DEPARTMENT OF MARKETING MANAGEMENT

A PROPOSAL PAPER SUBMITTED FOR MARKETING MANAGEMENT DEPARTMENT

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR BACHELOR OF ART (BA)
DEGREE IN MARKETING MANAGEMENT.

THE ASSESSMENT OF CUSTOMER RETENTION PRACTICE IN THE CASE OF

COMMERCIAL BANK OF ETHIOPIA 6KILO BRACH (ADDIS ABABA)

BREPARED BY:-

NAMES ID
Hirut Belayneh DADP/0104/14
Husniya Ahmed DADP/0065/14
Kalkidan Gizaw DADP/0367/14
Minale Adugna DADP/0028/15
Rahmet Ibrahim DADP/0066/14

ADVISOR NAME: - Mr. TESFATE Y. (MA)

JUNE 28 /2025 G.C

ADDIS ABBABA ETHIOPIA

 CHAPTER ONE ........................................................................................................................................1
1. INTRODUCTION.......................................................................................................................................1
1.1 BACKGROUND OF THE STUDY.........................................................................................................1
1.2 THE IMPORTANCE OF CUSTOMER RETENTION IN BANKING...................................................1
1.2.2 THE ROLE OF CUSTOMER RETENTION PRACTICES .................................................................2
1.3 STATEMENT OF THE PROBLEM.......................................................................................................3
1.4. BASIC RESEARCH QUESTIONS........................................................................................................3
1.5. OBJECTIVES ......................................................................................................................................4
1.5.1 GENERAL OBJECTIVE.................................................................................................................4
1.5.2 SPECIFIC OBJECTIVES ................................................................................................................4
1.6 SIGNIFICANCE OF THE STUDY .........................................................................................................4
1.7 DEFINITION OF TERMS .....................................................................................................................5
1.8 SCOPE OF THE STUDY.......................................................................................................................5
1.9 LIMITATION OF THE STUDY.............................................................................................................6
1.10 ORGANIZATION OF THE STUDY ....................................................................................................6
CHAPTER TWO ...........................................................................................................................................7
2. LITERATURE REVIEWS ..............................................................................................................7
2.2. THEORETICAL REVIEWS ...........................................................................................................8
1.7 2.3 CONCEPTUAL REVIEWS ..................................................................................................... 11
CHAPTER THREE...................................................................................................................................... 16
3.1 RESEARCH METROLOGY ......................................................................................................... 16
3.2 RESEARCH DESIGN................................................................................................................... 16
3.3. DATA TYPES .............................................................................................................................. 16
3.4 DATA COLLECTION METHOD ................................................................................................. 16
3.5. SAMPLE SIZE AND SAMPLING TECHNIQUES........................................................................ 17
3.5.2 SAMPLING TECHNIQUES.......................................................................................................... 17
3.6 DATA ANALYSIS METHOD ............................................................................................................... 17
ACTIVITES OF THE RESEARCH A N D B R E A K I N G O F BUDGET ................................................. 18
BIBLIOGRAPHY......................................................................................................................................... 20
APPENDIX.................................................................................................................................................. 21
CHAPTER ONE
1. INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In the contemporary banking sector, customer retention has become a pivotal focus for financial
institutions striving to maintain competitive advantage and ensure long-term sustainability. As
the landscape of banking evolves, driven by technological advancements and changing consumer
behaviors, the ability to retain customers has emerged as a critical determinant of success. This
chapter aims to provide a comprehensive background of the study, highlighting the importance
of customer retention practices specifically within the context of the Commercial Bank of
Ethiopia (CBE) 6 kilo branch in Addis Ababa.
1.2 THE IMPORTANCE OF CUSTOMER RETENTION IN BANKING
Customer retention is defined as the ability of a bank to keep its existing customers over a period
of time. In the banking industry, retaining customers is not only about maintaining a stable
revenue base but also about building long-term relationships that foster loyalty and trust.
Research has shown that acquiring new customers can be five to twenty-five times more
expensive than retaining existing ones. Therefore, banks that prioritize customer retention can
significantly enhance their profitability and market position.
The banking sector in Ethiopia has witnessed rapid growth and transformation over the past
decade. With an increasing number of commercial banks entering the market, competition has
intensified, making customer retention strategies more crucial than ever. The Commercial Bank
of Ethiopia, being one of the largest and oldest banks in the country, serves millions of customers
across various segments. As such, understanding and improving customer retention practices is
vital for CBE to navigate this competitive landscape effectively.

1.2.1 FACTORS INFLUENCING CUSTOMER RETENTION

Several factors influence customer retention in banking, including service quality, customer
satisfaction, relationship management, and technological integration.
Service Quality: High-quality service delivery is fundamental to retaining customers. Banks
must ensure that their services are not only efficient but also personalized to meet individual

1
customer needs. This includes timely responses to inquiries, accurate transaction processing, and
proactive problem resolution.
Customer Satisfaction: Satisfied customers are more likely to remain loyal to a bank.
Understanding customer expectations and consistently meeting or exceeding them can lead to
higher retention rates. Regular feedback mechanisms, such as surveys and focus groups, can help
banks gauge customer satisfaction levels. Woldu, T., & Belay, D. (2020).
Relationship Management: Building strong relationships with customers through effective
communication and engagement strategies can enhance loyalty. Relationship marketing focuses
on creating lasting connections with customers by understanding their preferences and providing
tailored offerings.
Technological Integration: The rise of digital banking has transformed how customers interact
with financial institutions. Banks that leverage technology to enhance customer experience
through mobile banking apps, online services, and personalized marketing are better positioned
to retain their clientele. (Woldu, T., & Belay, D. (2020). The roles of information technology in
improving the customer satisfaction)

1.2.2 THE ROLE OF CUSTOMER RETENTION PRACTICES

Customer retention practices encompass a range of strategies and initiatives designed to enhance
customer loyalty and minimize churn rates. These practices may include loyalty programs,
personalized communication, targeted marketing campaigns, and continuous service
improvement efforts.

For CBE, implementing effective customer retention practices is essential not only for sustaining
its existing customer base but also for attracting new clients through positive word-of-mouth
referrals. By fostering a culture that prioritizes customer-centricity, CBE can create an
environment where customers feel valued and appreciated.

“Customer retention is increasingly being seen as an important managerial issue, especially in

the context of saturated market or lower growth of the number of new customers. It has also been
acknowledged as a key objective of relationship marketing, primarily because of its potential in
delivering superior relationship economics, i.e. it costs less to retain than to acquire new
customers. ( Francis Arthur Buttle, article 2002, Customer retention management).”

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1.3 STATEMENT OF THE PROBLEM
Despite the recognized importance of customer retention, many commercial banks in Ethiopia
including CBE struggle with effectively implementing strategies that yield sustainable results.
High customer turnover rates can lead to significant financial losses and hinder long-term growth
prospects for these institutions.

CBE's position as a leading bank does not exempt it from facing challenges related to customer
retention. Factors such as increasing competition from both established banks and new entrants
in the fin tech space have heightened pressure on CBE to enhance its value proposition to
customers. Additionally, changing consumer preferences driven by technological advancements
necessitate that CBE continuously adapt its services to meet evolving expectations.

Preliminary observations suggest that while CBE has made strides in improving service delivery
and expanding its product offerings, there may be gaps in understanding customer needs and
preferences fully. Furthermore, there is limited empirical research specifically focused on
assessing the effectiveness of CBE's customer retention practices.

In our study we will seek to address these gaps by investigating the current state of
customer retention practices at the Commercial Bank of Ethiopia, identifying key
challenges faced by the bank, and recommending actionable strategies for improvement. By
doing so, this research aims to contribute to enhancing customer loyalty and ensuring long-
term success for CBE in an increasingly competitive banking environment.
1.4. BASIC RESEARCH QUESTIONS
In our study we will seek to answer the following questions:

1. How effective are these strategies in retaining customers?

2. What improvements can be made to enhance customer retention?
3. How does service quality affect customer retention at CBE?
4. What is the role of relationship marketing in enhancing customer loyalty at CBE?
5. How do technological innovations influence customer satisfaction and retention at CBE?

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1.5. OBJECTIVES
1.5.1 GENERAL OBJECTIVE
To assess the effectiveness of customer retention strategies employed by the Commercial Bank
of Ethiopia
1.5.2 SPECIFIC OBJECTIVES
To evaluate the current customer retention strategies employed by Comerica Bank of Ethiopia.
• To assess the effectiveness of these strategies in enhancing customer loyalty.
• To identify areas of improvement in the bank's customer retention practices.
• To examine the role of relationship marketing in fostering customer loyalty.
• To evaluate the impact of service quality on customer retention.
• To examine the role of relationship marketing in fostering customer loyalty.

1.6 SIGNIFICANCE OF THE STUDY

This study aims to assess the current customer retention practices employed by the Commercial
Bank of Ethiopia and identify areas for improvement. By examining the factors influencing
customer retention within the bank's operations, this research will provide valuable insights that
can inform strategic decision- making and enhance overall performance.
Furthermore, understanding customer retention practices will contribute to the broader discourse
on customer relationship management in the banking sector, particularly in developing
economies like Ethiopia. As more banks seek to navigate competitive challenges and meet
changing consumer expectations, insights from this study could serve as a valuable resource for
industry stakeholders. In this study holds significant importance for several stakeholders:

For the Commercial Bank of Ethiopia:- The findings will provide valuable insights
into the effectiveness of current customer retention practices, enabling CBE to make
informed decisions that enhance customer loyalty and improve overall performance.
For the Banking Sector:- The research will contribute to the broader understanding of
customer retention strategies in the Ethiopian banking industry, serving as a reference for
other financial institutions seeking to improve their customer relationship management
practices.

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 For Academics and Researchers:- This study will add to the existing body of literature
on customer retention in banking, particularly within developing economies, and may
serve as a foundation for future research in this area.
For Policy Makers:- Insights from this study can inform regulatory frameworks aimed at
promoting customer-centric practices within financial institutions, ultimately benefiting
consumers and enhancing financial inclusion.

1.7 DEFINITION OF TERMS

To ensure clarity and understanding throughout this study, the following key terms we are
defined:

 Customer Retention: The ability of a bank to keep its existing customers over time, often
measured through metrics such as churn rates and customer loyalty.
 Service Quality: The degree to which a bank's services meet or exceed customer
expectations, encompassing aspects such as reliability, responsiveness, assurance, empathy,
and tangibles.
 Customer Satisfaction: A measure of how products or services supplied by a bank meet or
surpass customer expectations, directly influencing their likelihood to remain loyal.
 Relationship Management: Strategies and practices employed by a bank to build and
maintain strong relationships with customers, focusing on personalized communication and
engagement.
 Technological Solutions: Digital tools and platforms used by banks to enhance service
delivery and improve customer experience, including mobile banking apps and online
banking services.

1.8 SCOPE OF THE STUDY

The scope of this study is focused on assessing customer retention practices specifically within
the Commercial Bank of Ethiopia 6kilo branch in Addis Ababa. The research will examine
various aspects of customer retention, including service quality, customer satisfaction,
relationship management, and technological integration. The study will involve data collection
from customers and employees of CBE through surveys and interviews to gain insights into their
experiences and perceptions.

5
 The geographical scope is limited to branches of CBE located in 6kilo branch in Addis Ababa,
where access to digital banking services is more prevalent. The time frame for current this study
will encompass current developments in customer retention practices in commercial bank of
Ethiopia 6kilo branch. .

1.9 LIMITATION OF THE STUDY

While this study aims to provide comprehensive insights into customer retention practices at
CBE, several limitations should be acknowledged:

 Sample Size: - The study's findings may be influenced by the sample size and
demographic diversity of respondents. A limited sample may not fully represent the
broader customer base of CBE.
 . Response Bias:-Participants may provide responses that they perceive as favorable or
socially acceptable, potentially skewing the results.
 Time Constraints: - The research will be conducted within a limited timeframe, which
may restrict the depth of data collection and analysis.
 Geographical Limitations: - The focus on urban branches may not capture the
experiences of customers in rural areas, where banking practices and challenges may
differ significantly.
 Dynamic Nature of Banking-: The rapidly evolving nature of technology and consumer
preferences means that findings may quickly become outdated as new trends emerge in
the banking sector.

1.10 ORGANIZATION OF THE STUDY

The researcher would run or operate te research are back ground of the study,reviewing the
literatures that related to the case study and selecting the method of research approaches that
used of guide to finding the target objective also the researcher follow how the data collecting
techniques chose and apply that techniques and analysis the date for interpreting and finally
seting the recomandations is expected form the researcher.

6
 CHAPTER TWO

2. LITERATURE REVIEWS
2.1 CUSTOMER RETAINTION
Customer Retention Customer Retention can be defined as the possibility of a client to be
retained by the organization (Morgan& Hunt, 1994). Also Hall (1997) considers customer
retention as maintaining customers for life. The life span worth of a customer to any business can
be appreciated in their financial performance. Some studies considered Customer retention from
a behavioural perspective. Thus, the customer feeling belong and dedicated to the company. For
instance, the customer recommends the company to others and willing to repurchase services or
products from the organization (Diller, 1996; Diller &MuÈllner, 1998; Gremler& Brown, 1998;
Homburg et al., 1999; Oliver, 1999).

One of the key elements of customer retention understands the factors that drive customer
satisfaction and loyalty. These factors often include the quality of products or services, customer
service experiences, and the overall value perceived by the customer. Businesses that prioritize
high-quality interactions and deliver on their promises are more likely to build strong
relationships with their customers. Additionally, gathering feedback and actively addressing
customer concerns can create a sense of trust and commitment, further solidifying the customer’s
connection to the brand.

 Effective customer retention strategies may include personalized marketing efforts, loyalty
programs, and consistent communication. Personalized experiences that cater to individual
preferences can make customers feel valued and appreciated. Loyalty programs incentivize
repeat purchases by offering rewards or discounts, encouraging customers to continue their
relationship with the brand.
 Maintaining open lines of communication through newsletters, social media engagement,
and customer support can keep customers informed and involved, reinforcing their loyalty.
Customer retention is an essential component of a successful business strategy. By focusing
on building strong relationships with existing customers through quality service, personalized
experiences, and effective communication, companies can enhance customer loyalty and

7
 drive long-term profitability. (The effect of customer relationship management by Kebede,
A., & Tegegne, Z. (2018).

2.1.1 COMPONENTS OF CUSTOMER RETENTION

Retaining customer relationships are viewed as one of the crucial possession for companies
(Webster, 1992; Collier &Bienstock, 2006). Some previous studies affirms that, maintaining
obtainable customers is mostly worthwhile than acquiring new customers (see Rosenberg
&Czepiel, 1984; Vandermerwe, 1996). As a result, some researchers have developed interest in
examining the strategies for attracting and sustaining good relationships with obtainable
customers (Duncan & Moriarty, 1998; Gonza´lez et al., 2004). Again Finn (2005) suggests that,
Relationship quality plays an important role in sustaining long lasting relationship.

2.2. THEORETICAL REVIEWS

Customer retention is a critical aspect of the banking sector, influencing profitability, market
share, and competitive advantage. This theoretical framework aims to explore the various
dimensions and models that underpin customer retention strategies within banks. By examining
relevant theories and concepts, we can better understand how banks can effectively retain
customers in a dynamic and competitive environment.

1. Customer Relationship Management (CRM)

Customer Relationship Management (CRM) is a foundational concept in understanding customer

retention. CRM encompasses strategies and technologies that banks use to manage interactions
with current and potential customers. The goal of CRM is to enhance customer satisfaction and
loyalty through personalized communication, tailored services, and efficient service delivery.

Relationship Marketing: This approach focuses on building long-term relationships with

customers rather than merely transactional interactions. It highlights the importance of trust,
commitment, and engagement in fostering customer loyalty (Berry, 1995)

Key Elements of CRM in Customer Retention

• Data Analytics: Banks utilize customer data to analyze behavior, preferences, and transaction
patterns. This data-driven approach allows for personalized marketing efforts and targeted offers
that resonate with individual customers.

8
• Segmentation: By segmenting customers based on demographics, behaviors, or needs, banks
can tailor their services and communications to meet specific customer requirements, thereby
increasing satisfaction and retention.

2. Service Quality Model

The Service Quality Model (SERVQUAL) developed by Parasuraman, Zeithaml, and Berry
provides a framework for assessing service quality across five dimensions: tangibles, reliability,
responsiveness, assurance, and empathy. High service quality has been shown to correlate
positively with customer satisfaction and retention.

Application of SERVQUAL in Banking:

 Tangibles: The physical appearance of branches, staff uniforms, and marketing materials
can influence customer perceptions.
 Reliability: Consistency in delivering promised services is crucial for building trust.
 Responsiveness: Timely assistance and support enhance customer experience.
 Assurance: Competence and courtesy of staff instill confidence in customers.
 Empathy: Personalized attention and understanding of customer needs foster loyalty.

3. Customer Satisfaction Theory

Customer satisfaction is a pivotal factor influencing customer retention. Theories such as the
Expectancy Disconfirmation Theory suggest that satisfaction arises when actual service
performance meets or exceeds customer expectations. In the banking context, exceeding
expectations can lead to higher levels of satisfaction, which in turn enhances retention.

Customer Satisfaction Theory: This theory emphasizes the relationship between customer
satisfaction and retention. Satisfied customers are more likely to return and recommend the
business to others (Oliver, 1999)

Factors Influencing Customer Satisfaction:

 Product Quality: The perceived quality of banking products (e.g., loans, investment
options) directly impacts satisfaction.
 Service Experience: Positive interactions with bank representatives contribute to overall
satisfaction.

9
 Value for Money: Customers evaluate whether the benefits they receive justify the costs
associated with banking services.

4. Commitment-Trust Theory

The Commitment-Trust Theory posits that trust and commitment are essential for long-term
relationships between customers and service providers. In the banking sector, fostering trust
through transparency, security measures, and ethical practices can enhance customer
commitment, leading to improved retention rates.

Key Components

 Trust: Customers must believe that their bank will act in their best interest. Trust can be
built through consistent communication and reliable service delivery.
 Commitment: A strong emotional attachment to the bank encourages customers to remain
loyal, even when faced with competitive offers from other institutions.

5. Loyalty Programs

Loyalty programs are practical applications of several theoretical constructs related to customer
retention. These programs reward customers for their continued patronage, reinforcing positive
behavior and enhancing emotional connections with the bank.

Mechanisms of Loyalty Programs

• Rewards Systems: Offering points or incentives for transactions encourages repeat business.

• Exclusive Benefits: Providing access to premium services or preferential rates creates a sense
of belonging and value among loyal customers.

The theoretical framework of customer retention in the banking sector encompasses various
models and theories that highlight the importance of CRM, service quality, customer satisfaction,
commitment-trust dynamics, and loyalty programs. By integrating these concepts into their
strategies, banks can create a comprehensive approach to retaining customers in an increasingly
competitive landscape. Understanding these theoretical underpinnings allows banks to design
effective retention strategies that not only enhance customer loyalty but also contribute to long-
term business success.

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  Customer Relationship
Management (CRM)
 Service Quality
Customer retention
 Customer Satisfaction
 Customer Loyalty
 Trust

Conceptual framework of customer retention

1.7 2.3 CONCEPTUAL REVIEWS

Customer retention refers to the strategies and practices that banks employ to keep their existing
customers engaged and satisfied, thereby reducing churn and fostering long-term loyalty. In an
increasingly competitive financial landscape, where numerous banks offer similar products and
services, retaining customers has become crucial for sustainable growth and profitability.

Importance of Customer Retention

 Cost Efficiency: Acquiring new customers is often more expensive than retaining
existing ones. Marketing efforts, promotional offers, and onboarding processes can drain
resources. By focusing on retention, banks can optimize their costs and increase
profitability.
 Lifetime Value: Existing customers tend to have a higher lifetime value (LTV) than new
customers. They are more likely to purchase additional products, such as loans, credit
cards, and investment services. Retaining these customers can significantly enhance a
bank's revenue stream.
 Referrals and Word-of-Mouth: Satisfied customers are more likely to recommend their
bank to friends and family. Positive word-of-mouth can be a powerful tool in attracting
new customers, further amplifying the benefits of retention strategies.

Strategies for Effective Customer Retention

 Personalized Services: Banks can leverage data analytics to understand customer

preferences and behavior. By offering personalized services and tailored financial
products, banks can enhance customer satisfaction and loyalty.

11
  Excellent Customer Service: Providing exceptional customer service is essential for
retention. This includes prompt responses to inquiries, efficient problem resolution, and
ongoing support. Training staff to be knowledgeable and empathetic can create a positive
experience for customers.
 Loyalty Programs: Implementing loyalty programs that reward customers for their
continued business can foster retention. These programs may include cash-back offers,
discounts on fees, or exclusive access to premium services.
 Regular Communication: Keeping customers informed about new products, services, or
changes in policies through newsletters, emails, or mobile notifications helps maintain
engagement. Regular communication also provides an opportunity for feedback, allowing
banks to address concerns proactively.
 Customer Feedback Mechanisms: Establishing channels for customer feedback such as
surveys or suggestion boxes enables banks to understand customer needs better and make
necessary adjustments. Actively seeking input demonstrates that the bank values its
customers' opinions.
 Technology Integration: Investing in technology to enhance the banking experience is
vital. User-friendly mobile apps, online banking features, and secure digital transactions
can significantly improve customer satisfaction and loyalty.

Challenges in Customer Retention

While the importance of customer retention is clear, banks face several challenges in this area:

 High Competition: The proliferation of digital banks and fin tech companies has
intensified competition, making it easier for customers to switch banks.
 Changing Customer Expectations: As consumers become more tech-savvy, their
expectations for convenience and service quality continue to rise.
 Economic Factors: Economic downturns can lead to increased price sensitivity among
customers, prompting them to seek better deals elsewhere.

Customer retention in the banking sector is essential for maintaining competitiveness and
ensuring long-term success. By implementing effective retention strategies that focus on
personalized service, exceptional customer support, and leveraging technology, banks can

12
cultivate loyalty among their customer base. As the financial landscape continues to evolve,
prioritizing customer retention will be key to thriving in a challenging environment.

2.4 EMPIRICAL REVIEW OF CUSTOMER RETENTION

Customer retention is a vital concern for banks, as retaining existing customers is often more
cost-effective than acquiring new ones. This empirical review examines various studies and
findings related to customer retention in the banking sector, highlighting key factors, strategies,
and outcomes that influence customer loyalty. Customer retention refers to the strategies and
actions companies take to reduce customer defections and encourage repeat business. It is crucial
because retaining existing customers is often less costly than acquiring new ones. Studies have
shown that increasing customer retention by just 5% can lead to an increase in profits by 25% to
95% (Reichheld Schefter, 2000) .

1. Importance of Customer Retention

Numerous studies underscore the significance of customer retention in banking. For instance, a
study by Khan et al. (2016) found that a 5% increase in customer retention can lead to a 25- 95%
increase in profits. This highlights the financial benefits associated with retaining customers
rather than focusing solely on acquisition.

2. Factors Influencing Customer Retention

Several empirical studies have identified key factors that influence customer retention in the
banking sector:

 Service Quality: Research by Amin et al. (2013) demonstrated a positive correlation

between service quality dimensions (tangibles, reliability, responsiveness, assurance, and
empathy) and customer satisfaction, which in turn affects retention. Higher service quality
leads to greater customer trust and loyalty.
 Customer Satisfaction: A study by Haseeb et al. (2019) indicated that customer satisfaction
significantly impacts retention rates. Satisfied customers are more likely to remain loyal to
their banks and recommend them to others.
 Trust and Commitment: Research by Morgan and Hunt (1994) emphasized the role of trust
and commitment in building long-term relationships. Their findings suggest that banks that

13
 foster trust through transparent practices and reliable service are more likely to retain
customers.
 Loyalty Programs: A study conducted by Kumar and Reinartz (2016) found that loyalty
programs positively influence customer retention. Customers who perceive value in loyalty
rewards are more likely to stay with their banks and engage in repeat transactions.

3. Strategies for Enhancing Customer Retention

Empirical research has also explored various strategies employed by banks to enhance customer
retention:

Personalized Services: According to Bennett and Rundle-Thiele (2005), personalized

banking services tailored to individual customer needs can significantly improve retention
rates. Banks that understand their customers' preferences and offer customized solutions
foster stronger relationships.
Effective Communication: A study by Sweeney and Soutar (2001) highlighted the
importance of effective communication in building customer loyalty. Banks that maintain
regular contact with their customers through newsletters, updates, and feedback solicitations
demonstrate care and commitment, leading to higher retention rates.
Technology Adoption: Research by Mansour et al. (2020) showed that the adoption of
digital banking technologies enhances customer experience and satisfaction. Banks that
invest in user-friendly online platforms and mobile applications tend to retain tech-savvy
customers who value convenience.

Key Customer Retention Practices

 Relationship Marketing: Relationship marketing components such as trust, bonding,

responsiveness, empathy, and reciprocity have a positive effect on customer retention at
CBE. These elements help build stronger relationships with customers, leading to
increased sales, profits, and market share.
 Customer Relationship Management (CRM): CRM practices, including key customer
focus, knowledge management, CRM organization, and technology-based CRM,
significantly influence customer loyalty and retention. These practices help banks address
individual customer needs, thereby enhancing satisfaction and loyalty. (Nigussie, T.

14
 (2018). The Practices of Customer Relationship Management Ethiopia. European Journal
of 10, 39-45.)
 Service Quality and Core Banking: There is a strong correlation between service quality
dimensions (reliability, assurance, empathy) and customer satisfaction, which in turn
affects retention. Core banking services also positively influence customer satisfaction
and retention
 Organizational Performance: Effective customer management practices are linked to
improved organizational performance, including customer attraction, satisfaction, and
retention. This underscores the importance of strategic customer management in
enhancing bank performance.

4. Empirical Evidence from Different Regions

Empirical studies across various regions provide insights into customer retention dynamics: •
North America: Research by Reichheld and Schefter (2000) found that North American banks
focusing on relationship management achieved higher retention rates compared to those
emphasizing transactional interactions.

• Asia-Pacific: A study by Choudhury et al. (2021) highlighted that Asian banks leveraging
mobile banking solutions experienced improved customer retention, particularly among younger
demographics. Europe: Research conducted by Bauer et al. (2002) revealed that European banks
with strong brand equity and reputation retained customers more effectively than those lacking
brand recognition.

The empirical evidence reviewed indicates that customer retention in the banking sector is
influenced by multiple factors, including service quality, customer satisfaction, trust,
personalized services, loyalty programs, and effective communication. While challenges such as
increased competition and changing customer expectations exist, banks can enhance retention
through strategic initiatives that focus on building strong relationships with their customers. As
the banking landscape continues to evolve, ongoing research will be essential to identify
emerging trends and best practices for maintaining customer loyalty in an increasingly
competitive environment.

15
 CHAPTER THREE
3. RESEARCH METROLOGY

3.1. QUALITATIVE
In our research we will use the method or approach of qualitative
research is will applicable.
3.2 RESEARCH DESIGN
3.2 .1 DESCRIPTIVE STUDY AREA
The Commercial Bank Of Ethiopia Established in 1942, the Commercial Bank of Ethiopia has
played a significant role in the country's economic development by providing a wide range of
financial services to individuals, businesses, and government entities. With over 1,980 branches
across Ethiopia and a growing customer base, CBE has established itself as a market leader in
the banking sector.
In recent years, CBE has made substantial investments in technology and innovation to improve
service delivery and enhance customer experience. The bank has introduced various digital
banking solutions, including mobile banking platforms and internet banking services, aimed at
meeting the evolving needs of its customers. And it customers are about 40 millions.
Despite these advancements, CBE faces challenges in retaining customers amidst increasing
competition from both traditional banks and emerging Fitch companies. Understanding the
effectiveness of its customer retention practices is crucial for CBE to maintain its leadership
position in the market.

3.3. DATA TYPES

3.3.1 QUALITATIVE
We are going to use for our research qualitative types of data. Those
including primary and secondary source of data.

3.4 DATA COLLECTION METHOD

We will collect data for our research by using structure and semi structure interviews are one of
the most commonly used data collection methods in qualitative research because they allow us to

16
collect highly personalized information directly from the source. Interviews explore participants'
opinions, motivations, beliefs, and experiences and are particularly beneficial in gathering data
on sensitive topics because respondents are more likely to open.

3.5. SAMPLE SIZE AND SAMPLING TECHNIQUES

3.5.1 POPULLATION OF STUDY
Target population is defined as the entire group a researcher is interested in. In the branch total
no of population is 260. For our study we will use random sampling technique and select
employees as a sample to conduct the study. Therefore, the target populations of this study will
the customers, customer service manager and the manager in 6kilo branch.

N=260
n= =
n=
= =130
E=5% or 0.05

So our sample size is 130

3.5.2 SAMPLING TECHNIQUES

We are going to use the random sampling technique to select the
respondents or 130 respondent of our target to be conducted. Because
they have equal chance to be select due to they are customer of CBE
6kilo branch.

3.6 DATA ANALYSIS METHOD

Data processing and analysis is an important part of the whole survey operation. It includes
manual editing, coding, data entry, data cleaning and consistency checking. The researcher wills
all these activities of data processing. By using Descriptive statistics analysis methods will use to
analyze the collected data. Descriptive tools such as frequency, percentages, appropriate data
through table, percentage to presentation.

17
 GENERAL GUIDLINE OF THE RESEARCH

ACTIVITES OF THE RESEARCH A N D B R E A K IN G O F BUDGET

NO Activities Require of time

1. Distribute questioners 2 days
2. Data collection 3days
3. Data analysis and interpretation 7 days
4. Organized of the paper 3 days
5. Report writing 4 days
6. Exercising presentation for examine 8 days
date
7. Submission of paper Within day
8. Presentation of finding of the paper Within a day


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 Budget

Necessary material Quantity Unit cost Total

Paper 1package 600 600birr
Pen 5 unit 25 birr 125 birr
Water 0.5L 60units 15birr 900birr
Printing cost 32 page 3 birr 66birr
Secretary 1 400 birr 400 birr
Respondent incentives 100 100 10,000
Flash 4 GB 350 birr 350 birr
Transportation 3 of our group 20birr 60 birr
Coffee and tea 5 20 birr 100 birr
Total 12,6001birr

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BIBLIOGRAPHY
 Customer retention management: A reflection of theory and practice by Francis Arthur
Buttle, article 2002.
 Customer retention by (Reichheld Schefter, 2000)
 Understanding custome r experience throughout the customer journey. By Lemon, K. N., &
Verhoef, P. C. (2016). Journal ofMarketing,. https://doi.org/10.1509/jm.15.0420
 Customer engagement: Conceptual domain, fundamental propositions, and implications for
research by Brodie, R. J., Hollebeek, L. D., Juric, B., Ilic, A. (2011).
 Customer Satisfaction Theory:- by (Oliver, 1999)
 Customer relationship marketing by Berry, 1995)
 aspects of customer relationship management and retention strategies by Philip Kotler
 Customer Relationship Management and Customer Retention By Ama Achiaa Kankam
Boadu 2019
 The Practices of Customer Relationship Management Ethiopia. By Nigussie,T.
(2018). European Journal of 10, 39-45.

 The effect of customer relationship management by Kebede, A., &

Tegegne, Z. (2018).
 The roles of information technology in improving the customer satisfaction by (Woldu, T., &
Belay, D. (2020).
 Matilani, A., & Nyakwara, S. (2023). Strategies Adopted by Commercial
Banks to Enhance Customer Retention in Kenya.East African Journal of
Business and economics https://doi.org/10.37284/eajbe.6.1.1282.
 Rani, G., &.A. (2024). A Study on Effectiveness of Customer Retention
Strategies Factors in Banking Sector.
International Journal of Information

Technology and Management. https://doi.org/10.29070/nr2r4769.

 Chimote, N., & Srivastava, A. (2012). Analyzing the Effectiveness of
Customer Retention Strategies with Existing Customers in Banking
Industry. International Journal of Customer Relationship Marketing and Management , 3,
1-14. https://doi.org/10.4018/JCRMM.2012070101.
 A Conceptual framework of customer retention strategy by Palto Dattain June 2013

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 APPENDIX
QUESTIONNARIES

DAMAT HOTEL AND BUSINESS COLLAGE

UNDERGRADUATE STUDENTS

DEPARTEMET OF MARKETING MANAGEMENT

Dear Respondents,

We are student of Damat Hotel And Business Collage undergraduate under taking of BA
marketing management as partial fulfillment of our study, we are conducting a research on the
title ” customer retention practice in the case of commercial bank of Ethiopia 6kilo branch”

You are invited to take part in this research by filling the attached questionnaire honestly. We
would like to assure the confidentiality of this study because it is solely used for academic
purpose and all of respondents will remain anonymous to safeguard their privacy. We would like
to thank you in advance for the time you are willing to spend to fill out this questionnaire

Feel free to contact us if you have any question related to the questionnaires.

Tel: E-mail @gmail.com

Instruction for filling the questionnaire:- Please read each statement carefully and put the tick (√) mark
under the choice and no need of writing your name.

Part I. Demographic Information (Please tick (√) mark)

1. Please indicate your Gender Male Female

2. Age Group 18-25 26-35 36-45 45-55 56-65 66 above

3. Educational Background

Primary Secondary First Degree Master’s Degree Ph.D.

4. How many years you are customer to the Bank? < 5 year 5-10 years >10years

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 Part II. Customer’s opinion on customer retention

Indicate on a five point scale the extent to which you agree/disagree with the following
statements by ticking the appropriate answers on the box in the columns.by ticking the
appropriate answers on the box in the columns.

Strongly Agree Agree Neutral Disagree Strongly Disagree

5 4 3 2 1

1. Customer Satisfaction Point of scale

Descriptions 1 2 3 4 5
1 Customers are satisfied by the service delivery of CBE

2 Customers service expectation matches with their service perception

3 Customers can service as per their requirement

4 CBEA goal & mission lie it base on satisfying its customers
5 A bank should have to give individual attention to customers
6 A bank should have customers interest at heart
7 A bank should have employees who give personal attention to customers

8 Employees of a bank should have to understand customer’s specific needs

2. SERVICE Quality Point of scales

Description 1 2 3 4 5
1. Dealing with customer confidentially foster customer retention.
2. Accuracy is essential for customer’s satisfaction in banking services.
3. Meeting customer expectation of good service level and having many varieties
Of products essential for customer retention.

4. Spreading bank’s branches is important for customers‟ retention.

5.Availability of bank customer database is essential for effective marketing
Performance.

6. Providing excellence services with reasonable price increases customer

retention.

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3.CUSTOMER RELATIONSHIP MANAGEMENT (CRM) in CBE Point of scales
Description 1 2 3 4 5
1. The Bank employee encourage customers to use more Service of the
Bank
.2 What makes the Bank different from its rivals is that it Can make good
relationship with its customers
3. The bank has established clear business goals related to customer
acquisition, development, retention, and reactivation

4. The bank structure is meticulously (thoroughly) designed around its

customers
5. The Bank has effective customer recovery strategy Including guarantee
for service failure.
4. CUSTOMER LOYALTY Point of scales
DESCRIPTION 1 2 3 4 5
1. I consider the bank as my first choice among others bank in the area.
2. I will recommend this bank to My friends and family
3 .It is highly likely that I will be the customer of this bank
4. I am confident of giving positive word of mouth testimonies to others
about this bank
5. I am satisfied with the Bank service provided.
5.CUSTOMER RETENTION Point of scales
Description 1 2 3 4 5
1. Good relationship between CRM and customer is essential for customer
retention.
2. The bank tries very hard to establish a long term relationship with its
customers.
3. Most of our customers consider as their primary operator.
4. The bank keeps its promises are able to retain customers
6.Trust 1 2 3 4 5
1. You believe your bank is a reliable and financiallystrong institution; therefore
you will keep on being a customer
2. The staffs of your bank are honest & professional ;therefore you will keep on
being a customer
3. You believe your bank keeps financial information confidential, therefore you
will keep on being a customer

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 PART III: - FOR STAFFS INTERVIEW QUESTIONS
1) Are there service failure management practices in CBE?

2) How CBE apply customer relationship management?

3) What are the methods of CBE to exercise service recovery?

4) How CBE control customer defection?

5) How CBE solve customer incompatibility to retain customer?

6) What are the methods of CBE use to make loyal its customers?

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