The impact of customer relationship management on the performance of the bank a case study of vp bank

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

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

ACKNOWLEDGEMENTS

Graduation thesis in Banking with the title "The Impact of Customer Relationship Management on the Performance of the Bank: A Case Study of VP Bank" is the product of a long process of hard work and encouragement from teachers, friends, and family The author wishes to express gratitude to those who assisted me during the course of my study and thesis completion via this page

First and foremost, I would like to express my heartfelt gratitude to the lecturers, particularly my supervisor, Ph Do Thi Thu Ha, for her focused attention, lessons, and advice, which provided me with crucial knowledge and necessary skills during the course More significantly, everything I've learned here will surely help

me tremendously in my future career

I'd like to convey sincere thanks to the Banking Academy's leadership and the Banking Faculty's faculty for creating favorable conditions for me to complete

my graduation thesis

Finally, I am pleased to show gratitude to the leaders and members of the VPBank - West Hanoi branch for their passionate assistance and for establishing good conditions for me to obtain more important materials for the thesis

However, due to a lack of professional expertise and practical experience, the limitation of the content of the research is inevitable I hope to receive comments and additional guidance from lectures so that I can add to this graduation thesis

DECLARATION

I declare that this Graduation Thesis has been composed solely by myself and that it has not been submitted, in whole or in part, in any previous application for a degree Except where stated otherwise by reference or acknowledgment, the work presented is entirely my own

Hanoi, May 2023

Signature

Ngo Ngoc Thao

TABLE OF CONTENT

ACKNOWLEDGEMENTS i

DECLARATION ii

ABBREVIATIONS vi

LIST OF TABLE AND FIGURES vii

INTRODUCTION 1

1 Statement of the Problem and Rationale for the Study 1

2 Significance of the Study 2

2.1 Abroad Studies 2

2.2 Domestic Studies 3

2.3 Significance of the study 4

3 Theoretical Framework 5

4 Purpose of the study 5

5 Scope of the study 6

6 Questions of the Study 6

7 Methodology 6

8 Organization of the thesis 6

CHAPTER 1: LITERATURE REVIEW 7

1.1 Characteristics of Customer Relationship Management 7

1.1.1 Definition of Customer Relationship Management 7

1.1.2 Characteristics of Customer Relationship Management 8

1.1.3 The Role and Benefits of Customer Relationship Management in the Banking Sector 9

1.2 Customer Relationship Management Elements 11

1.2.1 Service quality 11

1.2.2 Employee Behaviors 12

1.2.3 Customer Database 13

1.2.4 Conflict Handling 13

1.2.5 Physical Environment 14

1.2.6 Social Network Interaction 14

1.3 Overview of Bank Performance 14

1.3.1 Definition of Bank Performance 14

1.3.2 Factors Affect Bank Performance 15

1.4 Bank Performance and the Effect of CRM 17

1.4.1 Customer Satisfaction 17

1.4.2 Customer Retention 17

CHAPTER 1 SUMMARY 19

CHAPTER 2: METHODOLOGY 20

2.1 Overview of Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) 20 2.1.1 Formation and Development History of VPBank 20

2.1.2 Vision, Mission, and Core Values of VPBank 20

2.1.3 Outstanding Products and Services of VPBank 21

2.2 Research Methods 23

2.2.1 Questionnaires 23

2.2.2 Sample and Data Collection 23

2.3 Data Analysis Procedures 23

2.3.1 Thematic Analysis 23

2.3.2 Statistical Analysis 24

CHAPTER 2 SUMMARY 27

CHAPTER 3: FINDINGS AND ANALYSIS 28

3.1 Business performance of VPBank in the period from 2020-2022 28

3.1.1 Capital Mobilization 29

3.1.2 Lending Activities 30

3.1.3 Profit and Loss Statement 31

3.2 The Reality of CRM Practices at VPBank 32

3.2.1 Customer database system 32

3.2.2 Analyzing customer database 33

3.2.3 Selecting target customer 33

3.2.4 Evaluation of CRM practices at VPBank 34

3.3 Impact of CRM on the bank performance of VPBank 35

3.3.1 Descreptive Analysis 35

3.3.2 Reliability Test 40

3.3.3 Correlation Test 42

3.3.4 Regression Test 44

CHAPTER 3 SUMMARY 48

CHAPTER 4: CONCLUSION, LIMITATION, AND RECOMMENDATION 49

4.1 Conclusion 49

4.2 Limitation and Recommendation 50

REFERENCES 52

APPENDIXES 01 56

APPENDIXES 02 59

ABBREVIATIONS

VPBank Vietnam Prosperity Joint Stock Commercial Bank

LIST OF TABLE AND FIGURES

Table 2.1 Cronbach’s alpha values and internal consistency Table 2.2 Level of relationship according to Pearson correlation Table 3.1 Business performance of VPBank 2020-2022

Table 3.3 VPBank Diamond priority classification

Table 3.9 Coefficients of Customer database

Table 3.10 Correlation of Employee's behavior

Table 3.11 Correlation of Physical environment

Figure 2.1 Capital Mobilization Proportion of VPBank 2020-2022 Figure 2.2 Analysis of Loans by Terms of VPBank 2020-2022

Figure 2.3 Gender Structure of participants

Figure 2.6 Most Used Services provided by VPBank

INTRODUCTION

The Banking - Finance sectors have undergone significant transformations

in recent years Many joint-stock commercial banks were established, along with foreign bank branches and joint venture banks All of these factors contribute to the diversity of a developed economy's financial system, such as Vietnam's

Accompanying the development of the banking industry is fierce competition

to attract customers to their bank and retain them In today's market economy, with its competitive environment, clients play a key role for each business in general, and the bank in particular, to survive and develop Every company understands that customer retention and development are important elements of its overall strategy

As a result, expanding business products and services to satisfy customer wants and expectations and preserve client loyalty is more important than ever Building a CRM system for the purpose of developing relationships with potential customer groups and maintaining long-term relationships with existing customer groups not only adds value to customers but also increases profits for businesses, particularly those in the banking industry Therefore, CRM is considered an organization's core competency in a highly competitive business environment However, implementation is still difficult, so the number of successful projects is still relatively low, and banks often miss the opportunity to increase loyalty and expand sales

Besides the opinion that the effectiveness of CRM activities will help the bank acquire new potential customers as well as maintain the loyalty of existing customers, there are also negative views about the need to create this system So, what exactly is CRM? Is it truly beneficial to Vietnamese commercial banks? Or, to

be more specific, the situation of executing CRM activities and what impact they have had on the performance of Vietnam Prosperity Joint Stock Commercial Bank recently Recognizing the importance of high applicability in practice as a result of clarifying the above problem, the researcher chose the topic "The Impact of Customer Relationship Management on the Performance of the Bank: A Case Study

of VPBank" to investigate the practical application of the CRM process and the

effects of CRM on the bank's performance From there, make recommendations to the Vietnam Prosperity Commercial Joint Stock Bank

2 Significance of the Study

2.1 Abroad Studies

In the world, research on customer relationship management has been noticed since the early 1990s of the last century However, the theory of customer relationship management has only been popularized in the last decade and is constantly evolving Currently, there have been several research on both theoretical and practical elements of CRM and its effects on organizations in a variety of areas

According to Peppers and Roger (2004) in their book "Managing Customer Relationships: A Strategic Framework", CRM is a management decision-making process with the ultimate goal of increasing customer value in order to create strong connections with customers through a customizable pace In this book, the writers also developed the IDIC Model The IDIC Model stands for four actions (Identify, Differentiate, Interact, Customize) that companies should do in order to build stronger one-to-one relationships with their clients

In the study of Wu and Lu (2012), the authors showed that CRM is used to minimize expenses and increase company performance, which means profits are achieved through the satisfaction and loyalty of customers According to their research, the primary purpose of any firm is to develop profitable customers According to the Pareto 80/20 Rule, 80% of a company's income comes from 20%

of its primary consumers Furthermore, according to Peppers and Rogers (1993), referenced in Wu and Lu (2012), the cost of getting a new customer is six times higher than the cost of retaining an existing customer The reason for this is primarily due to existing clients becoming familiar with the products and services that have been provided At the same time, if a customer has been satisfied for a long time, the customer no longer needs to hunt for products and services from competitors CRM is thus an effective way for firms to improve customer loyalty and business 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 indicate that customer database, understand customer needs and complaints, and provide specific solutions so that they can positively relate to customer loyalty According to the author, using CRM in the firm will save expenses while improving the company's operational efficiency and profitability through customer satisfaction and loyalty

Adele and Gabriel (2013) studied the relationship between CRM and bank performance at ten money deposit banks in Nigeria This study shows that there is a significant relationship between CRM and bank performance Furthermore, of the three aspects of CRM (Customer Identification, Customer Attraction, Customer Retention), customer identification has the most impact on bank performance As a result, retail banks should strengthen their CRM strategies to improve their business viability, particularly their customer acquisition and retention policies, in order to avoid losing consumers to competitors

Pham Chi Binh (2011) conducted a study on customer relationship management at the Quang Nam branch of the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) The study provides a theoretical framework for customer care activities at banks, summarizes achievements, and points out some shortcomings in CRM activities at banks Following that, the author provides guidance on how to construct a CRM system, including constructing a marketing function apparatus, overcoming perception restrictions, improving the CRM information system, and building a 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

Vietnam (BIDV) - Nghe An Branch" presented the theoretical basis of CRM, and assessed the current status of CRM activities at BIDV Nghe An branch according to the following contents: collect and analyze customer databases; through analysis, the bank will select target customers, identify services and products for target customers; create relationships and assess the satisfaction level of target customers From there, propose solutions to improve the CRM strategy at the bank

In terms of the article, Nguyen Tien Dong examined the reasons why certain banks failed to implement CRM in his article "Customer relationship management, situation and solutions for Vietnamese commercial banks" published on the Financial and Monetary Research Forum There are five main reasons: (i) Banks have not paid enough attention to developing a complete CRM strategy or have encountered difficulties in strategy formulation; (ii) 90% of the bank's database is provided by the customer, and other necessary information is either unavailable or incorrect; (iii) CRM solution selection at some banks is not compatible with the bank's strategy and objectives; (iv) Lack of collaboration between departments in implementing CRM activities; (v) The human factor has not been fully exploited in the CRM implementation process

2.3 Significance of the study

Through references to related studies, the issue of CRM has received the attention of many authors around the world The development of research works on the topic of CRM is relatively diverse, helping subsequent researchers have a solid basis for further research

Meanwhile, so far in Vietnam, there has been no research on the impact of CRM on bank performance Therefore, the author chooses a research direction on the influence of CRM on bank performance at VPBank Through this research paper, the author wants to deeply evaluate and clarify the main factors of CRM that affect VPBank's performance On that basis, the author also proposes solutions to support VPBank in particular and the banking industry in general in perfecting CRM activities with the main purpose of maintaining and developing sustainable relationships with customers, thereby improving bank performance

3 Theoretical Framework

The theoretical framework for this study is based on the Balanced Scorecard model (BSC) The balanced scorecard was developed in the early 1990s by Harvard Business School researchers Robert Kaplan and David Norton By combining both financial and non-financial indicators in a single report, the Balanced Scorecard attempts to provide managers with more detailed and relevant information about the activities under management than financial measures alone (Cobbold & Lawrie, 2002)

Based on CRM analytical research studies and the Balanced Scorecard (BSC) model, the author uses an Azzam (2014) framework to evaluate VPBank's CRM variables These resources also provide CRM basics for creating questionnaires

Figure 1.1: Theoretical framework (adapted from Z.A.Mohmmad Azzam, 2014)

4 Purpose of the study

The study focuses on understanding and clarifying the theoretical bases of customer relationship management activities and emphasizes the importance of CRM to the bank's performance At the same time, learn the factors of CRM that affect the business activities of VPBank Based on the survey results and assessment

of the impact of CRM on the bank's performance, the article proposes solutions and

Conflict Handling

Physical Environment

Social Network Interaction

Bank Performance (BSC model)

External (Customer) Perspective

Customer Satisfaction and Retention

Internal (Employee) Perspective

Internal Processes

recommendations to contribute to improving customer relationship management at

VPBank and help improve the bank’s performance

5 Scope of the study

The study refers to CRM performance at VPBank along with the practical

relationship between CRM and the bank’s performance Therefore, the scope of the

research will include data and information related to the current status of VPBank's

CRM operations in the period from 2020 to 2022

6 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?

7 Methodology

This thesis uses both qualitative and quantitative methods Based on the

collected documents, combined with comparison and analysis of business results in

general and the results of CRM strategy in particular from financial statements and

annual reports of VPBank Along with that, primary data collected from customer

questionnaires was analyzed descriptively and processed using SPSS software

version 20.0 with methods such as Cronbach's Alpha, reliability test, correlation

test, and regression analysis Thereby conducting assessments, learning experiences,

and finding solutions to improve and develop VPBank's products and policies for

this activity

8 Organization of the thesis

The thesis contains four major parts, regardless of the introduction,

conclusion, reference, and appendices:

Chapter 1: Literature Review

Chapter 2: Methodology

Chapter 3: Findings and Analysis

Chapter 4: Conclusion, Limitation, and Recommendation

CHAPTER 1: LITERATURE REVIEW 1.1 Characteristics of Customer Relationship Management

1.1.1 Definition of Customer Relationship Management

Customer Relationship Management is an economic activity that is difficult

to define because CRM is applied to many different levels of customers, such as distributors, wholesalers, partners, and consumers CRM when applied to each type

of relationship between customers and distributors is also different Even if the businesses have the same goals, the form of the CRM system will vary based on the requirements of the firm

According to Zikmund et al (2003), CRM is a process of gathering information to improve knowledge of an organization's connection with its customers It is a business strategy that employs information technology to provide firms with a full, dependable view that combines with their consumer database Thereby, all processes and interactions with customers will help maintain and expand relationships that are beneficial for both parties Therefore, CRM is a technique or a set of processes designed to collect data and provide information to assist an organization in evaluating strategic options

According to Bodenberg (2001), CRM is a strategy for focusing on existing clients Specifically, CRM includes the business processes that an organization implements to better identify, select, acquire, nurture, retain, and serve customers These processes cover the organization's end-to-end agreement with the client as well as the prospect of a long-term customer connection

Kumar and Reinartz (2006) defined CRM as the exploitation and analysis of marketing databases and the use of information technologies to assess the situation

of the business and identify methods that allow maximum value the long-term value of each customer to the business CRM is also defined as the process of selecting the customers that a business can most profitably serve and establishing unique interactions between the business and each customer (Kumar and Reinartz, 2006)

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 built on four principles: (1) customers should be handled as valuable assets; (2) not all customers are equal; (3) customers differ in their needs, tastes, and purchasing behavior; and (4) a better understanding of consumers helps firms better provide and optimize total value The more a company understands its clients, the more chances it has of entering the market and increasing its customer contribution (Kutner and Cripps, 1997)

In general, CRM can be considered as a set of business activities aimed to put a company in closer contact with its customers in order to better understand and add value to each client It is an open business approach to understanding and influencing customer behavior via communication to improve customer acquisition, retention, and profitability

1.1.2 Characteristics of Customer Relationship Management

CRM enables businesses to identify, attract, and trust their best customers, allowing them to increase sales and profitability CRM fosters long-term, meaningful, personal relationships with individual clients, which produce future business income CRM builds long-term, meaningful, personal relationships with individual customers who will generate future business income According to Norazah (2021), CRM is "an approach that involves identifying, attracting, developing, and maintaining successful customer relationships over time in order to increase retention of profitable customers"

CRM brings organizations closer to their customers, allowing them to better understand each customer, provide more value to each of them, and make each customer more important to the firm Businesses that make their products and services more pleasant, convenient, and valuable to their customers are more likely

to spend all of their time and money on themselves than competitors CRM is defined 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"

by Pohludka and Stevrkova (2019)

CRM helps businesses personalize the customer experience Businesses use a direct interaction strategy tailored to the needs of each customer In essence, that concept is specifically a one-to-one relationship between a customer and a business, from customer input to business output for a specific customer According to Akgun

et al (2014), CRM attempts to develop and maintain outstanding customer connections by providing experiences that go above and beyond what customers would expect

CRM is a customer-oriented business concept that promotes effective marketing, business, and service operations, according to Ramaj and Ismaili (2015), Bahari and Erajidom (2015), and Saura, Soriano, and Marques (2021) CRM is both

an operational and an analytical process CRM maximizes return on investment by integrating individual customer information into all bank processes This will help the bank provide consistent services to each customer, thereby improving service quality and business efficiency

Swift (2001) stated that the purpose of CRM is to improve customer repurchase opportunities by improving the process of communicating with the right customers and providing the right product at the right price through the right channel at the right time Thereby, we see that the overall business goal of this strategy is to make the business more and more profitable by gradually increasing the value of the customer base

1.1.3 The Role and Benefits of Customer Relationship Management in the Banking Sector

In the banking industry's extremely competitive climate, the decline in customer loyalty, and changes in customer trends require banks to seek solutions to attract and keep customers while also increasing income CRM's role as an information management and customer needs response tool has been approved as a method for identifying and capturing the bank's most profitable clients CRM is made up of advanced technology and people to develop new business strategies for retaining competitive advantage by pleasing existing customers and acquiring new ones CRM enables banks to provide customers with suitable and cost-effective services, produce goods and services that are appropriate for customers, and

enhance customer loyalty and long-term value The potential of the CRM system in the banking sector enables the bank to handle a big volume of customers, control customer retention, and successfully cross-sell items at the same time CRM allows banks to use data mining tools to better understand their customers, find prospects, and determine the best approach to interact and cross-sell their products to potential customers

In Bligh's book "CRM Unplugged Releasing CRM's Strategic Value" published in 2004, the author found that CRM allows banks to categorize customers into different segments, helping them customize services and create demand through multi-channel campaigns CRM gives a comprehensive picture that allows bank employees to have a multidimensional view of their customers, allowing them

to cross-sell different goods to customers more quickly When bank employees use the CRM system to follow and communicate with consumers indirectly via phone, fax, email, and direct contact through bank employees at the transaction office, business risks can be decreased CRM at the bank brings benefits to customers with convenient services such as online banking, mobile banking, ATMs, and so on

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

Increase Revenue &

- Increase the possibility

for retention and

- Decrease costs of sales

- Lower costs of acquisitions of new customers

- Banks can establish a better relationship with customers

comparative advantage

customers

profitability of

customers

Table 1.1: Benefits of CRM Concept (Laketa et al 2015)

CRM, according to Catalan-Matamoros (2012), creates new potential for consumer engagement through cross-selling products and services Customers that have long-term relationships with that one bank are less likely to seek out products and services from other competitors The author also asserts that if a bank focuses its activities on meeting customer needs, the rate at which customers leave will be decreased by up to 25%, and the cost of acquiring new customers will be reduced in the long run

1.2 Customer Relationship Management Elements

To better understand CRM, researchers have divided CRM into elements Specifically, the research conducted by Azzam (2014) has demonstrated that CRM

in the banking sector consists of six components including Service quality, Employee behaviors, Customer database, Conflict handling, Physical environment, and Social network

1.2.1 Service quality

The concept of service quality is difficult to define because researchers have difficulty defining and measuring it since service quality is intangible The most commonly used definition to define service quality is the degree to which a service meets a customer's need or expectation (Lewis and Mitchell, 1990; Dotchin and Oakland, 1994) According to the definition of Parasuraman et al (1985), service quality is a form of attitude, resulting from a comparison between the actual service that customers perceive when consuming the service and their expectations Service quality is related but not synonymous with customer satisfaction." Service quality can also be defined as the ability of a service to perform its functions, including

overall durability, reliability, accuracy, ease of operation, and repair, as well as other attributes have different values (Kotler et al., 2005)

Service quality in a bank is evaluated based on customer experience The majority of banks compete with one another based more on their financial capacity than on the quality of their services because they believe that banks are part of the financial sector However, the existence of any business, including banks, is due to the fact that customers determine the amount of revenue generated by the company based on their assessment of service quality In other words, the bank's profitability

is determined by the quality of service, and the customer determines the quality of service

1.2.2 Employee Behaviors

Bank employees are brand ambassadors for their respective institutions Because the relationship between the bank and the consumer serves as a mirror that reflects the bank's service quality, image, and brand The bank employees have a direct touch with the customers When a bank employee dissatisfies clients, the bank's image and reputation suffer; conversely, when a bank employee satisfies consumers, the positive impression is noticed and propagated by customers Customers will have a positive view of the bank as a good and efficient bank if employees do their best to help customers address their difficulties On the other side, if a customer has to wait a long time and is serviced by an employee who has

an awful attitude, it will reflect negatively on the bank A skilled employee understands that offering ideal service is closely related to politeness, elegance, enthusiasm, and a caring, attentive style of service, with other characteristics not to mention For example, employees provide full and honest information to customers about products and services; employees do not forget to express sincere gratitude to customers for their interest and using the bank's services, as well as admit mistakes and apologize to customers when problems occur during the customer's use of services at the bank; when customers complain about the bank's products and services, the staff remains calm, listens, understands the customer's concern, and seeks the best solution; staff provides quick, effective, and high-quality service to all customers The aforementioned are some exemplars of providing customers with

ideal service, and these acts can have substantial benefits reflecting on the bank’s performance

1.2.3 Customer Database

A customer database is a collection of information gathered from customers who have used the bank's products or services in the past Customer data contains identifying information (name, home address, personal ID, phone number, email address, and so on), demographic information (age, gender, marital status, education level, income), and credit history information (transactions and loan history) Banks must conduct comprehensive research on potential consumers in order to offer products and services that satisfy their individual demands Databases are used in customer relations to identify the most profitable consumers, generate leads, and send personalized messages about items and services that customers are interested

in in order to increase cross-selling, assure effective contact with customers, and personalize customer service In short, a customer database assists a bank in categorizing customers into multiple groups to ensure successful marketing, customer retention, and an incentive to repurchase

1.2.4 Conflict Handling

According to research by Raven and Kruglanski (1970), conflict is described

as "the tension and frustration between two or more social entities arising from the incompatibility between actual and desired responses" Conflict resolution reflects the service provider's ability to limit the negative consequences of potential or apparent conflict (Gaski, 1984) Ndubsi (2006) asserts that conflict resolution helps

to ensure consumer satisfaction, loyalty, and a good relationship with the company

In fact, conflicts are unavoidable in the service industry, therefore managers' primary worry is not whether or not the conflict happens, but rather where, what type, scale, and intensity it is, as well as the basis for suitable strategies and solutions Conflicts can have positive or negative outcomes depending on the kind and degree of the issue and how the bank resolves them When the bank maintains a calm demeanor, listens to the customer's concern, and collaborates with the consumer to find a solution, it demonstrates professionalism and reliability From

there, customers will have a positive impression of the bank and will have more faith in it

1.2.5 Physical Environment

Physical environments are tools for offering services to customers Interior decoration in transaction offices, waiting rooms, parking lots, and utilities like air conditioners, water purifiers, product brochures, catalogs, and so on are examples of the physical environment According to Azzam (2014), a bank's physical environment is an aspect of CRM, through which customers can have a positive image of the bank that cares about these matters, which eventually affects customer satisfaction

1.2.6 Social Network Interaction

In recent years, businesses have used social media as a way to easily reach out to their potential customers Social networks help businesses increase the success of marketing campaigns, reduce costs, and increase revenue effectively Businesses are currently using social networking sites such as Facebook, Twitter, and LinkedIn to build sales channels Because of the social isolation caused by the Covid-19 pandemic, customers' habits of seeking and using products and services shift to online platforms and means Using social networking platforms also allows banks to immediately advise clients on products and services, as well as detect and manage customer concerns, thereby increasing customer satisfaction and the bank's performance

1.3 Overview of Bank Performance

1.3.1 Definition of Bank Performance

Operational efficiency is a concept widely applied in all economic, technical, and social fields Each field is different, and looking at it from different angles, we will have different views on the issue of effectiveness From the perspective of different economic viewpoints, there are also many different opinions on the definition of business efficiency

According to Farrell (1957), the performance effect is expressed as the correlation relationship between the obtained output variables and the input

variables used to produce the outputs The advantage of this view is that it reflects the intrinsic relationship between economic efficiency and productivity However, the quantitative and qualitative correlation between the results has not yet been shown and does not fully reflect the closeness of this relationship

According to the European Central Bank (2010), operational efficiency is the ability to generate sustainable profits Earnings first serve as provision for unexpected losses, strengthen capital positions, and improve future returns through the investment of retained earnings

Antonio, Ludger and Vito (2006) point out that efficiency is a comparison between inputs and outputs, or between profits and costs Given the same input, the operation that produces the larger output will be the more efficient one

In short, business efficiency is a comparative quantity: Comparison between inputs and outputs, comparison between business costs and results obtained From a social perspective, the considered cost must be a social cost because there is a combination of labor factors, labor materials, and labor objects according to a correlation both in quantity and quality in the process business process to produce qualified products for consumption Business efficiency reflects the quality of business activities and the level of production resources in the business processes of the enterprise

The bank is also a business enterprise in a specific field and operates with the goal of maximizing profits with low risk, preserving capital, increasing market share, attracting investment, and enhancing brand reputation Bank performance is defined as the main driver of profitability generated from their operations Besides,

it is the pillar and the purpose of any banking activity (Ferrouhi, 2018)

1.3.2 Factors Affect Bank Performance

Financial Factors

Commonly, to measure a company's performance, financial ratios are a quantitative measure in most studies for all different business sectors, including banking Therefore, financial factors largely affect the bank's performance, specifically the elements in the CAMELS model

CAMELS is an acronym containing the following six words: Capital Adequacy (C), Asset Quality (A), Management (M), Earnings (E), Liquidity (L), and Sensitivity to Market Risk (S) Based on the literature and reviews of previous researchers, each component is mentioned concretely Because CAMELS is a synthesizing criteria method to evaluate and measure bank performance, it will facilitate commercial banks in effectively managing their business activities

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

Non-financial factors are essentially the bank's activities off the balance sheet These factors also have a significant impact on bank performance as are financial factors Specifically, factors about customers, macro policies, products, and customer relationship management in the bank as described in the next section

Customers are an important factor and are paid special attention by banks If the products offered by the bank are not widely accepted by consumers, the bank cannot develop Population density, income level, psychology and consumer preferences of customers greatly affect the bank's products, affecting the bank's competition As a result, the bank's performance is affected

Macro-policies are the factors that inhibit or encourage the existence and development of the bank, thus directly affecting the bank's performance

Products are an important competitive tool of banks in the market, because the product quality satisfies customers' demand for the product The higher the quality of the product, the more it will meet the increasing needs of customers Product quality contributes to the prestige and reputation of the bank in the market

As mentioned in the previous sections, CRM helps banks save costs and increase revenue by well meeting customer needs, making customers happy and retaining customers Details will be covered in the next section

1.4 Bank Performance and the Effect of CRM

1.4.1 Customer Satisfaction

According to Bonne and Kurtz (2013), customer satisfaction refers to how pleased the guest is with the products or services they have gotten Kotler and Kelner (2012) state that, the customer's satisfaction or dissatisfaction expresses the individual feeling of the customers, and to what extent the organization satisfied their needs Customer satisfaction is therefore a relative term It is the guest's subjective decision, feeling, or attitude about whether their requirements have been met Why is measuring customer satisfaction so important? Because when customers are satisfied with the products and services they are provided with, they will have a good impression of the organization and thereby increase customers' confidence in the organization When customers have trust, they will come back and use other products and services, thereby increasing the organization's revenue If the service meets the customer's requirements, the consumer is satisfied If the service surpasses these requirements, the consumer will be extremely satisfied But if it doesn't live up to these expectations, the customer won't be satisfied Furthermore, customer satisfaction is the primary goal of all service organizations and must come first before product, profit, or any other goal the business wants to achieve Since customer satisfaction is a key component of every business culture and is a useful metric for assessing business performance Particularly, if the firm is focused on the customers and building lasting client relations (Bakri & Taleb, 2014) Nevertheless, CRM raises a positive impact on customer satisfaction and keeps the customers coming back to the bank

1.4.2 Customer Retention

Customer retention refers to a determined commitment to continue using a service over time, regardless of external factors including promotional campaigns that may cause customers to change providers According to the authors, customer retention is essential to a bank's success Organizations generate most of their revenue and income from existing customers compared to acquiring new customers

As a consequence, losing each client risks potential revenue losses However, it has been stated that satisfied customers are more likely to recommend the company's

services to others (Bakri and Taleb, 2014) Furthermore, the importance of customer retention depends mostly on maintaining good customer interactions with the organization Customer retention is one of the most important indicators of client satisfaction Also, customer retention is recognized as an important aspect in determining a company's financial performance and profitability

CHAPTER 1 SUMMARY

In this chapter, the thesis presents the theories of CRM, including the definition of CRM, the characteristics of CRM, the role and benefit of CRM in the banking industry, and the main factors contributing to the effectiveness of CRM in banking At the same time, the CRM elements affecting bank performance were highlighted in this first chapter The theoretical foundations of CRM in this chapter will serve as the framework for further CRM research at VPBank and the CRM aspects influencing bank performance in the next chapters

CHAPTER 2: METHODOLOGY 2.1 Overview of Vietnam Prosperity Joint-Stock Commercial Bank (VPBank)

2.1.1 Formation and Development History of VPBank

Vietnam Prosperity Joint Stock Commercial Bank (VPBank), established on August 12, 1993 - is one of Vietnam's oldest commercial joint stock banks VPBank has always accompanied the country's development over the last 30 years, serving

as a bridge to effectively mobilize and allocate resources for the economy and assisting people in accessing burdensome financial - banking services, as well as assisting many businesses in borrowing capital in time to invest and expand production - business activities

According to the 2022 annual report, the VPBank ecosystem currently has one head office in Hanoi, 72 branches, and 178 transaction offices across the country Succeeding in the 'Running Moments' (2012-2017) and 'Breakthrough' phases (2018-2022), VPBank has now grown to become the largest bank with charter capital in Vietnam, with more than 67.000 billion VND as of December 31,

2022 By the end of 2022, VPBank's total assets reached 631.013 billion VND, and equity reached 103.502 billion VND, with a market capitalization of 120.116 billion VND - more than double what it was in 2017 (VPBank’s 2022 Annual Report)

2.1.2 Vision, Mission, and Core Values of VPBank

VPBank is ready for the next development journey – the journey to becoming a powerful and strong financial institution in the 5-year development period from 2022–2026 The vision and goal of the 5-year development strategy for the period 2022–2026 are "To become a bank with a solid position in the Top 3 leading banks in Vietnam and the Top 100 largest banks in Asia, contributing to promoting the sustainable development and prosperity of the country and the community" (VPBank's 2022 Annual Report) This clear vision of VPBank will be

a guideline to guide the bank firmly on its path to development

The noble aim of VPBank is to "pioneer in innovation, elevate the quality of outstanding financial services to customers and partners, and develop effectively to bring sustainable prosperity values to 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:

• Customer is the focus

2.1.3 Outstanding Products and Services of VPBank

Digital Payment

VPBank is the first bank to deploy digital payments with Google Pay product that allows customers to make contactless payments with Android mobile devices for the entire Mastercard and Visa card portfolio (VPBank Annual Report 2022)

Saving Products

VPBank is a pioneer in the development of a variety of online savings products, allowing consumers to deposit money without having to visit a branch At VPBank, there are seven online savings products to meet the needs of all customers including regular savings, savings for Luck and Prosperity, Prosperity - Preserved savings, savings with early interest payment, savings with periodically paid interest, Easy Savings@Kids, and Easy Savings (VPBank’s Website)

Unsecured Loans

The diverse unsecured loan products of VPBank on the market meet the majority of customer segments from customers with proof of income to customers whose income is assessed through customer behavior data This diversification of product portfolio helps many customer segments to access the bank's capital and reduce dependence on the black market Also, VPBank is the first bank to provide

unsecured overdraft products for priority customers in the market to meet the needs

of the high-end customer segment (VPBank Annual Report 2022)

Secured Loans

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)

Mortgage products of VPBank are highly competitive in the market thanks to the ability to quickly value simple assets such as cars, project houses, numbered apartments, and real estate in the data warehouse The collateral valuation is done online and gives quick results, saving customers time (VPBank Annual Report 2022)

Debit & Credit Card

VPBank has a diverse portfolio of card services to suit the needs of each customer The most prominent in this category is the co-branded card product with IDC Shopee launched in December 2022, continuing to mark the long-term cooperation relationship between Shopee and VPBank over the past 2 years VPBank is continuously honored by Shopee as the “Most Impressive Partner” in

2020 and 2021 Also in 2022, VPBank got four Mastercard 2021 awards and five Visa 2022 awards (VPBank annual report 2022)

VPBank NEO

VPBank NEO is VPBank's mobile banking product that helps customers make simple and convenient transactions with just one click In 2022, the volunteer feature on VPBank NEO was launched, helping customers with the fastest and most effective volunteering needs to donate to the right people, in the right circumstances, affirming the value of community prosperity that VPBank wants to bring to the people of Vietnam According to VPBank’s 2022 Annual Report, the number of customers activating new VPBank NEO in 2022 reached 2.15 million customers, equal to 229% compared to 2021 Furthermore, VPbank has received 2 awards from The Asian Banker magazine for "Best Digital Banking Application in Vietnam" and "Best Digital Business Initiative in Vietnam" in 2022

2.2 Research Methods

2.2.1 Questionnaires

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 (2014) on "The Impact of Customer Relationship Management on Customer Satisfaction in the Banking Industry - A Case of Jordan” and research by Choi Sang Long et al (2013) with the topic “Impact of CRM Factors on Customer Satisfaction and Loyalty” Furthermore, the questionnaire was modified according to VPBank's CRM practices The questionnaire is divided into two 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

2.2.2 Sample and Data Collection

The questionnaires are sent to customers via email, text message, or directly

at the bank's counter According to Hair, Anderson, Tatham, and Black (1998) the number of samples required is at least five times the observed variable Therefore, the number of observation samples collected by the survey is 205, which is appropriate

2.3 Data Analysis Procedures

2.3.1 Thematic Analysis

Thematic analysis, which is the process of identifying data design, configurations, and subjects that occur in qualitative data, proved to be the best data analysis strategy for this study It matches the needs of the research because its major purpose is the organizing and complete description of the obtained data

2.3.2 Statistical Analysis

In this study, inferential statistics known as "deductive statistics" are applied Inferential statistics have been beneficial in determining whether or not there are correlations between variables and in making conclusions regarding the results (Sekaran & Bougie, 2010) The data obtained from the questionnaire were processed using SPSS software version 20.0 Some data processing methods applied

in this thesis include Cronbach Alpha Test, Correlation Analysis, and Regression Analysis

2.3.2.1 Cronbach’s Alpha Test

Cronbach's alpha is a method of evaluating reliability by comparing the amount of common variation among the components that comprise an instrument to the amount of total variance Cronbach's coefficient alpha is commonly used to describe the consistency of a multiple-item scale, such as studies that used the Likert scale in the questionnaire Cronbach's confidence range for alpha is from 0 to

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

Table 2.1: Cronbach’s alpha values and internal consistency

(George & Mallery, 2003)

Cronbach's alpha analysis, in addition to analyzing scale reliability, is also helpful in determining whether any item is inconsistent with the other elements of the scale via item-total correlations The correlation of one variable with others on the same scale is performed via item-total correlation; the higher the correlation value, the better the correlation between that item and the others Variables with item-total correlations more than 0.3 will be accepted; variables with item-total correlations less than 0.3 will be removed from the analysis data

2.3.2.2 Correlation Analysis

The purpose of using correlation analysis is to test the close linear correlation between the dependent variable and the independent variables This study uses the Pearson Correlation for the correlation analysis The Pearson correlation coefficient ranges from -1 to 1 If the value is 1, then the two variables have a strong positive connection, and when one increases in value, the other follows the trend A value less than 0 indicates that the two variables have a negative relationship, which means that as the value of one variable increases, the value of the other decreases When the value equals 0, however, there is no relationship The more specific level

of relationships is described in Table 2.2

𝑌 = 𝑏0+ 𝑏1𝑋1+ 𝑏2𝑋2+ +𝑏𝑘𝑋𝑘+ 𝜀 Where:

Y: Scores on the customer satisfaction towards VPBank

𝑋1, 𝑋2, , 𝑋𝑘: Scores on the CRM components' attitude (service quality, employee behaviors, customer database, conflict handling, physical environment, social network interaction)

𝑏1, 𝑏2, , 𝑏𝑘: Regression coefficient of independent variables

𝑏0: An intercept

𝜀: An error term

CHAPTER 2 SUMMARY

This chapter gave an overview of VPBank's development history, vision, mission, core values, and outstanding products In addition, it will also provide detailed research methodology and data collection preparation In order to have an objective and accurate analysis, the author conducted a survey and collected 205 questionnaires Also mentioned is the use of Cronbach's alpha test, regression, and correlation test to test the reliability of data and research The finding and analysis

of the data are further performed in the next chapter

CHAPTER 3: FINDINGS AND ANALYSIS 3.1 Business performance of VPBank in the period from 2020-2022

The period from 2020 to 2022 is a difficult and challenging period with natural disasters, the global outbreak of the Covid-19 pandemic, and, at the same time, many rapid, unpredictable, and dramatic changes in the world and the region

In the common context of many challenges, VPBank has made great efforts, united

in solidarity, to overcome difficulties to ensure the operation of the Table 2.1 shows that in three years, VPBank has still maintained steady growth despite the difficulties of the changes in the global and domestic markets

Total Income Before Taxes 13.019.455 14.363.770 21.220.132

Table 3.1: Business performance of VPBank 2020-2022 (Source: VPBank’s 2020 - 2022 annual report)