1.1 INTRODUCTION
Figure1.1: Evaluation & identification of appropriate CRM product
Figure1.2: Social CRM, The New Rules of Customer Relationship Management
CRM, or Customer relationship management, is a number of strategies and technologies that are used to build stronger relationships between companies and their customers. A company will store information that is related to their customers, and they will spend time analyzing it so that it can be used for this purpose. Some of the methods connected with CRM are automated, and the purpose of this is to create marketing strategies which are targeted towards specific customers. The strategies used will be dependent on the information that is contained within the system. Customer relationship management is commonly used by corporations, and they will focus on maintaining a strong relationship with their clients.
There are a number of reasons why CRM has become so important in the last 10 years. The competition in the global market has become highly competitive, and it has become easier for customers to switch companies if they are not happy with the service they receive. One of the primary goals of CRM is to maintain clients. When it is used effectively, a company will be able to build a relationship with their customers that can last a lifetime. Customer relationship management tools will generally come in the form of software. Each software program may vary in the way it approaches CRM. It is important to realize that CRM is more than just a technology.
Customer relationship management could be better defined as being a methodology, an approach that a company will use to achieve their goals. It should be directly connected to the philosophy of the company. It must guide all of its policies, and it must be an important part of customer service and marketing. If this is not done, the CRM system will become a failure. There are a number of things the ideal CRM system should have. It should allow the company to find the factors that interest their customers the most. A company must realize that it is impossible for them to succeed if they do not cater to the desires and needs of their customers. Customer relationship management is a powerful system that will allow them to do this.
It is also important for the CRM system to foster a philosophy that is oriented towards the customers. While this may sound like common sense, there are a sizeable number of companies that have failed to do it, and their businesses suffered as a result. With CRM, the customer is always right, and they are the most important factor in the success of the company. It is also important for the company to use measures that are dependent on their customers. This will greatly tip the odds of success in their favor. While CRM should not be viewed as a technology, it is important to realize that there are end to end processes that must be created so that customers can be properly served. In many cases, these processes will use computers and software.
Customer support is directly connected to CRM. If a company fails to provide quality customer support, they have also failed with their CRM system. When a customer makes complaints, they must be handled quickly and efficiently. The company should also seek to make sure those mistakes are not repeated. When sales are made, they should be tracked so that the company can analyze them from various aspects. It is also important to understand the architecture of Customer relationship management.
1.2 CRM OVERVEW
MEANING OF CRM
Customer Relationship Management is the establishment, development, maintenance and optimization of long-term mutually valuable relationships between consumers and the organizations. Successful customer relationship management focuses on understanding the needs and desires of the customers and is achieved by placing these needs at the heart of the business by integrating them with the organization's strategy, people, technology and business processes.
At the heart of a perfect CRM strategy is the creation of mutual value for all the parties involved in the business process. It is about creating a sustainable competitive advantage by being the best at understanding, communicating, and delivering, and developing existing customer relationships in addition to creating and keeping new customers.
DEFINITION OF CRM
“Customer Relationship Management (CRM) is a co-ordinate approach to the selling process allowing the various operational, customer contact and sales promotional functions of an organization to function as a whole.”
1.3 GOALS OF CRM
Implementing customer relationship management can be a costly undertaking. Organizations spend a lot of money scrutinizing vendors, buying the right CRM software, hiring, consultant, training employees, etc. The only way in which a company can actually measure its success is if it establishes CRM goals prior to the implementation as in this way it is able to determine whether or not it has successfully implemented CRM. Despite the fact that industries have different business aspects they share some common CRM goals.
Some of the commonly Established CRM Objectives are as follows:
1) Increase in Customer Service :
Establishing customer loyalty as one of your top CRM goals is absolutely fundamental to CRM successful implementation .For this task it is essential that the whole organization realize that they play a part in this goal. This objective cannot be achieved with the help of a few employees only. Customers need to feel that they have received excellent service. This ensures their continued patronage. This is by far one of the most essential goals of customer relationship management. Customer retention and brand loyalty is absolutely essential to ensure success. Undoubtedly it is far harder to gain a new customer than to actually keep one. Customer service is the pivotal point around which CRM revolves.
2) Increasing Efficiency:
One of the most important goals of CRM is the increase in organization efficiency and effectiveness. This is almost always adopted by every organization. It is necessitated by the fact that increase in efficiency is required to boost success. CRM achieves this through cost reduction and customer retention. Adequate CRM training achieves this goal.
3) Lowering Operating Costs:
CRM goals also include the reduction of costs of operation. This goal should be clearly established and conveyed to all those involved in the CRM implementation process. CRM manages to reduce operating costs through a workforce management system. This helps to maximize skills and thus reduce cost. These reduced costs enable an organization to achieve greater efficiency. If cost reduction is management's objective then the CRM implementation should be carried out in such a way that this is achieved. Throughout the process maximum reduction in costs should be adhered to in order to meet this particular CRM goal.
4) Aiding the Marketing Department:
Another goal of CRM is generally aiding the marketing department in all its efforts. This includes marketing campaigns, sales promotions etc. If this is fixated as one of the goals of CRM, then it should be communicated to those involved. This goal is fundamental as it boosts sales indirectly thereby increasing the profitability.
1.4 CRM--A POWERFUL TOOL
CRM is a powerful management tool that can be used to exploit sales potential and maximize the value of the customer to the bank. Generally, CRM integrates various components of a business such as sales, marketing, IT and accounting. This strategy may not increase a business's profit today or tomorrow, but it will add customer loyalty to the business.
In the long term, CRM produces continuous scrutiny of the bank's business relationship with the customer, thereby increasing the value of the Customer’s business. Although CRM is known to be a relatively new method in managing customer loyalty, it has been used previously by retail businesses for many years.
The core objective of modern CRM methodology is to help businesses to use technology and human resources to gain a better view of customer behavior. With this, a business can hope to achieve better customer service, make call centers more efficient, cross-sell products more effectively, simplify marketing and sales processes, identify new customers and increase customer revenues.
As an example, banks may keep track of a customer's life stages in order to market appropriate banking products, such as mortgages or credit cards to their customers at the appropriate time.
The next stage is to look into the different methods customers' information are gathered, where and how this data is stored and how it is currently being used. For instance, banks may interact with customers in a countless ways via mails, emails, call centers, marketing and advertising. The collected data may flow between operational systems (such as sales and stock systems) and analytical systems that can help sort through these records to identify patterns. Business analysts can then browse through the data to obtain an in-depth view of each customer and identify areas where better services are required.
1.5 CRM AND BANKS
One of the banks' greatest assets is their knowledge of their customers. Banks can use this asset and turn it into key competitive advantage by retaining those customers who represent the highest lifetime value and profitability. Banks can develop customer relationships across a broad spectrum of touch points such as at bank branches, kiosks, ATMs, internet, electronic banking and call centers.
CRM is not a new phenomenon in the industry. Over the years, banks have invested heavily in CRM, especially in developing call centers, which, in the past, were designed to improve the process of inbound calls. In future, call centers will evolve to encompass more than just cost reduction and improved efficiency. According to Gartner Group, more than 80 per cent of all US banks will develop their call centers as alternative delivery channels and revenue centers, to be used for the delivery of existing products and services. But to be successful, a bank needs more than the ability to handle customer service calls. It needs a comprehensive CRM strategy in which all departments within the bank are integrated.
1.6 OBJECTIVES OF CRM IN BANKS
CRM, the technology, along with human resources of the banks, enables the banks to analyze the behavior of customers and their value. The main areas of focus are as the name suggests: customer, relationship, and the management of relationship and the main objectives to implement CRM in the business strategy are:
To simplify marketing and sales process
To make call centers more efficient
To provide better customer service
To discover new customers and increase customer revenue
To cross sell products more effectively
The CRM processes should fully support the basic steps of customer life cycle. The basic steps are:
Attracting present and new customers
Acquiring new customers
Serving the customers
Finally, retaining the customers
In today's increasingly competitive environment, maximizing organic growth through sales momentum has become a priority for Banks and Financial institutions. To build this momentum banks are focusing on Customer relationship management initiatives to improve
Customer satisfaction and loyalty
Customer insight/ 360º view of customer
Speed to market for products and service
Increase products-to-customer ratio
Improve up sales and cross sales
Capitalizing on New market opportunities
The idea of CRM is that it helps businesses use technology and human resources gain insight into the behavior 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 centers, mobile sales force staff and marketing and advertising efforts. Solid CRM systems link up each of these points. This collected data flows between operational systems (like sales and inventory systems) and analytical systems that can help sort through these records for patterns. Company analysts can then comb through the data to obtain a holistic view of each customer and pinpoint areas where better services are needed.
In CRM projects, following data should be collected to run process engine:
1) Responses to campaigns,
2) Shipping and fulfillment dates,
3) Sales and purchase data,
4) Account information,
5) Web registration data,
6) Service and support records,
7) Demographic data,
8) Web sales data.
1.7 NEED OF CRM IN BANKS
Bank merely an organization it accepts deposits and lends money to the needy persons, but banking is the process associated with the activities of banks. It includes issuance of chuque and cards, monthly statements, timely announcement of new services, helping the customers to avail online and mobile banking etc. Huge growth of customer relationship management is predicted in the banking sector over the next few years.
Banks are aiming to increase customer profitability with any customer retention. This paper deals with the role of CRM in banking sector and the need for it is to increase customer value by using some analytical methods in CRM applications. It is a sound business strategy to identify the bank’s most profitable customers and prospects, and devotes time and attention to expanding account relationships with those customers through individualized marketing, pricing, discretionary decision making.
In banking sector, relationship management could be defined as having and acting upon deeper knowledge about the customer, ensure that the customer such as how to fund the customer, get to know the customer, keep in tough with the customer, ensure that the customer gets what he wishes from service provider and understand when they are not satisfied and might leave the service provider and act accordingly.
CRM in banking industry entirely different from other sectors, because banking industry purely related to financial services, which needs to create the trust among the people. Establishing customer care support during on and off official hours, making timely information about interest payments, maturity of time deposit, issuing credit and debit cum ATM card, creating awareness regarding online and e-banking, adopting mobile request etc are required to keep regular relationship with customers.
The present day CRM includes developing customer base. The bank has to pay adequate attention to increase customer base by all means, it is possible if the performance is at satisfactory level, the existing clients can recommend others to have banking connection with the bank he is operating. Hence asking reference from the existing customers can develop their client base. If the base increased, the profitability is also increase. Hence the bank has to implement lot of innovative CRM to capture and retain the customers.
There is a shift from bank centric activities to customer centric activities are opted. The private sector banks in India deployed much innovative strategies to attract new customers and to retain existing customers. CRM in banking sector is still in evolutionary stage, it is the time for taking ideas from customers to enrich its service. The use of CRM in banking has gained importance with the aggressive strategies for customer acquisition and retention being employed by the bank in today’s competitive milieu. This has resulted in the adoption of various CRM initiatives by these banks.
STEP TO FOLLOW
The following steps minimize the work regarding adoption of CRM strategy. These are:
Ø Identification of proper CRM initiatives
Ø Implementing adequate technologies in order to assist CRM initiative
Ø Setting standards (targets) for each initiative and each person involved in that circle
Ø Evaluating actual performance with the standard or benchmark
Ø Taking corrective actions to improve deviations, if any
Customer Relationship Management is concerned with attracting, maintaining and enhancing customer relationship in multi service organizations. CRM goes beyond the transactional exchange and enables the marketer to estimate the customer’s sentiments and buying intentions so that the customer can be provided with products and services before the starts demanding. Customers are the backbone of any kind of business activities, maintaining relationship with them yield better result.
1.8 BENEFITS OF CRM TO BANKS
Despite the fact that in most banks profits sometimes fail, they seldom pay attention to or adopt any customer strategy. It has long been the misconception that banks need not pay much attention to customer focus just because they had customers. Some banks even if they possess good customer relationships are unable to cross sell as they have not figured out who to target with what product/service. What happens is that customers are often approached for the wrong products.
However the new millennium has resulted in banks and financial agencies rethinking their strategies and goals. They have come to understand the importance of hanging onto the customer and keeping him happy. The rules that once governed the banking industry have changed. They have realized that adopting a customer centric strategy is essential and needs to be compulsorily undertaken. The vast majority of banks now realize they need a customer strategy and are opting for CRM - Customer Relationship Management.
Banking CRM software serves to increase the market share and boost growth in the banking industry. What happens in CRM banking solutions is that they change the way the employees think and mould them into customer conscious people. CRM induces bankers to know that they are required to maintain good relationships with their customers and should strive to retain them.
They are made to realize that the business process should consist of efforts to discover and satisfy customer requirements. Since the banking field now boasts of so much of technological innovations there has been a wide variety of innovations in CRM banking as well. Statistics show that bankers will spend $7 billion on CRM. The sector will also evidence an increase in expenditure of 14 percent each year. With such phenomenal statistics it is but a surety that CRM banking solutions sales will soar in the coming years.
FOLLOWING ARE THE BENEFITS OF CRM TO BANKS:
CRM Banking Focuses on the Customer
CRM manages to places the customer at the focal point of the organization in order to cater to his needs, satisfy him and thus maximize the profits of the organization. Banking CRM understands the needs of the customer and integrates it with people, technology, resources and business rocesses. It focuses on the existing data available in the organization and uses it to improve its relationship with customers. Banking CRM uses information and analytical tools to secure customer focus. Thus it is completely essential that banks implement CRM in order to secure this.
Overall Profitability
CRM enables banks to give employee's better training that helps them face customers easily. It achieves better infrastructure and ultimately contributes to better overall performance. The byproducts of CRM banking solutions are customer acquisition, retention and profitability. Banks that don't implement CRM will undoubtedly find themselves with lesser profitability coupled with a sharp decline in the number of customers.
Satisfied Customers
It is important to make a customer feel as if he / she is the only one - this will go a long way in satisfying and retaining them. Bankers need a return on investment and it has been proved that increase in customer satisfaction more than contributes a fair share to ROI. The main value of CRM banking lies in satisfaction and increased retention of customers.
Centralized Information
CRM banking solutions manage to clearly integrate people, processes and technology. CRM banking provides banks with a holistic view of all bank transactions and customer information as well and stores it in a single data warehouse where it can be studied later.
5. CRM Banking Boosts Small Banks
Banking CRM software meets the needs of banks of all sizes in terms of attaining the required accuracy and understanding of customers. Merely assuming that banks that are considerably smaller in size have a better customer approach and are able to deal with their customers in a better manner is wrong.
They are just as much in need of CRM aid as the others. Small banks on account of a limited amount of money have had to realize that a large contribution to profits is directly the result of good customer service. CRM makes sure that the bank delivers exactly what the customer expects.
Customer Segregation
CRM enables a bank to see which customers are costing them and which are bringing benefits. CRM provides them with the required analytical tools that will help them focus on the importance of segregating these two and doing what is required to avail of the maximum returns.
After this segregation is done CRM easily enables banks to increase their communication and cross-selling to their customers effectively and efficiently.
Aggressive Customer Acquisition
CRM solution supports the creation of demand generation through multi-channel and multi-wave campaigns. The solution ensures the bank’s marketing message is appropriately personalized and targeted towards the most suitable segment of prospects. This optimizes marketing efforts and results in greater conversion of prospects
Improved Cross-sell Framework
The solution presents a unified 360° view of the customer, allowing single point access to all the relationships the customer has forged with the bank. This along with robust customer analytics effectively supports true relationship banking, providing a robust framework for cross-sell opportunities.
CRM solution also integrates with other white labeled solutions to facilitate contextual and personalized customer engagement, with a keen focus on right-talk driven right-sell.
Increased Operational Efficiencies and Collaboration
CRM solution supports business automation for processes and business activities, eliminating manual tasks and reducing process time. Straight through processing abilities enhance reduction in turnaround and processing time, increasing output and enabling speedy completion of tasks. The multilingual Web-based single repository of information enables remotely located bankers to collaborate and transact seamlessly.
Lower Total Cost of Ownership (TCO)
A Web-based solution leveraging new-generation technologies, Financial CRM solution is future-proof and can be seamlessly integrated with other enterprise applications. With a robust architecture and proven scalability, it ensures protection for the bank’s technology investments.
11. Campaign Management
Banks need to identify customers, tailor products and services to meet their needs and sell these products to them. CRM achieves this through Campaign Management by analyzing data from banks internal applications or by importing data from external applications to evaluate customer profitability and designing comprehensive customer profiles in terms of individual lifestyle preferences, income levels and other related criteria.
Based on these profiles, banks can identify the most lucrative customers and customer segments, and execute targeted, personalized multi-channel marketing campaigns to reach these customers and maximize the lifetime value of those relationships.
Customer Information Consolidation
Instead of customer information being stored in product centric silos, (for e.g. separate databases of savings account & credit card customers), with CRM the information is stored in a customer centric manner covering all the products of the bank. CRM integrates various channels to deliver a host of services to customers, while aiding the functioning of the bank.
Marketing Encyclopedia
Central repository for products, pricing and competitive information, as well as internal training material, sales presentations, proposal templates and marketing collateral.
360-degree view of company
This means whoever the bank speaks to, irrespective of whether the communication is from sales, finance or support, the bank is aware of the interaction. Removal of inconsistencies of data makes the client interaction processes smooth and efficient, thus leading to enhanced customer satisfaction.
Personalized sales home page
CRM can provide a single view where Sales Mangers and agents can get all the most up-to-date information in one place, including opportunity, account, news, and expense report information. This would make sales decision fast and consistent.
Lead and Opportunity Management
These enable organizations to effectively manage leads and opportunities and track the leads through deal closure, the required follow-up and interaction with the prospects.
Operational Inefficiency Removal
CRM can help in Strategy Formulation to eliminate current operational inefficiencies. An effective CRM solution supports all channels of customer interaction including telephone, fax, e-mail, the online portals, wireless devices, ATMs, and face-to-face contacts with bank personnel. It also links these customer touch points to an operations center and connects the operations center with the relevant internal and external business partners.
CRM with Business Intelligence
Banks need to analyze the performance of customer relationships, uncover trends in customer behavior, and understand the true business value of their customers. CRM with business intelligence allows banks to assess customer segments, which help them calculate the net present value (NPV) of a customer segment over a given period to derive customer lifetime value. Customers can be evaluated within a scoring framework. Combining the behavior key figure and frequency to monetary acquisition analysis with a marketing revenue quota can optimize acquisition costs and cut the number of inefficient activities. With such knowledge, banks can efficiently allocate resources to the most profitable customers and reengineer the unprofitable ones. Data warehousing solutions have been implemented in City bank, IBBL .MBBL.ASIA BANK . And Business Intelligence players hope many more will follow .
1.9 BENEFITS OF CRM TO CUSTOMERS
Customer relationships are becoming even more important for banks as market conditions get harder. Competition is increasing, margins are eroding, customers are becoming more demanding and the life-cycles of products and services are shortening dramatically. All these forces make it necessary for banks to intensify the relationship with their customers and offer them the services they need via the channels they prefer.
CRM helps banks to provide lot of benefits to their customers; some key benefits are as follow.
► Service provisioning throughout the entire life cycle of the corporate customer, from the initial stages to the establishment of a close, long-term relationship with profitable clients,
► Optimization of the use of bank resources, such as alternative channels of distribution (internet and home banking),
► Significant reduction in and limitation of operational costs through system automation and standardization,
► Low maintenance and expansion costs owing to the use of modern administration tools which allow bank employees to make a wide range of modifications to the system
► CRM permits businesses to leverage information from their databases to achieve customer retention and to cross-sell new products and services to existing customers.
► Companies that implement CRM make better relationships with their customers, achieve loyal customers and a substantial payback, increased revenue and reduced cost.
► CRM when successfully deployed can have a dramatic effect on bottom-line performance. For example, Lowe’s Home Improvement Warehouse, in a span of 18 months, achieved a 265 percent return on investment (ROI) on its $ 11m CRM investment.
► According to a study conducted in the sector of banking, convenience of location, price, recommendations from others and advertising are not important selection criteria for banks. From customers’ point of view, important criteria are: account and transaction accuracy and carefulness, efficiency in correcting mistakes and friendliness and helpfulness of personnel. Thus, CRM, high-quality attributes of the product / service and differentiation proved to be the most important factors for customers.
► Another study conducted in a European bank shows that with CRM, the bank was able to focus on profitable clients through efficient segmentation according to individual behavior. Information about ‘who buys what and how much’ enabled the bank to have a commercial approach based on the client and not solely on the product. Thus, the bank was able to better satisfy and retain its customers.
1.10 RECOMMENDATION
Customer Relationship Management (CRM), the most exciting strategies that emerged from networking technology revolution of the nineties, is today fast emerging s one of the most important cooperates strategies. A well-executed Customer Relationship Strategies can result in number of quantitative benefits, including greater ability to sell and cross sell, improved retention besides cost of services.
Customer Relationship Management is do-able. However the following must take into consideration before embarking upon its implementation. All aspects of customer relationship management, including technology solution, must be fully explored effectively deliver the competencies required to realize the business benefits.
1. Tackling any one competence alone will lead to a dysfunctional business. One competence does not customer relationship management make.
2. Take pragmatic steps with a clear view on delivery of all the components in the medium term, rather than piecemeal in the short term.
3. Successful mass customization is crucial to reducing customer acquisition cost and improving the cross selling capacity.
4. Channels are a delivery mechanism. The effectiveness of the mechanism is achieved when it is faultless!
5. 75% of all Customer Relationship Management projects have failed due to lapses in implementation. Technology is not enough, implementation is the key and this is where the people aspect comes into the forefront.
6. Customer Relationship Management implementation is effective when companies are able to identify the internal and external customer and integrate them with its core business process.
1.11 Conclusion
Banking can be mysterious for consumers and how they interact with their finances can be a complex matter. The challenges faced by banks and their customers are many but the trick lies in de-mystifying complex financial relationships.
Technical solutions deployed by banks today are flexible, user-friendly and meant to facilitate specific workflow and requirements in implementation processes. In order to simplify lives, banks have begun to implement end-to-end technologies through all departments with the intention of removing human error from processes. Previously existing manual environments could not have been adequate for future visions, growth plans and strategies.
In this day and age, customers enjoy complete luxury in terms of customized technical solutions and banks use the same to cement long-term, mutually-beneficial relationships. For a bank to succeed in adopting a CRM philosophy of doing business, bank management must first understand CRM as a holistic concept that involves multiple, interlocking disciplines, including market knowledge, strategic planning, business process improvement, product design and pricing analysis, technology implementation, human resources management, customer retention, and sales management and training.
Turning the business strategy into actionable items is a difficult undertaking. For which Customer Relationship Management works a magic wand.
1.2 Appendices
There are a number of reasons why CRM has become so important in the last 10 years. The competition in the global market has become highly competitive, and it has become easier for customers to switch companies if they are not happy with the service they receive. One of the primary goals of CRM is to maintain clients. When it is used effectively, a company will be able to build a relationship with their customers that can last a lifetime. Customer relationship management tools will generally come in the form of software. Each software program may vary in the way it approaches CRM. It is important to realize that CRM is more than just a technology.
Customer relationship management could be better defined as being a methodology, an approach that a company will use to achieve their goals. It should be directly connected to the philosophy of the company. It must guide all of its policies, and it must be an important part of customer service and marketing. If this is not done, the CRM system will become a failure. There are a number of things the ideal CRM system should have. It should allow the company to find the factors that interest their customers the most. A company must realize that it is impossible for them to succeed if they do not cater to the desires and needs of their customers. Customer relationship management is a powerful system that will allow them to do this.
It is also important for the CRM system to foster a philosophy that is oriented towards the customers. While this may sound like common sense, there are a sizeable number of companies that have failed to do it, and their businesses suffered as a result. With CRM, the customer is always right, and they are the most important factor in the success of the company. It is also important for the company to use measures that are dependent on their customers. This will greatly tip the odds of success in their favor. While CRM should not be viewed as a technology, it is important to realize that there are end to end processes that must be created so that customers can be properly served. In many cases, these processes will use computers and software.
Customer support is directly connected to CRM. If a company fails to provide quality customer support, they have also failed with their CRM system. When a customer makes complaints, they must be handled quickly and efficiently. The company should also seek to make sure those mistakes are not repeated. When sales are made, they should be tracked so that the company can analyze them from various aspects. It is also important to understand the architecture of Customer relationship management.
1.2 CRM OVERVEW
MEANING OF CRM
Customer Relationship Management is the establishment, development, maintenance and optimization of long-term mutually valuable relationships between consumers and the organizations. Successful customer relationship management focuses on understanding the needs and desires of the customers and is achieved by placing these needs at the heart of the business by integrating them with the organization's strategy, people, technology and business processes.
At the heart of a perfect CRM strategy is the creation of mutual value for all the parties involved in the business process. It is about creating a sustainable competitive advantage by being the best at understanding, communicating, and delivering, and developing existing customer relationships in addition to creating and keeping new customers.
DEFINITION OF CRM
“Customer Relationship Management (CRM) is a co-ordinate approach to the selling process allowing the various operational, customer contact and sales promotional functions of an organization to function as a whole.”
1.3 GOALS OF CRM
Implementing customer relationship management can be a costly undertaking. Organizations spend a lot of money scrutinizing vendors, buying the right CRM software, hiring, consultant, training employees, etc. The only way in which a company can actually measure its success is if it establishes CRM goals prior to the implementation as in this way it is able to determine whether or not it has successfully implemented CRM. Despite the fact that industries have different business aspects they share some common CRM goals.
Some of the commonly Established CRM Objectives are as follows:
1) Increase in Customer Service :
Establishing customer loyalty as one of your top CRM goals is absolutely fundamental to CRM successful implementation .For this task it is essential that the whole organization realize that they play a part in this goal. This objective cannot be achieved with the help of a few employees only. Customers need to feel that they have received excellent service. This ensures their continued patronage. This is by far one of the most essential goals of customer relationship management. Customer retention and brand loyalty is absolutely essential to ensure success. Undoubtedly it is far harder to gain a new customer than to actually keep one. Customer service is the pivotal point around which CRM revolves.
2) Increasing Efficiency:
One of the most important goals of CRM is the increase in organization efficiency and effectiveness. This is almost always adopted by every organization. It is necessitated by the fact that increase in efficiency is required to boost success. CRM achieves this through cost reduction and customer retention. Adequate CRM training achieves this goal.
3) Lowering Operating Costs:
CRM goals also include the reduction of costs of operation. This goal should be clearly established and conveyed to all those involved in the CRM implementation process. CRM manages to reduce operating costs through a workforce management system. This helps to maximize skills and thus reduce cost. These reduced costs enable an organization to achieve greater efficiency. If cost reduction is management's objective then the CRM implementation should be carried out in such a way that this is achieved. Throughout the process maximum reduction in costs should be adhered to in order to meet this particular CRM goal.
4) Aiding the Marketing Department:
Another goal of CRM is generally aiding the marketing department in all its efforts. This includes marketing campaigns, sales promotions etc. If this is fixated as one of the goals of CRM, then it should be communicated to those involved. This goal is fundamental as it boosts sales indirectly thereby increasing the profitability.
1.4 CRM--A POWERFUL TOOL
CRM is a powerful management tool that can be used to exploit sales potential and maximize the value of the customer to the bank. Generally, CRM integrates various components of a business such as sales, marketing, IT and accounting. This strategy may not increase a business's profit today or tomorrow, but it will add customer loyalty to the business.
In the long term, CRM produces continuous scrutiny of the bank's business relationship with the customer, thereby increasing the value of the Customer’s business. Although CRM is known to be a relatively new method in managing customer loyalty, it has been used previously by retail businesses for many years.
The core objective of modern CRM methodology is to help businesses to use technology and human resources to gain a better view of customer behavior. With this, a business can hope to achieve better customer service, make call centers more efficient, cross-sell products more effectively, simplify marketing and sales processes, identify new customers and increase customer revenues.
As an example, banks may keep track of a customer's life stages in order to market appropriate banking products, such as mortgages or credit cards to their customers at the appropriate time.
The next stage is to look into the different methods customers' information are gathered, where and how this data is stored and how it is currently being used. For instance, banks may interact with customers in a countless ways via mails, emails, call centers, marketing and advertising. The collected data may flow between operational systems (such as sales and stock systems) and analytical systems that can help sort through these records to identify patterns. Business analysts can then browse through the data to obtain an in-depth view of each customer and identify areas where better services are required.
1.5 CRM AND BANKS
One of the banks' greatest assets is their knowledge of their customers. Banks can use this asset and turn it into key competitive advantage by retaining those customers who represent the highest lifetime value and profitability. Banks can develop customer relationships across a broad spectrum of touch points such as at bank branches, kiosks, ATMs, internet, electronic banking and call centers.
CRM is not a new phenomenon in the industry. Over the years, banks have invested heavily in CRM, especially in developing call centers, which, in the past, were designed to improve the process of inbound calls. In future, call centers will evolve to encompass more than just cost reduction and improved efficiency. According to Gartner Group, more than 80 per cent of all US banks will develop their call centers as alternative delivery channels and revenue centers, to be used for the delivery of existing products and services. But to be successful, a bank needs more than the ability to handle customer service calls. It needs a comprehensive CRM strategy in which all departments within the bank are integrated.
1.6 OBJECTIVES OF CRM IN BANKS
CRM, the technology, along with human resources of the banks, enables the banks to analyze the behavior of customers and their value. The main areas of focus are as the name suggests: customer, relationship, and the management of relationship and the main objectives to implement CRM in the business strategy are:
To simplify marketing and sales process
To make call centers more efficient
To provide better customer service
To discover new customers and increase customer revenue
To cross sell products more effectively
The CRM processes should fully support the basic steps of customer life cycle. The basic steps are:
Attracting present and new customers
Acquiring new customers
Serving the customers
Finally, retaining the customers
In today's increasingly competitive environment, maximizing organic growth through sales momentum has become a priority for Banks and Financial institutions. To build this momentum banks are focusing on Customer relationship management initiatives to improve
Customer satisfaction and loyalty
Customer insight/ 360º view of customer
Speed to market for products and service
Increase products-to-customer ratio
Improve up sales and cross sales
Capitalizing on New market opportunities
The idea of CRM is that it helps businesses use technology and human resources gain insight into the behavior 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 centers, mobile sales force staff and marketing and advertising efforts. Solid CRM systems link up each of these points. This collected data flows between operational systems (like sales and inventory systems) and analytical systems that can help sort through these records for patterns. Company analysts can then comb through the data to obtain a holistic view of each customer and pinpoint areas where better services are needed.
In CRM projects, following data should be collected to run process engine:
1) Responses to campaigns,
2) Shipping and fulfillment dates,
3) Sales and purchase data,
4) Account information,
5) Web registration data,
6) Service and support records,
7) Demographic data,
8) Web sales data.
1.7 NEED OF CRM IN BANKS
Bank merely an organization it accepts deposits and lends money to the needy persons, but banking is the process associated with the activities of banks. It includes issuance of chuque and cards, monthly statements, timely announcement of new services, helping the customers to avail online and mobile banking etc. Huge growth of customer relationship management is predicted in the banking sector over the next few years.
Banks are aiming to increase customer profitability with any customer retention. This paper deals with the role of CRM in banking sector and the need for it is to increase customer value by using some analytical methods in CRM applications. It is a sound business strategy to identify the bank’s most profitable customers and prospects, and devotes time and attention to expanding account relationships with those customers through individualized marketing, pricing, discretionary decision making.
In banking sector, relationship management could be defined as having and acting upon deeper knowledge about the customer, ensure that the customer such as how to fund the customer, get to know the customer, keep in tough with the customer, ensure that the customer gets what he wishes from service provider and understand when they are not satisfied and might leave the service provider and act accordingly.
CRM in banking industry entirely different from other sectors, because banking industry purely related to financial services, which needs to create the trust among the people. Establishing customer care support during on and off official hours, making timely information about interest payments, maturity of time deposit, issuing credit and debit cum ATM card, creating awareness regarding online and e-banking, adopting mobile request etc are required to keep regular relationship with customers.
The present day CRM includes developing customer base. The bank has to pay adequate attention to increase customer base by all means, it is possible if the performance is at satisfactory level, the existing clients can recommend others to have banking connection with the bank he is operating. Hence asking reference from the existing customers can develop their client base. If the base increased, the profitability is also increase. Hence the bank has to implement lot of innovative CRM to capture and retain the customers.
There is a shift from bank centric activities to customer centric activities are opted. The private sector banks in India deployed much innovative strategies to attract new customers and to retain existing customers. CRM in banking sector is still in evolutionary stage, it is the time for taking ideas from customers to enrich its service. The use of CRM in banking has gained importance with the aggressive strategies for customer acquisition and retention being employed by the bank in today’s competitive milieu. This has resulted in the adoption of various CRM initiatives by these banks.
STEP TO FOLLOW
The following steps minimize the work regarding adoption of CRM strategy. These are:
Ø Identification of proper CRM initiatives
Ø Implementing adequate technologies in order to assist CRM initiative
Ø Setting standards (targets) for each initiative and each person involved in that circle
Ø Evaluating actual performance with the standard or benchmark
Ø Taking corrective actions to improve deviations, if any
Customer Relationship Management is concerned with attracting, maintaining and enhancing customer relationship in multi service organizations. CRM goes beyond the transactional exchange and enables the marketer to estimate the customer’s sentiments and buying intentions so that the customer can be provided with products and services before the starts demanding. Customers are the backbone of any kind of business activities, maintaining relationship with them yield better result.
1.8 BENEFITS OF CRM TO BANKS
Despite the fact that in most banks profits sometimes fail, they seldom pay attention to or adopt any customer strategy. It has long been the misconception that banks need not pay much attention to customer focus just because they had customers. Some banks even if they possess good customer relationships are unable to cross sell as they have not figured out who to target with what product/service. What happens is that customers are often approached for the wrong products.
However the new millennium has resulted in banks and financial agencies rethinking their strategies and goals. They have come to understand the importance of hanging onto the customer and keeping him happy. The rules that once governed the banking industry have changed. They have realized that adopting a customer centric strategy is essential and needs to be compulsorily undertaken. The vast majority of banks now realize they need a customer strategy and are opting for CRM - Customer Relationship Management.
Banking CRM software serves to increase the market share and boost growth in the banking industry. What happens in CRM banking solutions is that they change the way the employees think and mould them into customer conscious people. CRM induces bankers to know that they are required to maintain good relationships with their customers and should strive to retain them.
They are made to realize that the business process should consist of efforts to discover and satisfy customer requirements. Since the banking field now boasts of so much of technological innovations there has been a wide variety of innovations in CRM banking as well. Statistics show that bankers will spend $7 billion on CRM. The sector will also evidence an increase in expenditure of 14 percent each year. With such phenomenal statistics it is but a surety that CRM banking solutions sales will soar in the coming years.
FOLLOWING ARE THE BENEFITS OF CRM TO BANKS:
CRM Banking Focuses on the Customer
CRM manages to places the customer at the focal point of the organization in order to cater to his needs, satisfy him and thus maximize the profits of the organization. Banking CRM understands the needs of the customer and integrates it with people, technology, resources and business rocesses. It focuses on the existing data available in the organization and uses it to improve its relationship with customers. Banking CRM uses information and analytical tools to secure customer focus. Thus it is completely essential that banks implement CRM in order to secure this.
Overall Profitability
CRM enables banks to give employee's better training that helps them face customers easily. It achieves better infrastructure and ultimately contributes to better overall performance. The byproducts of CRM banking solutions are customer acquisition, retention and profitability. Banks that don't implement CRM will undoubtedly find themselves with lesser profitability coupled with a sharp decline in the number of customers.
Satisfied Customers
It is important to make a customer feel as if he / she is the only one - this will go a long way in satisfying and retaining them. Bankers need a return on investment and it has been proved that increase in customer satisfaction more than contributes a fair share to ROI. The main value of CRM banking lies in satisfaction and increased retention of customers.
Centralized Information
CRM banking solutions manage to clearly integrate people, processes and technology. CRM banking provides banks with a holistic view of all bank transactions and customer information as well and stores it in a single data warehouse where it can be studied later.
5. CRM Banking Boosts Small Banks
Banking CRM software meets the needs of banks of all sizes in terms of attaining the required accuracy and understanding of customers. Merely assuming that banks that are considerably smaller in size have a better customer approach and are able to deal with their customers in a better manner is wrong.
They are just as much in need of CRM aid as the others. Small banks on account of a limited amount of money have had to realize that a large contribution to profits is directly the result of good customer service. CRM makes sure that the bank delivers exactly what the customer expects.
Customer Segregation
CRM enables a bank to see which customers are costing them and which are bringing benefits. CRM provides them with the required analytical tools that will help them focus on the importance of segregating these two and doing what is required to avail of the maximum returns.
After this segregation is done CRM easily enables banks to increase their communication and cross-selling to their customers effectively and efficiently.
Aggressive Customer Acquisition
CRM solution supports the creation of demand generation through multi-channel and multi-wave campaigns. The solution ensures the bank’s marketing message is appropriately personalized and targeted towards the most suitable segment of prospects. This optimizes marketing efforts and results in greater conversion of prospects
Improved Cross-sell Framework
The solution presents a unified 360° view of the customer, allowing single point access to all the relationships the customer has forged with the bank. This along with robust customer analytics effectively supports true relationship banking, providing a robust framework for cross-sell opportunities.
CRM solution also integrates with other white labeled solutions to facilitate contextual and personalized customer engagement, with a keen focus on right-talk driven right-sell.
Increased Operational Efficiencies and Collaboration
CRM solution supports business automation for processes and business activities, eliminating manual tasks and reducing process time. Straight through processing abilities enhance reduction in turnaround and processing time, increasing output and enabling speedy completion of tasks. The multilingual Web-based single repository of information enables remotely located bankers to collaborate and transact seamlessly.
Lower Total Cost of Ownership (TCO)
A Web-based solution leveraging new-generation technologies, Financial CRM solution is future-proof and can be seamlessly integrated with other enterprise applications. With a robust architecture and proven scalability, it ensures protection for the bank’s technology investments.
11. Campaign Management
Banks need to identify customers, tailor products and services to meet their needs and sell these products to them. CRM achieves this through Campaign Management by analyzing data from banks internal applications or by importing data from external applications to evaluate customer profitability and designing comprehensive customer profiles in terms of individual lifestyle preferences, income levels and other related criteria.
Based on these profiles, banks can identify the most lucrative customers and customer segments, and execute targeted, personalized multi-channel marketing campaigns to reach these customers and maximize the lifetime value of those relationships.
Customer Information Consolidation
Instead of customer information being stored in product centric silos, (for e.g. separate databases of savings account & credit card customers), with CRM the information is stored in a customer centric manner covering all the products of the bank. CRM integrates various channels to deliver a host of services to customers, while aiding the functioning of the bank.
Marketing Encyclopedia
Central repository for products, pricing and competitive information, as well as internal training material, sales presentations, proposal templates and marketing collateral.
360-degree view of company
This means whoever the bank speaks to, irrespective of whether the communication is from sales, finance or support, the bank is aware of the interaction. Removal of inconsistencies of data makes the client interaction processes smooth and efficient, thus leading to enhanced customer satisfaction.
Personalized sales home page
CRM can provide a single view where Sales Mangers and agents can get all the most up-to-date information in one place, including opportunity, account, news, and expense report information. This would make sales decision fast and consistent.
Lead and Opportunity Management
These enable organizations to effectively manage leads and opportunities and track the leads through deal closure, the required follow-up and interaction with the prospects.
Operational Inefficiency Removal
CRM can help in Strategy Formulation to eliminate current operational inefficiencies. An effective CRM solution supports all channels of customer interaction including telephone, fax, e-mail, the online portals, wireless devices, ATMs, and face-to-face contacts with bank personnel. It also links these customer touch points to an operations center and connects the operations center with the relevant internal and external business partners.
CRM with Business Intelligence
Banks need to analyze the performance of customer relationships, uncover trends in customer behavior, and understand the true business value of their customers. CRM with business intelligence allows banks to assess customer segments, which help them calculate the net present value (NPV) of a customer segment over a given period to derive customer lifetime value. Customers can be evaluated within a scoring framework. Combining the behavior key figure and frequency to monetary acquisition analysis with a marketing revenue quota can optimize acquisition costs and cut the number of inefficient activities. With such knowledge, banks can efficiently allocate resources to the most profitable customers and reengineer the unprofitable ones. Data warehousing solutions have been implemented in City bank, IBBL .MBBL.ASIA BANK . And Business Intelligence players hope many more will follow .
1.9 BENEFITS OF CRM TO CUSTOMERS
Customer relationships are becoming even more important for banks as market conditions get harder. Competition is increasing, margins are eroding, customers are becoming more demanding and the life-cycles of products and services are shortening dramatically. All these forces make it necessary for banks to intensify the relationship with their customers and offer them the services they need via the channels they prefer.
CRM helps banks to provide lot of benefits to their customers; some key benefits are as follow.
► Service provisioning throughout the entire life cycle of the corporate customer, from the initial stages to the establishment of a close, long-term relationship with profitable clients,
► Optimization of the use of bank resources, such as alternative channels of distribution (internet and home banking),
► Significant reduction in and limitation of operational costs through system automation and standardization,
► Low maintenance and expansion costs owing to the use of modern administration tools which allow bank employees to make a wide range of modifications to the system
► CRM permits businesses to leverage information from their databases to achieve customer retention and to cross-sell new products and services to existing customers.
► Companies that implement CRM make better relationships with their customers, achieve loyal customers and a substantial payback, increased revenue and reduced cost.
► CRM when successfully deployed can have a dramatic effect on bottom-line performance. For example, Lowe’s Home Improvement Warehouse, in a span of 18 months, achieved a 265 percent return on investment (ROI) on its $ 11m CRM investment.
► According to a study conducted in the sector of banking, convenience of location, price, recommendations from others and advertising are not important selection criteria for banks. From customers’ point of view, important criteria are: account and transaction accuracy and carefulness, efficiency in correcting mistakes and friendliness and helpfulness of personnel. Thus, CRM, high-quality attributes of the product / service and differentiation proved to be the most important factors for customers.
► Another study conducted in a European bank shows that with CRM, the bank was able to focus on profitable clients through efficient segmentation according to individual behavior. Information about ‘who buys what and how much’ enabled the bank to have a commercial approach based on the client and not solely on the product. Thus, the bank was able to better satisfy and retain its customers.
1.10 RECOMMENDATION
Customer Relationship Management (CRM), the most exciting strategies that emerged from networking technology revolution of the nineties, is today fast emerging s one of the most important cooperates strategies. A well-executed Customer Relationship Strategies can result in number of quantitative benefits, including greater ability to sell and cross sell, improved retention besides cost of services.
Customer Relationship Management is do-able. However the following must take into consideration before embarking upon its implementation. All aspects of customer relationship management, including technology solution, must be fully explored effectively deliver the competencies required to realize the business benefits.
1. Tackling any one competence alone will lead to a dysfunctional business. One competence does not customer relationship management make.
2. Take pragmatic steps with a clear view on delivery of all the components in the medium term, rather than piecemeal in the short term.
3. Successful mass customization is crucial to reducing customer acquisition cost and improving the cross selling capacity.
4. Channels are a delivery mechanism. The effectiveness of the mechanism is achieved when it is faultless!
5. 75% of all Customer Relationship Management projects have failed due to lapses in implementation. Technology is not enough, implementation is the key and this is where the people aspect comes into the forefront.
6. Customer Relationship Management implementation is effective when companies are able to identify the internal and external customer and integrate them with its core business process.
1.11 Conclusion
Banking can be mysterious for consumers and how they interact with their finances can be a complex matter. The challenges faced by banks and their customers are many but the trick lies in de-mystifying complex financial relationships.
Technical solutions deployed by banks today are flexible, user-friendly and meant to facilitate specific workflow and requirements in implementation processes. In order to simplify lives, banks have begun to implement end-to-end technologies through all departments with the intention of removing human error from processes. Previously existing manual environments could not have been adequate for future visions, growth plans and strategies.
In this day and age, customers enjoy complete luxury in terms of customized technical solutions and banks use the same to cement long-term, mutually-beneficial relationships. For a bank to succeed in adopting a CRM philosophy of doing business, bank management must first understand CRM as a holistic concept that involves multiple, interlocking disciplines, including market knowledge, strategic planning, business process improvement, product design and pricing analysis, technology implementation, human resources management, customer retention, and sales management and training.
Turning the business strategy into actionable items is a difficult undertaking. For which Customer Relationship Management works a magic wand.
1.2 Appendices
Figure1.1: Evaluation & identification of appropriate CRM product
Figure1.2: Social CRM, The New Rules of Customer Relationship Management
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