volunteer community (Emana, 2009).
Saving and credit services through cooperatives in Ethiopia took in 1950s (Welday, 2004).
The first saving and credit cooperative (FSCCO) in Ethiopia was established by the
employees of Ethiopian Airline in 1956 (Bezabih, 2012). International donors, NGOs and the
government of Ethiopia have also supported the growth of credit and saving to the rural poor
in the 1970s to 1990s.During the time the accesses of rural credit i.e. contribution loans in
Ethiopia were intervened through formal banks such as Agricultural and industrial
development bank. The emergence and expansion of modern microfinance institution in
Ethiopia is recent phenomenon that happens because of formal financial system like

15 | P a
commercial banking system was very limited and could not address the financial need of poor
households for the fact that they are not their ultimate target client.
By the end of 2012/13, as per the annual report of National Bank of Ethiopia (NBE), 31 MFIs
have been registered with the national bank of Ethiopia and operate under the support of
proclamation no. 40/1996 in the country (rural and urban areas) and accordingly their total
capital and total asset reached Birr 4.5 billion and Birr 17.7 billion respectively. Amhara
credit and saving institution (ACSI) can be considered as the launch of modern microfinance
institution in Ethiopia and its operation is traced back to 1995 as a department with the
initiation of the former Ethiopian relief organization (ERO) currently organization for
Rehabilitation and development in Amhara (ORDA), an indigenous NGO engaged in
development activities in Amhara region. ACSI had undertaken pilot activities in 1996 and
was licensed by National Bank of Ethiopia as microfinance intermediary Share Company in
April 1997 (www.acsi.org.et.)
With giving support of the Amhara regional government and donors Its primary objective is
promoting agricultural and non-agricultural activities by providing sustainable financial
service for poverty alleviation and stimulating the region‟s economic growth. To achieve its
objective ACSI operates in a very tough environment with the majority of its clients being
from the rural area of the region; in line with the government‟s policy ACSI‟s target focus is
the low income, rural based susceptible to draught and productive poor with a special
emphasis on women (USAID, 2006). ACSI currently delivers microfinance activities
including credit, saving, micro insurance, and money transfer and fund management.
It is now a three tiered organization with head office in Bahir Dar (capital city of Amhara
national regional state), 8 area or regional offices and 331 branches in the area offices (ACSI
yearly report, 2017). ACSI has more than 3 million active clients and out of this total client
955,218 (63 % female) clients are active borrowers and 2,414,901 (47 %) voluntary savers. In
terms of kebele (the last governmental administrative unit in the country), currently it is
rendering its services in 3397 “kebeles” (97 % of the total) in the region. (Acsi bocher , 2020)
2.2.12 Empirical review
The following studies were reviewed to familiarize the topic of customer relationship
management to demonstrate the originality of this study and to reveal the gap it will fill in the
customer‟s loyalty research.
Most papers see customer relationship as important contributor towards customer satisfaction
where by satisfaction resulting in customer retention/loyalty.

16 | P a
According to Swift (2001), cited in Rahimi (2007:18), companies can gain many benefits
from CRM. He states that the benefits are commonly found in one of these areas:
1. Lower cost of recruiting customers – the cost for recruiting customers will decrease since
there are savings to be made on marketing, contact, follow-up, fulfillment, services, and so
on.
2. No need to recruit so many customers to preserve a stay volume of business – the number
of long-term customers will increase and consequently the need for recruiting many new
customer‟s decreases.
3. Reduced costs of sales – the costs regarding selling are reduced owing to that existing
customers are usually more responsive. In addition, with better knowledge of channels and
distributions the relationships become more effective, as well as the costs for marketing
campaigns are reduced.
4. Higher customer profitability – the customer profitability will get higher since the
customer wallet-share increases, there are increases in up-selling, cross-selling and follow-up
sales, and more referrals comes with higher customer satisfaction among existing customers.
5. Increased customer retention and loyalty – the customer retention increases since
customers stay longer, buy more and buy more frequently. The customer does also more
often take initiatives, which increase the bounding relationship, and as a result the customer
loyalty increases as well.
6. Evaluation of customer profitability – the company will get to know which customer are
profitable, the ones who never might become profitable, and which ones that might be
profitable in the future. This is very important since the key to success in any business is to
focus on acquiring customers who generate profit, and once you have found them, never let
them go. All customers are not valuable; some many even be danger to the business. This
occurs when the customers use the company‟s time, energy and resources without generating
enough business to make them worth the effort. (Budhwani, 2002:38) Mohammad Taleghani,
ShahramGilaninia and SeyyedJavadMousavian, have mentioned some of the key relationship
marketing virtues based on their literature review as identified by various scholars. The stated
virtues are: Trust (Macintosh and Lockshin,1997; Sirdeshmukh et al, 2002; Veloutsou et al.,
2002; Knemeyer et al., 2003; Beetles and Harris, 2010 ), Commitment (Morgan and Hunt,
1994; Beetles and Harris, 2010), Competence (Smith and Barclay, 1997; Metawa and
Almossawi, 1998; Hunt et al, 2006), Equity (Kavali et al, 1999), Benevolence (Ndubisi and
Wah,2005), Empathy (Ndubisi, 2004), Conflict handling (Ndubisi and Madu, 2009; Gilaninia
et al, 2011), and (Morgan and Hunt, 1994; Ndubisi and Wah,2005; Knemeyer and Murphy,

17 | P a
2005; Tian et al., 2008. Five of the virtues listed above (trust, commitment, communication,
conflict handling& competence) was used to see the impact of Customer Relationship
Management on Customer Loyalty. These five virtues are chosen for this study as they are
found to be highly applicable to any service giving industry and are mentioned repeatedly on
most of relationship and loyalty related studies like studies.

18 | P a
 CHAPTER THREE
3. RESEARCH DESIGN AND METHODOLOGY
3.1 Research Design
To this study, after considering the available time, cost, and suitability a cross- sectional
design were adopted. in this study where data collected at only one point in time, after
acknowledging that Cross-sectional research involves the measurement of all variable(s) for
all cases within a narrow time span so that the measurements may be viewed as
contemporaneous (Baltes, Reese, Nesslroade, 1988; Creswell, 1994). The advantage of cross-
sectional research is that it is more economical in time and cost than other designs.
3.2 Research Approach
The mixed research method of research approach was followed in this study because
mathematical models was applied and hypotheses were tested which require quantitative data
and methods, Qualitative method was also employed for instrument development, problem
identification and hypotheses formation; a self-administered questionnaire was considered an
appropriate approach to collecting the data for this research. The qualitative data was
collected through secondary data sources.
3.3 POPULATIONOF THE STUDY
3.3.1Target Population
Population refers to the entire group of people, events or things of interest that the researcher
wishes to investigate (Sekaran, 2016). Target population in statistics is the specific population
about which information is desired. Branch managers and the branch clients were the target
population of this study.
3.4 Sampling technique
Sampling is a procedure that uses a small number of units of a given population as a basis for
drawing conclusions about the whole populations (Albaum, 1997).It would have been
desirable to use a census of the whole population of all the institutions of ACSI that are found
in Ethiopia, but owing to time and cost limitations and other reasons, it needs sample drawn
from the population. Unit of analysis is related with the population (specific population) that
is used to collect data. The unit of analysis for this study were customers of ACSI. Including
both account holders and borrowers. The study used non-probability convenient random
sampling technique. Convenience sampling inherently is a non-probability sample method.
Zikmund (2003) demonstrated that convenience sampling was referred to as sampling by
obtaining units or people who were most conveniently available. Malhotra (2007) showed

19 | P a
that convenience sampling was common with market researchers and newspaper reporters.
Convenience sampling also called accidental or opportunity sampling is a technique in which
a sample was drawn from that part of the population that is close to hand, readily available, or
convenient.
3.5 Sample size
According to Roscoe (1975) proposed the rule of thumb for determining sample size which is
appropriate for most research. He proposed that the minimum size of sample should be 30%
of the population. An optimum sample size is one which fulfills the requirements of
efficiency, representativeness, reliability and flexibility (Kothari, 2004).The sample size is
expected to represent the total population of the study that deemed to be used as a source of
relevant data.
From these the researcher was use representative data use solving formula cited by Yemane
(1967) considering the level of acceptable margins of error 5%. Hence, from the target
population size of ACSI chacha branch (N=2457). Based on this the researcher decided to
take both the saver at the same time borrowers of ACSI to get more valid sample size.Then
the total sample size (n) can be calculated by using the following formula
n= N2457= 343.99 ~344
1+N (e) 2 1+2457(0.05)2
n = the sample size
N= the size of the population
e = the margin of error
Totally in the study area consists of 344 respondents were addressed. Therefore, the sample
size of this study was considered fairly representative of the target population in the study
area.
3.6. Data collection instrument and methods of data collection
3.6.1 Source of Data
According to Saunders, et al, (2009), using more than one data sources and collection
methods helps to authenticate findings. In this study the researcher was used both primary
and secondary data sources.
3.6.1.1 Primary Data source
According to Kothari, (2004) primary data are those which are collected fresh and for the first
time and thus happen to be original in character.

20 | P a
Primary data was collected through questionnaire that request for ideas related to the research
problem from respondents. The questions required to address the research objective and
question related to the study. In addition to questionnaires designed and distributed to sample
respondents an interview was conducted with branch managers.
3.6.1.2 Secondary Data Source
The secondary data was collected from ACSI yearly magazines and manual. In addition,
relevant research literature, such as books, articles, and research outputs are uses as additional
secondary source.
3.6.2ToolsofdataCollection
3.6.2.1 Questionnaire
Questionnaires were prepared and translated in to Amharic language and distributed to
sample respondents by researcher. Through this method the relevant data was collected from
sample respondents and employees.
3.6.2.2 Interview
The interview method of collecting data involves presentation of oral stimuli and reply in
terms of oral responses. (Holton and Swanson, 2005).This method uses through personal
interviews to collect obvious and relevant data the researcher was apply personal or face-to-
face interview with branch managers.
3.7. Reliability and Validity of data
Reliability according to Hamersley (1992) refers to the degree of consistency, which is
assigned to the same category by different observers or by the same observer on a different
occasion. In this particular case further testing may enhance reliability.Cornbach‟s alpha
reliability coefficient was used to assure the reliability of the data.
Alpha reliability is regarded as a measure of internal consistency of the mean of the items at
the time of administration of the questionnaire. Cronbach‟s alpha is a reliability coefficient
that indicates how well the items in a set are positively related to one another. It is computed
in terms of the average inter correlations among the items measuring the concept. Reliability
is calculated in such a way that it represents the reliability of the mean of the items, not the
reliability of any single item. This coefficient can hold a value of 0 to 1. The result of 0.7 and
above implies an acceptable level of internal reliability. The result of reliability test for the
questionnaire is shown in the following table

21 | P a
Table 3.1 Reliability test
Variables Cronbach’s N
Alpha value

Customer loyalty .772 344

Trust .786 344
Commitment .772 344
Conflict handling .786 344
Communication .928 344
Competence .911 344

Extensive literature review was performed to operationalize the variables. Specifically,

Nunnally (1978) recommended 0.70 Cronbach‟s alpha value (internal consistency) for newly
developed research instruments. All the major research measures met Nunnally‟s (1978)
internal consistency (reliability) standard. Therefore, subjects to the specific and unusual
limitations associated with this type of research, with an average Cronbach‟s alpha value of
0.772 the research instrument appears reliable and valid.

The reliability test table above shows all variables under the study are reliable enough. That is
all value of Cronbach‟s Alpha is more than 0.75. This implies that the data of the study is
more reliable.

Validity on the other hand means truth interpreted as the extent to which an account
accurately represents the social phenomena to which it refers. Validity refers to the degree to
which the questions measure what it is supposed to be measuring (Hamersley 1992). In short
the validity issue in this research study is whether the research explains or measures what we
are trying to explain or measure.
3.8. Methods of Data analysis
The collected data was analyzed and interpreted by using software which is called Statistical
Package for Social Sciences (SPSS) because of its ability to cover a wide range of the most
common statistical and graphical data analysis and is very systematic.
3.9 Methods of Presentation
The data from the study is presented in the form of tables, graphs and charts to make all the
data readable and understandable by all concerned parties

22 | P a
3.10 Ethical Considerations
All information collected were treated with confidentiality without disclosure of the
respondents‟ identity. Moreover, no information was modified or changed, hence the
information was presented as collected and all the literatures collected for the purpose of this
study were acknowledged in the reference list. In order to keep the confidentiality of the
information that were given by respondents, they were not required to write their name and
assured that their responses were treated in strict confidentiality. The purpose of the study
was disclosed in the introductory part of the questionnaire. Furthermore, the researcher tried
to avoid misleading or deceptive statements in the questionnaire. Lastly, the questionnaires
were distributed only to voluntary participants.
3.11Conceptual Framework of the study
Conceptual framework provides direction for this study. Diagrammatical description of
variables below indicates relationship existing between customer relationship management
and customer loyalty. Customer loyalty is influenced by trust, commitment, conflict handling,
competence which also affects MFIs activities.

Dependent Variables Independent Variables

Figure 3.1 Conceptual Model

Source: Ndubisi and Wah (2005).

23 | P a
 CHAPTE FOUR
4. RESULTS AND DISCUSSION
4.1 Introduction
This chapter presents the analysis of the survey questionnaire as well as results of the data
analysis in order to realize the ultimate objective of the study, no information was modified
or changed, hence the information was presented as collected and all the literatures collected
for the purpose of this study was acknowledged in the reference list. The target population of
this study was customers of ACS in chacha town. Questionnaires was spread out and
collected at one time within 5 days. The researcher was used descriptive statistical analyses to
analyze the Demographic variables of the respondents such as gender, age, monthly income,
educational back ground and duration to use service of ACSI.
Next, inferential statistical analysis was used to analyze the correlation of variables under the
study. Basically regression and correlation were used to identify factors that affect customer
loyalty in ACSI MFI in chacha branch.
Finally, the hypotheses tests of this research was conducted within the following two
grounds:
1. Use Pearson‟s correlation test to test the relationship between the independent (X) and
dependent (Y) variable of the research.
2. Conduct t – test to test the significance of the relationship. This research uses a standard of
95% confidence interval to test all the hypotheses.
All the results are generated using SPSS software and are presented in tabular form below.
4.1.1 Descriptive Statistics for Demographic Data

It is the initial step of data analysis which summarizes the background information about the
respondents in the data set. Descriptive statistics was employed to simple demonstration of
the observation result in light with the research objectives and questions. Demographic
variables of the respondents such as gender, age, monthly income, educational back ground
and duration to use service of ACSI the respondents were presented and discussed below.

4.2 Demographic of Respondents

4.2.1 Gender of respondents

The study found out that gender distribution of the respondents showed that male customers
representing 35.55% of the entire population and the 64.45% representing female customers.
According to the previous research Customer loyalty difference might be influenced by

24 | P a
customer‟s gender and it is expected that females tend to be more loyal than males (kuruvilla,
joshi and shah, 2009, Patterson, 2007). And also in this research as the manager of the
institution said that they gives more emphasis for female clients. The main reason is that
females are not extravagant than male, they use their money wisely at the intended purpose
and they are paid their loan on time. So we can say that females are loyal customer of ACSI
than male.

Sex
Male-35.55
Female-64.45

Figure 4.1: Gender of respondents

4.2.2Age of Respondents
The study found that 30.64% are aged 40-59 years while the majority that is 45.66% ACSI
customers is aged between 20 to 39 years and 23.70% of them are aged above 60 years. This
implies that those aged between 20-39 years comprise a huge Proportion of clients of MFI.
The researcher perceived from these percentages, most of respondents were mature and
responsible for questions and answers in due care. Customer loyalty difference might be
influenced by customers age (kuruvilla,of joshi and shah2009,Patterson,2007). The older
customers tend to be more loyal than younger generations (ndubisi 2007).

25 | P a
Figure: 4.2 age of respondent
4.2.3 Occupational status of respondents
The study found that 18.21% of the total are government sector, 8.67% of the respondents
hold their own business. And 0.29% has other occupation. While the majority that is 72.83%
of ACSI customers are farmers. This implies that those 72.83% comprise a huge Proportion
of clients of MFI. This indicates ACSI fulfill the value of its establishment. In other word it
address its service in the area where there is no access in bank(rural areas).in this case
farmers are loyal customers of ACSI.

Consider as figure below

Figure 4.3 occupational status of respondents

26 | P a
4.2.4 Educational level of the respondents
Table 4.4 the educational level of the respondents looks like what is shown in above table. As
it can be seen from the table 8.67% of the respondents hold a first degree. 72.83% of them are
diploma holders 18.50% them are primary.(fareley,1964) The higher level of education
engage more in information gathering and processing prior to the decision process
(schaninger and sciglimpaglia,1981), use more information prior to decision making and have
an impact on customer loyalty and also lower emotional attachment to the organization.
while less educated people rely more on fewer information cues(capon and
burke,1980,however The higher the level of education has lower emotional attachment to the
organization most of the customers of acsi are farmers so they are not well educated.

Figure 4.4 Educational level of the respondents

4.2.5 Monthly income of Respondents
Table 4.6 illustrates that the largest groups of respondents have the income level of
3000-4999 birr. It represents 81.50% of the total sample of this research. Secondly,
respondents with a monthly income of 1000-2999 birr represent 18.50% of the total sample
respondents. The income of a person has a strong impact on choice decision (zeithaml,
1985). In a general sense, It implies when the income of the employees increase the
borrowing amount also increase so in my view and the above interpretation this makes the
clients more loyal.

27 | P a
Figure 4.5 Monthly income of Respondents
4.2.6 Respondents time length as customer of the ACSI.
Table 4.8 illustrates the frequency and percentage distributions of respondent‟s have been
customer of the institution. Out of 344 respondents surveyed in this research, accordingly
45.95% of the respondents have been customer of ACSI from 5-7 years. While about 41.33%
respondent‟s customer of ACSI above 7 years, 12.72% of them are customer of the
organizations for 3-5 years. as customers –organization relationship become increasingly
extraverted customers increase their interaction with service providers.( international journal
for quality research website ).

28 | P a
 Figure 4.6 respondents time length as customer of the ACSI

4.3. Correlation Analysis

Like the demographic factors, the data from the scale typed questionnaire were fed to
the SPSS software version 21.00, to process the correlation analysis. Based on the
questionnaire which was filled by the customers of ACSI, the following correlation analysis
was made. A correlation coefficient is a very useful means to summarize the relationship
between two variables with a single number that falls between -1 and +1 (Field 2005). A
correlation analysis with Pearson‟s correlation coefficient was conducted in this study.
According to guidelines suggested by Field (2005) to interpret the strength of relationship
between variables, the correlation coefficient(r) is as follows:

Correlation coefficient falls between; 0.1 to 0.29 weak relationships

0.3 to 0.49 moderate relationship

And> 0.5 strong relationship

4.1 correlation between independent and dependent variables.

Correlations

Trust Commi Conflict Communi Compet Customer

tment Handling cation ency loyalty
Trust Pearson Correlation 1

Sig. (2-tailed)
N 344
Commitment Pearson Correlation .853** 1
Sig. (2-tailed) .000
N 344 344
**
Conflict handling Pearson Correlation .839 .909** 1
Sig. (2-tailed) .000 .000
N 344 344 344
** **
Communication Pearson Correlation .810 .948 .890** 1
Sig. (2-tailed) .000 .000 .000
N 344 344 344 344
** ** **
Competency Pearson Correlation .688 .773 .721 .738** 1
Sig. (2-tailed) .000 .000 .000 .000
N 344 344 344 344 344
** ** ** **
customer Pearson Correlation .760 .827 .782 .846 .667** 1
Loyalty Sig. (2-tailed) .000 .000 .000 .000 .000

29 | P a
 N 344 344 344 344 344 344
**. Correlation is significant at the 0.01 level (2-tailed).

In this study, Pearson correlation was used to examine the relationship between each of the
independent variables and the dependent variable using a two tailed test of statistical
significance at the level of 99% confidence and significance < 0.01.

From the results shown in table 4.1 below, each variable correlated perfectly with itself with
coefficients value of +1.00. The correlation between all the independent variables and
dependent variable is proved to be positive and significant, which means the improvement in
any or all of the independent variables results in improvement in customer loyalty

The correlation matrix shows that there is a positive, significant and strong relationship
between trust, commitment, conflict handling, communication, competence and customer
loyalty.

The findings of Ayida (2017) suggested The Pearson correlation coefficient reveals that trust
(r=0.272), Commitment (r=0.262), Conflict handling (0.387), Communication (0.268), and
Competence (0.325) are all positively correlated with customer loyalty. But not all dependent
variables has strong relation with the independent variables. The strength of correlation is
highest for Conflict handling followed by Commitment with the organization; the correlation
is also significant at .01 level two tailed.

But this research differ with this research by The strength of correlation is highest for
Conflict handling followed by competence with the organization. and in this research the
whole dimensions has strong correlation with the independent variables‟.

4.4 Multiple linear regressions

Testing assumption of regression analysis

Linearity: the relationship between the dependent and independent variable should be linear
with respect to their parameter, this can be checked by the scatter plot of dependent variable
versus standardize predicted.

30 | P a
Figure 4.7 linearity test result

Normality: the second assumption of regression analysis is error terms must be normally
distributed with mean zero and constant variance. This can be checked by histogram or pp-
plot. To attain this assumption the histogram should be approximately normal or it must be
bell shaped distribution. And the distribution of points should be lies around the 45 degree
straight line in the pp-plot.

Figure 4.8 normality test result

Constant variance (homoscedasticity): the third assumption of multiple linear regressions is

error assumption that is error terms should have a constant variance, if this assumption is
violated there is a problem of hetroscedasticity, which is a series problem of data, should be
treated before analysis. This can be checked by drawing the scatter plot of standardize
residual versus standardize predicted value. To attain this assumption the distribution or the
scatteredness of the point on the graph should be random. As it have indicated below the
distribution of points has not any pattern which is random, so the assumption of constant
variance was attained.

31 | P a
Absence of Multi co linearity: the predictor variables in the model should not be linearly
correlate with each other; if this happens there is a problem of Multico linearity which is also
a series problem of data should be treated before analysis to get a reasonable result. This can
be checked by either by illustrating variance inflation factor (VIF); to attain this assumption
the value of VIF should be less than ten or Multicollinearity is tested in this study using the
Durbin-Watson which quantifies the severity of Multicollinearity in regression analysis.
Multicollinearity occurs when there are high inter correlations among some set of the
independent variables. Various recommendations for acceptable levels of Durbin-Watson
have been published on various studies (a value of 10 by Hair, Anderson, Tatham, & Black,
1995; Kennedy, 1992; Marquardt, 1970; Neter,Wasserman, &Kutner, 1989, a value of 5 by
Rogerson, 2001 and even 4 by Pan & Jackson, The Effect of CRM on customer loyalty 56
2008). The rule is that when tolerance value is less than 0.2 and the Durbin-Watson exceeds
10; it is a signal of Multicollinearity, which could lead to misleading and/or inaccurate
results. Therefore, in this study the tolerance level for all variable is above 0.2 and Durbin-
Watson is less than 2.0, confirming that the study is free from Multicollinearity issue. Refer
to collinearity Statistics shown below in table 4.4, the tolerance and Durbin-Watson showed
that there was no Multicollinearity between the study predictors.
Homogeneity test: this test conducted before regression analysis to assure the presence of
equal variance in between samples and groups. This test done through SPSS by conducting
Levene statistic test and its significance. The below table shows that the Levene test is not
significant which means there is equal variance across the sample.

Table 4.2 test of homogeneity

Test of Homogeneity of Variances
Levene df1 df2 Sig.
Statistic
Commitment 48.847 9 333 .80
Conflict handling 21.402 9 333 .70
communication 33.266 9 333 90
Competence 3.084 9 333 .61
Trust 14.343 9 333 .60

This regression is conducted to know how much the independent variable explains the

32 | P a
dependent variable. It is also used to understand by how much each independent variable
(trust, commitment, conflict handling, communication & Competence) explains the
dependent variable, which is customer loyalty .The regression model presents how much of
the variance in the measure of customer loyalty is explained by the underlying dimensions of
CRM, in MFI, Customer loyalty was used as the dependent variable while Customer
relationship management dimensions were used as the independent variables.
Basic Outputs of Multiple Linear Regression Model
Adjusted R Square in the model summary table below shows the degree of explanation of the
dependent variable by the model. The result reveals that about 73% of the variability in
customer loyalty explained by the set of different dimensions in the model.
Table 4.3 Model summary table
Model Summaryb
Model R R Adjusted R Std. Error of Durbin-
Square Square the Estimate Watson
1 .856a .733 .730 .34690 1.407
a. Predictors: (Constant), Competency, Trust, Communication, Conflict
handling, commitment
b. Dependent Variable: Loyalty

Table 4.4 ANOVA Table (F-test)

ANOVAb
Model Sum of Df Mean F Sig.
Squares Square
1 Regressio 5.644 5 1.129 247.721 .000a
n

Residual 1.577 344 .005

Total 7.221 351
a. Predictors: (Constant), trust, commitment, conflict handling, communication
and competence
b. Dependent Variable:-customer loyalty

Analysis of variance (F-test) part of regression analysis shows that the overall model is
significant or not. The significance level in the following table reveals that the regression
model is highly significance to fit the data. The cumulative effect of the set of factors on the
customer loyalty is highly significance, but it doesn‟t show which predictor variable make the
model significance, which can be examined by the coefficient table (t-test) in table 4.5below.

33 | P a
Table 4.5: Regression table

Co efficient

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta T Sig.

1 (Constant) .023 .113 .207 .836

Trust .099 .020 .143 5.005 .000

Commitment .130 .027 .152 4.838 .000

Communication .139 .023 .179 6.107 .000

Competence .214 .027 .241 7.886 .000

Conflict handling .425 .030 .458 14.112 .000

a. Dependent Variable: -customer loyalty

The fitted multiple linear regression equation is given by:
Yi = , where
Yi is customer loyalty and X1 is trust, X2 is commitment, X3 is conflict handling, X4 is
communication and X5 is competence.

The table 4.5 shows the overall significance/acceptability of the model from a statistical
perspective. As the significance value of F statistics shows a value of 247.721and p
value(.000), which is less than p<0.05, the model is significant. This indicates the variation
explained by the model is not due to chance.

4.7.1 Regression analysis and Hypothesis test

Table 4.6 Summary of Hypothesis
Hypothesis r-value Relationship Beta Sig. Result
H0: Trust has no .760
a significant positive .000
positive Rejected
impact on significant
Customer loyalty .143

34 | P a
H0: Commitment has no .827 Positive .153 .000 Rejected
a significant positive significant
impact on Customer
Loyalty
H0: Conflict handling has .782 Positive .458 .000 Rejected
No a significant positive
impact on Customer Significant
Loyalty
H0: Communication has .746 Positive .179 .000 Rejected
No a significant positive Significant
impact on Customer
Loyalty
H0: Competence has no .667 Positive .241 .000 Rejected
a significant positive Significant
impact on Customer
Loyalty

A) The impact of Trust on Customer loyalty

Based on the regression analysis result presented on the above table Trust had a significant
positive impact on customer locality. The study of Ndubisi (2007) suggested that the greater
the trust in the organization, the higher the level of the companies commitment, the more
reliable and timely its communications and the more satisfactorily it handles conflicts, the
more loyal its customers will tend to be. Trust is an important ingredient in firm-customer
relationships and ultimately in the development of loyalty. The coefficient of Trust explains
that if Trust increased by 1 level customer loyalty also increased by 0.143 which is significant
even 99% of confidence interval. Trusted companies and employees can build loyal satisfied
customers in turn satisfied customers much more loyal to its company.
The hypothesized result of trust explains that trust has no a significant positive impact on
customer loyalty. However the result shows that trust has a positive impact on customer
loyalty which is significant. In this regard the researcher rejects the null hypothesis (H0).
B) The impact of Commitment on Customer Loyalty
Commitment has a strong positive effect on the softer aspects of customer loyalty such as
advocacy and willingness to pay more for the service. (Fullerton, 2003). The regression result
shows that commitment had a significant positive impact on customer loyalty as explained on

35 | P a
the regression table. The coefficient of the variable shows commitment affects customer
loyalty by 0.15 unit as commitment more or less by 1 unit. The significance value is
significant at 99%. Companies and employees working on it who cannot committed for its
customers will create discomfort to its customers and further leads dissatisfaction and shifts
to other competitors. Commitment have a power to put a value on customers mind and to stay
within our companies.
The hypothesis test of the predicted result which calls H0 says that commitment has no a
significant impact on customer loyalty had now rejected by the result of the data. Therefore
the researcher accept the alternate hypothesis and commitment has a positive significant
impact on customer loyalty.
C) The impact of Conflict handling on Customer Loyalty
As the result of regression analysis proved that conflict handling had higher magnitude and
affects with higher value and powerful impact on customer loyalty as compared to other
independent variables. The coefficient of conflict handling 0.458 implies that if way of
conflict handling improved by 1 step customer loyalty is strong by 0.458 times. Ndubisi and
Wah (2005) found a significant relationship between conflict handling and customer loyalty
and also the finding of Yekuno amlak Hailu (2004), proved that to maintain good relationship
with customers, the way customers are handled such as proper acts of frontline employees
and proper customer service are significantly important for customer loyalty.
Many customers who are dissatisfied could not going to complaint and not come again and
finally switch to other. Therefore if there is easy way of complaining companies can easily
retain its customers. That is why the result of conflict handling become the highest one to
affect customer loyalty positively and significantly. In this regard the researcher rejects null
hypothesis (H0) based on the test and result of the data.
D) The impact of Communication on Customer Loyalty
The regression analysis shows that communication has a positive impact on customer loyalty.
The coefficient explains that customer loyalty shifted by 0.17 times up or down if
communication degraded by 1 times. Effective communication helps to understand customers
feeling and need. If there is no such mechanism and availability of broken system of
communication leads to customer complaint further affects satisfaction and loyalty of
customers.
The researcher rejects the null hypothesis based on the test and result of data that is
communication has a significant positive impact on customer loyalty.

36 | P a
E) The impact of Competence on Customer Loyalty
Competence has highest positive and powerful impact on customer loyalty next to conflict
handling. The coefficient is 0.241 which implies that competence is improved by 1 level
customer loyalty is strengthen by 0.241 times. The higher the competence of employees the
more service excellence will have in the operation. And further this results higher satisfaction
and more loyal customers to be increased.
The researcher rejects the null hypothesis based on the test and result of data that is
competence has a significant positive impact on customer loyalty.
The multiple regression findings of marczyk et al,2005) show that the simple regression is
used to approve or disapprove hypotheses1 up to 5 while multiple regression was used to
approve or disapprove hypothesis number 6.in both of the types statistical significance was
given due care at p-value of 0.05. the other research findings of Ayida (2017) suggested that
two independent variables conflict handling (β=0.262) & commitment (C=0.022)
significantly refer and explain the dependent variable Customer loyalty supporting H3& H5.
The rest of variables do not support H1, H2 & H4 since the significant levels resulted 0.05
with (β=0.27).

37 | P a
 CHAPTER FIVE
5. SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
5.1. Introduction
The purpose of the study was to examine the effect of customer relationship management
dimensions to customer loyalty of ACSI in chacha. In this chapter of the study, summary of
findings, conclusion drawn, and recommendations of the study are stated. And suggestions
for future researches is also included at the end of this chapter.
5.2 Summary of the major findings
This discussion is very important to provide more clarification on the above results.
Demographic factors such as gender, age, occupation, education qualification, monthly
income and length of time the customers use the ACSI‟s services was used to know the
general characteristics of the respondents and to know which demographic factors have
relation with the customer loyalty.
Based on the finding of this research all the demographic factors have relationship with
customer‟s loyalty. According to the finding of (shifera bekele; 2011) From demographic
factors only age and length of time the customers uses are correlated with customers loyalty.
The other dimensions have no relationship with customers loyalty (Appendix B under
correlation analysis).
 According to (poonlar Btawee; 1987) as cited by the researcher the organization is
effective from the five dimension or each of the variables under consideration were
perceived as good & valid among respondents.
the result of this research is also similar with the findings of (poonlar Btawee; 1987).
 Based on the results from this research, customer relationship management is
correlated with customer‟s loyalty.
 The findings show that customer relationship management activities can explain 73%
of customer‟s loyalty in, MFI, particularly in ACSI chacha branch.
 The findings of Foster &Cadogan (2000) showed that the quality of the relationship
customers have built with their organization positively influences their assessment of
their relationship with the organization. Again the result of this research is also similar
with the findings of Foster &Cadogan (2000).
 The findings of Ayida (2017) suggested that Among the five dimensions the conflict
handling has strong degree of importance on customer Loyalty followed by

38 | P a
 Commitment. But this research is quite different with by Among the five dimensions
the conflict handling has strong degree of importance on customer Loyalty followed
by Competence.
 the way customers are handled such as proper acts of frontline employees and proper
customer service are significantly important for customer loyalty. Therefore, the result
of this research on conflict handling dimension is similar with the above results in
indicating that proper conflict handling can increase customer‟s loyalty.
 Finally Five hypotheses was raised based on the five independent variable, each of
them were analyzed and all of them proved to be rejected as of the findings of the
study.
In order to know the current information of the Institution with regard to customer
relationship management and customers loyalty concepts, interview was conducted with the
ACSI manager. Some questions was asked and responded by the ACSI chacha branch
manager.
After interview has been made with the manager on customer relationship management and
customer loyalty questions, the following points are generalized.
In the ACSI there is the concept of customer relationship management to retain and
attract customers. But it is not independently established and has no officer.
The institution identifies and collects information about the needs and wants of
customers. Here the major problem is that there is no follow up of the collected data.
The manager noticed that customer relationship management activities have the
power to make customers loyal. Some of the procedures of customer relationship
management that the organization uses are suggestion box, customer handling log,
identifying customers and face-to-face discussion, collecting data and providing lastly
solution.
In the institution all employees are treat customers nicely.
The ACSI is rated as fair in customer relationship management activities. With regard
to customer‟s response for their complaints, solution is given on time. But Absence
of follow up is the weakness of the ACSI.
In order to improve the ACSIs services, the institution need to continue strongly,
hiring committed employees, and assign responsible body for customer relationship
management is important.

39 | P a
5.3 Conclusion
Based on the findings summarized in the previous section the following conclusions were
drawn.

management on customer loyalty in the MFI/micro finance institution in an/tera woreda. The
researcher concluded that CRM effect dimensions namely: Trust, communication, conflict
handling, commitment & Competence have positive significant and strong correlation with
the dependent variable customer Loyalty.

on customer loyalty in the MFI/micro finance institution in an/tera woreda. Conflict handling
appeared to be the most correlated construct with customer loyalty in the MFI/micro finance
institution in an/tera woeda with a correlation coefficient of 0.425. It is also the most
dominant factor in predicting customer loyalty with a beta coefficient of 0.458. This result
supported the findings of previous researchers (Veloutsou et al. 2004). It was also discussed
as, the ability of the product or service provider to handle conflict well will also directly
influence customer loyalty. Clow& Kurtz (2003) this implies that when the company can
manage conflicts well and try to avoid any possible conflicts customers remain loyal to their
respective branches. Thus, improving conflict handling methods brings improved customer
loyalty.
s
customer loyalty in the MFI in Ethiopia. Competence is the second most correlated construct
with a correlation coefficient of 0.214customer loyalty in the ACSI chacha branch. It is also
the second most dominant factor in predicting customer loyalty. with a beta coefficient of
0.241.The implication is that as customers are more sensitive to competent service & they
tend to be loyal. So, increasing competency in every direction increases Customer loyalty.
.e. to find out the level of effect, trust,
Commitment & Communication have on customer loyalty in the MFI of chacha. they were
analyzed and the findings shows that Trust, Communication & commitment were found to be
less compared with the rest one considered in the loyalty of MFI , there is also a significant
positive high relationship between communication and customer loyalty. in previous studies
it was discussed that Commitment as an important determinant of the strength of CRM, and a
useful construct for measuring the likelihood of customer loyalty and predicting future
purchase frequency (Morgan and Hunt, 1994). The variable Commitment has also high

40 | P a
correlation coefficient. that indicates, customer of this selected organization gives high
concern regarding their loyalty.
In conclusion, taking in to account the above result chacha ACSIMFI should note the two
dimensions of CRM, conflict handling & Competence to be antecedents that are found to
predict loyalty and emphasize them in their marketing strategy.
5.4. Recommendations
To be successful in implementation of CRM practices, the MFI/micro financial institutions
and banking organizations must define and develop a business strategy as well as a
supporting infrastructure for that strategy (Kwamena, 2013). This study investigated the
influential dimensions of CRM that makes consumers to be loyal to the institutions. the
findings of the study followed by the conclusion made by the researcher, the following
recommendation was developed to be used by MFI in chacha, currently exercising CRM. The
problem statement of the study goes around the fact that CRM is already under operation and
the ACSI lacks a follow up mechanism to make sure its effect.
 In order to enhance customer satisfaction the ACSI shall make continuous effort to
enhance the effect of CRM dimensions specially the dimensions, Competence &
Conflict handling, which have significant effect on customer satisfaction.
 As the findings of the study showed consumers‟ loyalty depends highly on Conflict
handling attributes; it is a sensitive dimension of CRM to the customer. Since it has
the highest influence on customer satisfaction, the ACSI shall be very conscious in
improving more the mechanisms used to handle conflicts. For example, Try to avoid
conflict probability by closely monitoring the work environment, narrow gaps for
potential problems, and try to reach a win-win situation at time of conflict, Having a
complain managing personnel can lead to the success of firms and to get sustainable
competitive advantages by retaining loyal customers.
 Competence is explained in different dimensions, the study raised competence in
relation to knowledge, locations convince (time, place) and employees service quality
and that experience of the customer is important to bring out the long-term loyalty.
Therefore, ACSI‟s officials responsible for the success of the adopted CRM strategy
should give attention to being competence regarding all dimensions of ACSI service.
Recruiting outstanding stuffs, arranging trainings and experience sharing stages and
creating Customer focused culture all over the institutions.

41 | P a
  Even though the three dimensions; Trust, Commitment & Communication,
unexpectedly have shown less effect on customer satisfaction still they are positively
correlate with the dependent variable. The ACSI shall not ignore the dimensions;
rather they should Acknowledge many Marketing practitioners and scholars and
dedicate some level of effort to balance their effect on customer loyalty.
 High level of customer satisfaction leads to increased in customer loyalty. Hence the
management of the ACSI should enhance the awareness of frontline employees
regarding CRM.
 ACSI shall develop customer relationship program that will help them build and
support positive customer relationships. Since the ACSI is providing services to
customers, it shall to give high value for good relationship. Relationship with
customers can be improved by explaining to employees, especially in the frontline
and knowing how much each customer is worth to the business.
 The more employees work together to keep existing customers satisfied, the lesser
customer attrition will be.
 To retain and develop loyal customers, the ACSI shall be trustworthy and show
commitment, providing individualized attention to customers and must resolve
conflicts in a manner that will eliminate unimportant loss and inconvenience to their
customers.
 In Ethiopia, the growing number of Credit and saving institution and banks led to the
increase in the competition of business industry. Therefore, the ACSI must be well
aware of the want and needs of the customers. Nowadays customers are demanding
more not only based on the service but they demand the way they are treated. Once
they are satisfied with the services that were provided by the Institutions, they will
communicate about the ACSI or services to the other customers.
 ACSI shall put more effort to attract more customers especially in dimensions related
to commitment, conflict handling, trust and empathy. In order to create and maintain
loyalty, the ACSI must recognize that many of the core product attributes are
necessary, but not sufficient for loyalty. On the other hand, it is a must to have a
strong connection with its customers in order to create and maintain customer loyalty.
By having strong relationship with customers it is possible to keep customer from
switching to other competitor.

42 | P a
  ACSI shall invest in its employees, especially on the frontline, to motivate them to
serve customers best. Frontline employees should be trained to act in a manner that
recognizes customers as a valuable asset.
 To motivate employees and get their commitment, the ACSI should offer them a
challenging work, attractive salary that recognizes the contribution of their effort
towards the overall success of the business. Besides these, actions to make them
participate in decision making activities, to provide an opportunity to learn and
advance, and reward for their contribution have a lot to play in employee‟s
motivation.
 The management of the ACSIs are recommended to understand their gap and take
action regarding the practice
 Finally the ACSI is recommended to utilize the banking technology because in the
coming year it will be bank called Tsedey and the CRM implementation activities in
collecting the necessary customer data that will help in customizing the service and
make sure of its application in every stage of service.
5.5 Directions for Further Studies
There is limitation with regard to scope of the study. Therefore, additional studies with
broader customer base are needed to have a complete picture about the subject matter in
Ethiopian context.
Since CRM is a wide concept it has many other variables related to it that might have
even more effect on it than raised on this study. Therefore Gathering the data by using
different uncover other variables that might have an impact on customer loyalty in order to be
able to dig deeper insights to the issue.
This research focused only on the perceptions of customers and did not measure the
observation from customers of the ACSI. Future researches should consider the employees
perception and the ACSI as a business perception, and measure the variable accordingly.
CRM can be adopted by any business organization and the variables that has effect on
customer loyalty in the case of MFI might be insignificant in other sections, therefore there is
a huge room for future researchers to study CRM application in other industries.
All the above mentioned problems in effect limit the realm of the study. Hence it does not
address all customers of the ACSI and doesn‟t consider other industries future researchers are
appreciated.

43 | P a
Reference
 Baumeister, H. (unknown), “Customer Relationship Management for SMEs”,
Available at http://www.crm2day.com/library/EpFZEpykZkPeADiEcE.php, [last
accessed on September 4, 2006
 Buttle, F. (2004). Customer relationship management: Concept and tools.
 Buttle, F. (2009). Customer relationship management: Concepts and technologies.
Burlington, MA: Elsevier Butterworth-HeinemannBose, S. (2002). “A systemic
perspective of a customer relationship management solution for businesses”
Unpublished D.B.A. – dissertation. Bellville: University of Stellenbosch Kracklauer,
2001:44
 Chen, I. J., &Popovich, K. (2003) . Understanding customer relationship
management (CRM): People, process, and technology. Business Process Management
Journal , 9 (5), 672-688.
 Chow, S., & Holden, R.(1997). “Toward an understanding of loyalty: The moderating
role of trust”, Journal of Managerial Issues, 9(3), 275-298
 Dick, Alan S. and KunalBasu (1994), “Customer Loyalty: Toward an Integrated
Conceptual Framework,” Journal of the Academy of Marketing Science, 22 (2), 99-
113. Henning-Tharaugh et al, (2003.Robinsons S. (2001) The Microfinance
Revolution: Sustainable Finance for the Poor. Vol. 1.World Bank: Washington D.C.
 Ledgerwood, J. eds. (2013).The New Microfinance Handbook: A Financial Market
System Perspective. Washngton, DC. World Bank.
 Ledgerwood, J. (1999).Microfinance handbook: an institutional and financial
perspective. Washngton, DC. World Bank.
 Warue,BN.,(2012), factors affecting loan delinquency in micro finance in Kenya
.International journal of management Sciences and Business Research .Vol.1 Issue 12.
 Jbem,(2012 ).Journal of Business and Economic Management Vol1 Issue 17.
 Robinson, M. (2001). The Micro Finance Revolution Sustainable Finance for the
Poor. Washington D.C., USA
 Wolday A, (2000). Networking Microfinance Activities in Ethiopia: Challenges and
Prospects. Occasional Paper No. 1 .AEMFI. Addis Ababa, Ethiopia.
 Ledgerwood, J. (1999). Microfinance handbook: an institutional and financial
perspective. Washngton, DC. World Bank.

44 | P a
  AsmamawYigzawChirkos,(2014). The role of microfinance institutions in the
development of small and medium size businesses in ethiopia: a case study in amhara
credit and saving institutions. Journal of Business Administration and Management
Sciences Research Vol. 3(6), pp.106-120. Department Of Accounting and Finance,
College Of Business and Economics, Bahir Dar University.
 Ledgerwood, J. (2000). Microfinance handbook: an institutional and financial
perspective. Washngton, DC. World Bank.
 Wiedmaier-Pfister, M., Gesesse, D., Amha, W., Mommartz, R., & Steel, E. D. (2008).
Access to finance in Ethiopia Sector assessment study,Volume 2. German Technical
Cooperation.
 WoldayAmha (2000). Review of Micro Finance Industry in Ethiopia:
RegulatoryFramework and Performance. Occasional paper No.2, Addis
Ababa,Ethiopia.
 Degefe (2004) Trends in Financial Development of Nine Microfinance Institutions
from 1999 to 2002. The Paper Presented in the Second International Workshop, Addis
Ababa University: Addis Ababa, Ethiopia.
 Robinson. M.S. (2001), “The Microfinance Revolution: Sustainable Finance for the
poor”, assessed on March 4, 2014.
 Amha W. (2008). Innovations in the delivery of financial services through the deposit
taking microfinance institutions (MFIs) in Ethiopia, Ethiopia.
 Getaneh G (2005). Regulating Microfinance in Ethiopia: Making it more Effective.
Amhara Credit and Savings Institution (ACSI).
 Creswell, J. W. (1998). Qualitative inquiry and research design: Choosing among five
traditions. Thousand Oaks, CA: Sage.
 Bezabih (2012), “Cooperative Movement in Ethiopia”, Workshop on perspectives for
Cooperatives in Eastern Africa October 2-3, 2012, Uganda.
 Emana (2009), “Cooperatives: a path to economic and social empowerment in
Ethiopia”, Coop AFRICA Working Paper No. 9.
 Oesterreichische, K. (2000), National bank Credit Approval Process and Credit Risk
Management.
 Stephen, A., Randolph, W., and Bradford, D. (1999). Corporate Finance, 5th Edition.
 Zerai B. and Rani L. (2012) „Technical efficiency and its determinants of micro
finance institutions in Ethiopia: A stochastic frontier approach, African Journal of
Accounting, Economics, Finance and Banking Research. Vol. 8.No. 8, 2012.

45 | P a
  Godquin, M. (2004). Microfinance repayment performance in Bangladesh: How to
improve the allocation of loans by MFIs. World Development, 32(11), 1909-1926.
 Sengupta, R., &Aubuchin, C.P. (2008). The microfinance revolution. An overview
Federal Reserve Bank of St. Louis Review, 90(1), 9-30.
 Conroy, D. J. (2003).The Challenges of Micro financing In Southeast Asia. Institute
of Southeast Asian Studies: Singapore

46 | P a
Appendix I
Questioner
DEBRE BIRIHAN UNIVERSITY
College of Business and Economics
Department of management
Master of Business administration (MBA program)

Dear participants:
The questionnaire is prepared by Master of Business Administration (MBA) graduate
student for the purpose of writing thesis on the effect of customer relationship
management on customers loyalty. Your honest response is very much important input to
my thesis. I want assure you that your privacy for responding to this questionnaire is
completely kept in secret.
I know that your time is valuable, and I hope that you will take the time (an estimated 15-
20 minutes) to complete the questionnaire. Please attempt to answer all the questions and
click one appropriate box that best suits your perspective for each statement. Thank you
very much for your time and assistance.

Sincerely yours,

HaymanotShiferaw

47 | P a
Part I: -General information
Choose the suitable answer and tick ( ) in the box given for each question.
1. Gender

Female Male

2. Age

Below 20 years 20-39 years

40-59 years 60 years and above
3. Education qualification

Primary Secondary Diploma

Degree Postgraduate Others

4. Occupation

Government sector farmers

Own Business Student Others

5. Monthly income
Below Birr 1000 Birr 1000-2999

Birr 3000-4999 Birr 5000 and above

6. For how many times you have used the ACSI`s services?

Below 1 year 1 ± 3 years 3- 5 years

5-7 years Above7 years

Part II Please, put your opinion by writing the appropriate answer on the given blank
spaceFrom1-5 Strongly Disagree -----(1) Disagree ----------------(2) Neutral --------------
----(3) Agree -------------------(4)Strongly Agree-------- (5)

48 | P a
 Trust 1 2 3 4 5
1 The ACSI is secured and confidential regarding my
financial information
2 The ACSI shows all the necessary concern to my
financial transactions
3 Employees of the ACSI are trustworthy
4 In your experience, the ACSI taken as reliable
entity
Commitment
5 ACSI`s promise for quality service all the time
6 ACSI` is committed in providing easy &speedy
transactions
7 My relationship with the ACSI is one that I really
care about
8 The ACSI makes adjustment to suit my needs
Conflict handling
9 The ACSI tries to avoid potential conflict
10 The ACSI tries to solve obvious conflicts before
the problems exist
11 The ACSI shows a sincere interest in solving
customers‟ problems rapidly
12 The ACSI is responsive to my complaints
Communication
13 The employees of the ACSI understand your
specific needs
14 The institution`s clearly communicates about each
Commercial Bank of Ethiopia (CBE)policy to their
customers(about customers‟ right, responsibility,
and other related issues)
15 ACSI clearly communicates to you about how and
where to complain in case of a problem
16 ACSI use information from customers to design or
improve its services
Competence

49 | P a
17 The ACSI staff appears knowledgeable confident
in communicating information
18 The ACSI staff cope successfully with unexpected
events
19 ACSI has convenient locations to all its customers
20 The ACSI employees go beyond their
responsibility to serve customers
21 ACSI has operating hours convenient to all its
customers
Customer loyalty
22 I am a loyal customer to the ACSI
23 The ACSI always come to my mind at time of need
for financial service
24 I would always recommend the ACSI to someone
who seeks my advise
25 I do not like to change to another institution
because ACSI sees my needs and I value the
institution.

Part III Semi-structured Interview Questions

1. How do you evaluate the customer relationship management activities of your
institution?
2. What are the customer relationship management strategies that your institution used to
make customers satisfied and loyal?
4. Do you think that your company have no problem with regard to customer loyalty?
5. According to your opinion, what importance customers handling has in creating good
relationship with the customer?
6. How do you see your employees of the institution in treating customers with respect,
trust and dignity?
7. To what extent the institution informs customers in advance about any change that
takes place in the ACSI?
8. How do you rate your institution`s efforts on the following points?
I. Recognizing the regular customers
II. Providing individualized attention III. Learning the customer‟s specific requirements

50 | P a
 9. Would you tell me any strength and weakness of the ACSI related to maintaining good
relationship with customers, providing service and on anything you think important to
enhance customer satisfaction and loyalty? Example:-
 ACSI`s lending interest rate
 Related with collateral and Deductions for insurance incase of lending

51 | P a
Appendix II
SPSS results
Case Processing Summary
N %
Cases Valid 344 99.4
Excluded a 2 .6
Total 344 100.0
a. List wise deletion based on all variables in the
procedure.

Reliability Statistics
Cronbach's Alpha N of Items
.772 4

Descriptive

Descriptive Statistics
N Minimum Maximum Mean Std. Deviation
Trust 344 2.25 4.75 4.0145 .43256
Commitment 344 2.00 5.00 4.1799 .54802
Conflict handling 344 2.00 5.00 4.1519 .58871
Communication 344 2.00 5.00 4.1490 .57220
Competency 344 2.00 12.00 4.1907 .70112
Loyalty 344 2.00 7.75 4.1170 .66701
Valid N (listwise) 344

REGRESSION /MISSING LISTWISE

/STATISTICS COEFF OUTS R ANOVA
/CRITERIA=PIN(.05) POUT(.10)
/NOORIGIN
/DEPENDENT Loyalty
/METHOD=ENTER Trust commitment Conflict handling Communication Competency
/SCATTERPLOT=(Loyalty ,*SDRESID)
/RESIDUALS DURBIN HISTOGRAM(ZRESID).

52 | P a
 Correlations

Correlations
Trust commitment Conflict handling Communication Competency Loyalty
Trust Pearson 1
Correlation
Sig. (2-tailed)

N 344
Commitment Pearson .853** 1
Correlation
Sig. (2-tailed) .000

N 344 344
**
Conflict handling Pearson .839 .909** 1
Correlation
Sig. (2-tailed) .000 .000

N 344 344 344

Communication Pearson .810** .948** .890** 1
Correlation
Sig. (2-tailed) .000 .000 .000

N 344 344 344 344

** ** **
Competency Pearson .688 .773 .721 .738** 1
Correlation
Sig. (2-tailed) .000 .000 .000 .000

N 344 344 344 344 344

** ** ** **
Loyalty Pearson .760 .827 .782 .846 .667** 1
Correlation
Sig. (2-tailed) .000 .000 .000 .000 .000

N 344 344 344 344 344 344

**. Correlation is significant at the 0.01 level (2-tailed).

DESCRIPTIVES VARIABLES=Trust commitment Conflict handling Communication Competency Loyalty

/STATISTICS=MEAN STDDEV MIN MAX.

53 | P a
Model Summaryb
Adjusted R Std. Error of the
Model R R Square Square Estimate Durbin-Watson
a
1 .856 .733 .730 .34690 1.407
a. Predictors: (Constant), Competency, Trust, Communication, Conflict handling, commitment
b. Dependent Variable: Loyalty

ANOVAa
Model Sum of Squares Df Mean Square F Sig.
1 Regression 5.644 5 1.129 247.721 .000b

Residual 1.577 344 .005

Total 7.221 351

a. Dependent Variable: Loyalty

b. Predictors: (Constant), Competency, Trust, Communication, Conflict handling, commitment

Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta T Sig.
1 (Constant) .023 .113 .207 .836

Trust .099 .020 .143 5.005 .000

commitment .130 .027 .152 4.838 .000

Conflict handling .139 .023 .179 6.107 .000

Communication .214 .027 .241 7.886 .000

Competency .425 .030 .458 14.112 .000

a. Dependent Variable: Loyalty

54 | P a
55 | P a
56 | P a