Customer Relationship Management in Banking Sector-
What More Needed?
Customer Relationship Management has become inevitable for growth and profitability of Banks in present scenario marked by rising competition, technological advancement and empowered customers. The CRM practices are adopted to generate better understanding of the customer for product development, segmentation, appropriate targeting, campaign management and maintenance of long term profitable and mutually beneficial relationships with customers. In Indian banking Customer Relationship Management is still at a nascent stage. A very small proportion of its potential has been utilised. The concept has been implemented on a limited scale. The paper investigates the impediments to successful implementation of CRM. An attempt is made to chart out a strategic framework to realise the benefits of Customer Relationship Management.
In the present Indian Banking Scenario, two prominent phenomena are the focal point to emerging practices and policies. These are ‘Technology’ and ‘Relationship Marketing’. The power of technology that has revolutionised banking services and practices. ‘Relationship Marketing’ is seen as the only differentiating factor given the almost commoditisation of banking services. On observation of the recent restructuring, rebranding and reengineering efforts of many banks, we find that the key motive towards these is to utilise customer centricity as a strategy. Further, catalysing the importance of Technology and Relationship marketing is the Core Banking Solution (CBS). All the banks have overcome the teething troubles of CBS and it has become the axis of banks’ growth and performance. Going further, most of the Banks have invested in technology enabled Customer Relationship Management Software to utilise CBS generated customer information for enhancing business opportunities, access to customers and support. Thus, CRM is a logical progression of CBS for Indian banks. Although, at a nascent stage it is developing swiftly. Customer Relationship Management is the integration of these two cornerstones of Indian banking viz. technology and relationship marketing. It has a potential to bring about dynamic changes in marketing practices of banks in near future, with the objective of business growth through managing customers as assets, Systematically collecting, analysing and disseminating customer information and use of this customer information for acquiring, retaining and better servicing customers. An understanding of the current status of the CRM initiative in majority of banks suggests that only a minuscule of the potential of CRM has been realised. The key impediment is the lack of understanding and acceptance of CRM as an organisation wide strategy and need for reorientation of organisation structure to adopt this. The paper attempts to investigate these issues and suggests a framework for reaping the benefits of this investment in CRM by various banks.
CRM – Conceptual framework
CRM is the strategy for building, managing and strengthening loyal and long-lasting customer relationships. CRM is a customer centric approach based on customer insight. Its ultimate objective is toward ‘Personalised’ handling of customers as distinct entities through the identification and understanding of their differentiated needs, preferences and behaviours. A few more definitions which clarify CRM concept are –
According to Philip Kotler, CRM is the process of carefully managing detailed information about individual customers and all customer ‘touch points’ to maximise customer loyalty.
It can also be described as a business strategy comprised of process, organisational and technical change to better manage business around customer behaviours.
Types of CRM
Broadly, three types of CRM are adopted by banks:
- Operation CRM – In this, CRM software packages are used to track and efficiently organise inbound and outbound interactions with customers including the management of marketing campaigns and call centres. Operational CRM supports frontline processes in sales, marketing and customer service, automating communications and interactions with the customers. They record contact history and store valuable customer information to ensure a consistent picture of customer’s relationship with the bank that can be retrieved by staff as per requirement. The major benefits of operational CRM to banks are:
(a) Sales Force Automation
(b) Customer Service and Support
(c) Enterprise Marketing Automation
- Analytical CRM – It is about analysing customer information to better address marketing and customer service objectives and deliver the right message to the right customer at the right time through the right channel. It involves the use of data analysis to extract knowledge for optimising customer relationships.
The major benefits of Analytical CRM to banks are:
- Customer Retention
(b) Fraud Detection
(c) Optimising marketing efforts as per customer life time value
(d) Credit Risk Analysis
(e) Segmentation and targeting
(f) Development of customised new products matching the specific preferences and priorities of customers.
- Collaborative CRM – These involve systems facilitating customers to perform services on their own through a variety of communication and interactive channels. It brings people process and data together and enables channelling of data and information appropriately to bank staff for proactive decision making and enhanced informed customer service and support activities. It provides a means of information sharing to all concerned in timely manner and includes customer as a creator of service. The major benefits of collaborative CRM to banks are
(a) Providing efficient customer communication across a variety of channels
(b) Online services to reduce customer service costs
(c) Providing access to customer data while interacting with customers.
Thus, CRM can be understood as a catalyst enabling transformation of Banking from traditional ‘Transactional banking’ to ‘Relationship Banking’ by use of technology.
CRM in Banking: Global scenario
Worldwide banks have explored and realised the benefits of CRM in a variety of ways. Different banks have implemented the philosophy in their own different way. A few illustrations will give a glimpse of the global scenario with respect to CRM in Banking.
Royal Bank of Canada utilised CRM to develop models of assessment of customer profitability and life time value. These were then included in determining customer decisions like – Customised Marketing campaign, establishing service levels, segmentation, targeting, product design and pricing. Customer’s vulnerability to attrition also is analysed and the most valuable are flagged before they defect, in order to take preventive action in a focused and effective way.
Wells Fargo Bank renowned for leadership in service and convenience to varied customer segments focused on customer service through CRM. Application of CRM enabled better integration of customer information and service applications to assist representatives of customer sales and services to easily provide a one-stop-shop for any banking service or transaction. Using CRM, Wells Fargo takes full advantage of available customer information to offer customer the choice, convenience and price benefits so that they give the Bank, all their business.
Wachovia Bank uses customer transaction data to support modelling processes that evaluate each branch’s current and long term profitability. In Atlanta Bank’s largest market, significant performance improvements were attained when it used the output of modelling process as a basis to decide which of its 96 branches to close and which location to open new ones.
CRM in Banking: Indian scenario
Although significance of Relationship Marketing practices and optimising and maintaining customer relationships across diverse customer segments has been realised and practiced by all banks in India, the technology enabled CRM is still at a developing stage. Different Banks are at different levels of CRM adoption and implementation and majority of them can be considered to be at preliminary stages. Operational CRM is the most wide spread, but collaborative CRM is most evident in internet banking, mobile banking, ATM functions, POS devices and initiatives like availability of pass book printing machines to enable customers to update their passbooks themselves. Also SMS alerts at various significant customer service events are proliferating. Analytical CRM is being utilised but not by all banks. Here also a few illustrations of Indian banks using CRM will define a clearer picture of CRM in Indian banking.
Yes Bank has developed YCCRM (Yes Bank Collaborative CRM), the prominent features of which are ‘discussion boards’ and ‘templates’. These enable sharing of relevant customer information to all concerned staff members to design new products, provide proactive service, and informed customer handling leading better service. It enables collaboration among staff and customers to create higher customer value through use of CRM software.
Punjab National Bank deployed CRM software with modules of Prospect Management, Lead Management, Activity Management, Product Management, Complaint Management and Business Intelligence Reporting. The payoffs are in terms of increased customer base, cross- selling, sales force optimisation, efficient lead management and higher productivity.
ICICI identified five functional areas which when integrated will give Bank its CRM Business Transformation Map. Core areas of transformation were business focus, organisation structure, business matrix, marketing focus and technology. The pay offs were : lower total cost of ownership, efficient management of volume growth, greater responsiveness to market needs, improved operations, decrease in operational costs, reduction in turnaround time, and integrated platform for all applications of bank. The recent CRM application is enabling ICICI customers to perform transactions via the platform of face book, a social networking site. This brings the bank one step ahead in providing convenience and service through CRM. SBI’s Business Intelligence system integrates data from nearly 70 databases to form a single enterprise data warehouse model. The system generates 248 reports daily for top management and each of the branches have access to reports generated particularly for them. This has empowered decision makers to have actionable data lending to faster decision making based on latter’s information.
Bank of Maharashtra has developed in-house software which generates and updates a variety of reports on detailed customer information and sends to branches. These reports are utilised for better customer understanding, better customer support and service by access to relevant customer information with all stakeholders to enable decision making and Business Development as well as retention activities.
CRM in Banking: Issues and challenges
CRM is a strategic initiative which has organisation wide implication. Many banks are still struggling to make proper use of this very useful mechanism. However, the adoption and utilisation is dependent on a number of factors and impediments. Broadly the issues are pertaining to: People, Processes, Data and Technology. Also a major drawback is the general perception of CRM being a Technology imperative. There is a great need to understand that technology is only the enabler to CRM. In the real sense it is an organisation wide strategy. The success of this depends on a careful integration of Organisation’s goals, structure, systems, processes and resources.
CRM: Technology issues
The following are the impediments to CRM implementation in context of technology:
- Misconception about role of technology: Most officers perceive technology as a limited to record of information and transaction. The use of technology in further sophisticated information processing and dissemination is not done.
- Lack of Integration: There are multiple channels and multiple technologies in use simultaneously in customer interface, service and sales. The integration of this complex system of technologies is a challenge.
- Empowerment to frontline staff: Frontline staffs have customer profile and data. Most of them have no motivation to further process these and make full utilisation of these to provide better services and proactive selling effort. They are neither trained to use customer analytics nor to customise the Banks offering.
- Underutilisation: the single integrated view of customer ,past transactions preferred mode of business are known, but no mechanism is in place to utilise this with aid of software like lead management and activity management for higher effectiveness in sales and service.
(1) Fragmented Data: banks have multiple repositories of data accumulated across various channels. Systematically collecting and organizing this huge data is big challenge.
(2) Legacy Systems: Historical data collected from legacy systems tend not to have been collected in any standard form.
(3) Quality of data: As huge amount of data has to be cleaned and a lot of missing data has to be identified and included. This process has to be carried out across branches which in addition to their core tasks have this work.
(4) Lack of understanding, skill and initiative to manage and utilise data: Employees expected to organise and systematically manage data may not dot efficiently because of the lack of understanding of the strategic perspective of this activity. They also lack the necessary infrastructure and skill to complete this task.
- Lack of knowledge and skills in converting data to customer knowledge
- Lack of motivation for utilising the potential of CRM solution
- Inadequate performance management parameters
- Less or insufficient decision making authority : In order to use CRM concept towards customer centricity, sufficient decision making power is required to provide customised, responsive and proactive services.
- Training: Staff lacks training in IT, its applications, the complete use of software and its applications as well as marketing skills, analytical skills, uses of customer information and service skills for implementation CRM.
As CRM is an organisation wide strategy the entire processes need to be aligned appropriately. Some important process issues are:
- Change in Culture: The CRM implementation demands a change in organisational culture in terms of vision, mission, philosophy, and shared values. This encompasses a fundamental change in the organisational practices and employee behaviour.
- Breaking the silos: CRM cannot succeed in Silo structure of departments. It demands integration and collaboration of all departments on a continuous basis. So, Breaking of silos prevalent in traditional organisation structure is a challenge.
- Change in Structure and Systems: CRM success lies in ownership of CRM by all departments with Marketing in the strategic role of combining efforts in all these towards better customer service. This basic structural change from product centric organisation to customer centric organisation faces impediments in terms of role conflicts, ambiguity, resistance and attitudinal impediments.
- Demand for more pro-activeness and flexibility: The former strict hierarchical and rigid structure has to be transformed to flexible, responsive and proactive structure. This demands top management support, proper training and efficient follow up systems. In addition to behavioural issues the full utilisation of CRM benefits cannot be attained unless this is enabled.
Strategic framework for successful implementation of CRM
A global survey conducted by the IBM Institute for Business Value and part of IBM Business Consulting Services three part series ‘Doing CRM Right’, claims that only 15 percent of CRM projects are fully successful, but that the success rate can be improved to as high as 80 percent, through proper business methodology and prioritisation.
Banks have made a large investment in technology and benefits thereof are being realised in terms of improved customer empowerment, customer orientation and convenience. Yet to realise the full potential, a need to emphasise the strategic importance of CRM is felt. For successful adoption and implementation relevant changes in banks’ culture, practices, processes and employee attitudes are required. The following section suggests a strategic framework to enable successful CRM implementation.
(1)Recognising CRM as a strategic initiative
(a) CRM has many dimensions, resulting in varied perspective to CRM. Therefore, the CRM philosophy in its true sense is not understood by stakeholders. This becomes a major impediment to
|(a)||CRM is primarily about information technology software packages||(a)||CRM is primarily about relationships where information technology software package comes handy.|
|(b)||CRM is primarily sales and marketing||(b)||CRM is primarily to automate customer support.|
|(c)||Once we approach the known CRM software developers and vendors, they will supply CRM solution that will fit my business.||(c)||Development of an intellectual infrastructure and active involvement are the prerequisites before we approach CRM software vendors.|
|(d)||CRM once brought and implemented in place in a firm takes care of itself for all time to come.||(d)||Life of the firm is dynamic. Hence the CRM, solution must be in ‘scalable and modifiable’ form.|
|(e)||CRM is highly expensive.||(e)||CRM is highly cost effective.|
|(f)||CRM is suited to Business-to-Business (B2B) situations and in dealing with large customers.||(f)||CRM is as useful to business to consumer (B2C situations) as well and for any customer who is your key customer.|
|(g)||CRM works well for high value-high anxiety product only.||(g)||CRM is good for any product even commodities.|
Acceptance and implementation of the concept. So, it is imperative to state that CRM is a long term strategic initiative meaning that it emanates from the mission of organisation and is considered as a key means of attaining the organisation’s long term objectives. It also means that it is designed to sustain the organisation’s objective attainment, fitting in the plan of action formulated to optimise the organisation’s opportunities and face the threats. Here a clarification of some myths about CRM is helpful.
(b) Before embarking on CRM, it is necessary to delineate CRM and technology. It should be clearly understood that the role of technology is in enabling the CRM strategy. Once this is clearly understood, CRM will get a buy in by all employees in Bank. Passing the entire responsibility of CRM related tasks on to IT department does not result in conversion of technology applications into business. Passing solely to Marketing department, without educating the officers about functionalities, results in non utilisation in most cases and underutilisation in some. The need of the hour is recognition to CRM as organisation wide strategy or planned sequence of activities to develop and nurture customer relationships.
(2) Top management support
Without leadership and endorsement of top management, the CRM initiative may not get the required weight age, attention and effective deployment. In fact, the philosophy should be propagated and sold to internal customers i.e. employees at all levels by senior management. A particularly important role of top management in this context is development and sharing a
‘CRM vision’. A study of best practices adopted by organisations successful in implementation of CRM indicates that senior managers of these firms create a vision for how CRM will change their organisations. In addition to this, they include attributes that affect customers’ perceptions of value, how they can bond with organisation, product and purchase intent. This vision evolves as the organisation progresses ahead in CRM journey. For example, at a major Canadian Bank, initially the vision was associated with the development of customer information systems. With time the vision became more focused on the delivery of differentiated value propositions through products to customers.
(3) Realignment of Organisational Structure and practices
Sales force Automation, dashboards, loads of customer information in MIS reports cannot lead to CRM implementation in it’s true sense unless and until the organisation structure in Banks is realigned. The present structures in most banks are product and process centric. Having installed technology set up for CRM, relevant changes in structure making it compatible to adoption and use of technology enabled CRM is the need of the hour. This has certain dimensions such as:
(a) Steering Committee for CRM
At present, there are Marketing divisions, IT departments, MIS departments, Data Centres and Project Management offices. All are working towards effective management of customer information towards attainment of Bank’s objectives, one of which is maintenance of customer relations to develop business. There is a need to streamline this effort towards attaining the CRM vision. This can be achieved through formation of a CRM Steering Committee at the top level which has representatives from all these departments. The Committee can synergise the efforts of all these departments, so that CRM practices are identified, communicated and practiced in coordination with sufficient top management support and functional expertise.
(b) Breaking of Silos
Present systems are marked by a silo approach where in IT department works in isolation to marketing department. They have different objectives and strategies. But, it is necessary to understand that CRM cannot be successful in this environment. Coordination, communication and joint ownership of both the departments is essential. This will enable IT people to give technical expertise and marketing people to link the market realities to technology and then plan products, services to match them.
(c) New positions
The ownership of CRM concept and management of its implementation and adoption through out the Bank is not possible without creation of some new positions which handle the responsibility and anchor the propagation of the concept. Most desirable is that, at all levels officials responsible for different dimensions of CRM be employed. To overlook the overall implementation and management, an H.O. level position be created. Then IT, Marketing positions for specific tasks of campaign management, software development and product development etc. can be created.
(4) Change in culture
CRM being a strategic initiative demands a change in organisation culture pertaining to perceptions and practices. CRM to be successful needs buy in from all organisational members and particularly the recognition of the fact that each one is responsible for CRM. It is often observed that CRM is perceived to be the task of employees in direct contact with customers. The truth is every employee is a part of process leading to customer satisfaction. So, each can contribute meaningfully in value addition to customer irrespective of his task and role in process sequence. Thus, a realisation of each employee’s basic role towards customer centricity will strengthen adoption of CRM.
(5) Communication and coordination
To put life into technology and strategic plans for customer acquisition, service and retention, communication of CRM vision, enabling practices and desired behaviours is necessary. Also, coordination of human efforts and customer communications to software enabled CRM updates, alerts and templates is essential. This can be achieved by Multichannel Integration Process. Today Banks customers are utilising a variety of channels, leading to strategic customer information scattered in islands across Bank. CRM objectives cannot be attained unless these transactions across channels like internet, mobile, call centre, branch, POS terminal, ATM, etc. are tracked. The multichannel integration will enable a unified view of the customer leading to better insights into his preferred products, channel preference, usage frequency, needs and wants. This definitely will aid not only better and informed service, but also new product development, targeting, approaching the customer with the right product at the right time, through the right channel. This phenomena called `versioning’ can differentiate a Bank’s offerings from other players just bombarding offers and products through all possible channels leading to wastage of effort, resource and time. Apart from this, unified customer view will enable informed decision making preventing attrition, bad loans and frauds.
Lack of motivation towards adopting, accepting and using CRM applications is a major impediment to CRM in Banks. This can be addressed by helping employee at all levels to understand CRM concepts and firm’s vision for CRM as well as communicating customer, market and profitability data to describe the Banks’ progress, as it proceeds on its CRM journey. Also helpful will be setting expectations to help individuals and groups align their performance with the goals of CRM. It is essential to set expectations to help individuals and groups align their performance with the goals of CRM. People need to know the link between CRM and their own role performance and success.
Adequate training to end users is essential keeping in view the involvement of new technology, realignment of business practices and magnitude of fundamental change in Bank’s service offerings. Training at all levels focused on CRM philosophy, applications in banking, new processes to be adopted, employee’s role in customer service, and change management along with use of new technology is the need of the hour. In addition, behavioural training in reinforcing customer centric attitudes and behaviour is required. In other words, rather than simply demonstrating how to use software’s features and functionality, training should teach employees how to effectively execute the business process, enabled by the CRM system.
A bank’s ability to identify customer needs, segment customers and build accurate customer profiles, all depend on how effectively it collects, manages and uses customer data. Banks need to realise which type of information they need, harvest it carefully, store it safely, keep it updated and use it proactively to cross- sell, improve customer experience and deepen relationships. Today data access is no longer a challenge, rather banks have access to loads of customer information, but the challenge still lies in converting this into business advantage. This implies that CRM needs to address the gap of converting data into customer insights which proliferates profitable customer relationships across multiple touch points. The strategic framework suggested for effective implementation of CRM emphasises the importance of understanding CRM as an organisation wide strategy and need for alignment of bank’s culture and processes to bring customer centricity at the core of operations. The framework recommends leadership and motivation driven by top management to optimise customer relationships on the basis of customer information. It points out the need for training at all levels along with coordination and communication amongst various departments. Thus, a strategic approach towards CRM implementation will enable attainment of the desired benefits of the CRM investments made by banks.
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Mohd Junaid Ahmad
Department of commerce
Aligarh Muslim University,Aligarh
E-mail Id:junaidahma[email protected]