Effects of Customer Relationship Management Strategy on Selected Commercial Private Banks’ Performance in Addis Ababa, Ethiopia

Abstract

Effects of customer relationship management (CRM) strategy on Ethiopian Commercial Private banks' performance is investigated in this study, emphasizing aspects such as client-focused strategies, customer knowledge management, customer intimacy, CRM based technological infrastructure, and CRM organizational practices. Mixed research methods were employed, with data gathered through structured questionnaires from 312 employees working in six selected private commercial banks operating in Addis Ababa where their head office is located. The analysis was conducted through Structural Equation Modeling (SEM) and SPSS version 23 highlights the relationships between CRM dimensions and bank performance. Customer orientation (β=0.273), p<0.001) and CRM organization (β=0.258, p<0.001) exhibit the highest positive effect, stressing the value of customers focus and structured CRM practices. Technology infrastructure (β = 0.251, p<0.001) and customer knowledge management (β = 0.251, p<0.001) also significantly enhance performance, showing the roles of technology and insights in service efficiency and strategy alignment. Conversely, client closeness (β = -0.068, p>0.05) shows no significant effect, questioning its relevance. Overall, strategic customer focus, technology, and management of knowledge are critical for bank performance. Therefore, banks should concentrate on understanding customer needs, invest in CRM platforms, and improve customer knowledge management systems, alongside continuous staff training, to cultivate client loyalty, enhance operational efficiency, and gain a competitive edge in the dynamic banking industry to boost performance.