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The Exploration of Two-Way Communication and Conflict Handling African Journal of Business Management Vol.5 (9), pp. 3487-3496, 4 May 2011 Available online at http://www.academicjournals.org/AJBM DOI: 10.5897/AJBM10.759 ISSN 1993-8233 ©2011 Academic Journals Full Length Research Paper Customer retention through customer relationship management: The exploration of two-way communication and conflict handling Mornay Roberts-Lombard Department of Marketing Management, University of Johannesburg, Kingsway Campus, C-Ring 607, Auckland Park, Johannesburg. South Africa. E-mail: [email protected]. Tel: (11) 559 3031 (w). Fax: (011) 559 4943 (w). Accepted 16 February, 2011 Organisations such as banks and short-term insurance organisations become more aware of the importance of customer relationship management (CRM) and its potential to help them acquire new customers, retain existing ones and maximise their lifetime value. A close relationship with customers will require a strong coordination between information technology (IT) and marketing departments to provide a long-term retention of selected customers. The primary objective of this study is to investigate the influence of selected independent variables, two-way communication and conflict handling on intentional customer loyalty via CRM as the intervening variable at a South African short- term insurance organisation. Primary data were gathered using a questionnaire, with items referring to CRM, customer loyalty, two-way communication and conflict handling. The sample consisted of 254 customers in four major centres in South Africa. Data were factor-analysed. One independent variable, conflict handling exerted a statistically significant positive influence on the intervening variable (CRM), while two-way communication exerted a statistically significant negative influence on the intervening variable (CRM). The intervening variable (CRM) positively influenced the dependent variable (Customer Loyalty). If short-term insurance organisations communicate timeously and accurately, and are skilled in conflict handling, greater loyalty will be created among customers. Key words: Customer relationship management (CRM), two-way communication, conflict handling, customer retention. INTRODUCTION Over the past twenty years, the importance of the service A business that wants to succeed in today’s global industries to the world economy has grown tremendously. competitive market, where customers are empowered In 2003, the service sector contributed to over 80% of the and brand loyalty erosion is increasing, will have to move employment and gross domestic product (GDP) of the to customer relationship management (CRM). Customer United States (Zeithaml et al., 2006: 8). In the South relationship management enables organisations to African economy, the service sector contributed 71.4% of provide excellent real-time customer service through the South Africa’s total GDP in 2006 (Datamonitor, 2008: 45). effective use of individual account information (Kotler and The services sector is spearheaded by the financial Keller, 2006: 152). This requires a more complex services sector. The services sector employs 65% of the approach. Organisations need to investigate customer total workforce in South Africa (Datamonitor, 2008: 55). needs, they have to build relationships with both existing Since democracy in 1994, there has been increasing and potential customers, and they will have to satisfy competition in the South African financial services their customers’ needs (Rootman, 2006: 2). Short-term industries from niche players and foreign entrants, as insurance organisations will therefore require a loyal technology and financial liberalisation created the customer base to secure their sustainability. Loyal stimulus for competition from new areas. customers can be generated through CRM. CRM can 3488 Afr. J. Bus. Manage. assist short-term insurance organisations in building long- in 2008, generating gross written premiums of $10.2 term beneficial relationships with customers which has a billion, equivalent to 43.8% of the market's overall value. direct influence on the value proposition to customers, The performance of the market is forecasted to and the competitive position of the organisation in the accelerate, with an anticipated CAGR of 4.8% for the market. This will lead to customer loyalty and increased five-year period, 2007 to 2012, which is expected to drive profits for the organisation due to customer retention the market to a value of $29.6 billion by the end of 2012 (resulting in increased R and value spent over the long- (Datamonitor, 2009: 7). Santam is the largest short-term term). insurance organisation in South Africa, accounting for Relationship marketing and its application, CRM, focus 23% of the country’s value. on the long-term profitability of keeping customers for life (Sauers, 2008: xxi). This requires two-way dialogue between the organisation and the customer to develop a Customer relationship management relationship (Du et al., 2005: 73). The literature stipulates that two-way communication and conflict handling form Today, many organisations such as banks and short-term important parts of CRM. Communication is very insurance organisations realise the importance of CRM important, especially in the early stages of the and its potential to help them acquire new customers, relationship with the customers, as an organisation wants retain existing ones and maximise their lifetime value. A to build awareness and convince interested customers to close relationship with customers will require a strong make a purchase. Communication is the ability to provide coordination between information technology (IT) and timeously and trustworthy information (Ndubisi, 2007: marketing departments to provide a long-term retention of 100). An organisation would not be able to function selected customers (Onut et al., n.d.:1). The broad without two-way communication, as its management application of CRM has lead to a multitude of definitions. would not be able to convey important information to Berndt et al. (2009: 237 - 238) defined CRM as “an employees, downward communication, and vice versa, enterprise-wide commitment to identify the individual upward communication, or to customers (Rootman, 2006: customers of an organisation, and to create a relationship 12). If an organisation succeeds in avoiding or resolving between the organisation and these customers as long conflicts with customers before they become problems, as the relationship is mutually beneficial. CRM evolved this will have a positive influence on customer loyalty from organisation processes such as relationship (Ndubisi and Wah, 2005: 553). This will lead to commit- marketing (RM) and the increased emphasis on improved ment which can be defined as the willingness to work and customer retention through the effective management of stay in the relationship indefinitely (Sauers, 2008: 35). customer relationships.” Relationship marketing is a This article includes a literature review of CRM and consumer centered approach seeking long term relation- customer loyalty, and an explanation of the problem that ships with existing as well as with prospective partners to was investigated. The research objectives, hypotheses the marketing process (that is, consumers, suppliers, and methodology are then discussed. Thereafter the alliances, competitors, distributors and employees and empirical results are discussed followed by management consumers) (Steynet al., 2004: 35 - 36). Relationship implications and recommendations. marketing wants to establish a long term relationship with customers of the organisation as well as other role players which will contribute to the successful operation Literature review of the organisation in the future (Eiriz and Wilson, 2006: 275 - 276). The literature review presented in this article aims at The purpose of CRM is to develop appropriate providing a broader understanding of the major con- relationships with customers through communication and structs examined in the research. Specifically, a brief conflict handling and to create long-term profit (Ndubisi, discussion of the South African short-term insurance 2007: 98; Grönroos, 2003: 31). CRM provides a transition industry is provided. The literature review will also focus from a transaction-based to a relationship-based model on CRM, two-way communication, conflict handling and that concentrates on the acquisition, development and customer loyalty. retention of profitable customer relationships. Two-way communication with customers is enabled by advances in information and telecommunications systems. All the The short-term insurance industry in South Africa communication with customers, when it is integrated into the organisation, recorded and managed, allows the The South African insurance market generated total relationships with customers to develop and to be gross written premiums of $24.2 billion in 2007, repre- maintained (Baran et al., 2008: 6 - 7). A goal of CRM is to senting a compound annual growth rate (CAGR) of 8.9% create an opportunity for re-purchase by a customer for the period spanning 2003 to 2007. The short-term through an improvement in the communication process to insurance segment was a lucrative segment in the market the customer, providing the right offer, relating to product Lombard 3489 and price, through the right channel, at the right time. Conflict handling This will lead the customer to perceive that the organisation is concerned with the customer’s needs, and Conflict handling can be described
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