The Crm Relationship And Interaction With Customers Marketing Essay

Published Date: 23 Mar 2015

CRM projects are difficult to execute successfully. This is because of the wide range offactors influencing their success. Organisations tend to approach them as IT projects,neglecting the people and (business) process aspects. But without changing the way anbank works, in respect of its customer-facing activities, the chances of success areLimited. To make matters worse, CRM projects have to be set against a moving background of changes in technology, the organisation and its marketplace. This means they face conflicting demands to deliver short and long term benefits to the banks. All of these factors mean that it will take a long time to make CRM to work properly for banks.

Relationship' exists between the customers and the bank. But because of various reasons and apprehensions like financial burdens, risk of failure, marketing inertia etc., many European banks are still following the traditional ways of marketing and only few banks are making attempts to adapt CRM. It is with this background, the researcher has made a modest attempt towards bring up ideas that will improving CRM in the European banks (Czech republic)

Chapter One

1.1 Introduction

Over the years, reviewed literature has argued that businesses across all sectors will have to change their approach to marketing, which should now be carried out through relationships, networks, and interactions (e.g., Day 2000; Grönroos 2000a; Gummesson 1999; Hunt 2000; Peck et al. 1999; Webster 2000). Such a marketing approach is very different from the more traditional one of marketing through 4Ps transactions (i.e., product, price, place, and promotion). The customer market is one of the many different markets that businesses need to consider with research suggesting that customer retention leads to increased market share and bigger profits (e.g., Buttle 1996; Fornell 1992; Hillier 1999; Rust, Zahorik, and Keiningham 1996). Customer relationship management (CRM) remains one of the basic vigorous aspects in achieving customer retention. commercial and financial sectors especially banks, insurance companies, and other service Providers has realize the importance of CRM and It's potential to help them acquire new customers, retain existing ones and maximize Their lifetime value. Although the promises of how CRM can improve the performance of a business are many, the practical guidelines on how to design and implement CRM successfully are few, and practitioners have been struggling because of that. The role of the present research is to identify the problems and solutions associated to CRM and provide greater understanding of CRM practices. This indicates the need for an in-depth examination of such practices within an industry where customer relationships are a notable part of developing a competitive advantage (Price and Arnould 1998; Yin 1994). Single-industry studies are also useful for identifying universal organizational patterns and processes (Baum,Locke, and Smith 2001). This project analysed the recent experiences of a major European bank that implemented a CRM program.

1.2 Overview of CRM model

According to" parvatiyar and sheth 2000 " CRM is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer. Brown 2000 states that "CRM has overtaken the market and it is revolutionizing marketing and reshaping entire business models. He equally state that ,We are on the verge of the most significant transformation in the business landscape Delivering pure Internet applications directly to browsers will empower a global workforce to know, to do, to measure, and to improve their jobs in support of a common, customer-oriented strategy. "This is the promise of CRM."

CRM has become one of 'the' buzzwords for many organisations. A tiny proportion of a company's customers will generate the bulk of its profits. Identifying, collecting and keeping these clients is the very essence of customer relationship management Ody (2000) offers three views of the concept of CRM.

The first is concerned with precision marketing the exact matching of a product or service with a customer's requirement in order to secure sales.

The second relates to the notion of creating a single, coherent view of customers as commonly associated with call centres.

The third is focused on consumer databases with CRM driving investment into data warehouses.

This view shows CRM as a business theory, built around the simple premise that it pays to know about and look after customers.

1.3 The CRM relationship and interaction with customers

The new market approach has become an imperative for business to formulate their market activities to and to build relationship and networks and interactions with a number of different, but often equal important markets. CRM is said to be a business strategy to select and manage most valuable customer relations. Customers are the most valuable resource and heart of the business. The ability to access the customers can determine how well you understand and use this resource in the business goals and strategies. Business strategy is the proper application of the information which use the resources in the most efficient and economical manner. It is customer-centric business strategy with the goal of maximizing profitability, revenue and customer satisfaction.

One of the challenges faced by the successful business is to acquire customer satisfaction and developing CRM. While recruiting employees to give customer service there is tendency to concentrate more on functional expertise, technical competence and knowledge rather than interpersonal or communication skills. Client satisfaction levels have a reverse effect because of lack of right attitude.

In today's competitive world it has become more important to maintain rich and fruitful relationships. CRM is a corporate level strategy focusing on creating and maintaining relationships with customers. CRM is a term not only used by the business organizations but also in any type of organizations to create a beneficial environment among the customers. This is a business approach that combines people, processes and technology to maximize the relation of an organization with all types of customers. It helps in understanding the customer better and according to the needs of the customer; the organization can effectively customize their products and services in order to retain the customers and also to increase customer's loyalty and satisfaction. CRM has made himself a path to identify, acquire and retain customers who are the business' greatest assets. CRM get the value out of customers by highly integrating sales, marketing and support efforts. By providing the means to manage and coordinate customer interactions, it technologically helps companies to maximize the value of every customer interaction and in turn drive improved corporate performance.it software application can enable effective CRM provided that an enterprise has the right leadership, strategy and culture. Commerce enabled CRM applications help the organizations to interact with customers through all media and channels. CRM products and services manage every point of contact with the customer to ensure that each customer gets the appropriate level of service and no sales opportunities are lost. An organization can improve the business processes and technology solutions around selling, marketing and service functions across all customer touch-point by implementing CRM strategy.

1.4 The CRM relationship and interaction with market

CRM leverages and amplifies customer base of an organization through efficient marketing. In fact CRM has brought up new dimensions in the field of marketing by significantly improving marketing functioning and execution. Intuitive CRM associated marketing strategies like direct marketing, web marketing, e-mail marketing etc. have been matured during the recent past. These marketing strategies are more promising as compared to the traditional ways on marketing as they help delivering higher-up performance and walloping business. They also help meliorating response rates in marketing campaigns, cut cost on promotions due to low asset values and provide higher scrutiny on organizational investments.

1.5 Aspects Of CRM Orientation In Marketing

Web Marketing With the growing popularity of web, customers are tending towards web marketing or web shopping. This has helped both customers and suppliers to transact in a real time environment irrespective of their locations. Web Marketing has contributed the following to market,

It is relatively very inexpensive as it reduces the cost for physically reaching to the target customers for interaction.

Suppliers can reach to more number of customers in lesser amount of time.

The online marketing campaigns can be easily tracked, traced, calculated and tested.

The selection process of any product or brand is simplified due to proven online research and analysis techniques.

Online marketing campaigns are more promotional as compared to manual campaigns.

Email Marketing:

Email marketing has turned out to be more efficacious and inexpensive as compared to mail or phone based marketing strategies. Email marketing is direct marketing which is data driven and leads to more accurate customer response and effective fulfillment of customer needs. More attractive features include newsletters, sending of eCoupons, eCards, provision of saving events into calendars etc.

Analyzing customers buying behavior online:CRM system provides a platform to analyze the customers buying behavior online. This interactive strategy provides great accuracy with high speed which includes profiling services furnishing elaborated bits of information regarding customers purchasing habits or behavior. Individualized analysis of this behavior also helps to identify to which product or brand the customers are more tended. For example an online selling website www.xyz.com can analyze the customers buying behavior by installing an in-house service with the help of a full-fledged CRM that checks what all products are being purchased by a particular customer and under which specific group they fall. This is achieved by personalized analyzing the buying history of customers in the past which predicts the future business with those customers also. This accomplishes to build a long-term relationship with customers by properly canvassing customer needs and resulting in customer satisfaction. Analyzing this particular buying behavior of customers online also helps to fix or change of marketing techniques or strategies to mould the system according to the future perspectives.

Forecasting future marketing strategies:Down the line marketing strategies keeps on changing according to the emotional behavioral change of customers. CRM market forecasting techniques help to understand this change through regression and statistical analysis of customer behavior online. These are some complex but more accurate analysis techniques provided by CRM system which are proved to be one of best marketing strategies. This innovative approach is carried out with greater risks but is believed to outturn astonishing rewards.

Building business impact models: It is important for an organization to have check on marketing performance regularly so that the techniques never deteriorate and always match to yield greater results. These CRM oriented models help in delivering accurate measurement of marketing performance throughout the organization and to do better every time.

These synergistic marketing strategies make a part of CRM system to develop high-end marketing business. Hence it is very important for an organization to incorporate them by carefully anticipating change, testing their performance and assembling the best possible combination of these strategies to meet the needs of the customers and maximize its marketing growth.

CRM FOR BANKS AND CREDITS

The Bank and Credit Management unions allow banks to better understand their customers and strengthen the customer relationship. The solution is based on the Microsoft Dynamics CRM platform and is tailored for retail banks, commercial banks, investment banks, credit unions and private bankers. This CRM solution provides banks with 360 degree relationship view of customers including checking/ savings accounts, transaction information, individual preferences and helps bankers strengthen the relationships with their customers

Bank Account & Customer Management on CRM

Bank account master with real-time bank balance and other transaction information

1,Bank account master with real-time bank balance and other transaction information

2, Native multi-currency support to transact with accounts in different currencies

CRM Multi-currency bank Accounts

Multi-currency bank accounts

Features

Record Bank Transactions including Branch and ATM Transactions including Account Opening, Deposits, Withdrawals, Account Closures

Record and Update Signature Type - Joint, Single, Any/ Either

Add, Delete Account Holders to a Bank Account. Record all history of past owners with active/inactive status

Ability to view and manage account owners for a bank account

Attach signatures recorded on an electronic signature pad to the customer for bank representatives to view .

Attach signatures recorded on an electronic signature pad to the customer for bank representatives to view

Attach signatures recorded on an electronic signature pad to the customer for bank representatives to view

Record Electronic Signatures on a customer record for verification. Signatures can be scanned in from a paper copy or automatically captured on an electronic signature pad.

RELATIONSHIP MANAGEMENT & MARKETING

Automatically classify customers into different preferred customer tiers based on bank balance and transaction history.

Automatically Recommend Financial Products based on past history and balances.

Organize various types of campaigns including mail, email, phone and event campaigns.

Run Tailored Marketing Campaigns for Customers. Track Responses of a campaign.

Marketing campaigns tracking outlook

Marketing campaigns for bank customers with ability to track success of each campaign

Relationship Management & Marketing

Automatically classify customers into different preferred customer tiers based on bank balance and transaction history.

Automatically Recommend Financial Products based on past history and balances.

Organize various types of campaigns including mail, email, phone and event campaigns.

Run Tailored Marketing Campaigns for Customers. Track Responses of a campaign

CUSTOMER PROFILE ANALYTICS AND REPORTS

Track average transaction size by customer segment

Track profitability of each customer

Advanced customer profile - contact preferences, product preferences for tailored marketing activities

Customer Service

CRM have target dates automatically predicted. Ability to track actual Vs. Target completion date

Customer service cases have target dates automatically predicted. Ability to track actual Vs. Target completion date

FEATURES

Accept Incoming cases via phone, fax, email and chat

Automatic Assignment of Cases to Queues or Customer Service Representatives (CSRs)

Automatic template-based responders for case acknowledgements, case resolution

Knowledge base to help with improving first contact resolutions (FCR) and reducing Turn-around time

System assigned target close date. Tracking of expected close date to actual close dates

Automatic escalation of cases if beyond expected close date

{Source bank management for dynamics CRM: ignify.com}

1.6 CRM IN BANKING

Banks are highly focusing on CRM for the last five years that is expected to continue (Foss, 2002). According to Foss (2002) most of the financial services industries are trying to use CRM techniques to achieve varieties of outcomes.

These areas are:

• Creating consumer-centric culture and organization;

• Securing customer relationships;

• Maximizing customer profitability

• Aligning effort and resource behind most valuable customer groups.

To implement strategies these aspects must be considered

• Communications and supplier - customer interactions through channels;

• Identifying sales prospects and opportunities;

• Supporting cross- and up-selling initiatives;

• Managing customer value by developing propositions aimed at different customer segments;

• Supporting channel management, pricing and migration. (Ibid)

According to foss(2002) It is equally necessary for banks to identify this four stages

1. Building the infrastructure and systems to deliver customer knowledge and understand customer profitability;

2. Aligning corporate resource behind customer value - developing segment management strategies to maximize customer profitability and satisfaction

3. Incorporating a market perspective into understanding of customer value, to avoid any possibly adverse effects and maintain customer relationships;

4. Integrating strategic planning and customer value management.

Foss pointed out that the four stages are usually sequential, but not always so. The bank would need a complete view of its customers across the various systems that contain their data. If the bank could track customer behaviour's, it will help their staff to understand and predict customer future behaviours and preferences.

1.7 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, Web sites, brick-and-mortar stores, call centres, 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.

1.8 The Benefits of CRM

According to Newell (2000) the real value to a company lies in the value they create for their customers and in the value the customers deliver back to the company. Accordingly, it is important to mark that the value does not lie in more information and in more advanced technology. The value lies in the customer knowledge and in how the company uses that knowledge to manage their customer relationships. Knowledge is the sole of CRM. Unfortunately, few companies are transforming the information to customer knowledge and therefore they miss the opportunity to provide value to their customer. However, applied in the right way, CRM is the tool that contributes to profit. If companies are transforming the customer data into knowledge and then uses that knowledge to build relationships it will create loyalty, followed by profits (Newell, 2000).

1. Lower cost of recruiting customers: Customer recruitment cost will decrease and there will be savings in marketing, mailing, contact, follow-up, fulfillment, services, and so on (Newell, 2000)

2. No need to recruit so many customers to preserve a steady volume of business Increase in long-term customers' relationship will ultimately minimize the need for new customer recruitment (Newell, 2000)

3. Reduced Costs of sales: Long-term customers are more responsive than the newer ones that will decrease the selling cost. As well as marketing campaign cost will also decrease due to familiarity with the distribution channels (Newell, 2000)

4. Higher customer Profitability Customer profitability will increase by higher customer wallet-startup-selling, cross-selling and follow-up sales and satisfied customer refers more customers (Newell, 2000)

5. Increased customer retention and loyalty: The retained or long-staying customer buys big quantities frequently. The customers initiatives increases bounding relationships and as a result- loyalty (Newell, 2000)

6. Evaluation of customer profitability: The Company evaluates which customers are profitable, going to be profitable in future and never profitable in future. The key to success in business is to discover economically beneficial customers, acquire them and never let them go (Newell, 2000).

According to Budhwani (2002) all the customers are not beneficial; if the customers are taking company's time, energy and resources without generating enough business, they are dangerous customers. Newell (2000) describes that the company must use CRM where they can get good profitable customers.

{source: how banks manage CRM: http://epubl.ltu.se}

1.9 RESEARCH PROBLEM

Modern Marketing philosophy advocates the concept of CRM that creates customer delight. This applies to all sectors of Sales and Marketing includes the banking. In the banking field a unique 'Relationship' exists between the customers and the bank. But because of various reasons and apprehensions like financial burdens, risk of failure, marketing inertia etc., many banks are still following the traditional ways of marketing and only few banks are making attempts to adapt CRM. It is with this background, the researcher has made a modest attempt towards the idea that CRM can be adapted uniformly in the banking industry for betterment of Banking Services. The role of CRM is quite different and distinguishable to traditional type of Marketing CRM participate not only in Marketing but also in implementing the business as a strategy to acquire, grow and retain profitable customers with a goal of creating a sustainable competitive advantage. Particularly in banking sector, the role of CRM is very vital in leading the banks towards high level and volume of profits. So there is a need to study the role of CRM in development and promotion of banking sector through the side lines of the practices, problems and impact of the CRM on banking sector all the time.

1.91 OBJECTIVES OF THE STUDY

The main objective of the study is to examine the importance and how to improve CRM in European banks, and its impact on 'Customer Satisfaction' with a special reference to Czech republic. The other specific objectives of the study are:

1.To review the literature on the concept and use of CRM in banking sector.

2.To analyse the perception of customer on CRM as a tool of banking sector in retention of customers in general and European banks in particular.

3.To offer pertinent suggestions based on the findings of the study.

Chapter Two

2.0 Literature Review

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 organisations got affected from 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 motivators for embracing marketing principles were the competitive pressure that arose from the deregulation of the financial services market particularly in Europe. 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 behaviour, executives can have a better understanding, a predicative future behaviour and customer preferences. The data and applications can help the bank to manage its customer relationship to continue to grow and evolve (Dyche, 2001). According to Stone et al. (2002) most sectors of the financial services industry are trying to use CRM techniques to achieve a variety of outcomes.

In this literature, the main difference among the definitions of CRM are technological and relationship aspects of CRM. The phrase CRM appeared in the literature after the evolution in the relationship marketing philosophy. Berry (1983) defined relationship marketing as attracting, maintaining and enhancing the customers' relationships in multi-service organisation. After a few decades, the evolution in relationship marketing philosophy changed the word relationship marketing to CRM.According to Brown (2000) CRM is a process of acquiring new customers, retaining the existence customers, and at the same time understands,anticipates and manages the needs of an organisation's current and potential customers. Furthermore, Mylonakis (2009) described CRM as an innovative process to create a long term relationship and gaining trust.

CRM in financial service industry is a cyclical process which starts with definition of customer actions (Panda, 2003). CRM is fundamental to building a customer-centric

organisation. CRM is a key element that allows a bank to develop its customer base and sales capacity. The goal of CRM is to manage all aspects of customer interactions in a manner that enables the organisation to maximise profitability from every customer. Panda (2003) on his own describe that customer expectations are difficult to manage but are often the cause of dissonance which results in loss of existing customer base. So understanding of customer expectations with regard to service delivery levels and product quality is essential for establishing a long term symbolic value relationship. From the foregoing, it can be said that the purpose of CRM is to bring about Customer Focused Services (Gummesson, 1987; Gronroos, 1990; Varki) Information and Communication Technology, Complaints Management (Wilke 1994; Ingram,1996; O'marley and Tynan, 2000) High Quality Service (Khandwalla, 1995; Eisingerich and Bell, 2006), Timeliness in Service Delivery, Friendliness of Employees (Reinatz and Kumar, 2003), Ease of Opening Account and Competitive Charges in order to enhance organisational performance as indicated by such variables as Customer Satisfaction (Morgan and Hunt, 1994; Naidu etal., 1999), Customer Retention (Dick and Basu, 1994; Morgan and Hunt, 1994; Reichheld, 1996), increase in number of customers (Groonroos, 1990), and increased net profit (Khandwalla, 1995; Page et al., 2006). The organisational performance is enhanced because marketing efficiency is achieved due to the cooperative and collaborative processes (Sheth and Sisodia, 1995) introduced by CRM which helps in reducing transaction costs and overall development costs for the company. These brings about two important processes of proactive customer business development and building partnering relationships with the most important customers (Chitanya, 2005) and eventually leads to superior mutual value creation between the organisation and the customer. Further, a clear vision of CRM along with appropriate strategies if applies in banking sectors found out that beneficial in maintaining the customer service quality, customer satisfaction and customer retention which ultimately leads to the growth of the organisation and profitability (Bansal and Sharma, 2008). Girdhar (2009) observed that by satisfying the internal customers and building good relationship with them, the relationship with the external customers can also be retained and satisfied by the banks. Kumar & Rajesh (2009) reveals that any bank that wishes to either grow in size of its banking operation or improve its profitability must consider the challenges affecting its customer relationship.

2.1 Discussion And Argument For The Service Quality And CRM Practices.

The challenge before the banks is not only to obtain updated information for each customer, but also to use the information to determine the best time to offer the most relevant products (Lau etal., 2003). It is also important to understand that if customers bring in profits for the bank, it becomes imperative for the bank to provide excellent services to those customers, otherwise they switch to other banks (Ray, 2007). Service quality in banking implies consistently anticipating and satisfying the needs and expectations of customers. Parasuraman et al. (1985) also hold the view that high quality service gives credibility to the field sales force and advertising, stimulates favourable word-of-mouth communications, enhances customers' perception of value, and boosts the morale and loyalty of employees and customers alike. Puccinelli (1999) looks the financial services industry as entering a new era where personal attention is decreasing because the institutions are using technology to replace human contact in many application areas. Over the last few decades, technical evolution has highly affected the banking industry (Sherif,2002). In today's competitive banking industry, customers have to make a choice among various service providers by making a trade-off between relationships and economies, trust and products, or service and efficiency (Sachdev et al., 2004). Roger Hallowell (1996) conducted a research on customer satisfaction, loyalty, and profitability and found that as compared to public sector, private sector bank customers' level of satisfaction is comparatively higher. CRM is a key to create a superior customer experience. It manages the customer relationship by creating a clear understanding (Know),by developing services and products based on the added value for target groups (Target), then enabling the actual sale and delivery of services and products through the selected channels (Sell), and developing long term profitable relationships with customers after sales services (Service) (Hussain, et.al., 2009). Many researchers have been done in various industries especially in the banking sector that focussing on customer oriented services (Ndubisi et al., 2007; Rootman et al., 2008; and Dutta and Dutta, 2009). Lu and Shang (2007) explored the CRM perceptions in freight forwarder services from managerial perspectives. They had come out with six dimensions of CRM namely

1,customer acquisition,

2,customer response,

3,customer knowledge,

4, customer information system,

5,customer value evaluation,

6, customer information process.

2.2 DISCUSSION AND ARGUMENT FOR THE SELECTION OF THE VARIABLES FOR THE EMPIRICAL INVESTIGATION ON CRM.

Sin et al. (2005) identified four dimensions of CRM in their study. key customer focus, CRM organisation, technology-based CRM and knowledge management (Parvatiyar and Sheth, 2001). Rootman etal. (2008) investigated the variables that influence the effectiveness of CRM strategies in banks. Attitude, knowledge ability and two-way communication related to bank employees. This literature suggests that banks should consider the customer relationship life cycle . In general, there are three core phases: customer acquisition, customer enhancement, and customer recovery. The acquisition phase describes the initiation of a customer-bank relationship.

In CRM initiatives, customer representatives' help customers get used to the products and services, thereby increase customer familiarity. As the service industry has a high degree of integration and interaction in terms of contact contribution, empowerment is a helpful instrument for successful control of individual customer relationships (Mudie and Cottam, 1993). Service recovery is critical as it provides an opportunity to retain customers. If the customer has been lost but is still attractive, recovery offers could be made to the customer (e.g. cancellation in the initiation fee; taking care of formality caused by the switching) or value added services could be offered. In the customer-centered paradigm, customer asset management (CAM), customer equity (CE), return on quality and service profit chain are similar to CRM (Berger et al., 2002; Blattberg et al., 2001; Rust et al., 1995; Heskett et al., 1994)

Chapter Three

3.0 CURRENT SITUATION

According to Xu,et al., 2002. CRM came into the power when banking institutions were getting more and more competitive. The focus of CRM helped banks to understand the customers' current needs, the customers past transitions, and what the customer plans to do in the future to meet their own goals. Even though most of the banks in the developing countries such as: Nigeria, Czech and some other European and Asian countries have realised the need and importance of CRM and has implemented its applications, but the initial investigations of this current research have shown that quite a number of CRM goals does not produce required results and even worse, in some cases users say that CRM has damaged customer relationships

3.1 SITUATION IN CESKA SPORITELNA

Ceská sporitelna is one of the lending commercial bank in Czech republic the bank placed high value to its scarcest resource existing customers. Enjoying an image as a trusted partner, strategies and values ensured that the bank remained close to customers. The bank launched a strategic initiative to fulfil its vision for effective CRM. It entrusted Capgemini(CRM consulting company) as its CRM and integration partner their Technology included Siebel eFinance,SAS Enterprise Miner, Oracle 9i DWH and BEA Middleware served by EMC

Symmetrix and HP UNIX hardware. Interfaces with customers were streamlined for an enhanced experience with higher quality. The team designed a framework of relevant metrics, at operational and process levels, to Measure success of this software. According to their results the Program measurement has allowed Ceská sporitelna to track its CRM investment. The company reports ROI as forecasted. The result show an incremental increases in sales and better profitability from customer-focused processes and services. Since the bank embarked on this project, they have exceeded their growth forecasts for two years. In 2012, gross revenue and net profits both increased by 20% with profitability up to 35.8%. Brand awareness (prompted) increased to 99.3%. Customer satisfaction metrics were equally good. The index for customer satisfaction rose to 76.6% and Return on investment for some direct marketing campaigns increased by thousands to a stunning 3,400%. According to my simple research on their customers, customer service was rank above average but many customers still believe that more still have to be done to encourage to growth.

3.2 Analytics of CRM in CSOB

According to research the backbone of the CRM efforts at CSOB has been in the customer knowledge realm. The bank has had an unusual advantage in this regard as a result of its well established client information file. Recognizing the value of this corporate asset to its CRM efforts, the bank has embraced a maxim of making the analysis of customer information as sophisticated as possible in a centralized back office function so that the execution of customer strategies is facilitated for customer contact personnel. And over the years, the bank has actively sought to improve its ability to mine, analyze, and understand the data that resides in its warehouse. At present, the core responsibilities of the Strategic Marketing Research and Analytics are:

customer profitability measurement,

customer decisioning,

(3) segmentation, modeling, and other advanced analytics,

Chapter Four

4.0 Research Methodology

According to Ernst and young review, the European banking market has witnessed unprecedented turmoil as it has undergone a period of massive uncertainty and change. With the financial institutions that had enjoyed record profits in 2012 now the subject of intense public scrutiny. It costs banks as much as six times more to attract a new customer as it does to retain an existing one, and yet for many years the industry has not always focused on customer loyalty and the opportunities among its existing client base. Research shows that 24% of Czech citizen had at some point changed their bank account, with 10% of the change happening in the last two years alone, this changes is not business of the Europe crisis but due to less customer satisfaction and bank charges. A further 11% of Europeans say that they plan to change their main provider in the future. Customers in Spain (20%), Italy (14%) Cyprus(38%) and so many others are the most likely to change their banks with only 6% in Belgium and France planning to do likewise These shows that banks must work hard to meet the challenges of retaining customers, restoring public confidence and providing the services and products that customers really want. Customer satisfaction has never been such a major concern for European banking leaders. Now is the time for banks to identify the specific satisfaction drivers that most influence their businesses, and act on those findings to improve the service quality and perception of customers. Reviewing Ernst and young report, I found out that the expected drivers of satisfaction; price, service and the product offering, are the three main causes of customer dissatisfaction. In light of the credit crisis, 25% of Europeans who plan to leave their bank cited lack of trust as the reason to change. The reasons for moving banks were different across the markets. Price was a key factor for Italian (50%) and German (55%) customers but not for French and UK customers, where only 16% cited this as the reason. French customers were most affected by bad service with 35% giving this as the main reason for changing banks, Their report show the continued need for banks to segment their customer bases and target loyal customers. As service channels move towards online banking and telephone banking, customers still demand personal relationships with their banks. Customer's rate personal relationships as highly important and most European considered the current level of personal service to be either bad or limited.

4.1 THE FAILURE OF CRM IN CZECH REPUBLIC

Given the enormous change that the European banking industry has undergone in the last years, it is little wonder that customer attrition has become a real and pressing concern. Among the customers who have changed their main bank, 10% did it in the last two years and a further 11% have plan to do so. This clearly demonstrates acceleration in attrition, even if these customers often keep one or more products with their former main bank Before banks can begin to design and implement meaningful CRM retention strategies, it is vital that they first investigate the factors driving customer attrition. Approximately a third of Czech's(10%) attribute their decision to change banks to service levels, while 16% blame the price of products(charges on withdrawal). Among those planning to leave, these issues take on even greater significance, with 8% blaming price and 22% attributing their dissatisfaction to service. Most worryingly, perhaps, a quarter of those customers planning to change their main bank say that they are doing so because of a lack of trust and loyalty from banks

4.2 RESEARCH STRATEGY

Having seen the overview of customer's dissatisfaction in the European banks The objective of this part of the research is to gather evidence of how European bank have implemented CRM and possible way to improve it. This makes it difficult to begin with a theory or a set of hypotheses. According to Yin (1994: p.13) he defined research method as an empirical inquiry that "investigates a contemporary phenomenon within its real-life context, especially when the boundaries, between phenomenon and context are clearly not evident, and in which multiple sources of evidence are used". In this research there was little prospect of simplifying matters by excluding other European countries and limiting the research on Czech bank. The Case study method facilitates the exploration of complex social processes, however, by Taking a holistic perspective on real-life events with all of their potentially rich. Rather the researcher observes the important contextual variables impinging on the behaviour of interest, over time (Neuman1997; Punch 1998; Yin 1994)

4.3 MAJOR RESEARCH

In order to gain an initial understanding of CRM practices I decided to select few European bank (Ceska Sporitelna) and CSOB. According to one of the manager of ceska sporitelna interviewed, the bank loses approximately six per cent of its clients every year, which practically explains why many players in the sector are seeking to implement a CRM-based strategy. Most of the data for the case stems from in-depth interviews with senior people from Banks and the outside consulting company (Capgemini) that was partly responsible for the design and implementation of the CRM program. In-depth interviews are considered to be the most valuable source of information when the aim is to investigate the underlying meaning of complex phenomena and processes (Lincoln and Guba 1985; Miles and Huberman 1994;Patton 1990). The interview protocol included questions that were standardized around topics such as

1, His manager's perception of what CRM constitutes,

2, The objectives of the CRM program,

3,The influence CRM has on the technological and organizational infrastructure of the business.

4, The need of CRM in the banking sector.

The questions were kept deliberately broad to allow respondents as

much freedom in their answers as possible. On average each interview lasted between one and two hours.

The researchers also consulted written reports that existed within Ceska Sporitelna and the consulting company.

Ceska Sporitelna is one of the lending commercial bank in Czech republic with more than 1000 employees. It aims at achieving stable growth and excellent profitability. The roots of ÄŒeská spoÃ…â„¢itelna reach back to 1825, when the SpoÃ…â„¢itelna česká, the oldest predecessor of ÄŒeská spoÃ…â„¢itelna, began operating. This tradition of a Czech savings institution was continued in 1992 by ÄŒeská spoÃ…â„¢itelna as a joint-stock company. The 5.2 million clients of ÄŒeská spoÃ…â„¢itelna today clearly show its strong position on the Czech market.Since 2000, Ceska Sporitelna has been a member of Erste Group, one of the leading financial providers in Central and Eastern Europe with 17 million clients in eight predominantly EU-member-countries. Within the next eighteen months, ÄŒeská spoÃ…â„¢itelna successfully completed its transformation - a transformation that aimed to the improvement of all key areas of the bank. ÄŒeská spoÃ…â„¢itelna continues in the improvement of its products and services, while at the same time making work processes more effective. The bank is a modern bank that is geared towards small-scale clients, small and medium-sized companies, towns and municipalities. ÄŒeská spoÃ…â„¢itelna plays also indispensable role in the financing of large companies and corporations and in providing financial market services. As a big bank with large number if can't identify which clients to focus on could, therefore, lead to failure. Two years after joining the group, the Bank reinforced its position and diversified its activities to other sector. The tough competition and the massive and rapid changes in media and communications technology guided the bank in offering a wider range of products and services through a better-designed communications and distributions network adapted to individual needs. The bank defines CRM as a marketing strategy that allows the bank to

1, Understand different combinations of clients, products, and volumes. Indeed, information about who buys what and how much' enables the bank to have a commercial approach based on the client and no longer solely on the product;

2, Have a proactive approach, which consists in creating the demand as a result of better Information instead of just experiencing it.

3 Set up a mix of distribution channels with standardized or specialized services according to the individual client's importance for the bank.

4 Focus on profitable clients through discriminated segmentation

4.4 INTERVIEWS WITH EUROPEAN BANKS MANAGERS ON CRM

Interviewers

Michael Otto Gopal Sondur

Group Head - Products & Strategy, Finacle,Infosys technologies Ltd

Head of CRM at Erste Bank, Austria

Radi Badidi

Vice President Marketing

Intelligence/CRM ABN AMRO Bank,

Netherlands

QUESTION 1: how would you define bank CRM?

Radi Badidi, ABN AMRO: We consider CRM to be a business strategy than anything else - not just Technology, not just analytics, not just an impressive story of how customer focused you are. All major banks have invested heavily in technology and infrastructure over the last 5 to 10 years in this area, but hardly any of them have been successful in actually getting it effective. Neither has the customer felt a real difference nor has it contributed to higher ROI. I would say that optimizing every customer contact by effectively creating value for both your clients and your business, using customer knowledge, is the main differentiator compared to non-CRM focused companies.

Michael Otto, Erste Bank: There are many definitions for CRM and all of them are more or less correct. It is important that the client not the product is in the center The CRM definition we use is the following, 'having the right offer for the right client, at the right time via the right channel'.

That is the reason why we tried to improve the following processes and support it with systems - customer service and advice, customer analytics and campaign-management.

Gopal Sondur, Infosys: CRM as we see it is about enterprises collaborating across the customer value chain to develop and implement solutions that better meet the evolving preferences of individual customer groups. The C in CRM therefore has now evolved from 'Customer' to "Collaborative". The core of CRM requires various entities in a bank to work collaboratively to define and realize a series of business principles which are essential to establish customer-centric organizations. Essentially this means collaboration across those entities that deal with Acquisition (sales & marketing/distribution), Transactions (fulfilment) and Servicing (customer service). This approach is different from the past where CRM was modelled around an ad-hoc set of activities strung together to work across functions. Using the collaborative approach, leading banks are today trying to achieve a state where the customers become less aware of marketing and selling and feel a constant level of personalized, consistent, high quality service.

Question 2

How important is CRM for banks? What benefits can banks hope to achieve through deploying CRM solutions

Radi Badidi: I think it really depends on the positioning and focus of a bank. If operational excellence is your key-focus and not customer intimacy, the choices you make in terms of investments in CRM will be completely different. In strategic terms, ABN AMRO has a strong ambition to create value for our clients (especially the "mid-market" which we define as mass-affluent/private-client consumers and mid-sized businesses) by offering high-quality financial solutions that best meet their current needs and long-term goals. Knowing our client and acting on that information in every contact is essential in achieving this. For the Netherlands, it means that we aim to be "personal in every channel" and we will use CRM to create more and more clients that consider us to be their primary bank.

Gopal Sondur : CRM is fundamental to building a customer-centric organization. With the growth of fee-based income and increasing focus on advisory services, the role of CRM in banks is now more critical and pivotal than ever before. The benefits that banks hope to achieve through deploying CRM solutions will be to arrive at satisfactory, measurable answers to questions such as 'how profitable is the customer', 'which products/services does the customer require; when, where and through which channel' and 'what risks does the customer present to the bank.

Jose Olalla: There are two main points that describe the significant jump regarding CRM, customer demand for sophistication and multi-channel approach and orientation. Consequently there are four steps that banks should take to benefit from CRM, change their commercial product vision to a customer centric vision, effectively integrate different channels, ensure data quality and deploy complex marketing strategies.

Question 3

How has the understanding of CRM in banking changed today as compared to a few years back?

Jose Olalla: Few years ago, banks thought about CRM as just a new 'magical' software, and therefore something that should be managed within the technology and systems departments. Now it is a critical part of the agenda of business managers. Since banks pursue high growth strategies, expanding their franchises into growth segments, and are really aware of the winning concept of the multi-channel and multi-price approach, CRM becomes key and critical. Further, today customer centric banking means a new way of thinking. Banks need to focus on relationship banking rather than traditional transaction banking and realize the importance of SOW - share of wallet. In the world of margin pressure, being a product specialist is hard, so banks need to make advice rather than product price as the basis of the added value in banking. In this situation, CRM is key because the value of retail banking lies in distribution. Knowing your client is the first requirement of a retailer. It protects your business, helps penetrate growth markets and prevents disintermediation by other players

Michael Otto : CRM is not technology, it is business. CRM has to improve the "moment of truth" when the client is with the bank making the contact more efficient and more satisfactory for the customer. So banks have to improve not only the technology but also the relationship skills of the advisors.

Question 4

How will the CRM landscape in the banking industry develop in the coming

days?

Radi Badidi : in the coming years there will be more focus on the demand side of customers, they will have various channels at their disposal and have more choice than ever to purchase their products and services with a growing variety of general banks and niche players. As the customer is more in control, we will want to be "actively ready" in all channels when the customer contacts us, based on what we know and anticipate of this client. This requires different marketing skills and new ways of managing your sales. The second trend will probably be that CRM will contribute more to branding. Not just ROI on every contact will be leading, but the way we want to be perceived as a brand will become more important. Now, a lot of effort is put on being there at customers' moments-of-truth. In the future, all customer contacts will be moments-of-truth as all these contacts tell the customers who we are and what we want to be,CRM will help us enable this.

Gopal Sondur: Although the potential benefits of a CRM strategy focused on corporate banking were high, firms have been slow to adopt due to the greater complexity of the relationships and number of touch-points. With the advent of more powerful technologies and greater experience in customer relationship management solutions, we see leading banks concentrating on relationships with corporate customers in the coming days. The other area we expect to see development is channel integration. Due to lack of channel data and the dispersion of channel responsibilities throughout the organization, most financial institutions develop channel strategies and manage their channels poorly and in an uncoordinated fashion. This leads to sub-optimal resource allocation and poor customer management. Leading banks have realized this problem and are addressing this aggressively. The whole area of integrated channel management which is tightly coupled with CRM will rapidly evolve to higher levels of sophistication.

{Source CRM in bank: infosys.com}

4.5 INTERVIEW WITH CSOB CZECH REPUBLIC

The bank claims to be the strongest, most stable and most powerful bank not only Czech republic but in the whole region of Central and Eastern Europe. It operates in two national markets, Czech and Slovak. It is the largest bank based in the Czech Republic and Central Europe, measured by the value of assets. As a universal bank offering a full range of banking services to individuals and businesses. ÄŒSOB has about 5,000 employees. Customers Information and communication with them are kept mainly in electronic documents (Microsoft Excel files, text reports). Some documents are stored centrally on a shared drive. The updates is carried out on an individual basis and branches, departments or staff .

As one of the fastest growing bank , it was up to improve customer care. Achieve maximum fast and accurate response from the bank towards the client. And to achieve more detailed and accurate knowledge of the client's needs in order to offer them real solutions. All the greatest extent allowed by current state of CRM . Since the bank customer base is growing too large, the bank decided to use Microsoft Dynamics CRM 3.0, mainly due to the integration of best in ÄŒSOB existing Microsoft Windows environment and Microsoft Office. Furthermore, for its easy "customizovatelnost" (to modify applications to customer) and the possibility of further development. (Source www.csob.cz)

The system was initially used for about 300 users in the Czech Republic and about 150 users in the Slovak Republic. Users work primarily with six different modules, The project was completed in a short period of three months following timeframe.

4.6 THE IMPACT OF CRM ON CSOB

Support systematic work with a portfolio of corporate clients.

Improving the quality of customer care through systematic information about the client and facilitate the exchange of personnel between ÄŒSOB (Client employee, business support)

unification of tools for recording existing and potential clients:

Facilitate and simplify administrative tasks. (Registration, reporting, ...) ensure the same high level of quality work with a client portfolio in different locations.

Support the implementation of business strategies through accurate planning.

The possibility for the customers and managers continually assess the progress of business activities, leading to facilitate transparent evaluation and motivation of workers within the segment.

4.7 RESEARCH RESULTS

CRM has emerged as a popular business strategy in today's competitive environment. It

is a discipline that enables the companies to identify and target their most profitable customers. It involves new and advance marketing strategies that not only retain the existing customers but also acquire new customers. It has been found as a unique technique which can bring remarkable changes in total output of companies. Through the literature survey and data analysis it can be inferred that CRM tries to find out the relationship between perception and satisfaction, commitment and loyalty that underlines the significance in European Banking Sector. Customers largely select their banks based on how convenient the location of bank was to their homes or offices. With the advent of new technologies in the business of banking, such as internet banking and ATM'S, now customers can freely choose any bank for their transactions. Private Banks have traditionally viewed themselves as exceedingly "Customer Centric" offering what they believe to be highly personalised services to the High Net Worth Customers. It is also found that the structured approach of CRM can provide various benefits to a bank, namely

1, A distinctive and consistent customer experience,

2, clear identification of the organisation,

3, Technological and process-related capabilities.

The banking industry is much further along than other industries in recognising the value of CRM and implementing decision support systems to support CRM. Though most of the banks have already focused on tactical point solutions, they're ready for a transition toward strategic, enterprise-wide CRM initiatives that cross major business lines. An effective decision support system for CRM enables to collect data about customer from every touch consolidate this information into a single view of the customer, and use this information for customer profiling, segmentation, cross-selling, up selling and retention efforts. As banks continue to seek a unified understanding of customer relationships across diverse channels, the importance and penetration of CRM is expected to grow like anything. With regard to various aspects of CRM through the opinions of select bank customers

4.8 FINDING FROM CZECH BANKS

CRM strategies are difficult to execute successfully. This is because of the wide range of factors influencing their success. Banks in czech tend to approach them as IT projects,neglecting the people and (business) process aspects. But without changing the way a bank works, in respect of its customer-facing activities, the chances of success are limited. To make matters worse, CRM have to be set against a moving background of changes in technology, the organisation and its marketplace. This means they face conflicting demands to deliver short and long term benefits to the organisation. All of these factors mean that it can take a long time to make CRM work properly for an organisation. Most banks like CSOB acknowledge the need to become ever closer to their customers, provide higher levels of service and gain and retain a higher share of business with the most valuable customers. The market for CRM has grown rapidly as organisations scramble to outperform the competition in developing superior customer relationships. The CRM has created severe challenges for businesses. Many banks like Stebbank(Volksbank) never fulfil the implementers' expectations and the financial return to the bank is difficult to determine. There are several reasons for this but the principle issue relates to the complex environment factors affecting the successful implementation of CRM in Czech banks From the analysis, it is found that only few customers recognise that there is a change in marketing approach of Banks due to changing business environment. Majority of customers uncertain that the CRM is centered in a particular department very few of the customers have accepted that CRM is prevalent through all the levels in the Banks. CRM undertaken by employee approach to customers is found very poor. It is further observed that the CRM activities are initiated and implemented by the Banks in a serious manner, so that the customers in particular and the society in general benefited a lot. Providing service to customers has been identified as the prime responsibility of the Banks and therefore, Banks considered that CRM is the best tool to perform the job of rendering good services. Equally It is found that Customer Retention is not a big challenge to Banks as per the opinions of customers of selected Banks. It is found that though CRM activities have not helped to increase the confidence of the customers in meeting the changing needs, it helped to increase the confidence of the customers while rendering services in mean time efficiently. CRM activities on this selected Banks are not up to the mark in retaining the key customers. It is beyond doubt that when banks through CRM activity attend the needs of customers without delay in time, the banks can create more awareness to customers and can create a customer data base very significantly. According to the perception of customers interviewed, enhancing customer loyalty through different activities is not an absolute activity. My analysis shows that CRM activities have not helped to increase rapport with the customers of the selected banks as expected. Most the customers have not accepted that the selected Banks are not showing interest in CRM activities with full attention but maintaining the same as a compulsion. Most of the customers are uncertain about the CRM's benefit in building the customer loyalty. It is further observed that CRM activity does not help the Banks to get immediate commercial returns and also to have a favourable public image over the long run unless the CRM activities are taken up by all the departments in the banks.

Chapter Five

5.0 SOLUTION AND RECOMMENDATIONS

Executing Customer Relationship Management (CRM) for the financial and banking industry involves many issues, including the use of unique processes and solutions. To be successful with CRM, banks must define and develop a business strategy as well as a supporting infrastructure for that strategy. This research identified the needs for banks to become closer to their customers, provide higher levels of service and gain and retain a higher share of business with the most valuable customers. The market for CRM technology has grown rapidly as organisations scramble to outperform the competition in developing superior customer relationships.

In general it can be said that the bank is yet to develop an integrative approach which focuses on the customer needs and to deliver to it. As shown by the study, the bank is far from developing a customer centric approach both for the customer as well as for the employees. Thus, for CRM to deliver to its expectations, it should play an integrative role within the bank and ensure that all processes are integrated in the bank global strategy, which is far from reality in the study above. In view of this, to implement a CRM integration strategy, the following recommendations should be adopted

Czech banks should have a good and realistic marketing strategy in place an