The Effect of Customer Relationship Management On Customer Satisfaction: Empirical Evidence From Star Rated Hotels in Amhara Region, Ethiopia
The Effect of Customer Relationship Management On Customer Satisfaction: Empirical Evidence From Star Rated Hotels in Amhara Region, Ethiopia
Volume 11, Issue 5, May 2020, pp. 550-567, Article ID: IJM_11_05_050
Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=11&IType=5
Journal Impact Factor (2020): 10.1471 (Calculated by GISI) www.jifactor.com
ISSN Print: 0976-6502 and ISSN Online: 0976-6510
DOI: 10.34218/IJM.11.5.2020.050
ABSTRACT
As far as customers are the means of the existence of business organizations,
customer relationship management is the exclusive weapon to win customers
confidence and keep sustainable competitive advantage. CRM implementation in the
hotel industry is an ongoing phenomenon as long as there is tough competition in the
industry. The main objective of this research was to examine the influence of CRM on
customer satisfaction. The research was focused on three and above three star rated
hotels in Amhara Region, Ethiopia. The basic drive force of the researcher in this
particular area was that the region has tremendous tourism destination in which
hospitality business accompaniments required. Therefore, CRM issue and customer
satisfaction in the hotel industry was an agenda for the researcher. Self-administered
questionnaire in the form of 5 point Likert scale was the primary data collection
instrument. 260 Hotel guests who stayed in the hotel, at least one night and more,
during data collection had been selected at check-in time via stratified random
sampling. Pearson correlation coefficient, ANOVA and multiple regression model
were the inferential part of data analysis. SPSS version 23 was applied for data entry
and presentation. All measures of CRM (people, technology, process and strategy)
had positive relationship to customer satisfaction. People and strategy measures had
positive and statistically significant contribution to customer satisfaction whereas
technology and process measures had negative but statistically insignificant
contribution. People element in these hotels was the best predictor of customer
satisfaction.
Key words: CRM, Hotel industry, Star rated hotels; Hospitality, Customer
satisfaction
Cite this Article: Simachew Zeleke and Dr. A. Prabhu Kumar, The Effect of
Customer Relationship Management on Customer Satisfaction: Empirical Evidence
from Star Rated Hotels in Amhara Region, Ethiopia. International Journal of
Management, 11 (5), 2020, pp. 550-567.
http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=5
1. INTRODUCTION
Around the world the service sector of the economy is growing through a period of just about
revolutionary change during which established ways of doing business still be shunted aside.
This sector has been contributing tons for employment opportunities, eradicating countries
from poverty, and increasing countries’ GDP. Unfortunately, customers are not always proud
of the standard and value of the services they receive. People complain about late deliveries,
rude or incompetent personnel, inconvenient service hours, poor performance, needlessly
complicated procedures and a number of other problems (Christopher H. Lovelock, Jochen
Wirtz, 2011).
Customer relationship management (CRM) is one among the organizations effective
strategic tool for his or her success like strategic planning (Darrel, R. 2017). In today’s
competitive business world, CRM is one among the key success factors and methods most
companies deployed to realize competitive advantage (Rajesh & Manivannan, 2013; Eid El-
Gohary, 2014 and Vallabh et al., 2015).
CRM is an abbreviation for Customer Relationship Management, not Customer
Relationship Marketing which needs organizational and business level approaches – which are
customer centric – to doing business instead of an easy marketing strategy. The last several
years saw the increase of customer relationship management as a crucial business approach.
The objectives of CRM is that the paradigm shift from mass marketing to individual (one-to-
one) marketing to make long lasting relationship with customers through the utilization of
information technology (Paul Gray and Jongbok Byun, 2001).
Customer relationship management (CRM) is one among those magnificent concepts that
swept the business world with the promise of forever changing the way businesses are done
across the world. It is increasingly found at the upper level of organizations agenda.
Companies large and small across a spread of sectors are embracing CRM as a serious
element of corporate strategy for two important reasons: new technologies now enable
companies to focus on chosen market segments, micro-segments or individual customers
more precisely and new marketing thinking has recognized the restrictions of traditional
marketing and therefore the potential of more customer-focused, one to one marketing, mass
customization and process-based strategies. It is a business approach that seeks to make,
develop and enhance future relationships with carefully targeted customers so as to enhance
customer value and company profitability and thereby maximize market share and
shareholder value (Adrian Payne, 2005).
Customer relationship management (CRM) can be the exclusive and powerful weapon to
ensure customer satisfaction and loyalty. It is also a nonnegotiable business strategy in
today’s business situation for customers connecting electronically or face to face and for both
internal and external customers from across the world or town (Anderson and Kerr, 2002).
government, with the assistance of United Nation World Tourism Organization (UNWTO),
started rating hotels within the country. Six experts from UNWTO and 200 experts from
Ethiopia jointly establish criteria and actual assessment for the rating. The association of hotel
owners also had active participation during the standards which has 12 parameters.
Parameters within the criteria template are: exterior view, bedroom, bathroom, public area,
bar and dining facilities, kitchen, housekeeping & maintenance, general services, additional
facilities like swimming bath, gym, and spa, sustainability (research and development), safety
& security, staff facility and training including staff recreation area (Addis Fortune, Published
on August 21, 2015). Though participation in the grading process is mandatory, the graded
hotels still have not undergone annual audits to make sure that they are maintaining with the
standard they were awarded.
Therefore, the researcher addressed the above research gap through the following basic
research questions:
• How is the relationship between CRM dimensions and customer satisfaction in the
study area?
• How well do the four measures of CRM (people, technology, process and strategy)
predict customer satisfaction in three and above three star hotels?
• Which is the best predictor of customer satisfaction in three and above three star
hotels: people, technology, process or strategy?
3. RESEARCH OBJECTIVES
• To analyze the relationship between CRM and customer satisfaction.
• To examine the effect of CRM on customer satisfaction in the study area.
• To determine the relative importance of CRM dimensions over customer satisfaction
in three and above three star Hotels.
4. LITERATURE REVIEW
4.1. CRM Definition
Every business unit emphasizes on maintaining a long term relationship with customers to
nurture its stability in today’s turbulent and competitive market arena. Customer’s
expectations are not any longer solely restricted to induce best product and services, they
also need a face-to-face business during which they need to receive exactly what they
demand and in a quick time.
Different people and company viewed CRM from different perspectives. Information
technology companies viewed it as a software or IT which supports the business activities
whereas others viewed from marketing and management perspective as a business strategy
which consider customer centric approach to acquire, satisfy and retain profitable customers.
Francis Buttle (2009), identified four types of CRM to explain and elaborate the definitions of
CRM. These are: strategic CRM, operational CRM, analytical and collaborative CRM.
Strategic CRM: It is focused upon the event of customer centric business culture to win
and keep customers by creating and delivering superior value than competitors. It is as an
enterprise wide strategy during which the most focus is on the customer. It is also assumed
that, within an enterprise, it is a core managerial task to champion and implement this focus as
a CRM strategy. The systematic analysis and use of customer information as a platform for
marketing and management could be included in the strategy.
Operational CRM (Front office): It automates and improving customer facing and
customer supporting business process (like marketing, selling and service) through CRM
software.
Analytical CRM (Back office): It is concerned with capturing, storing, extracting,
integrating, processing, interpreting, distributing, using and reporting customer related data to
enhance both customer and company value. Analytical CRM builds on the inspiration of
customer-related information. Customer-related data could also be found in enterprise-wide
repositories: sales data (purchase history), financial data (payment history, credit score),
marketing data (campaign response, loyalty scheme data) and service data.
The data are often collected from different sources of information like customers, internal
company and other stakeholders. Therefore, organizations are expected to use data warehouse
to integrate customer data for analyzing their behavior. But, inappropriate integration of
customer data will break the connection between customers and companies.
Collaborative CRM: This type of CRM can enable to integrate the strategic and tactical
business approaches of separate business entities for better customer identification,
development and satisfaction. CRM technology plays a fabulous role for the integration of
people, process and strategies to make sure that business objectives will achieve.
create positive; those ways are being properly used. Companies got to prepare their force for
CRM for cordial reception implementation.
The hospitality industry generally and therefore the hotel industry especially are highly
interactive and interesting where customer-centricity literally forms the core of business
relationships. It is compulsory that at any given time, an inclusive view of customers is
maintained. Hotel industries worldwide are therefore constantly on the look-out the formost
rewarding ways not only to satisfy but exceed customer expectations with every consequent
experience. Cost effective, tenable, and in fact customer centric plans and methods are an
absolute must to remain afloat during this industry’s competitive environment.
Working in the hospitality stream could be quite challenging. Among the different service
industries, the hospitality industry is exclusive in its nature which tends to be service-oriented
and features a strong emphasis on human exchange within the service delivery processes.
Hospitality industry has the following characteristics: product-service mix, two-way
communication, relationship building, diversity in nature and labor intensive (“The
Government of the Hong Kong Special Administrative Region, 2013”).
Creating and maintaining long lasting relationship with customers and deliver absolute
customer satisfaction seems the critical agenda of contemporary business organizations. The
nature of service organizations generally and the sensitivity of hotel organizations
particularly, made them vulnerable to intense competition.
5. CONCEPTUAL FRAMEWORK
People
Technology
Customer
Satisfaction
Process
Strategy
6. RESEARCH METHODS
6.1. Research Approach
The nature of this research, which aims at identifying critical aspects and CRM practices, will
help the researcher to select the research approach. In order to acquire a good insight about
the research problem and questions, the researcher did a library research about CRM and to
come up with a comprehensive theoretical framework.
Any research can follow deductive or inductive approach. Deductive research approach
helps to test hypothesis based on the existing theories whereas inductive research approach
helps to construct theories through collection and analysis of data. As far as this study is
concerned, the deductive approach is chosen.
All hotels are taken through census method whereas regarding guests Krejcie and Morgan,
1970 sample size determination used and the detail is as follows:
𝑥 2 𝑁𝑝(1 − 𝑝)
𝑆= 2
𝑑 (𝑁 − 1) + 𝑥 2 𝑝(1 − 𝑝)
S=required sample size
N=the given population size
P=prevalence
d= degree of accuracy
𝑥 2 =3.841 for the 95% confidence level
Therefore, the sample size is determined as follows at 95% confidence level and 5%
margin error.
(3.841)(598)(0.5)(0.5)
𝑆=
(0.05)2 (598 −1) + (3.841)(0.5)(0.5)
S=574.23/2.45
S=234.38, approximately=234
Sample size estimation determines the number of complete cases which are needed for
analysis. Therefore, 234 samples are required. But some subjects who enroll in the study may
drop out, others may be protocol failures and still others may have incomplete data, especially
on the key outcome variables. To deal with this, the researcher decided on an “attrition rate”
and inflate the sample size by a certain factor. During data collection, the researcher expected
to lose about 18% of the sample, then the sample size should be increased by a factor of 1 / (1
- 0.18) or 1.22. That is, enroll 22% more subjects that the sample size calculation called for.
Therefore, 234 x 1.22=285.48 which is approximately 286. Twenty-two sample guests in each
hotel had been selected during check-in at reception desk. Therefore, from thirteen hotels,
random sample of 286 guests had been selected at check-in, using simple random sampling.
7. RESULTS
The researcher has distributed to 286 total guests and finally collected complete data from 260
which was a response rate of 90.9%.
Model Summaryb
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .641a .411 .402 4.44890
a. Predictors: (Constant), Total strategy, Total technology, Total people, Total process
Table 5 ANOVAa
Model Sum of Squares df Mean Square F Sig.
Regression 3518.808 4 879.702 44.446 .000b
1 Residual 5047.130 255 19.793
Total 8565.938 259
a. Dependent Variable: Total customer satisfaction
b. Predictors: (Constant), Total strategy, Total technology, Total people , Total process
ANOVA table shows whether the result is statistically significant. The model in this result reaches
statistical significance (Sig. = .000; this really means p<.0005).
Table 6 Coefficientsa
95.0%
Unstandardized Standardized Collinearity
Confidence Correlations
Coefficients Coefficients Statistics
Model t Sig. Interval for B
Std. Lower Upper Zero-
B Beta Partial Part Tolerance VIF
Error Bound Bound order
(Constant) 11.245 2.818 3.990 .000 5.695 16.795
Total people .388 .060 .391 6.458 .000 .269 .506 .570 .375 .310 .631 1.584
Total
-.034 .050 -.044 -.670 .503 -.132 .065 .314 -.042 -.032 .533 1.875
technology
1
Total
-.037 .086 -.031 -.432 .666 -.205 .131 .379 -.027 -.021 .453 2.209
process
Total
.461 .080 .382 5.753 .000 .303 .619 .559 .339 .277 .523 1.912
strategy
a. Dependent Variable: Total customer satisfaction
Cus.sat= 11.245+0.388Ppl+ (-0.034Tech) + (-0.037Pro) + 0.461Stra +2.818
Evaluating each of the independent variables
The next thing to know is which of the variables included in the model contributed to the
prediction of the dependent variable. It can be find this information in the output box labelled
Coefficients. To compare the different variables, it is important that to look at the
standardized coefficients, not the unstandardized ones. Unstandardized coefficient values
listed as B will be applicable in constructing a regression equation.
In this case, the researcher is interested in comparing the contribution of each independent
variable; therefore, it is better to use the beta values. In this case the largest beta coefficient is
.391 followed by .382, which are total people and total strategy. This means that employees in
the hotel makes the strongest unique contribution to explaining the customer satisfaction,
when the variance explained by all other variables in the model is controlled for. Technology
and business process were negative and lower (–.044 and -.031) respectively, indicating that
they made less of unique contribution to customer satisfaction.
It is better to look at the sig. column to know whether this variable is making a statistically
significant unique contribution to the equation. This is very dependent on which variables are
included in the equation and how much overlap there is among the independent variables. If
the Sig. value is less than .05, the variable is making a significant unique contribution to the
prediction of the dependent variable. If greater than .05, it can be concluded that the variable
is not making a significant unique contribution to the prediction of the dependent variable.
This may be due to overlap with other independent variables in the model. In this case, both
people and strategy made a unique, and statistically significant contribution to the prediction
of total customer satisfaction. On the other hand, the remaining two variables (technology and
process) made not statistically significant contribution to the prediction of customer
satisfaction.
Therefore, the null hypotheses 1 and 3 are accepted whereas 2 and 4 are rejected.
9. PRACTICAL IMPLICATION
In Ethiopia CRM is a recent phenomenon exercising in different service industries like bank
and insurance, telecom and airlines. Hospitality industries are also implementing it for their
frequent interaction with guests. Employees hospitality, knowledge and skill, responsiveness,
and overall treatment of guests had a positive and significant contribution to customer
satisfaction. Hotel managers are better to keep their performance and give more training
for hospitality issues. Regarding the strategies of hotels, it had a positive and significant
contribution to customer satisfaction. This shows that hotels are aware about the value of
CRM as a corporate strategy like part of their strategic planning. Managers are expected
to recraft and improve their hotel strategies according to the prevailing s ituation and
existing demand. Ethiopia is weak in technology and digital economy. Most of the
business activities are going on through traditional way of marketing rather than online
shopping and e-commerce. Moreover, excess procedure from service order to service
delivery is also another issue. Ease and friendly implemented technology cuts
unnecessary processes and facilitates service delivery. Therefore, applicati on of ease and
user friendly CRM technology, integration of CRM to any other customer touch p oints
such as social media, hotel websites, and third party agents will be the assignments of
hotel managers. In addition to these hotel managers better to work for making employees
capable enough how to use those technologies.
REFERENCES
[1] Addis Fortune, Published on (2015). Retrieved from https://addisfortune.net/articles/how-
hotels-earn-their-stars/ on 9/17/2019.
[2] Adrian Payne, (2005). Handbook of CRM. Achieving Excellence in Customer Management.
Butterworth-Heinemann publications vol 1
[3] Anderson and Kerr, (2002). Customer Relationship Management: The McGraw-Hill
Companies, Inc. United States of America DOI: 10.1036/0071394125
[4] Arnil Lacej, Ermira H. Kalaj, (2015). The Effect of Consumer Relationship Management on
Satisfaction and Loyalty: A Focus on Albanian Tour Operator Business. Mediterranean Journal
of Social Sciences Vol 6, No 2 DOI: 10.5901/mjss.2015.v6n2s1p635
[5] B. Angamuthu, (2015). Impact of customer relationship management on customer satisfaction
and its role towards customer loyalty and retention practices in the hotel sector. BVIMSR’s
Journal of Management Research, Vol. 7 Issue - 1
[6] Baksi, A.K. (2015). An empirical study to assess moderating impact of customer-relationship
dimensions on service quality perception-tourist satisfaction-destination loyalty link, Singapore
Management Journal, East Asia institute of Management, Singapore [ISSN: 2251-239X], Vol.
3, No.2, pp. 7-42.
[7] Basma Elsaid Eldesouki and Yang Wen (2018). The Impact of Crm Dimensions on the
Performance of Hotel Industry in Egypt: A Case of Cairo Hotels. International Journal of
Business and Management Review Vol.6, No.3, pp.17-44
[8] Christopher H. Lovelock, Jochen Wirtz (2011). Services Marketing: People, Technology
Strategy 7th ed. Pearson Education, Inc., publishing as Prentice Hall.
[9] D. Goodhue, B. Wixom and H. Watson, (2002). “Realizing Business Benefits through CRM:
Hitting the Right Target in the Right Way,” MIS Quarterly Executive, Vol. 1, No. 2, pp. 79-94.
[10] Daniel Catalán-Matamoros (2012). An Overview to Customer Relationship Management,
Advances in Customer Relationship Management, Dr. Daniel Catalan-Matamoros (Ed.), ISBN:
978-953-51-0516-9, In Tech, Available from: https://www.intechopen.com/books/advances-in-
customer-relationship-management/an-overview-to-customer-relationship-management.
[11] Darrell, R. (2017). Top 10 Management Tools.
https://www.bain.com/contentassets/caa40128a49c4f34800a76eae15828e3/bain_brief-
management_tools_and_trends.pdf.
[12] David Bowie and Francis Buttle, (2004). Hospitality Marketing
[13] Dyche, J. (2002). The CRM Handbook: A Business Guide to Customer Relationship
Management. Addison-Wesley Professional.
[14] Eid, Riyad & El-Gohary, Hatem (2014). Muslim Tourist Perceived Value in the Hospitality
and Tourism Industry. Journal of Travel Research. Fothcoming. 10.1177/0047287514532367.
[15] Fox, T & Stead, S. (2001). Customer relationship management: delivering the benefits. White
Paper, CRM (UK) and SECOR Consulting. New Malden
[16] Francis Buttle, (2009). Customer Relationship Management Concepts and Technologies
Second Edition Published by Elsevier Ltd.
[17] Goldenberg, Jacob & Han, Sangman & Lehmann, Donald & Hong, Jae. (2009). The Role of
Hubs in the Adoption Process. Journal of Marketing - J Marketing. 73. 1-13.
10.1509/jmkg.73.2.1.
[18] Grönroos, C. (1997). "Keynote paper from marketing mix to relationship marketing ‐ towards a
paradigm shift in marketing", Management Decision, Vol. 35 No. 4, pp. 322-339.
https://doi.org/10.1108/00251749710169729.
[19] Injazz J. Chen, Karen Popovich, (2003). "Understanding customer relationship
management (CRM): People, process and technology", Business Process Management
Journal, Vol. 9 Issue: 5, pp.672-688 https://doi.org/10.1108/14637150310496758
[20] Iriana, Reiny & Buttle, Francis. (2006). Strategic, Operational, and Analytical Customer
Relationship Management. Journal of Relationship Marketing. 5. 23-42.
https://www.tandfonline.com/doi/abs/10.1300/J366v05n04_03.
[21] K. Tawinunt, T. Phimonsathien and Wanno Fongsuwan, (2015). A Structural Equation Model
of Customer Relationship Management Factors Affecting Customer Retention of Long-Stay
Travelers in the Thai Tourism Industry. Research Journal of Business Management, 9: 1-24.
http://scialert.net/abstract/?doi=rjbm.2015.1.24
[22] Ken Jacobsen (2015). 4 Advantages of CRM for the Hospitality Industry. The TM Group
[23] Kim, Kyung Hoon & Jeon, Byung Joo & Jung, Hong Seob & Lu, Wei & Jones, Joseph, (2012)
"Effective employment brand equity through sustainable competitive advantage, marketing
strategy, and corporate image," Journal of Business Research, Elsevier, vol. 65(11), pages
1612-1617. DOI: 10.1016/j.jbusres.2011.02.047
[24] Kotler, P., & Keller, K. L. (2012). “Marketing Management”, Global Edition 14e,. London:
Pearson Education Limited 2012. Malhotra, Naresh K. & Birks, David F.
[25] Nguyen, B. and Mutum, D. (2012). "A review of customer relationship management:
successes, advances, pitfalls and futures", Business Process Management Journal, Vol. 18 No.
3, pp. 400-419. https://doi.org/10.1108/14637151211232614
[26] Nuha Hassan, (2017). The effect of CRM dimensions on customer satisfaction in
telecommunication sectors in Sudan: International journal of novel research in Marketing
management and economics Vol. 4, Issue 2, pp (29-40), www.noveltyjournals.com
[27] Orthodox Tefera and Krishna Govender, (2014). Hotel Grading, Service Quality, Satisfaction
and Loyalty – Proposing a Theoretical Model and Relationship. African Journal of Hospitality,
Tourism and Leisure Vol. 4 (Special edition) - (2015) ISSN: 2223- 814X Copyright: © 2014
AJHTL - Open Access- Online @ http//: www.ajhtl.com.
[28] Park, C. and Kim, Y. (2003). "Identifying key factors affecting consumer purchase behavior in
an online shopping context", International Journal of Retail & Distribution Management, Vol.
31 No. 1, pp. 16-29. https://doi.org/10.1108/09590550310457818.
[29] Parvatiyar A and Sheth JN (2001). Conceptual Framework of Customer Relationship in
Customer Relationship Management – Emerging Concepts, Tools and Applications, Tata
McGraw Hill, New Delhi, pp. 3-25.
[30] Patrick Amofah and Amer Ijaz, (2005). “Objectives, strategies and expected benefits of
Customer Relationship Management initiatives in service companies, Master’s thesis Lulea
University of Technology PP 7-10.
[31] Paul Gray, Jongbok Byun (2001). Customer Relationship Management, center for research on
information technology and organizations, University of California, Irvine, CA.
[32] Rajesh, V., and Manivannan, L., (2013). “A Study on Customer Relationship Management in
Bank of Baroda, with Special Reference to Erode City of Tamilnadu, India”, Wide Spectrum
Research Journal, 1(11), 45-50.
[33] Roya Rahimi, (2017). “Customer Relationship management (people, process and technology)
and organizational culture in hotels: Which traits matter?” International Journal of
Contemporary Hospitality Management, Vol. 29 Issue: 5, Pp 1380-1402, doi: 10.1108/1] CHM-
10-2015-0617.
[34] Vallabh, D., Radder, L. & Venter, D. (2015). “Factors preceding CRM readiness in small- and
medium-sized tourism enterprises”, Acta Commercii, Vol.15, No. 1, 263.
http://dx.doi.org/10.4102/ac.v15i1.263.
[35] Tamanna Kachwala and L. K. Sharma, Comparative Study of Supervised Learning In
Customer Relationship Management. International Journal of Computer Engineering &
Technology, 8(6), 2017, pp. 77–82
[36] Manoj Aiyer, Jayant Kumar Panigrahi and Biswajit Das, (2018), Successful Customer
Relationship Management in Business Process Integration and Development of Applications
for Project Management, International Journal of Mechanical Engineering and Technology,
9(2), pp. 637–643.
[37] Dr. Giriraj Kiradoo, (2010), The Effect of Customer Relationship Management (CRM) Factors
on Improving Satisfaction and Loyalty of Customers, International Journal of Advanced
Research in Management, 1(1), pp. 80–86.
[38] Dr. V.Antony Joe Raja, (2013), New Strategy in Today Banking Sector: Bank Customer
Relationship Management (CRM) & Marketing Mix in World, International Journal of
Marketing and Human Resource Management, 4(3),. pp. 19–29.