CHAPTER 3: RESEARCH METHODOLOGY
3.3 Research Process
selects credit card services in consumer banking as our study field because out of all the business services provided by consumer banking, credit card services relate most closely to customers. It is integral to customer consumption in daily living.
3.3 Research Process
There are four steps to establish the research. The steps are explained in Figure 3-2.
Step Description Objective Approach Deliverables
1 Literature Review
To understand the critical factors for CRM success after mergers
Data collected from journals and trade magazines
Possible factors for CRM success and failure after mergers
2 Multiple Case Studies
To understand the CRM performance after M&A in credit card services
Published data about CRM
performance of the credit card industry
Findings about CRM performance after M&A in credit card services 3 Cross Case
Analysis
Critical factors for CRM success in post-M&A
In-depth case study of the selected cases of different M&A types
Findings about factors for CRM success in post- M&A of factors for CRM success after merger
Final findings about CRM success after merger
Figure 3-2: Research Process
First, based on previous studies and practical cases, the study formed factors for CRM success after merging. Then, we conducted empirical analysis on M&A cases since 2004 regarding CRM performance in the credit card industry. Next, based on the case analysis from the previous stage, we selected five cases of different types of M&A, and we cross-case analyzed patterns of CRM success and failure with previously formed CRM success/failure factors verified and enhanced.
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Data Collection of the First Stage
In the case-analysis stage, this study collected data from government published reports about credit card services in Taiwan between 2004 and 2011. Eight M&A cases were selected, and we analyzed CRM performance data one year before and after the declared date of merger. The reason for analyzing data one year after the merging was to assure that we eliminated the effects of post-merger turbulence such as a period of refinement of the customer base, activities related to cleaning out customers with bad credit, and learning the path for the new customer base.
The Banking Bureau of FSCEY reports the credit card performance of all credit card issuers on a monthly basis. The published data of each credit card service include a total number of credit cards issued, effective cards, active cards, cards cancelled, retail sales volume, and the revolving balance of the issued cards. In credit card terms, the retail sales volume is the amount of charges owed to the credit card company; the revolving balance is also called the consumer credit amount, which is the portion of credit card spending that goes unpaid at the end of each billing cycle.
Four CRM measures—customer growth, customer loyalty, customer retention, and customer contribution—are used to measure the CRM performance of credit card services before and after the merger. The indexes and calculation of the indexes are listed in Table 3-1.
Table 3-1: CRM Measures in Credit Card Services
CRM
Measures Indexes Calculation
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Growth
• Cards issued
• Effective cards
• Market share
• Cards issued
• Effective cards = total cards issued – total cards cancelled
• Market share = effective cards/effective cards of all banks
Loyalty Active cards • Active cards
Retain Attrition rate • Attrition rate = cards cancelled/cards issued
Customer Contribution
• Revolving balance per card
• Balance per card
• Revolving balance per card = revolving balance/effective cards
• Balance per card = retail sales volume/effective cards
• Customer growth means a company’s efforts to acquire customers; it can mean the company’s marketing strength in obtaining customers in the market and its ability to maintain customers’ active use of the card. It is reflected in the total cards issued, effective cards, and market share.
• Customer loyalty means customer continuous use of the services, which is measured by the return on investment of the efforts put into serving customers and promoting card use. In other words, it is reflected in customer use of the credit card.
• Customer retention is about a company’s efforts to retain customers, and it is reflected in the customer attrition rate.
• Customer contribution means a company’s efforts to promote more products/services to customers, such as cross-selling to gain more customers’
pocket-share. It is reflected in the card’s revolving balance and balance per card.
Customer revolving balance is for the card issuers’ to earn interest on this debt.
When the revolving balance amount is higher, the credit card issuer will earn interest, and income will increase. The balance of the card refers to the use of the
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These CRM indexes of credit card services are provided by the Financial Supervisory Commission, Executive Yuan, R.O.C. (FSCEY). The FSCEY was established in 2004 to provide unified financial supervision (Tan, 2009) after the passing of the Finance Holding Company Law in July 2001 and the growth of mergers or alliances in the industry. The range of data collection is between June 2004 and 2011 because most banking M&A occurred after 2004. The eight studied M&A cases of credit card services are listed in Table 3-2. The results are described in chapter four.
Table 3-2: The Selected Services
Merger The Merged Current Bank Date of M&A
Standard Chartered Bank (180,745)
Citibank (1,617,971) Bank of Overseas Chinese (781,427)
Citibank (Taiwan) December 2007 Taipei Fubon Bank
(2,376,638)
International Bank of Taipei (1,509)
Taipei Fubon Bank January 2005
HSBC (586,373) The Chinese Bank (551,032)
HSBC March 2008
Bank of Taiwan (275,866) Central Trust of China (18,444)
Bank of Taiwan July 2007
Far Eastern International Bank (1,043,276)
AIG Credit Card Co.
(225,715)
Far Eastern
International Bank
September 2009 NOTE: The figures in the table mean effective cards before one month of M&A.
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Multiple Case Studies
Based on the findings of the previous case analysis of the eight M&A cases (refer to the Appendix 1), we selected four typical cases to examine the factors for running CRM with a successful or failure result. The selected cases include two with
improved CRM performance one year after the M&A and two with decreased CRM performance one year after the M&A. The case information is listed in Table 3-3
Table 3-3: Five Cases
Improved performance in CRM Taishin International Bank Citibank
Decreased performance in CRM HSBC
Bank of Taiwan
Same performance in CRM Taiwan Cooperative Bank
The objective of the multiple-case study is to understand the “what,” “why,” and
“how” of CRM success and failure after merger. This requires a descriptive and exploratory method of contextual analysis. The literature review of business integration and customer relationship management in the previous section provides a basis for understanding some factors for M&A failure with CRM. Though the previous literature analysis does not provide well-established hypotheses explaining the behavior of managing customer relationships, it provides sources for exploring answers to such questions as: “Why do organizations experience CRM success?”
Based on the organized points and explanations of CRM success and failure in the previous section, this study seeks patterns of CRM success after merger, with findings deduced from multiple sources of evidence. The case-study approach (Yin, 1994) is used because of the need to investigate, in depth, business and technology design and management. Because the factors of CRM success and failure after merger are
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dynamic, a semi-structured questionnaire with open questions exploring the underlying causes of the management of customer service and the knowledge-management process integration was used as an instrument for data collection and knowledge enhancement as well as subject exploration. The semi-structured questionnaire (APPENDIX 2) is developed based on a literature review of critical factors for CRM success after merger. Table 3-4 lists the possible factors for CRM success after merger that were used for building the semi-structured questionnaire (APPENDIX 2). However, the listed items were not used exclusively for data collection—the open question “Are there other factors that can cause CRM success or failure after merger?” was always asked in each interview.
Table 3-4: Factors about Managing Customer Relationships in M&A
Topic Description Sub-items
Strategy for Rebuilding Customer Base and Service Portfolio
The company’s goals and
directions of business integration of customer base and diversity of services
Customer base refinement Service portfolio refinement
Service culture
Organizational expectation for employees to develop service and performance competencies to attract and retain customers
Standard of service quality Service attitude and behavior Management style
Performance measurement Process
integration
To build standardized data and processes within the merged firm
Process standardization Operation familiarity
Technology integration
Technology integration to avoid inconsistent data and cut costs
Database conversion System/ dataflow synchronization
Business policy discussion, Procedure standardization Communication Communication with both
employees and customers to
Communication with employees
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smooth the transition and reduce uncertainty in the changing period
Communication with customers
Organizational inertia
Employees may manifest
resistance through different kinds of behavior due to
business-integration projects
Low productivity Low quality of services Low intention to cooperate Low intention to innovate
One to two managers were interviewed in each case, and cases supporting the success or failure of CRM were collected and re-examined to form a consistent explanation of CRM success. Table 3-5 lists the information from the interviews. Cross-case analysis was then conducted to identify common traits and different traits with regard to sources of factors for CRM success and failure.
Table 3-5: Information from Interviews
Bank Interviewer Time
Bank A Manager of Customer Management
Department
2 h
Bank B Manager of Credit Card Department
Manager of branch in Bank B1
3h
Bank C Director of Personal Finance Department 2 h
Bank D Specialist of Marcom Department 2 h
Bank E Assistant Manager of branch 2 h
The interviews were conducted with both business managers and business operators, and interviewees were encouraged to think retrospectively on the instances of CRM challenges associated with the implementation of the integrated practice. The purpose of this was to build a multi-dimensional view of CRM before and after the merger.
Next, causes of CRM success and failure were examined using both open and structured questions. This session usually elicited an interesting debate on the causes
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of M&A success or failure. The researcher invited different views and explanations and sought supporting evidence from different sources. Modification and verification of the case results were performed iteratively. Answers of the open question of “why?”
(i.e., why the success?) were content analyzed, and the findings were then triangulated and structured with further links to existing theories of organizational management.
Then, this research does cross-case studies based on verbatim transcripts (APPENDIX 3) in order to verify and enhanced the list of critical factors for CRM success but also discovered influential factors that can affect the effectiveness of CRM after merger. It presented in the following sections.
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