Customer Relationship Management (CRM) in Retail Banking

1.1. Introduction:

Customer relationship management is one of the strategies to manage customer as it focuses on understanding customers as individuals instead of as part of a group Lambert, 2010). Managing customer relationships is important and valuable to the business. The effective relationship between customers and banks depends on the understanding of the different needs of customers at different stages. The ability of banks to respond to the customers’ needs make the customers feel like a valuable individual rather than just part of a large number of customers. CRM manages the relationships between a firm and its customers. Managing customer relationships requires managing customer knowledge. CRM and knowledge management are directed towards improving and continuously delivering good services to customers. To understand more in customer relationship management, we first need to understand three components which are customer, relationship and their management (Peppers and Rogers, 2004). More often, managers always make mistakes by seeing customers’ satisfaction from their eye not from customers’ eye (Peppers and Rogers, 2004). The banking sector is a customer-oriented service where the customer is the KEY focus. Research is needed in such a sector to understand customers’ need and attitude so as to build a long relationship with them. Customer Relationship Management includes all the marketing activities, which are designed to establish, develop, maintain, and sustain a successful relationship with the target customers. CRM identifies the present and future markets, selects the markets to serve and identifies the progress of existing and new services.

Thus, CRM is a managerial philosophy that seeks to build long term relationships with customers. CRM can be defined as the development and maintenance of mutually beneficial long-term relationships with strategically significant customers (Buttle, 2002). It is the establishment, development, maintenance, and optimization of long term mutually valuable relationships between consumers and the organizations. Successful customer relationship management focuses on understanding the needs and desires of the customers and is achieved by placing these needs at the heart of the business by integrating them with the organization’s strategy, people, technology and business processes.

1.2. Customer Relationship Management in Banking Sector:

Over the last few decades, technical evolution has highly affected the banking industry. For more than 200 years, banks were using branch-based operations. Since the 1980s, things have been really changing with the advent of multiple technologies and applications. Different organizations got affected by this revolution; the banking industry is one of it (Sherif, 2002). In this technology revolution, technology-based remote access delivery channels and payment systems surfaced. ATM displaced cashier tellers, telephone represented by call centers replaced the bank branch, internet replaced the mail, credit cards, and electronic cash replaced traditional cash transactions, and interactive television will replace face-to-face transactions (Sherif, 2002). In recent years, banks have moved towards marketing orientation and the adoption of relationship banking principles. The key motivator s for embracing marketing principles were the competitive pressure that arose from the deregulation of the financial services market particularly in India. This essentially exposed clearing banks and the retail banking market to increased competition and led to a blurring of boundaries in many traditional product markets (Durkin, 2004). The bank would need a complete view of its customers across the various systems that contain their data. If the bank could track customer behavior, executives can have a better understanding, a predictive future behavior and customer preferences. The data and applications can help the bank to manage its customer relationship to continue to grow and evolve (Dyche, 2001).

1.3. Customer Relationship Management in Retail Banking Sector:

An expanding knowledge savvy consumer market is challenging the Indian retail banking industry to redefine itself. Not only are new financial products and the vehicles to deliver them to the customer demanded, but also new business strategies and models. In today’s situation, Indian retail banks can stay competitive only by building lifelong partnerships with customers. CRM can be employed to develop an ongoing dialog with customers, integrated across all contact points. CRM allows retail banks to integrate customer-interaction channels and provide consistency to their interactions with customers, generate better customer intelligence, customize their offerings and communications to customers, manage customer interactions and relationships more effectively, and manage the customer portfolio by assessing the lifetime value of customers.

The future for the retail banking industry in India depends on whether it continues to provide value to its customers. The challenge for retail bank managers and relationship supervisors is to understand what customers want-to distinguish between cutting ice and keeping food cold. In the researchers’ view, understanding the services that people demand and exploring banks’ comparative advantage in supplying them will be crucial in determining the future of the Indian retail banking industry.

By considering the value-adding activities of banks, the research paper provides a strategic framework for evaluating profitable opportunities and assessing competition from other banks, money market funds, or even phone and computer software companies. The paper also examines how new methods of delivering financial services may affect the role of the retail banks in regard to money, the payments system, and banking supervision through the use and implementation of strategic CRM business models. The research study aims at enabling managers to assess CRM activities and processes in retail banks. It also contributes to the customer relationship management literature by shedding light on an issue that has not been adequately examined by marketing scholars.

1.4. Customer Relationship Management Implementation in Retail Banks:

Retail Banks should spend time in strategic planning:

1. Establish retail banks’ corporate needs. Identify its problems. Identify the solution to that problem. Decide how to implement the solution.

2. Talk to customers and staff. Ensure staff is willing to accept it. Serve customers better to keep them loyal. Offer profitable products that meet their expectations, repeatedly. Change from product-focus to customer-focus. Build long-term, mutually beneficial relationships with all stakeholders.

3. Encourage inter-departmental communication and corporate-wide support. Appoint a chief customer officer and a CRM project team. Invest in key components such as a data warehouse and analytical tools.

4. Choose a scalable product with:

a) technology that facilitates monitoring of marketing campaigns;

b) CRM architecture that can handle existing and future sales channels.

5. Integrate front-end systems with back-office data mining processes for one view of the customer. Use only the relevant data for your business issue. Supplement data where required.

6. Establish a central data warehouse for new and old data. Data mine and analyze it. Create different data models for the solution. Standardize the data format to reduce extraction complications. Use only highest-quality data.

7. Automate the decision-making process. Monitor variances in customer behavior with intelligent Agents to predict key customer events.

8. Use cluster analysis to discover new customer insights. Promote customer retention through predictive modeling.

9. Build, test and apply analytic models.

10. Trigger behavioral change for more profitable marketing campaigns with an event service.

11. Define clear, measurable business objectives for each phase, limiting investment while monitoring ROI.

12. Break general goals into narrow specifics so progress can be monitored.

13. Benchmark customer satisfaction pre-implementation. Learn from campaign mistakes and successes to aid future improvements.

14. Analyze customer database.

15. Promote customer loyalty for increased profitability. Identify customer needs and further opportunities.

16. Deliver customized customer service.

17. Provide reliable, convenient, fast and readily-available customer interfaces.

18. Offer the same customer service level via all channels.

It is clear that to be effective, a CRM system must integrate seamlessly with the retail bank’s data warehouse. Indeed, to fully live up to expectations, the CRM system must integrate with all corporate applications and systems external to the company which includes e-commerce applications.

Article Collected From:

  • Chandra, T. R. (2014). Customer relationship management crm in retail banking a perceptional study with reference to select commercial banks in guntur district andhra pradesh.

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