How e-CRM successfully applied banking industry

Published Date: 23 Mar 2015

INTRODUCTION

Building positive and long-term relationships with customers is recognized as an important element to make profit in the workplace today (Chen & Chen, 2004). E-CRM applies and integrates new electronic media and e-technology to satisfy customer's needs and targeted customer easily and build long-term relationship based on analysing customer's portfolio (Iiu & Tang, 2006). Financial service in banking industry is viewed to be relevant to e-CRM because of the requirement of needs of privacy, speed and personalization service (Seyhold & Marshak, 1998). Since more banks show up and population is growing slowly in Australia, the way of banks providing service, strengthening customer's relationship and satisfying their needs will become the significant competitive advantage. This paper focuses on how e-CRM can be successfully applied into banking industry.

Situational Analysis (PEST Analysis) for Banking Industry

The adoption of eCRM platform in Australian banking industry is facilitated by the presence of operational business regulation that safe guides both the banks and the customers' interest. However, the four pillars policy that restricts merger in the banking industry poses a challenge to the growth in the industry which negates the ideals of eCRM. The prevalence of stable political environment builds the potential customers confidence in institutional services such as eCRM. Hence continued political stability in Australia will promote not only eCRM but also other internet supported banking services. The Australian banks have heavily invested in information technology. The technological advancement and the presence of information technology aware population provide the banking industry with a strategic opportunity for the growth and development of eCRM (Micro Finance Focus, 2009).

The Australian economy has been affected by the world economic downturn. The financial industry has been the most affected which has forced banks to adopt cost saving strategies such as reduction of employees. The use of eCRM which reduces the number of personnel required to attend to customer inquiries and complains is a plausible solution to overcome this problem. Hence the adoption of eCRM solutions may increase with time if banks reduce their staff requirement. Furthermore, the eCRM adoption enables the banks to serve their customer in timely and efficient manner that conforms to the demands of the prevailing economic realities.

SWOT Analysis of banking industry

Strength: Australian Banking System that has been implementing low inflation and low interest rate over the last five years holds double building societies and union credits (Laker, 2005). Internet banking and mobile phone banking that have been appearing for many years provide channels for customers to pay and make transitions. Laker (2005) indicated that profitability in banking is strong and risks are under controlled in Australia.

Weakness: Honohan (1997) stated that macroeconomic epidemics, poor management and endemic crisis are three main systemic financial failures in banking industry. Poor working efficiency in banking industry is viewed as an obstacle to increase profitability.

Opportunities: Due to the technological advancement, establishing e-CRM platform in the banking industry will be easier in near future which ultimately assists banks to develop relationship with customers.

Threats: Since the recent financial crisis has a negative influence on Australia's economy, more Australian who loss their jobs can not pay their debt to banks. And the financial crisis can easily result in bankruptcy.

Customer Portfolio Analysis

Electronic Customer Relationship Management (e-CRM) has come to influence organizational and employee behaviors in a big way in financial institutions and banks. The culture in banks is driven by innovations and customer aspirations and has made e-CRM to be adopted at an early stage. In order to assess the capacity to put together e-CRM in the customer portfolio analysis in banks, it is imperative to identify the different skills that are required to be well acquainted with the customer, which is a major variable in the relational approaches. This essentially involves the customer information processes, the limitations to IT marketing, the active involvement of senior management and an effective system of evaluation and incentives. Customer knowledge can be attained by understanding the varied profiles and incentives as viewed by customers. Hence it is correct to say that the performance of any bank is directly related to the extent to which contact personnel adopt the motivation procedures that support them in adopting the relationship approach with customers.

According to Sheth (2002), knowledge about customers must be efficiently constructed which depends upon using the optimum e-CRM tools and IT technology. The collected data has to be then transmitted in being used to the benefit of the customers so that they get the best services. Therefore banks have to ensure that internal procedures are introduced and strengthened in enhancing the knowledge and listening abilities of employees so that marketing services to customers are beneficial and rewarding. In order to make the customer portfolio analysis meaningful, banks must adopt strategic approaches such as mass customization and yield management. Personalization policies yield benefits in terms of customizing individual offerings at minor additional costs (LaRow, 2000).

Customer Intimacy

Customer intimacy relates to capturing the customers. It is also known as affinity marketing and relationship management. The strategy to capture customers must be the ultimate objective of banks so that they can achieve the maximum possible shares of the customers' total banking needs in different product categories. Stating the same concept in another way, the aim in adopting customer intimacy practices is to enhance the value attached to the customer by the bank. This is done by enhancing the value of the bank from the customer's perspective. The approach towards capturing customers depends much on techniques of inter active communication and benefits accruing from the banks capacity to use the collected and administered information as obtained from previous patterns of customer behaviour. By adopting such strategies the bank can considerably influence successive transactions and customer expectations (Crosby et al, 1990, pp.69-82)).

According to Sheth, (2002), an added version of customer intimacy relates to event oriented prospecting (EOP). Event oriented prospecting is based upon the ability of the bank to gather and administer information pertaining to life cycles and other situational requirements. The objective here is to manage the interaction with customers in a way that they trigger purchase decisions. By adopting the technique, banks can provide solutions as and when the need arises for customers to resolve typical issues related to their banking needs. Customer intimacy is primarily concerned with creating an environment which relates to literally reading the minds of clients (Perrien et al, 1993, pp. 143-147).

NETWORK DEVELOPMENT IN E-CRM

Network is defined as a structure consisted of nodes which are mutually dependent on threads (Buttle, 2009). Companies, which can not be isolated, need to develop network to achieve their goals. The development of business network exerts a significant impact on the accomplishment of e-CRM performance and e-CRM is positioned to make profit from target customers by integrating “internal processes and functions and external networks” (Buttle, 2009, p.293). The four main stakeholders that banks need to develop network are:

• Suppliers
• Employees
• Investors
• Partners

Suppliers: In banking industry, supplier includes different tiers suppliers who are required to provide product following the quality standard. Buttle (2009) stated that banking organizations do not only regard tier one supplier, but also take responsibility to manage the lower suppliers. For example, Commonwealth bank requires tier one suppliers to provide computers, however, the organization also responds to manage the lower suppliers who are required to contribute following the quality standard.

Employees: Employees who are important components of e-CRM networks exert a significant influence on customer's long term patronage and the application of e-CRM. Letaifa and Perrien (2007) indicated that the changing behaviors of employees through training can integrate the successful implementation of e-CRM system and help employees adapt to e-CRM technologies. Employees who accept training are expected to change their behaviors to adapt the e-CRM technologies.

Investors: Organization in banking industry needs to attract investment from investors to purchase or renew equipment and technologies. Barberies, Shleifer and Vishny (1998) claimed that the needs of investors should be treated carefully because investors will help stabilizing stock prices, avoiding takeover, improving organization's reputation and especially supplying capital needed for the creation and expansion of the organization.

Partners: Business partners have become essentially for a corporation to survive and business partner relationship has a dramatic impact on a corporation's long-term value creation (Parise & Casher, 2003). Many corporations struggle to maintain long- term relationship with business partners, however, the process of sharing information and knowledge becomes difficultly between alliances (Parise & Casher, 2003). E-CRM which integrates email, internet technologies etc can help partners deal with the issues of sharing information and knowledge by providing an effective communication platform.

Value Proposition in Australian Banking Industry

Value proposition development in e-CRM is aimed at recreating human interactions that are supported through the internet to nurture value for the customers. The value proposition development therefore begins with predictive analysis of the e-CRM processes which should provide information of how to restructure customer interactions through integration of data gathered and customer behavior with predictive algorithms (Stephens, 2000).

Some of the existing processes that can be improved to develop e-CRM value include the use of customer routing engine, the web content management, web configuration, customer analysis procedures and customer shopping alternatives. The customer routing engines should be upgrade to support customer dialogue through the use of automated interactive mechanisms. This will provide an effective platform for communication between the customer and the bank there by winning the customers trust and boost their confidence in the use of e-CRM to transact their business (Amit, 2001).

The bank should improve on their e-CRM platform content to ensure that all the customer concerns can be addressed with minimum cost on the customer and within the shortest time possible. The banks need to improve their content categorization so that related matters are grouped together. This enhances the customer's ease of locating services and enhances the organizational ability to timely services delivery (Alawneh, 2007).

Customer analytics also allows the banks to study the quality of their customer's experience within the eCRM platform. Useful information on the customer experience should not be generalized during collection and therefore, it is recommended that session based analytical data be utilized for such purposes (Porter, 2001). This allows identification of specific problematic areas within the platform and avoids the generalization of problem which may lead to unnecessary complete overhaul of the system.

Personal monitors and alerts should be integrated into the system to notify the customer about specific issue, content or condition within his trading domain (Baaken, 2007). The notification may be through automated email notice or short message via the mobile telephone. This kind of proactive responses to the customer needs increases the value for e-CRM platform and provides strategic opportunity for the bank to build long lasting mutual relationship with the customer.

Manage Customer Life Cycle:

Customer behavior changes over time and these changes are clues to the future. customer life cycle can be defined as the progression of steps starting with getting the attention of a potential customer, showing them what you have on offer, turning them into a customer from a potential one and then finally retaining them as a customer for life by ensuring complete satisfaction (Forman, 2009).

The life cycle of CRM consists of three phases - customer acquisition, customer retention and customer development.

Customer Acquisition

Contact management module and direct marketing module of CRM allow companies to effectively promote and market their products and services to prospects (Camille, 2009). Those modules help speed up the acquiring processes and reduce the cost of acquiring new customers. In case of banking industry, Banks use different e-CRM tools i.e. telemarketing, web portal, SMS banking, and web advertising etc. to acquire new customers. By using all these e-CRM tools, banks actually try to provide information about their new and existing products and services.

Customer Retention

Customer retention is critical to the overall profitability of an organization. By spending hundreds of dollars and months to acquire a customer, may leave in seconds as a result of poor customer services. Customer retention is more than giving the customer what they expect (Manghillis, 2009). Banks should identify their active and most valued customers and then retain them by building strong relationship. Customers, who obtain long-term loans from banks, need to be frequently contact by banks. Thus, banks must take special care to valued customers by offering different customer touch points.

Customer Development

CRM helps companies better understand existing customers' needs and behaviors and enhance the profitability from existing customers by cross-selling (Brad, 2008). They can customize their products and services to individual customers' needs and preferences. In case of banking industry, Banks must add value to its existing offers and services. For example, banks can provide property information to its customers through SMS or e-mails who obtained mortgages. Again they can provide customized information regarding their other services. In this way; they can build positive relationship with customers by providing different services and options.

Recommendation

Our goal was to achieve a better understanding of e-CRM by answering CRM value chain. Banks need to understand and realize the importance of e-CRM. It has a value and it is broader in term. There is no doubt that customer's interaction and satisfaction, convenience and speed of processing transactions and trust are the vital aspects that need to be given importance. Its is very clear and evident that needs of the customers keep on rising day by day. So it is always recommended to the banks to stay 1 foot ahead to the need of the customers. They look for banks with convenience, flexibility having innovative ideas, changing their offering according to the needs of the customers.
e-CRM and its role have to be clear each and every level of the organization. e-CRM is not just simply technology or tool, it has its own view point. When it comes to the implementation of e-CRM changes need to be taken place right from the top management to lower level of the management.
There might be different and various dimensions of e-CRM, but banks need to concentrate on e-CRM. By using e-CRM and different benefits of it, banks can enhance their relationships with customers.

Conclusion

Nowadays, many businesses such as banks, insurance companies, and other service providers realize the importance of Customer Relationship Management (CRM) and its potential to help them acquire new customers retain existing ones and maximize their lifetime value. At this point, close relationship with customers will require a strong coordination between IT and marketing departments to provide a long-term retention of selected customers. Here the finding indicates that with the implementation of e-CRM and the latest technologies banks have ensured full security for the transactions of their customer's. E-CRM facilitates the banks to provide one to one services and also maintain the transaction security of the customers.