Customer Relationship Management In Indian Banking Sector Marketing Essay

Customer relationship management (CRM) is popular business strategy in today’s competitive environment. Customer Relationship Management is discipline which enables companies to identify & target their most profitable customers. It involves new & advance marketing strategies which not only retain existing customer but also acquire new customers. It is a unique technique capable of remarkable changes in output of financial organisations.

The concept of maintaining one to one relationship with customers was formally introduced in early 90’s when financial services, airlines & other institutions stated to ‘reward to retain’ the existing customer by introducing loyalty programs.CRM was introduce in late nineties.

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Now a day’s many financial organizations have been pioneers in developing customer retention strategies. Banks have relationship managers for select customers, airlines have frequently flyer program to reward loyal customers, credit card offers redeemable bonus points for increase card usages, telecom services operators provides customised services to their heavy users, and hotels have personalised services for their regular guests.

3.0 literature review

3.1 Customer Relationship Management (CRM)

Unstable environment (financial crises) has forced organizations to restructure themselves in order to enhance their chances to survival and growth. The restructuring efforts have included, among others, the emergence of the “new paradigm” which is commonly referred as Customer Relationship Management (CRM). Customer Relationship Management business strategy places the customer at the centre of the organizations’ universe. Maintaining One to one Relationships in today’s world are more important than anything else which an organization wishes to maintain with their associations. It has become extremely important for all organizations to maintain rich and fruitful relationships, and it has become even more and more important to sustain them to be rewarding forever.

CRM is a business approach that integrates people, processes, and technology to maximize the relations of an organization with all types of customers. CRM helps in understanding the customer better, which enable organizations to effectively customize their products and service offerings according to the customer needs in order to retain customers and increase customer’s loyalty and satisfaction. Many organizations are embracing customer relationship management strategies to reap benefits such as enhanced revenues and high profits.

The basic proposition of a CRM strategy is based on the age-old idea that knowledge, understanding, and serving the customer is the best method developing a sustainable competitive advantage. But building a sustainable and successful relationship with a large customer base is not the easiest thing to do and carries a direct impact on many core operational processes. At the heart of a perfect CRM strategy is the creation of mutual value for all the parties involved in the business process. It is about creating a sustainable competitive advantage by being the best at understanding, communicating, and delivering values to the existing customers in addition to creating and keeping new customers. It addresses to the changing needs of the customers by developing products and services that continuously seek to satisfy the lifestyle and need patterns of individual customers. Organizations tend to acquire a structure around customer segments and not on the basis of product lines to deliver customer satisfaction.

(Figure 1: Basic CRM Strategy)

CRM is a corporate level strategy, focusing on creating and maintaining relationships with customers. An effective CRM system is able to identify factors important to clients, promote a customer oriented philosophy, adopt customer based measures, develop end-to-end processes to serve customers, provide successful customer support, handle customer complaints, track all aspects of sales, create a “holistic” view of customers’ sales and service information. The long-term success of an organization depends mainly on how well it attracts and retains a large customer base. Managing relationships with customers is very important for organizations since improved relationships increase business value. CRM helps in leveraging information regarding customer behaviour to achieve high levels of customer satisfaction, retention, and loyalty all resulting in improved profitability.

CRM life cycle begins with the integration of front office systems and the centralization of the customer- related data. The benefits of this phase include improved front office efficiency and productivity. In this phase, the customer data has to be collected in detail and maintained properly. Customer profile regarding demographics, socio-economic and lifestyle characteristics of customers has to be colleted. Based on collected data, analysis of customer begins to understand behavior, identify the pattern of buying and trends, and discover causal relationship. The out of this is strategic business decision. Business processes and organizational structures are refined based on the improved customer understanding gained through analysis.

In the context of service, relationship marketing has been defined as attracting, maintaining

And in multi-service organisations enhancing customer relationships (Berry 1983). Here

Attracting customers is considered to be an intermediary step in the relationship building

Process with the ultimate objective of increasing loyalty of profitable customers. This is

because of the applicability of the 80-20 rule. According to Market Line Associates, the top

20% of typical bank customers produce as much as 150% of overall profit, while the bottom

20% of customers drain about 50% from the bank’s bottom line and the revenues from the

rest just meeting their expenses.

Berry (1983) recommended the following five strategies for practicing relationship marketing

i. Developing a core service around which to build a customer relationship,

ii. Customizing the relationship to the individual customer,

iii Augmenting the core service with extra benefits,

iv. Pricing services to encourage customer loyalty,

v. Marketing to employees so that they will perform well for customers.

Developments in information technology, data warehousing and data mining have made it

Possible for firms to maintain a 1 to1 relationship with their customers. Firms can now manage every single contact with the customer from account management personnel, call centers, interactive voice response systems, on-line dial-up applications, and websites to build lasting relationships. These interactions can be used to glean information and insights about customer needs and their buying behaviour to design and develop services, which help create value for the customers as well as the firms. Although customised as well as off the shelf technological solutions are available in the marketplace, businesses need to do a lot more than just adopt these solutions to implement customer relationship management (CRM) practices. Successful implementation of CRM requires a strategic approach, which encompasses developing customer centric processes, selecting and implementing technology solutions, employee empowerment, customer information and knowledge generation capabilities to differentiate them, and the ability to learn from best practices.

3.2 CRM Objectives in Banking Sector

The idea of CRM is that it helps businesses use technology and human resources gain

insight into the behaviour of customers and the value of those customers. If it works as hoped, a business can: provide better customer service, make call centers more efficient, cross sell products more effectively, help sales staff close deals faster, simplify marketing and sales processes, discover new customers, and increase customer revenues. It doesn’t happen by simply buying software and installing it. For CRM to be truly effective, an organization must first decide what kind of customer information it is looking for and it must decide what it intends to do with that information. For example, many financial institutions keep track of customers’ life stages in order to market appropriate banking products like mortgages or IRAs to them at the right time to fit their needs. Next, the organization must look into all of the different ways information about customers comes into a business, where and how this data is stored and how it is currently used. One company, for instance, may interact with customers in a myriad of different ways including mail campaigns, Websites, brick-and-mortar stores, call centers, mobile sales force staff and marketing and advertising efforts. Solid CRM systems link up each of these points. This collected data flows between operational systems (like sales and inventory systems) and analytical systems that can help sort through these records for patterns. Company analysts can then comb through the data to obtain a holistic view of each customer and pinpoint areas where better services are needed. In CRM projects, following data should be collected to run process engine:

1) Responses to campaigns, 5) Web registration data,

2) Shipping and fulfilment dates, 6) Service and support records,

3) Sales and purchase data, 7) Demographic data,

4) Account information, 8) Web sales data

3.3 Future of Customer relationship management

Often driven by the need to improve customer satisfaction and retention, CRM systems can aid in understanding a customer or segment to focus sales and marketing activities. We will see more of an appreciation that profitability is a key variable in determining cross-sell promotions, product pricing and packaging based on historical as well as future anticipated consumer information. Lifetime value will be better understood to allow for organizations to think about potentially good prospects and the overall return on the relationship that is developed over time. CRM systems will be blended with operational and back- office systems to provide a seamless, real-time data environment. CRM will not only be about servicing the customer better, but also servicing the customer in the best interests of the customer as well as the business itself.

While CRM may already seem to be an old and jaded term, there is a bright future ahead that will bring new ways for small and mid-sized organizations to communicate, operate and strategize to manage their personnel, customers and prospects.

4.0 Aims & Objectives

The aim of the study is to evaluate critically the status of Customer relationship management in Indian banking sector.

In order to achieve the above aim, the study has four main objectives:

To evaluate critically the literature relating to bank selection in general and specifically relating to customers and their bank accounts;

To produce and disseminate a questionnaire to customer to establish what factors influence their choice of bank and to what extent they engage in ‘Customer relationship Management;

To critically analyse the results of the questionnaire to establish a better understanding of what factors affect the Customer relationship management in Banking sector;

To evaluate the results and provide detailed conclusions based on the primary research findings. Use the conclusions to make recommendations for businesses and further academic research.

5.0 Proposed Methodology and Critical Application

5.1 Proposed Data Collection

I intend to collect and analyse both primary and secondary data in the proposed study. The secondary data will take the form of a literature review and provide details of past studies into customer relationship management in Banking sector. From the literature a set of criteria for bank selection can be deduced. This can then be used in the primary data collection. Saunders, Lewis and Thornhill (2007) describe descriptive research as portraying an accurate profile of persons, events or situations. The study will follow the survey strategy because it allows the collection of large amounts of data from a large population. Saunders, Lewis and Thornhill (2007) contend that questionnaires work best with standardised questions. As the bank selection criteria will be drawn from past studies this enables the questionnaire to be set out in a standardised way. A Likert will be used allowing respondents to rate the importance of different criteria. This means the results can be analysed by a quantitative data package (SPSS).

5.2 Access to the Data

To complete the primary data collection all possible selected bank customers will be approached. They will be approached through e-mails and on-line networking sites (e.g. Facebook). Every reputed bank in India have minimum 1,18,952 registered accounts according to the latest figures available on-line . To take part in the study, Customer will be required to complete an on-line survey lasting no more than 5 minutes. Respondents will have to access to the internet and have at least 1 current account. As all customers are computer literate, with internet access provided by the bank, and should all have a bank account, the sample size is the number of customers at the bank. Due to time limitations non-probability sampling will be used with self selection.

5.3 Justification of Methods

The self completion question is selected because it is both cheaper and faster to administer and can be completed at the convenience of the respondent (Bryman and Bell, 2003). However, there are a number of issues listed by Bryman and Bell (2003) concerning self selection questionnaires. Firstly, self selection questionnaire have a lower response rate, this can be improved through writing a good covering e-mail, and the subsequent sending of follow up e-mails. Secondly, the researcher cannot prompt or probe the respondents. However, by piloting the questionnaire prior to administering, this should help ensure the depth and relevance of the questions. Finally, the questionnaire can be read as a whole and as such there is a greater risk of missing data because respondents can select which questions they wish to answer. However with the questionnaire being administered on-line, questions can be marked as requiring a response, thus limiting respondent progress until said questions are completed. Also, the questionnaire can be set so respondents can only see one question at a time.

6.0 Limitations & Delimitations

The proposed study is limited by time constraints; a time limit of 12 weeks. The delimitations of the proposed study are funding and geographical location. The study is not receiving any funding and the researcher is based in Salford, UK. However, as explained in the proposed methodology section, a self selection questionnaire has been selected as it is both cheap, and fast to administer.

7.0 Justification

7.1 Academic Benefits

The study will be of interest to academics that have an interest in financial services marketing. The results will add to, and update the limited academic literature that presently exists on banking behaviour and, more precisely how customer decide which bank to patronise. The study will also provide a useful information about status of customer relationship management in banking sector.

7.2 Practical Applications

The study will also be of interest to managers and marketers of financial services as it will provide insight into how an important segment of the customer relationship management makes decisions. The results of the study will help tailor products and marketing efforts better for banks attempting to attract/retain customer.

8.0 Conclusion

Customer relationship management does not enable a quick win. It is a long-term approach that has to be adopted at a strategic level. Whilst the value of customer relationship management has been identified by organizations, they are yet to look at the bigger picture and understand all of associated benefits that would enable their business strategies to be successful. Those responsible for delivery are perhaps the most informed about these strategic benefits yet the transformation is long-drawn-out process. The competencies required to deliver these customer benefits are: to deliver on its service promise, integrate products and service channels effectively, customize products & service and their respective prices, create opportunities for cross selling and delivery mechanisms for the onward promotion of these products and services and reduce the gestation period to market by allowing quick and effective introduction of new products and services.

9.0 Proposed Structure

The format of the dissertation will be as follows:

Title Page;

Declaration;

Abstract;

Acknowledgements;

Contents Page;

List of Tables and Figures (including word count);

Introduction;

Literature Review;

Methodology;

Results and Discussion;

Conclusions and Recommendations;

Evaluation of Study and Scope for Further Research;

Bibliography;

Appendices.