Customer relationship management: An approach to competitive advantage in the banking sector by exploring the mediational role of loyalty

Abstract

Purpose

The purpose of this paper is to develop a comprehensive integrated model which helps in explaining the impact of Customer Relationship Management (CRM) dimensions (complaint resolution, customer knowledge, customer empowerment and customer orientation) on customer loyalty and competitive advantage of a bank. The study also explores the mediating role of customer loyalty in the relationship between CRM and competitive advantage in retail banking.

Design/methodology/approach

The research is based on a theoretical model which consists of four CRM dimensions and two exogenous variables. These have been used for establishing the hypotheses to analyze relationships between the variables constituting the CRM model. The data have been collected from 278 customers of a private bank. The data were analyzed using structural equation modeling (SEM). The scale was developed and purified through factor analysis (exploratory and confirmatory factor analysis). SEM was then used to examine the causal relationships and “model fit” of the proposed model.

Findings

The results provide evidence that the four CRM dimensions have a positive effect on customer loyalty and competitive advantage of the bank. Among the CRM dimensions, customer knowledge is most influential of all the dimensions. Furthermore, customer loyalty acts as the mediator in the CRM model between CRM and competitive advantage.

Research limitations/implications

Since, the study involved a single bank and therefore the results should be generalized cautiously. Only four CRM variables were included in the study; additional variables can be introduced in further studies involving different contexts.

Practical implications

The study highlights and supports the need for mangers to devote additional resources toward developing a better CRM system. Therefore, mangers need to think beyond the technological aspects and should focus on these four dimensions, especially customer knowledge, to enhance the loyalty and competitiveness.

Originality/value

The paper investigated hitherto unexplored relationships between customer-centric CRM dimensions instrumental in providing competitive advantage to a bank through mediational analysis. Thus, it contributes to the information on the implementation of CRM practices valuable for banking sector.

Citation

Bhat, S.A. and Darzi, M.A. (2016), "Customer relationship management: An approach to competitive advantage in the banking sector by exploring the mediational role of loyalty", International Journal of Bank Marketing, Vol. 34 No. 3, pp. 388-410. https://doi.org/10.1108/IJBM-11-2014-0160