Bank Industry Continuously Seeking To Close Relationships

Published Date: 02 Nov 2017

Bank industry continuously seeking to close relationships with their customers . They know that their loyal customers are the source of most their profit . With recent advanced of technology, most banks have CRM system .However , implementing Customer relationship management systems have a low success rate. This literature review provides an over view of implementing CRM . First, we explore the role of CRM and their definition. Second, it covered a wide factors of success and failures that influencing the implementing CRM systems and can be helpful . Finally some maturity models, assessment tool and related works in this area that can be used to implement successful CRM system.

In recent year, the banking industry is running in a dynamic challenge concerning both customer base and performance . The competition among banks has become very tied. bank’s activities can be divided into retail banking which is dealing directly with individuals and small businesses, business banking which providing services to mid-market business, corporate banking which directed at large business entities, private banking which providing wealth management services to high net worth Individuals and families; and investment banking, relating to activities on the financial markets[1]. Today, many banks are rushing to become more customer centers. As the competition for customers intensifies, usually they are striving to improve their interactions with customers by investing in customer relationship management systems[2]. Customer relationship management can help banks manage customer interactions more effectively to maintain competitiveness and become sustained in today’s competitive era . Ozgener and Raz, pointed out that businesses try to get closer to their customers in order to create long-term relationships by using information and communication technology[3].In order to provide and generate more effective relationship with customers, bank sectors still prefer to adopt CRM, no matter what is the size of an organization[4]. So more and more banks began to reach the importance to customer relationship management ,which focuses on customers instead services. CRM has defined in various ways .One of the definition is" an integration of information technology and relationship marketing, provides the infrastructure that facilitates long-term relationship building with customers at an enterprise-wide level" [5,83]. In addition, CRM has been considered as a core process for being close to customers on an one-to-one basis[3]. On the other hand e-CRM is a five combinations of hardware, software, processes, applications, and management commitment[6]. According Mack, Mayo and Khare suggested strategic CRM as the operational component of managing shareholder value in the marketing, sales and service areas of the business[7].

In recent years ,many of Customer Relationship Management implementations have grown dramatically. However, few studies of the issues and problem associated with the implementation. The implementation of a CRM is a complex process, full of problems and barriers that must be managed in a proper manner in order to promote the success of an implementation[8]. According to IDC (International Data Corporation) and Gartner Group, the rate of successful CRM implementations is below 30%[9]. Forrester Research center also has announced failure rate of CRM projects equal to 47 percent in 2009 .This high failure rate has increased implementation risk of CRM projects and made direct and indirect disadvantages to the organization[10]. Also, According to industry analysts, almost two-thirds of CRM system development projects fail[5]. In addition, empirical observations pointed to a large percentage of implementation failures when attempts have been made to implement CRM strategies[8]. The success depends upon on both the appropriateness of the firm’s CRM strategy and CRM implementation effectiveness[11]. Besides, the low level of success rates, the experiences show that unsuccessful CRM implementations may lead to decrease in customer satisfaction (CS) and customer loyalty (CL) .In addition, customer lifetime value (CLV), customer satisfaction and customer loyalty are all critical factors in a successful CRM [12]. Hallowell Roger conducted a research on customer satisfaction, loyalty, and profitability in a bank industry and found that as compared to public sector, private sector bank customers’ level of satisfaction is comparatively higher[13].

Despite there are many promises have been put on how CRM can improve the performance of organization , the guidelines on how to design and implement CRM successfully are few and even rare in bank sector . Part of the problem was the fact that some of these bank industry had not always take the important first step toward a smooth implementing to CRM. Moreover, implementing customer relationship management in bank industry has a high risk and uncertainty that must be reduced using appropriate models and tool to get the desirable benefits. Corner and Hinton have identified eight theoretical risks to successful implementation. Some of these risks are speed change, the role of politics and vested interests. However, other studies have focused on findings ways to reduce the risks[14].

There are a various factors that affect CRM implementation .The study performed by Forsyth took a sample of 700 companies, with regards to the causes of failure to reach the CRM benefits . The main causes of failure were Organizational change (29%), Company policies (22%), and little understanding of CRM (20%)[5]. Ray Wang, a partner at Altimeter Group, highlighted that every CRM failure occurs on one of three axes software, the systems integrator doesn’t deliver on its promises and the customer doesn’t do a good job preparing its internal teams and planning[15]. One key factor in an implementation is the commitment from managers[16,17]. However, without managerial commitment, any implementation of CRM strategies is thought to be deemed as a failure[18]. Successful implementation of CRM initiatives rests on successful cross-functional integration of processes, people, operations, and marketing capabilities that is enabled through information, technology, and applications[11]. According to Seify Implementing CRM requires a customer business philosophy and culture to support effective marketing, sales and service processes[19]. Ko et. al. suggested that the maturity of an information system would influence the implementation level of CRM activities[20].

In general, maturity models can be defined in order to examine the development status of processes within an organization and to identify key practices required to increase the maturity. A maturity model contains various degrees of maturity that an organization can reach. ISO international standards provides basic and general information about tools and models in assessment of organizational maturity. Capability Maturity Model(CMMI) for Development consists of best practices that address development and maintenance activities applied to products and services. It addresses practices that cover the product’s lifecycle from conception through delivery and maintenance. The emphasis is on the work necessary to build and maintain the total product[21]. This CRM Process Capability Framework includes specific practices, documentation, reports and other evidence that CMMI authors identified in firms that have successfully achieved a characteristic level of process maturity. The Framework recommends specific metrics which a firm should monitor to improve CRM competency and economic value [22]. Many maturity models have been develop in CRM .Based on the model of Markus and Ward proposed that ES implementation comprised of four phases: chartering, project, shakedown, and onwards and upwards, with each phase involving various activities and having different measures of success. According to this model, the differences between each phase suggest that the organizational issues vary across the implementation process. Lipka described a 12-step process for rolling out CRM where each phase builds up on previous phases and each step brings more value, a process that is intended to help deploy CRM implementation. In fact, this model covers advice for companies already big enough to have systems support in place but it also pays attention to those who need a recipe for getting into CRM easily. As a whole, there are three phases in this model- foundation, basic, and advanced[23].Meanwhile, Gartner provided eight building blocks required to be a winner in CRM. These are CRM vision; CRM strategy, Consistent valued-customer experience, Organizational collaboration ,CRM Processes, CRM information, CRM technology, CRM metrics. Gartner developed a maturity model based on eight building blocks that contains six levels and suggests a correlation between CRM maturity and profitability [4]. Although there are various maturity models that provide some important aspects of implementation, but this field suffer from lack of comprehensive model that integrate all aspects in one place. Ocker and Mudambi proposed a model to assess readiness to implement CRM based upon the premise that business value is enhanced through the alignment of complementary factors occurring along three dimensions, intellectual, social, and technological. This assessment provided answers to two fundamental questions: what is a firm’s current CRM capability? .And what changes must be in place before embarking on a CRM initiative? [24]. Furthermore, some studies provided a general understanding of CRM processes in customer-oriented perspective and proposeed a measurement tool that addresses seven main processes which are: targeting management, customer information management, production/service customization, expansion management, referrals management, termination management and win back. However it only focused on management[25]. Meanwhile , Zablah proposed a conceptual framework which is CRM could be implemented successfully by linking a knowledge management process creating customer intelligence (internal process) with an interaction management process handling customer communications (external process)[26]. However , this implies that which CRM aspects should be focused on only conceptualized perspective of the CRM system. Another main direction to build a framework for measuring business performance is to have diverse evaluative perspectives. Lindgreen et al. propose a CRM assessment tool consisting of ten evaluative elements categorized into three sets of elements: strategic elements such as customer and brand strategy; infrastructural elements such as culture and people; and process elements such as the relationship-management process[27]. Hyung-Su Kim and Young-Gul Kim pointed out that this study is meaningful in that they included infrastructural factors as well and went a step further beyond just building a conceptual framework by providing measurable instruments. Meanwhile, since a CRM strategy can hardly generate immediate organizational performance, it is also important to see CRM on different dimension which is the behavioral dimension when assessing a corporate CRM strategy. Jain went from traditional quantitative Key Performance Indicators (KPI), such as sales, acquisition and retention rates, cost reduction, and service time, suggested various behavioral elements such as attitude to serve, understanding of expectations, quality perceptions etc [28]. Hyung-Su Kim and Young-Gul Kim highlighted that such behavioral factors are likely to fill the logical gap existing between firms' relationship building efforts and their financial objectives, which would be the result of assessing CRM only with economic and objective measures [9]. However, Brewton and Schliemann suggested that the importance of linkage between a firm's corporate business strategy and its CRM strategy by suggesting a hierarchical structure of the strategic business map. Focusing on evaluation methodology rather than evaluative elements, their study recommends a company should first define an appropriate CRM strategy matching its enterprise-wide business strategy, then select CRM measures to assess its CRM strategy, and finally cascade those through the organization. This more practical approach could help practitioners when they focus on the issue of "how" rather than "what". There are a study about critical success factors proposed a number of criteria that firms could use to evaluate the success of a CRM initiative. These criteria are dispersed in three groups; project focused criteria such as compliance of the system with specifications; internally oriented metrics such as adoption by employees, externally oriented metrics such as impact on customer retention or loyalty. Different measurement tools , models and framework can be used in implementing CRM.

At the end it can be cleared that different banks are implementing CRM in different ways. Some view CRM as a technology tool while others view it as an center part of business. In this literature review we have outlined the studies and researches of CRM at deeper level . This literature review can help in defining, specifying , and understanding the problem even more . When viewing the tools , frameworks and models of maturity and factors affecting the implementation of CRM of other researcher. Therefore bringing all together this help in gaining knowledge and provide a model that combine some of the factors and criteria of some models that can be suitable in Saudi`s banks .