BANKING ACADEMY OF VIETNAM ADVANCED PROGRAM GRADUATION THESIS THE IMPACT OF CUSTOMER RELATIONSHIPS MANAGEMENT ON THE PERFORMANCE OF THE BANK: A CASE STUDY OF VP BANK... ACKNOWLEDGEME
Statement of the Problem and Rationale for the Study
The banking and finance sectors have experienced substantial changes in recent years, marked by the establishment of numerous joint-stock commercial banks, foreign bank branches, and joint venture banks These developments enhance the diversity of the financial system in a growing economy like Vietnam's.
The banking industry is experiencing intense competition to attract and retain customers, making client relationships crucial for survival and growth In today's market economy, where competition is fierce, customer retention and development are vital components of a bank's overall strategy.
In today's competitive landscape, expanding products and services to meet customer needs and enhance loyalty is crucial Developing a robust CRM system fosters relationships with potential and existing customers, adding value and boosting profits, especially in the banking sector As a core competency, CRM is vital for success; however, implementation challenges result in a low rate of successful projects, causing banks to miss opportunities for increased loyalty and sales growth.
The effectiveness of Customer Relationship Management (CRM) activities is debated, with some believing it aids banks in acquiring new customers and retaining existing ones, while others question its necessity This article explores the definition of CRM and its true benefits for Vietnamese commercial banks, focusing specifically on the implementation of CRM activities at Vietnam Prosperity Joint Stock Commercial Bank (VPBank) and their impact on the bank's performance The research aims to clarify the practical application of CRM processes and provide recommendations for enhancing VPBank's performance through effective CRM strategies.
Significance of the Study
Abroad Studies
Since the early 1990s, customer relationship management (CRM) research has gained attention, but it has only become widely recognized in the past decade This field is continuously evolving, with numerous studies exploring both theoretical and practical aspects of CRM and its impact on organizations across various sectors.
In their book "Managing Customer Relationships: A Strategic Framework," Peppers and Roger (2004) define Customer Relationship Management (CRM) as a management decision-making process aimed at enhancing customer value and fostering strong connections through a customizable approach They introduce the IDIC Model, which comprises four essential actions—Identify, Differentiate, Interact, and Customize—that businesses should implement to cultivate stronger one-to-one relationships with their clients.
A study by Wu and Lu (2012) highlights that Customer Relationship Management (CRM) is essential for minimizing costs and enhancing company performance, ultimately leading to increased profits through customer satisfaction and loyalty The research emphasizes that the core objective of any business is to cultivate profitable customers Supporting this, the Pareto 80/20 Rule indicates that 80% of a company's revenue is generated by just 20% of its key customers Additionally, Peppers and Rogers (1993), as cited in Wu and Lu (2012), reveal that acquiring new customers is six times more expensive than retaining existing ones, primarily because loyal customers are already familiar with the company's offerings Satisfied customers are less likely to seek alternatives from competitors, making CRM a vital strategy for boosting customer loyalty and operational efficiency.
With a sample of 350 bankers, Kocoglue (2012) accomplished a survey on CRM and client loyalty in the Iranian banking industry The results of testing key
CRM variables highlight the importance of maintaining a customer database, understanding customer needs and complaints, and offering tailored solutions to enhance customer loyalty The author asserts that implementing CRM within a company can reduce costs while boosting operational efficiency and profitability through increased customer satisfaction and loyalty.
Adele and Gabriel (2013) conducted a study on the relationship between Customer Relationship Management (CRM) and bank performance across ten money deposit banks in Nigeria, revealing a significant correlation Among the three key aspects of CRM—Customer Identification, Customer Attraction, and Customer Retention—it was found that Customer Identification most greatly influences bank performance Consequently, retail banks are advised to enhance their CRM strategies, focusing on improving customer acquisition and retention policies to remain competitive and prevent consumer loss to rival institutions.
Domestic Studies
In Vietnam, customer relationship management (CRM) is gaining significant attention due to its critical role and the advantages it offers across various sectors The highly competitive banking industry, in particular, necessitates strategic investment in CRM initiatives to differentiate services, enhance value, and draw in customers Current research on CRM in Vietnam primarily consists of qualitative studies that provide a comprehensive understanding of CRM theories and their practical application in commercial banks, highlighting existing challenges and offering actionable recommendations for improvement.
In 2011, Pham Chi Binh examined customer relationship management (CRM) at the Quang Nam branch of Vietcombank, offering a theoretical framework for banking customer care activities The study highlights the bank's achievements while identifying shortcomings in its CRM efforts Additionally, Binh outlines strategies for developing an effective CRM system, which include establishing a marketing function structure, addressing perceptual limitations, enhancing the CRM information system, and fostering a supportive bank culture.
Master's thesis of Nguyen Lan Anh (2015) with the topic "Customer management at Joint Stock Commercial Bank for Investment and Development of
The BIDV Nghe An Branch presented a theoretical overview of Customer Relationship Management (CRM) and evaluated its current CRM activities This evaluation involved collecting and analyzing customer databases, identifying target customers, and determining suitable services and products for them Additionally, the bank focused on building relationships and assessing customer satisfaction levels Based on these findings, the branch proposed solutions to enhance its CRM strategy.
In his article "Customer Relationship Management: Situation and Solutions for Vietnamese Commercial Banks," Nguyen Tien Dong identifies five key reasons for the ineffective implementation of CRM in banks Firstly, many banks lack a comprehensive CRM strategy or face challenges in its development Secondly, a significant portion of the bank's database, about 90%, relies on customer-provided information, which is often incomplete or inaccurate Thirdly, the chosen CRM solutions at some banks do not align with their strategic goals Additionally, there is insufficient interdepartmental collaboration in CRM initiatives Lastly, the potential of the human factor remains underutilized in the CRM implementation process.
Significance of the study
Numerous authors globally have focused on Customer Relationship Management (CRM), as evidenced by various related studies This diverse body of research provides a robust foundation for future scholars to build upon in their exploration of CRM topics.
Currently, there is a lack of research in Vietnam regarding the impact of Customer Relationship Management (CRM) on bank performance This study focuses on examining how CRM influences the performance of VPBank The aim is to thoroughly assess the key CRM factors that affect VPBank's effectiveness Based on these findings, the study will propose solutions to enhance CRM activities, ultimately aiming to foster sustainable customer relationships and improve overall bank performance in the industry.
Theoretical Framework
This study is grounded in the Balanced Scorecard (BSC) model, which was introduced in the early 1990s by Harvard Business School researchers Robert Kaplan and David Norton The BSC integrates financial and non-financial indicators into a comprehensive report, offering managers enhanced insights into their activities beyond what traditional financial metrics can provide (Cobbold & Lawrie).
Utilizing CRM analytical research and the Balanced Scorecard (BSC) model, the author applies the Azzam (2014) framework to assess the CRM variables of VPBank This study also offers foundational insights into CRM for developing effective questionnaires.
Figure 1.1: Theoretical framework (adapted from Z.A.Mohmmad Azzam, 2014)
Purpose of the study
This study aims to elucidate the theoretical foundations of customer relationship management (CRM) activities and highlights the critical role of CRM in enhancing bank performance Additionally, it investigates the specific CRM factors influencing the business operations of VPBank Utilizing survey results and evaluating the impact of CRM on the bank's performance, the article offers actionable solutions to optimize these activities.
Internal Processes recommendations to contribute to improving customer relationship management at
VPBank and help improve the bank’s performance.
Scope of the study
The study examines the performance of Customer Relationship Management (CRM) at VPBank and its correlation with the bank's overall performance It encompasses data and insights regarding the current state of CRM practices at VPBank.
CRM operations in the period from 2020 to 2022.
Questions of the Study
The study will answer the following questions:
- To what extent does VPBank apply the CRM concepts?
- What are the CRM limitations in VPBank?
- To what extent do CRM elements impact the performance of VPBank?
Methodology
This thesis employs a mixed-methods approach, utilizing both qualitative and quantitative techniques It analyzes financial statements and annual reports from VPBank to evaluate overall business performance and the effectiveness of its CRM strategy Additionally, primary data gathered from customer questionnaires was descriptively analyzed using SPSS software version 20.0, employing methods such as Cronbach's Alpha, reliability tests, correlation tests, and regression analysis The findings aim to assess current practices, draw insights, and propose enhancements for VPBank's products and policies.
Organization of the thesis
The thesis contains four major parts, regardless of the introduction, conclusion, reference, and appendices:
Chapter 4: Conclusion, Limitation, and Recommendation
LITERATURE REVIEW
Characteristics of Customer Relationship Management
1.1.1 Definition of Customer Relationship Management
Customer Relationship Management (CRM) is a complex economic activity that varies across different customer levels, including distributors, wholesalers, partners, and consumers The application of CRM differs based on the specific relationships between customers and distributors Despite having similar business objectives, the structure of a CRM system will differ according to the unique needs of each firm.
Customer Relationship Management (CRM) is a strategic process that involves collecting and analyzing information to enhance an organization's understanding of its customer relationships (Zikmund et al., 2003) By utilizing information technology, CRM offers businesses a comprehensive and reliable perspective that integrates with their consumer databases This approach facilitates effective interactions and processes with customers, fostering mutually beneficial relationships Ultimately, CRM serves as a framework for data collection and information dissemination, aiding organizations in assessing their strategic options.
Customer Relationship Management (CRM) is a strategic approach that emphasizes the importance of existing clients, as noted by Bodenberg (2001) It encompasses the various business processes an organization employs to effectively identify, select, acquire, nurture, retain, and serve its customers These processes are integral to fostering a comprehensive agreement with clients and promoting long-term customer relationships.
Kumar and Reinartz (2006) define Customer Relationship Management (CRM) as the strategic analysis and utilization of marketing databases, leveraging information technologies to evaluate business conditions and uncover methods for maximizing customer value Additionally, CRM involves identifying the most profitable customers for a business and fostering unique interactions tailored to each individual customer.
Peppers and Rogers (2004) argued that CRM is a process of managerial decision-making with the ultimate goal of increasing customer value through better relationships with customers on an individual basis
CRM is founded on four key principles: treating customers as valuable assets, recognizing that not all customers are equal, acknowledging the diversity in customer needs and purchasing behaviors, and understanding that deeper consumer insights enable firms to enhance and optimize total value By gaining a better understanding of clients, companies can improve their market entry strategies and boost customer contributions (Kutner and Cripps, 1997).
Customer Relationship Management (CRM) encompasses a range of business activities designed to enhance a company's connection with its customers, enabling a deeper understanding and increased value for each client This open approach focuses on comprehending and influencing customer behavior through effective communication, ultimately aiming to boost customer acquisition, retention, and profitability.
1.1.2 Characteristics of Customer Relationship Management
Customer Relationship Management (CRM) empowers businesses to identify, attract, and build trust with their most valuable customers, ultimately enhancing sales and profitability By fostering long-term, meaningful relationships with individual clients, CRM not only generates future business income but also increases customer retention As noted by Norazah (2021), CRM is defined as "an approach that involves identifying, attracting, developing, and maintaining successful customer relationships over time to increase retention of profitable customers."
CRM fosters closer relationships between organizations and their customers, enhancing understanding and value for each individual Companies that prioritize creating enjoyable, convenient, and valuable experiences for their customers are more likely to retain their loyalty over competitors According to Pohludka and Stevrkova (2019), CRM is characterized as "an interactive process that aims to achieve a balance between the investment of the business entity and the satisfaction of the needs of its customers."
CRM enhances customer experience by enabling businesses to implement personalized interaction strategies tailored to individual needs This approach fosters a one-to-one relationship between customers and businesses, ensuring that customer feedback directly influences business offerings As noted by Akgun et al (2014), effective CRM aims to cultivate exceptional customer relationships by delivering experiences that exceed customer expectations.
Customer Relationship Management (CRM) is a strategic approach that enhances marketing, business, and service operations by focusing on customer needs, as highlighted by Ramaj and Ismaili (2015), Bahari and Erajidom (2015), and Saura, Soriano, and Marques (2021) It encompasses both operational and analytical processes, aiming to maximize return on investment by integrating individual customer data into all banking functions This integration enables banks to deliver consistent services, ultimately improving service quality and overall business efficiency.
According to Swift (2001), the primary aim of Customer Relationship Management (CRM) is to enhance customer repurchase opportunities by effectively communicating with the right customers and delivering the appropriate product at the right price through the ideal channel and timing Ultimately, this strategy seeks to boost overall business profitability by progressively increasing the value of the customer base.
1.1.3 The Role and Benefits of Customer Relationship Management in the Banking Sector
In today's competitive banking landscape, declining customer loyalty and shifting trends compel banks to adopt effective strategies for attracting and retaining clients while boosting revenue Customer Relationship Management (CRM) has emerged as a vital tool for managing information and addressing customer needs, enabling banks to identify and engage their most profitable customers By integrating advanced technology with human expertise, CRM helps develop innovative business strategies that enhance customer satisfaction and foster loyalty This system allows banks to deliver tailored, cost-effective services, create relevant products, and strengthen long-term customer relationships Additionally, CRM's capabilities in handling large customer volumes, managing retention, and facilitating cross-selling make it essential for understanding customer behavior through data mining, ultimately optimizing interactions and sales opportunities.
In "CRM Unplugged: Releasing CRM's Strategic Value," Bligh (2004) highlights that CRM enables banks to segment customers effectively, allowing for tailored services and demand creation through multi-channel campaigns This system provides bank employees with a comprehensive, multidimensional view of customers, facilitating quicker cross-selling of products By utilizing CRM for communication via phone, fax, email, and direct interactions, banks can mitigate business risks Additionally, CRM enhances customer experience by offering convenient services such as online banking, mobile banking, and ATMs.
According to Laketa et al (2015), the benefits of CRM are reflected in increased revenue and profit, reduced costs, and organizational change in the banking sector
Profit Decrease of Costs Organizational Change
- Increase the possibility for retention and acquisition of customers
- Increase the possibility of cross-selling
- Creation of loyalty of customers and increase profit
- Increase support to customers without increasing the costs of services
- Lower costs of acquisitions of new customers
- Banks can establish a better relationship with customers
- Banks have a comparative advantage customers
- Increase the profitability of customers
Table 1.1: Benefits of CRM Concept (Laketa et al 2015)
CRM enhances consumer engagement by facilitating cross-selling opportunities, as noted by Catalan-Matamoros (2012) Customers with long-term relationships with their bank are less inclined to explore offerings from competitors By prioritizing customer needs, banks can potentially reduce customer attrition rates by up to 25% and lower the long-term costs associated with acquiring new customers.
Customer Relationship Management Elements
To enhance the understanding of Customer Relationship Management (CRM), researchers have identified its key components Azzam (2014) highlighted that in the banking sector, CRM encompasses six essential elements: service quality, employee behaviors, customer database, conflict handling, physical environment, and social network.
Service quality is a challenging concept to define and measure due to its intangible nature It is commonly understood as the extent to which a service fulfills a customer's needs or expectations (Lewis and Mitchell, 1990; Dotchin and Oakland, 1994) According to Parasuraman et al (1985), service quality reflects an attitude formed by comparing perceived service performance with customer expectations While related, service quality is distinct from customer satisfaction Additionally, service quality encompasses a service's ability to perform its functions, including durability, reliability, accuracy, ease of operation, and other valuable attributes (Kotler et al., 2005).
Service quality in banking is primarily assessed through customer experience While many banks focus on financial strength to compete, they often overlook that customer satisfaction is crucial for revenue generation Ultimately, a bank's profitability hinges on the perceived quality of its services, which is directly influenced by customer assessments.
Bank employees serve as essential brand ambassadors for their institutions, as their interactions with customers directly influence the bank's image and service quality A satisfied customer can enhance the bank's reputation, while dissatisfaction can lead to negative perceptions When employees demonstrate professionalism, politeness, and a commitment to resolving customer issues, it fosters a positive view of the bank as efficient and customer-oriented Key aspects of exemplary service include providing clear and honest information, expressing gratitude, acknowledging mistakes, and actively listening to customer concerns By delivering quick and effective service, employees not only enhance customer satisfaction but also contribute significantly to the bank's overall performance and success.
A customer database is a vital asset for banks, containing essential information from past customers, including identifying details, demographics, and credit history This data enables banks to conduct thorough research on potential clients, tailoring products and services to meet their unique needs By leveraging customer databases, banks can identify profitable clients, generate leads, and deliver personalized communications, enhancing cross-selling opportunities and customer engagement Ultimately, a well-managed customer database aids in effective marketing strategies, boosts customer retention, and encourages repeat purchases.
Research by Raven and Kruglanski (1970) defines conflict as the tension and frustration stemming from the incompatibility between actual and desired responses among social entities Effective conflict resolution is crucial for service providers, as it minimizes the negative impacts of conflicts (Gaski, 1984) Furthermore, Ndubsi (2006) emphasizes that resolving conflicts is essential for maintaining consumer satisfaction, fostering loyalty, and nurturing positive relationships with companies.
Conflicts are inevitable in the service industry, prompting managers to focus on the type, scale, and intensity of these issues, as well as effective strategies for resolution The outcomes of conflicts can be both positive and negative, influenced by the nature of the problem and the bank's response By maintaining composure, actively listening to customer concerns, and working collaboratively towards solutions, banks can showcase their professionalism and reliability This approach fosters a positive customer impression and enhances trust in the institution.
Physical environments play a crucial role in delivering services to customers, encompassing elements such as interior decoration in transaction offices, waiting areas, and amenities like air conditioners and water purifiers Azzam (2014) highlights that the physical environment of a bank is integral to customer relationship management (CRM), as it helps shape a positive perception of the bank’s commitment to customer care, ultimately influencing overall customer satisfaction.
In recent years, businesses have leveraged social media to effectively connect with potential customers, enhancing marketing campaign success while reducing costs and boosting revenue Platforms like Facebook, Twitter, and LinkedIn have become vital for establishing sales channels The shift towards online interactions, accelerated by the Covid-19 pandemic, has transformed customer behaviors in seeking products and services Additionally, social networking allows banks to provide immediate advice on offerings and address customer concerns, ultimately improving satisfaction and overall performance.
Overview of Bank Performance
Operational efficiency is a crucial concept that spans various economic, technical, and social domains Each sector presents unique perspectives on effectiveness, leading to diverse interpretations of business efficiency based on different economic viewpoints.
According to Farrell (1957), the performance effect illustrates the correlation between output variables and the input variables utilized in their production This perspective highlights the intrinsic link between economic efficiency and productivity However, the quantitative and qualitative relationship between these results remains unproven, failing to fully capture the depth of this connection.
Operational efficiency, as defined by the European Central Bank (2010), refers to the capability of generating sustainable profits These earnings are crucial as they provide a buffer against unexpected losses, enhance capital positions, and facilitate improved future returns through the reinvestment of retained earnings.
According to Antonio, Ludger, and Vito (2006), efficiency is defined as the relationship between inputs and outputs, or profits and costs In scenarios where inputs are identical, the operation yielding a greater output is considered the more efficient one.
Business efficiency is defined as the relationship between inputs and outputs, specifically comparing business costs to the results achieved It is essential to consider social costs, which encompass labor factors, materials, and objects, reflecting both quantity and quality in the production process Ultimately, business efficiency serves as an indicator of the quality of business activities and the effectiveness of production resources within an enterprise's operations.
A bank functions as a business entity focused on maximizing profits while minimizing risk, preserving capital, expanding market share, attracting investments, and enhancing its brand reputation The performance of a bank is primarily determined by its operational profitability, serving as the foundation and objective of all banking activities (Ferrouhi, 2018).
To evaluate a company's performance, financial ratios serve as a key quantitative measure across various business sectors, including banking Consequently, financial factors significantly influence a bank's performance, particularly the components outlined in the CAMELS model.
CAMELS, an acronym for Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Sensitivity to Market Risk, serves as a comprehensive framework for assessing and measuring bank performance Drawing from extensive literature and previous research, each component is clearly defined, enabling commercial banks to effectively manage their operations and enhance overall business performance.
In addition to the components of CAMELS, there are some considerable variables that affect the bank’s performance, like leverage ratio, ownership type, economic growth (GDP), and inflation rate
Non-financial factors, which encompass a bank's off-balance sheet activities, play a crucial role in influencing bank performance alongside financial factors Key elements include customer-related aspects, macroeconomic policies, product offerings, and effective customer relationship management.
Customers play a crucial role in the success of banks, as their acceptance of banking products directly influences the institution's growth Factors such as population density, income levels, consumer psychology, and preferences significantly shape the offerings of banks, impacting their competitive edge Consequently, these elements have a profound effect on overall bank performance.
Macro-policies are the factors that inhibit or encourage the existence and development of the bank, thus directly affecting the bank's performance
Bank products serve as a crucial competitive advantage, as high-quality offerings effectively meet customer demands The superior quality of these products not only satisfies the evolving needs of clients but also enhances the bank's prestige and reputation within the market.
CRM enables banks to reduce costs and boost revenue by effectively addressing customer needs, enhancing customer satisfaction, and improving customer retention Further details will be discussed in the following section.
Bank Performance and the Effect of CRM
Customer satisfaction, as defined by Bonne and Kurtz (2013), reflects how pleased guests are with the products or services received Kotler and Kelner (2012) emphasize that customer satisfaction is a subjective feeling that indicates the extent to which an organization meets individual needs Measuring customer satisfaction is crucial because satisfied customers develop a positive perception of the organization, fostering trust and encouraging repeat business, which ultimately boosts revenue Satisfaction occurs when services meet or exceed customer expectations; conversely, failure to meet these expectations leads to dissatisfaction Consequently, prioritizing customer satisfaction is essential for service organizations, as it serves as a vital metric for evaluating business performance and cultivating lasting client relationships (Bakri & Taleb, 2014) Additionally, effective customer relationship management (CRM) significantly enhances customer satisfaction, promoting loyalty and repeat patronage.
Customer retention is a steadfast commitment to consistently utilize a service, unaffected by external influences such as promotional offers that might entice customers to switch providers This concept is crucial for a bank's success, as a significant portion of revenue and income is derived from existing customers rather than from acquiring new ones.
Losing clients can lead to significant revenue losses, highlighting the critical importance of customer retention Satisfied customers are more likely to recommend a company's services, which can enhance its reputation and attract new business (Bakri and Taleb, 2014) Maintaining positive interactions with customers is essential for fostering satisfaction and loyalty Ultimately, customer retention serves as a key indicator of client satisfaction and plays a vital role in influencing a company's financial performance and profitability.
SUMMARY
This chapter outlines the theories of Customer Relationship Management (CRM), detailing its definition, characteristics, and significance within the banking sector It emphasizes the benefits of CRM in enhancing bank performance and identifies key factors that contribute to its effectiveness Additionally, the chapter highlights the specific CRM elements that impact banking outcomes, establishing a theoretical foundation that will guide subsequent research on CRM practices at VPBank and their influence on overall bank performance.
METHODOLOGY
Overview of Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) 20 1 Formation and Development History of VPBank
2.1.1 Formation and Development History of VPBank
Vietnam Prosperity Joint Stock Commercial Bank (VPBank), founded on August 12, 1993, is among the oldest commercial banks in Vietnam Over the past 30 years, VPBank has played a crucial role in the country's development by effectively mobilizing and allocating financial resources The bank has facilitated access to financial services for individuals and provided timely capital to businesses, supporting their investment and expansion efforts.
As of December 31, 2022, VPBank has established a robust ecosystem comprising one head office in Hanoi, 72 branches, and 178 transaction offices nationwide Following the successful 'Running Moments' phase from 2012 to 2017 and the 'Breakthrough' phase from 2018 to 2022, VPBank has emerged as the largest bank in Vietnam by charter capital, exceeding 67 trillion VND.
By the end of 2022, VPBank's total assets reached 631.013 billion VND, with equity at 103.502 billion VND and a market capitalization of 120.116 billion VND, marking more than a twofold increase since 2017, according to VPBank’s 2022 Annual Report.
2.1.2 Vision, Mission, and Core Values of VPBank
VPBank is embarking on a significant development journey from 2022 to 2026, aiming to establish itself as a leading financial institution With a vision to secure a position among the Top 3 banks in Vietnam and the Top 100 banks in Asia, VPBank is committed to contributing to the sustainable development and prosperity of both the country and the community, as outlined in its 2022 Annual Report This clear and ambitious strategy will serve as a guiding framework for the bank's growth and development.
VPBank's mission is to lead in innovation by enhancing the quality of exceptional financial services for customers and partners, while effectively fostering sustainable prosperity for shareholders, the community, and society.
(VPBank's 2022 Annual Report) VPBank's company culture, created and nourished on six key values (VPBank's 2022 Annual Report), supports the implementation of the following strategy:
VPBank is committed to navigating challenges with unwavering determination, focusing on quality growth while continuously innovating and enhancing its products and services This steadfast approach aims to solidify its status as a leading bank in Vietnam, positioning it for expansion into regional and international markets.
2.1.3 Outstanding Products and Services of VPBank
VPBank has become the pioneer in digital payments by launching Google Pay, enabling customers to make contactless transactions using their Android devices across its entire Mastercard and Visa card offerings.
VPBank leads the way in innovative online savings products, enabling customers to deposit funds conveniently without visiting a branch The bank offers seven diverse online savings options tailored to meet various customer needs, including regular savings, Luck and Prosperity savings, Prosperity - Preserved savings, early interest payment savings, periodically paid interest savings, Easy Savings@Kids, and Easy Savings available through VPBank’s website.
VPBank offers a wide range of unsecured loan products that cater to various customer segments, from those with documented income to those whose income is evaluated through behavioral data This diverse portfolio enables more customers to access banking capital and diminishes reliance on the black market Notably, VPBank is the pioneer in providing unsecured overdraft products for priority customers, specifically targeting the high-end market segment (VPBank Annual Report 2022).
Business household overdraft products help individual customers and business households advance money and advance salaries in just 5 minutes on the VPBank NEO application without any paperwork (VPBank Annual Report 2022)
VPBank offers highly competitive mortgage products, leveraging a rapid online valuation process for simple assets like cars, project houses, numbered apartments, and real estate This efficient collateral assessment saves customers valuable time, enhancing their overall experience.
VPBank offers a wide range of card services tailored to meet individual customer needs A standout product is the co-branded card with IDC Shopee, launched in December 2022, highlighting the two-year partnership between Shopee and VPBank This collaboration has earned VPBank recognition as Shopee's "Most Impressive Partner."
2020 and 2021 Also in 2022, VPBank got four Mastercard 2021 awards and five Visa 2022 awards (VPBank annual report 2022)
VPBank NEO is a user-friendly mobile banking solution that enables customers to conduct transactions effortlessly with just one click Launched in 2022, the platform introduced a volunteer feature, facilitating quick and effective donations to those in need and highlighting VPBank's commitment to community welfare in Vietnam According to VPBank's 2022 Annual Report, the number of new VPBank NEO activations soared to 2.15 million, marking a remarkable 229% increase from the previous year Additionally, VPBank earned two prestigious awards from The Asian Banker magazine for "Best Digital Banking Application in Vietnam" and "Best Digital Business Initiative in Vietnam" in 2022.
Research Methods
The design of the questionnaires referring to the CRM factor and the quality scale has been used in previous studies such as the study by Z.A.Mohmmad Azzam
In 2014, a study titled "The Impact of Customer Relationship Management on Customer Satisfaction in the Banking Industry - A Case of Jordan" was conducted, alongside research by Choi Sang Long et al in 2013, which focused on the "Impact of CRM Factors on Customer Satisfaction and Loyalty." To align with VPBank's CRM practices, the questionnaire used in this research was adapted and consists of two distinct parts.
Part 1 - General information: including questions about basic customer information to categorize participants, such as gender, age, and questions about the service they used and their opinion of VPBank
Part 2 - Includes questions built into 7 groups of factors: Service quality, Employee behaviors, Customer database, Conflict handling, Physical environment, Social network, and Customer Satisfaction (specific questions are presented in Appendix 01) The questions are designed to be answered on a Likert scale to measure customer satisfaction on five levels: completely disagree, disagree, partially agree, agree, and completely agree
Questionnaires are distributed to customers through email, text messages, or in-person at the bank's counter As noted by Hair et al (1998), a minimum sample size of five times the number of observed variables is necessary for reliable results Consequently, the survey successfully collected 205 observation samples, which is deemed sufficient for analysis.
Data Analysis Procedures
Thematic analysis emerged as the most effective data analysis strategy for this study, as it focuses on identifying patterns, configurations, and themes within qualitative data This approach aligns perfectly with the research objectives, facilitating the organization and comprehensive description of the collected data.
This study employs inferential statistics, specifically "deductive statistics," to explore correlations between variables and draw conclusions from the results (Sekaran & Bougie, 2010) Data collected through questionnaires were analyzed using SPSS software version 20.0, employing various methods such as the Cronbach Alpha Test, Correlation Analysis, and Regression Analysis.
Cronbach's alpha is a statistical measure used to assess the reliability of an instrument by comparing the common variance among its components to the total variance It is frequently utilized to evaluate the consistency of multiple-item scales, particularly in studies employing the Likert scale within questionnaires The value of Cronbach's alpha ranges from 0 to 1, indicating the degree of reliability.
1 The internal consistency of the rating items improves as the Cronbach value approaches 1.0 An acceptable scale should have a Cronbach's Alpha reliability of 0.7 or higher However, as a preliminary exploratory study, a Cronbach's Alpha threshold of 0.6 is acceptable The higher the Cronbach's Alpha coefficient, the higher the reliability of the scale The reliability coefficient test criteria employed in the study are as in Table 2.1
Cronbach’s alpha Internal consistency α ≥ 0.9 Excellent
Table 2.1: Cronbach’s alpha values and internal consistency
Cronbach's alpha analysis not only assesses scale reliability but also identifies inconsistencies among scale items through item-total correlations This method evaluates the correlation of individual variables with the overall scale; a higher correlation value indicates a stronger relationship with other items Variables exhibiting item-total correlations greater than 0.3 are deemed acceptable, while those below this threshold are excluded from the analysis.
Correlation analysis aims to evaluate the linear relationship between dependent and independent variables, employing the Pearson Correlation method The Pearson correlation coefficient ranges from -1 to 1, where a value of 1 signifies a strong positive relationship—indicating that as one variable increases, the other does as well Conversely, a coefficient less than 0 reflects a negative relationship, meaning that an increase in one variable corresponds with a decrease in the other A value of 0 indicates no correlation Detailed levels of these relationships are outlined in Table 2.2.
Pearson correlation values Level of relationships
Table 2.2: Level of relationship according to Pearson correlation
Regression analysis is a statistical method utilized to determine the equation that most accurately represents the relationship between dependent and independent variables This technique provides the best estimate of the true correlation between these variables, enabling predictions about the dependent variable based on specific values of the independent variable In this research, multiple linear regression is employed as the primary regression model.
Y: Scores on the customer satisfaction towards VPBank
𝑋 1 , 𝑋 2 , , 𝑋 𝑘 : Scores on the CRM components' attitude (service quality, employee behaviors, customer database, conflict handling, physical environment, social network interaction)
𝑏 1 , 𝑏 2 , , 𝑏 𝑘 : Regression coefficient of independent variables
SUMMARY
This chapter provides a comprehensive overview of VPBank's development history, vision, mission, core values, and notable products It also outlines the research methodology and data collection process, highlighting the author’s objective analysis based on a survey of 205 questionnaires The reliability of the data was tested using Cronbach's alpha, along with regression and correlation tests Findings and detailed data analysis will be presented in the subsequent chapter.
FINDINGS AND ANALYSIS
Business performance of VPBank in the period from 2020-2022
The years 2020 to 2022 were marked by significant challenges, including natural disasters and the global Covid-19 pandemic, alongside rapid and unpredictable changes both globally and regionally.
Despite facing numerous challenges in the global and domestic markets, VPBank has demonstrated resilience and unity, ensuring steady growth over the past three years.
Deposits from Customers (i) 286.319.402 345.390.282 424.662.382 Valuable Paper Issued (ii) 62.845.488 81.295.633 63.699.974 Capital Mobilization (i+ii) 296.273.441 323.132.661 366.851.391 Loans to Customers 290.816.086 355.281.219 438.338.047
Table 3.1: Business performance of VPBank 2020-2022 (Source: VPBank’s 2020 - 2022 annual report)
Figure 2.1: Capital Mobilization Proportion of VPBank 2020-2022
Between 2020 and 2022, VPBank experienced a notable shift in capital mobilization, as illustrated in Figure 2.1 In 2020, the issuance of valuable papers accounted for 21.21% of capital mobilization, while customer deposits made up 78.79% By 2021, this trend reversed, with valuable papers issued increasing by 3.95% to 81,295,633 million VND, whereas customer deposits decreased by 3.95% to 345,390,282 million VND Despite the slight decline in customer deposits, valuable papers remained the dominant source of capital mobilization VPBank's 2021 Annual Report indicated that customer mobilization reached 91.5% of the annual target, reflecting a 9.1% increase from 2020.
In 2022, the issuance of valuable papers surged by 7.8%, totaling 63,699,974 million VND This increase occurred amid rising interest rates, prompting customers to shift their preferences towards term deposits.
In VPBank's 2022 Annual Report, it was noted that customer deposits surged significantly, totaling 424.662.382 million VND, despite a decrease in the proportion of issued valuable papers The bank achieved 89% of its annual mobilization and issuance plan, reflecting a 13.5% increase compared to 2021 This growth highlights VPBank's strategic initiatives to navigate the challenging liquidity conditions faced in the recent market.
Figure 2.2: Analysis of Loans by Terms of VPBank 2020-2022
In 2020, the distribution of loans to customers was balanced across three categories, with mid-term loans representing the largest share at 43.5% Short-term loans followed closely at 35.08%, while long-term loans comprised the smallest portion at 21.42%.
In 2021, short-term loans and long-term loans experienced slight growth, reaching 38.22% and 22.35%, respectively Despite a minor decrease of 4.07% in mid-term loans, they retained the largest share at 39.43%.
In the final year of the period, short-term loans dropped to 33,51% In the opposite direction, mid-term loans and long-term loans have a slight increase, reaching 40,94% and 25,55%, respectively
In a challenging financial landscape, VPBank has prioritized credit quality and effectively managed bad debts The bank successfully reduced its non-performing loan (NPL) ratio from 1.98% in 2020 to 1.51% in 2021 Despite a rise in the NPL ratio to 2.19% in 2022, VPBank's commitment to improving credit quality remains evident.
Table 3.2: Profit of VPBank 2020-2022 (Source: VPBank’s 2021 & 2022 annual report)
In 2020, VPBank achieved a total consolidated operating income of 39,033 billion VND, reinforcing its position as a leading Private Commercial Joint Stock Bank in revenue for multiple years The bank's strategic diversification of non-interest revenue sources effectively mitigated the impact of the epidemic, ensuring revenue stability Additionally, VPBank reported a pre-tax profit exceeding 13,000 billion VND, surpassing its annual target by 127.5%, as highlighted in VPBank’s 2020 Annual Report.
In its 2021 annual report, VPBank reported a total operating income exceeding 44 trillion VND, marking a 13.5% increase compared to the previous year and solidifying its status as a leader among private joint stock commercial banks Despite facing a challenging economic environment, the bank achieved a pre-tax profit of 14.36 trillion VND in 2021, reflecting a 10.3% growth from 2020.
In 2022, VPBank successfully diversified its attraction sources to navigate a volatile market, achieving total operating income exceeding 57.8 trillion VND, marking a 31% increase year-on-year and maintaining its leadership in the private banking sector for 26 consecutive quarters Additionally, VPBank's pre-tax profit soared to over 21.22 trillion VND, reflecting a remarkable 48% growth from the previous year, positioning it among the Top 5 most profitable banks in the system.
The Reality of CRM Practices at VPBank
Customer database is divided into two types of storage
Customer information is gathered through registration forms for various services, including card usage, loan applications, and credit card openings These forms are securely stored in the customer service department's data files at each branch where transactions occur.
The T24 Core Banking system centralizes the management of customer information, allowing for efficient data sharing across the entire banking network Upon initiating a transaction, each customer is assigned a unique Customer Information File (CIF) code, which enables the bank to monitor and access all associated accounts, deposit balances, and credit histories seamlessly.
T24 Core Banking is a flexible solution designed to help VPBank swiftly create new products and enhance existing processes to meet market demands With its automation capabilities, the T24 system enables rapid responses to customer needs, streamlining tasks such as client data management, product development, and banking operations reporting for improved efficiency and organization.
Customer data is categorized into three primary groups: basic data, demographic data, and current product usage information The corporate customer database comprises essential business details, contact information, a sample of the company seal, and the signatures of the accountant and legal representative.
At VPBank's head office, all customer data is centralized in the information technology center, accessible to branches through the IT department's General Planning Department Access to this data is granted at varying levels according to the responsibilities of each department Although VPBank utilizes customer database management software, it falls short in effectively identifying customers Instead, customer identification primarily relies on transaction channels, including phone interactions, the bank's website, social media, and direct engagement by branch personnel.
VPBank strategically segments its individual customers into distinct groups based on varying backgrounds, primarily targeting two key segments: middle-class customers, known as Mass Affluent (MAF), and high-net-worth individuals referred to as Affluent (AF).
VPBank has identified the MAF segment as a high-potential area that significantly contributes to its individual customer base To cater to this group, VPBank launched the VPBank Prime brand, aiming to become the market leader in the MAF segment Customers qualify as MAF Class by meeting specific criteria established by the bank.
- Assets under management (AUM) reach from 150 - 500 million VND
- Current Account Saving Account (CASA) reach from 15 - 80 million VND
- Newly opened deposit from 300 million VND to under 1 billion VND
- Life insurance contract deployed by VPBank as an insurance agent with an annual premium of 12 - 14 million VND
- Payroll salary account at VPBank in the previous month, the total salary payment entry is from 15 - 50 million VND
- Total secured loan amount more than 360 million VND
- Have a salary document proved more than 15 million VND approved on LOS
VPBank has established a distinct brand for its AF segment customers, known as the VPBank Diamond brand This exclusive brand caters to AF customers by providing premium banking experiences and customized products and services Within the VPBank AF segment, there are three distinct membership levels designed to meet varying customer needs.
Current Account Saving Account (CASA)
Diamond Elite (AF-Private) More than 5 billion VND More than 500 million
VND Diamond (AF-Preferred) 1-5 billion VND 150-500 million VND
Pre-Diamond (AF-Special) 500 million - 1 billion
Table 3.3: VPBank Diamond priority classification
3.2.4 Evaluation of CRM practices at VPBank
Over 30 years of operation, VPBank has left a good impression on customers because VPBank is well aware of the importance of customers and focuses on them for development It is undeniable that VPBank has achieved certain successes when implementing CRM But there are still some limitations in the process of implementing CMR at VPBank
In its 2022 annual report, VPBank achieved the highest Net Promoter Score (NPS) and Customer Satisfaction Score (CSAT) among commercial banks in Vietnam, reflecting exceptional customer satisfaction across all service channels, rated at 4.8/5 The bank proactively identified 300 systemic issues, preventing over 10 million negative customer experiences VPBank has developed a customer information system to enhance modern banking operations and facilitate effective customer relationship management Additionally, an integrated reporting system allows for monthly monitoring of business results and ongoing analysis, enabling timely adjustments to meet year-end targets The bank also employs diverse interaction strategies, with tailored policies for target, large, and loyal customers.
The customer database at VPBank is not updated promptly and lacks integration across various programs, leading to inefficient data mining While there are diverse interactive tools available, their effectiveness in supporting the customer relationship management system is limited Furthermore, VPBank has struggled to effectively assess the performance of its customer relationship management efforts.
Impact of CRM on the bank performance of VPBank
The study analyzed data from 205 valid participants, focusing on descriptive statistical analysis to evaluate the gender distribution, age, occupation, and banking service usage behaviors of the respondents.
Figure 2.3: Gender Structure of participants
The study included 104 female participants, accounting for 53% of the total, while males comprised the remaining 47% This relatively balanced gender distribution minimizes the influence of gender on the research outcomes.
Figure 2.4: Age Structure of participants
The survey predominantly included young participants aged 18 to 35, representing 64% of the total respondents Participants aged 36 to 55 accounted for 30%, with only 12 individuals over the age of 55, making up just 6% of the sample The limited number of respondents over 55 may be attributed to the online nature of the survey.
18-2223-3536-55Over 55 are often less exposed to technology and social networks to be able to access the survey
In Vietnam, 47% of the workforce is employed by private or foreign enterprises, highlighting the significant role these businesses play in the economy Most of these companies collaborate with banks to facilitate salary payments and manage employee salary accounts.
VPBank, a leading bank in Vietnam, appeals to a diverse clientele, including both corporate and individual customers Among its users, 24% are employed in state agencies, a figure that is relatively low due to a preference for banks with significant state ownership Additionally, 27% of customers are self-employed, while only 2% of participants are retirees.
Private or foreign organizationOwn BusinessRetired
Figure 2.6: Most Used Services provided by VPBank
VPBank offers a diverse range of card services, including ATM cards, Mastercard, and Visa, making it one of the most popular choices among customers With a variety of credit cards tailored to meet different needs, VPBank provides specialized options for e-commerce shoppers and frequent diners at franchise restaurants, each featuring unique payment incentives.
The rise of digital payment platforms, fueled by internet advancements, has led to E-banking becoming the second most popular service at VPBank The user-friendly banking application, easily installable on mobile devices, offers comprehensive features such as money transfers, passbook openings, bill payments, and online credit applications, akin to a traditional electronic bank Additionally, customers benefit from quick and convenient transactions, with their payment information securely stored in VPBank's big data system.
Credit services, international payments, and gold-foreign currency transactions are underutilized among Vietnamese citizens, who prefer converting gold and foreign currency at gold stores for better exchange rates The limited use of credit services can be attributed to cumbersome registration processes and VPBank's fee structure, which does not align with consumer preferences.
Figure 2.7: Service Channel of VPBank
ATMs are the least favored transaction channel compared to E-banking, primarily due to their lack of convenience and limited banking functions While E-banking provides most services available at traditional bank branches, ATMs fall short in offering the same diversity Additionally, services that E-banking cannot provide typically require the submission of legal documents, which ATMs are also unable to process.
A recent survey of 171 participants revealed a strong appreciation for the diverse range of financial products and services offered by VPBank, particularly their tailored credit cards designed for e-commerce shoppers and frequent diners at franchise restaurants, which come with various payment incentives Additionally, the bank's staff service attitude was highly valued by customers However, the bank's interest rates and fees did not leave a significant impression, indicating that these aspects are not VPBank's strengths.
The research employed a series of similar questions to develop explanatory observed variables for each factor within the model To assess the model's reliability, Cronbach's Alpha test will be conducted to measure the consistency and explanatory power of these observed variables concerning the common factor.
The test results for 28 observed variables, explaining the 7 main variables of the research model are summarized in the table 3.4 below:
Facilities Product Diversity Appropirate rate and fee
Factor Cronbach’s Alpha servicequality 0.760 customerdatabase 0.874 employeesbehavior 0.836 conflicthandling 0.863 physicalenvironment 0.717 socialnetworkinteraction 0.717 satisfaction 0.772
The test results indicate that most observed variable groups exhibit strong consistency and effectively explain common factors However, the variables servicequality4 and employeesbehavior1 demonstrated weak explanations, with Corrected Total-Item Correlation values of 0.240 and 0.196, both falling below the acceptable threshold of 0.3 The Cronbach's Alpha values for the factors servicequality and employeesbehavior, including these variables, were 0.524 and 0.724, respectively Upon removing these two variables from the research model, the Cronbach's Alpha values improved significantly to 0.760 and 0.836 Consequently, the study opted to exclude these two observed variables from the model.
The observed variables demonstrate high consistency and effectively explain the common variable, as indicated by Cronbach's Alpha values exceeding 0.7 and Corrected Total-Item Correlation values above 0.3 Removing any of these variables results in a decrease in the Cronbach's Alpha coefficient Consequently, the research model, after excluding the observed variables servicequality4 and employeesbehavior1, is deemed reliable and optimal for assessing the relationship between CRM factors at VPBank and customer satisfaction.
Correlations service quality customer database employee's behavior conflict handling physical environment social network interaction satisfaction service quality
** Correlation is significant at the 0.01 level (2-tailed)
* Correlation is significant at the 0.05 level (2-tailed)
The test results indicate a strong positive correlation between satisfaction and the independent variables in the research model, with a Pearson correlation coefficient of 0.766 between service quality and satisfaction, falling within the range of 0.6-0.79.
A p-value below 0.05 indicates significant correlations, with the correlation coefficient between customer database and satisfaction at 0.278, reflecting a weak correlation Similarly, the correlation coefficients for employee behavior, physical environment, and social network interaction are 0.332, 0.268, and 0.324, respectively, all indicating weak correlations In contrast, conflict handling shows a moderate correlation with the dependent variable, represented by a Pearson coefficient of 0.428 All correlations are statistically significant, as their significance indices are below 0.05.
Std Error of the Estimate
1 799 a 639 624 5402 a Predictors: (Constant), age, customer database, gender, social network interaction, service quality, employee's behavior, physical environment, conflict handling
The test results show that R Square is equal to 0.639 All independent and semi-controlled variables in the model explain 63.9% of the variation of the dependent variable
1 (Constant) -.589 418 -1.409 160 service quality 843 057 704 14.914