The influence of relationship marketing, social performance management and firm-it characteristics on customer retention by microfinance institutions in Kenya
Nyongesa, Stella Anne Kasobya
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Relationship marketing strategies are widely recognized by marketing managers as key in managing customer relationships. However, customer retention continues to be a challenge for many businesses including microfinance institutions in Kenya, implying there could be other factors affecting the outcome of relationship building efforts. This study sought empirical evidence on the moderating role of social performance management and firm IT characteristics in the association between relationship marketing and customer retention. Previous studies concentrated more on establishing a direct association between relationship marketing and customer retention, neglecting to establish the moderator effects on the strength of this direct association. Against this background, the study sought to establish the influence of relationship marketing on customer retention; extent to which firm IT characteristics influence the relationship marketing-customer retention association; assess the degree to which social performance management affects this association; and determine the joint effect of these variables on customer retention. Four hypotheses were formulated and using a descriptive cross-sectional design, with a population of 55 Kenyan microfinance institutions and 41,007 customers of these institutions, relevant data were collected from 48 employees and 492 customers using semi-structured questionnaires, and analyzed using descriptive and inferential analysis. Results showed relationship marketing characterized by communication and shared values plays a critical role in retaining customers. Further, a statistically significant positive association between relationship marketing and customer retention as well as between social performance management and customer retention was found, while firm IT characteristics had a statistically insignificant, weak and negative relationship with customer retention. Social performance management had a statistically significant strong moderating effect; however firm IT characteristics had a negative moderating effect. Finally, the joint effect was statistically significant. Theoretically, this study contributes to relationship marketing knowledge base by providing a model which explains the role of moderating factors in the relationship marketing–customer retention theoretical framework. The study provides empirical evidence supporting a more complex structure of the relationship marketing-customer retention link from a developing country context using customers’ and employees’ perspectives. The study also extends on the theory of corporate social performance by providing evidence on the role of social performance management in a business. Practically, the findings suggest marketers should combine relationship marketing with social performance management practices for optimum customer retention results. Despite technology not being a significant predictor of customer retention, institutions should not overlook technology adoption in building successful relationships. Policy formulation may focus on social performance reporting by microfinance institutions. The study was limited by use of fewer relationship marketing factors, the quantitative approach employed placed a constraint on obtaining in-depth insights of respondents which could provide deeper meaning to their responses, only a relatively small population of MFIs was accessible and furthermore, the variables were investigated in a business-to-customer setting. Future studies could address these limitations.