Does Environmental Dynamism Affect Customer Relationship Management - Commercial Banks’ Performance Nexus in Tanzania?

With a rapid change in the market environmental factors of the developing economies, uncertainty raises on the outcomes of the strategies employed by business organizations. The thrust of this paper therefore, was to examine how environmental dynamism interacts the link between Customer Relationship Management strategic practices namely CRM organisation, customer orientation, technology-based CRM, customer knowledge management; and performance of commercial banks in Tanzania. The study employed a cross sectional explanatory design, utilizing deductive approach and quantitative method. Yamane’s rule was used to establish the sample size for commercial banks. Data were collected using a survey technique from 272 employees across various departments including customer relationship, customer service, operations, marketing and sales, information and communication technology (ICT), credit, and management of commercial banks in Tanzania. Data were analyzed using Partial Least Squares Structural Equation Modelling (PLS-SEM) through Smart PLS version 4.0.9.5. The study revealed that environmental dynamism positively moderates the influence of CRM organization and customer knowledge management on commercial banks’ performance, while negatively moderating the effect of technology-based CRM and customer orientation variables. Results also indicate that three constructs namely customer knowledge management, CRM organization, and technology-based CRM have a positive significant influence on performance of commercial banks. In contrast, customer orientation demonstrated a positive but non-significant effect. This implies that to enhance performance in the settings of environmental dynamism, commercial banks’ management should continue investing in customer knowledge management, CRM organization and technology-based CRM strategies. Conversely, they should reconsider investment in customer orientation, as it was found to have non-significant contribution to performance.