Customer relationship management and importance of relationship marketing in the banking sector

P r o j e c t s f or m b a. b l o gs p o t. c o m

A
Dissertation
On

Customer Relationship Management And
Importance Of Relationship Marketing
In The Banking Sector

This project report is being submitted as a part of the
requirements of the MBA Program of Bangalore University.

The project has been undertaken

By:
SHRIYA MEHROTRA
Reg. No. 04VWCM 6117

With the guidance and support of
Prof. Raja Sekhar
Faculty: MBA

ALLIANCE BUSINESS ACADEMY
BANGALORE – 560 076
Batch: 2004-2006

P r o j e c t s f or m b 1 b l o gs p o t. c o m
a.


Declaration

I, Shriya Mehrotra, student of MBA 4th semester, studying at Alliance Business Academy,
Bangalore do here by declare that this project relating to the topic “Customer Relationship
Management And Importance Of Relationship Marketing In The Banking Sector” had been
prepared by me after undergoing the prescribed dissertation requirements a part of the
objective of the MBA program of Bangalore University ( Batch of 2004-2006).

The study has been done under the support and guidance of Prof. Raja Sekhar.

I further declare that this project report has not been submitted earlier to any other University
or Institute for the award of any Degree or Diploma.

Date:
Place:
Shriya Mehrotra
Reg. No. 04VWCM 6117

a.


Certificate

This is to certify that SHRIYA MEHROTRA, student of MBA 4th semester Reg. No.
04VWCM6117 of our Institute has completed his Dissertation report on the topic
“Customer Relationship Management and Importance of Relationship marketing In the
Banking Sector”, under my guidance, and that no part of this report has been submitted
for the award of any other Degree or Diploma to any other Board or University.

Date:
Place:

Prof. Raja Sekhar
Faculty
Alliance Business Academy

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Acknowledgement

The satiation and euphoric that accompany the successful completion of task, would
be incomplete without the mention of the people who made it possible. After all, the
success is the epitome of hard work, severance, undeterred, zeal, stead fast
determination and most of all encouraging guidance. So with immense gratitude, I
acknowledge all those whose guidance and encouragement served as a “beacon
light” and crowned our efforts with success.

I sincerely thank Mr.Sudhir.G.Angur, Honorable president- Alliance Business
Academy, for giving us an opportunity to take up this research. I thank him for being
a constant source of inspiration and encouragement. I would like to express my
profound sense of gratitude to Mr.B.V.Krishnamurthy, Director and executive vice
president –Alliance Business Academy for providing me support to conduct this
research

With a deep sense of gratitude and indebtedness, I sincerely and whole heartedly
thank Prof. Raja Sekhar, my project guide for giving me valuable suggestions and
advice through out the execution of the project.

Last but not the least, I would like to thank almighty God, my parents, and my friends
who helped me gather these data and have sat with me for hours discussing about
the project.

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TABLE OF CONTENTS
Sl. CHAPTERS Page
No no
1a 1-5
EXECUTIVE SUMMARY
1b INTRODUCTION
1.1- BANKING ON CRM
1.2- DEFINE CRM
1.3- STUDY OF BANKING SECTOR

2 6-7
BANKING
2.1- WHAT IS BANKING
2.2- KNOW YOUR CUSTOMER (KYC)
3 8-12
RELATIONSHIP MARKETING IN BANKS
3.1- CRM IN BANKING
3.2- WHAT DOES BANK NEED
3.3- HOW CRM HELP BANKS
3.4- CRM IN BUSINESS TRANSFORMATION
3.5- CRM IMPLEMENTATION IN INDIAN BANKS
4 13-23
SOCIAL CONCERNS
4.1-CONSUMER EXCLUSION & SOCIAL RES IN
MARKETING DECISIONS.
4.2- FIELD RESEARCH OBJECTIVES
4.3- METHODOLOGY
4.4- DEMOGRAPHICS OF SAMPLE
4.5- DATA ANALYSIS
4.6- FINDINGS
5 CRITICAL ISSUES AND TERMS 24-27

6 SWOT ANALYSIS OF RETAIL BANKS 28-30

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7 RELATIONSHIP BANKING IN 31
TROUBLEDTIMES
8 CRM IN FINANCIAL SERVICES SECTOR 32-37
8.1 DEFINING CRM
8.2 EVOLUTION OF CRM & CHALLENGES
OF PERSONALIZED E-SUPPORT
8.3 CUSTOMER SUPPORT
9 FINANCIAL &BANKING TECHNOLOGY 38-39
10 WHAT CUSTOMERS WANT 40-74
TEN MYTHS ABOUT THE CUSTOMERS
WHAT CUSTOMERS WANT
CUSTOMERS DIRECTIVES
11 BENEFITS OF IMPLEMENTING CRM 75-78
WARNING & PITFALLS
PRINCIPLES OF SERVICES IN BANKING
SUGGESTIONS
12 CONCLUSION 79-80
13 REFERENCES

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LIST OF TABLES & FIGURES
Table 1 Demographics of the sample
Table 2 Number of financial institution used
Table 3 Frequency of travelling for contacting financial
transactions
Table 4 Importance and availability of technology and bank
services
Table 5 Access to various banking services
Table 6 Use of various banking services
Table 7 Requirements of banking services in the region
Table 8 Use Automatic Teller Machines ( ATMs )

Figure 1 Workforce management system
Figure 2 Evolution of CRM
Figure 3 Customer 360 degrees
Figure 4 E- Support
Figure 5 Financial & Banking Technologies

Figure 2-1 “tell me what I get if I do this”
Figure 2-2 “I’ll do it myself when I’m ready”; “Use what I give
You”
Figure 2-3 “let me make a valid comparison”
Figure 2-4 Helpfulness as hindrance
Figure 2-5 Conflicting navigation system
Figure 2-6 too many homes
Figure 2-7 “Don’t lock me out”

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Chapter 1
INTRODUCTION
1.1 ‘Banking’ on CRM’

“Competition and globalisation of banking services are forcing banks to be productive and
profitable. To retain High Net Worth individuals, banks should focus strongly on relationship
management with customers. Innovative Customer Relationship Management (CRM)
strategies and cutting edge software can help, to a great extent, in achieving the desired
results. To provide customised services, banks are opening Personalised Boutiques which
provide all the required financial needs of a customer”.

The entire service industry is now metamorphosed to become customer- specific. In this
context, the management of customer relationship in financial services industry demands
special focus. Gone are the days when customers at a bank did not mind the long serpentine
queues and waited patiently for their turn with a token in their hand. In today’s Internet era,
no one has the leisure to wait. In this context, online banking is assuming a great significance.
Today, banking is more customer-centric, unlike the yester when it was transaction-centric.
Banks are increasingly focusing on the premise that customers choose on the service provider
who differentiates through quick and efficient service.

However, there is more to Customer Relationship Management (CRM) than just managing
customers and analysing their behaviours. Banks are well aware that their success is
predominantly dependent on the CRM strategies adopted by them. Service providers have
recognised that good CRM bonds customers with the organisation for a longer term, resulting
in increased revenues.

With customers’ expectations becoming even more competitive, banks are coming up with a
wide array of novel products and services every day. The challenge is for the banks to work
towards ensuring that customers prefer their products and services over that of competing
brands. The key to develop and nurture a close relationship with customers is by appreciating
their needs and preferences and catering to their requirements. Leveraging on IT, to
appropriately analyse and understand the needs of existing customers better, to ensure
customer satisfaction, and exploring the possibility of cross-selling products to gain a
competitive advantage are the other issues drawing attention and interest.

With the opening up of the economy, a number of private sector banks have joined the fray
and are offering a plethora of products and services- rechristening themselves as ‘Financial
Boutiques’. Knowledge dissemination has been propelled by electronic and mass media
campaigns. Today’s knowledgeable consumer is challenging the Indian retail banking
industry to redefine itself. Thus in this current competitive scenario, for a bank to survive
competition, succeed and make profit, there is hardly any option but to learn from and
actively respond to consumers’ needs. Banks offering retail products need to reorient their

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strategy from a product-centric to a customer-centric approach to attract and retain High Net
Worth Individuals (HNI) and profitable customers as well.
The battle of the banks, for gaining a greater slice of the market share, is taking on a new
dimension. In the current falling interest rate scenario, banks are finding it increasingly
difficult to meet the high growth expectations. In order to bolster their top lines, banks are in
pursuit of newer ways and means of achieving organic growth through strategies that enable
acquisition of new customers and retaining the loyalty of the existing customers. Success of a
bank’s strategy towards customer acquisition will depend on its ability to develop customer
insights and translate these into effective operating models. Ensuring a good customer
experience at every customer touch point is the cornerstone of a successful growth strategy. A
good customer experience will drive customer acquisition and promote customer retention,
which translates into increased profits. This, in other words, is the hallmark of a successful
CRM strategy. Emphasis on CRM arises on account of the challenges confronting retail
managers----- managing to sustain and achieve growth and profits.

Bankers are conscious of the relative costs of acquiring new customers. As top management
emphasizes on “delivering results”, most bankers resort to customer grabbing, rather that
customer cultivation and creation, with the result that “customer churn” is the call of the day.
Incidentally, bankers are fully aware that losing the existing customer and acquiring new
customers is an expensive affair. Moreover, it acts as a drain on the existing resources of the
bank, which can be better employed for growth initiatives. Therefore, the challenge for the
banks is to retain and deepen the profitability of the existing customer relationships, which is
borne out by Nat West’s success.

With the shift from a transaction-centric to a relationship-centric business approach,
leveraging CRM has become sine qua non. Banks are adopting CRM to converge people,
process and products more effectively to embark on the true relationship banking--- with the
end result of accelerating the business momentum. Towards this end, experts propose various
ideas and approaches to understand the fundamental marketing motivations driving the CRM
trend in banks.

To meet the challenging preferences of the customers and to stay ahead of competitors,
bankers are bound to attract customers by providing a spectrum of services. Online banking,
ATM banking and telebanking are just a few of them. Banks can enhance customer service by
leveraging on technology, maintenance of efficient service delivery standards and business
process reengineering. On their part, employees need to demonstrate certain service traits
such as, putting on pleasing attire. At the end of the day, bankers should display a flair for
cultivating a good relationship with customers through the mechanism of better customer
service.

Having understood the significance, it is prudent to plan for CRM in retail banks. To a large
extent, the success of a CRM plan is dependent on the choice of the software. Towards this
end, bankers should identify domain enterprise, credibility in the market, cost implementation
and relationship with the vendor as factors on which vendor selection is based. The domains
of software systems, multiply product database and tracking require specific CRM focus.
Besides understanding the requirements for CRM implementations such as, the setting up of a

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CRM cell and conducting surveys at a periodic intervals to track their effectiveness, banks
need to understand how CRM assists them n customer identification, acquisition and
retention.

As a part of the planning process, frontline executives in banks should thoroughly understand
their organisational structure, infrastructure, as well as the product environment. In this
context, the management initiatives for CRM assume importance. A top-down CRM focused
approach that starts with the top management, percolating and permeating to all levels of the
CRM is a necessity in the present business scenario. Initiatives, such as, introducing CRM
audit by independent teams to identify the existing lacunae, and plugging the loopholes in the
CRM strategy as per the recommendations of the audit report, are required to be adopted by
the banks for reaping benefits.

It is observed that banks lose their best clients to competitors due to a variety of reasons. The
rationale behind losing their best clients to other service providers such as non-brokerage
houses and mutual fund houses needs to be analysed by banks. Experts opine that inefficient
and improper service is one major reason. The remedies suggested by them are that banks
should adopt customer relationship building approaches such as responding to complaints
instantaneously, analyzing the attrition of the clients in a particular product, and rating of
services across the network of branches, and the creation of a suggestion box to elicit the
views and suggestion of their employees. Another dimension of the relationship building
exercise is to obtain an electronic feedback from customers to understand the level of
acceptance of existing products, which will facilitates in developing better products.

Banks can gain a competitive advantage from CRM by becoming low-cost players in the
market, achieving operational efficiency and maintaining customer loyalty. The ability to
predict the products that customers are likely to purchase over a period of time, increased
productivity of managerial executives, sales and customer service staff, and streamlining of
business processes are some of the benefits retail banks obtain by taking to successful
management of their customer relationships.

Implementing the right CRM tools can enhance customer satisfaction leading to business
growth. CRM enables organisations to motivate customers to initiate revenue-generating
contacts. Several CRM issues such as, its effectiveness, application and challenges draw
attention of the banking industry. Having witnessed the manner in which several global banks
have benefited through CRM, the Indian retail banks too need to focus on and continuously
invest in the customer relationship activities. The Indian banking scenario, which is still at an
embryonic stage as far as the CRM domain is considered, needs to strive towards CRM
implementation to meet the emerging demands of “universal banking”.

1.2 Defining CRM

Customer Relationship Marketing is a practice that encompasses all marketing activities
directed toward establishing, developing, and maintaining successful customer relationships.
The focus of relationship marketing is on developing long-term relationships and improving
corporate performance through customer loyalty and customer retention.

P r o j e c t s f or m b10 b l o gs p o t. c o m
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Customer Relationship Management (CRM) as the name suggests, the primary focal point is
placed on the customer. The key objective is to increase customer value over time by
increasing customer loyalty. If a company develops better customer relationships, it also
improves business processes as well as its profits. In general, CRM is a more efficient
automated method used to connect and improve all areas of business to focus on creating
strong customer relationships. All forces are coupled together to save, improve, and acquire
greater business to customer relationships. The most common areas of business that are
positively affected include marketing, sales, and customer service strategies.
CRM helps create time efficiency and savings on both sides of the business spectrum.
Through correct implementation and use of CRM solutions, companies gain a better
understanding of their strongest and weakest areas and how they can improve upon these.
Therefore, customers gain better products and services from their businesses of choice. In
order to achieve better insight on CRM, it is essential to consider all of its components.

CRM- meaning
Customer relationship management (CRM) is a business strategy that spans your entire
organization from front office to back-office. It is a commitment you make to put customers
at the heart of your enterprise. The right CRM strategy and solutions can help you securely,
reliably and consistently:
• Delight your customers every time they interact with your business by empowering
them with anytime, anywhere, and any channel access to accurate information and
more personalized service.
• Reach more customers more effectively, increase customer retention and boost
customer loyalty by leveraging opportunities to up-sell and cross-sell and driving
repeat business at lower cost.
• Drive improvements in business performance by providing your customers with the
ability to access more information through self-service and assisted-service
capabilities when it is convenient for them.
• Enable virtualization in your enterprise as more of your people and resources extend
beyond your offices and around the world.
• Balance sophisticated functionality with rapid implementation and effective support
for a faster return on your CRM investment.

Today’s customers face a growing range of choices in the products and services they can
buy. They base their choices on their perception of quality, value, and service. Each
consumer has a specific behavior. But buying habits are sometimes difficult to
understand. Therefore companies always want to gain some insight about consumer
behavior and habits in order to better control this behavior. Having an impact on
consumer behavior means being able to change consumer’s perception of the product or
service, to establish a relation between the company and its clients.

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1.3 Study of Banking Sector

The Indian banking can be broadly categorized into nationalized (government owned), private
banks and specialized banking institutions. The Reserve Bank of India acts a centralized body
monitoring any discrepancies and shortcoming in the system. Ever since nationalization of
banks took place in 1969, the public sector banks or the nationalized banks have acquired a
prominent place and has since then seen tremendous progress.
The need to become highly customer focused has forced the slow-moving public sector banks
to adopt a fast track approach. The unleashing of products and services through the net has
galvanized players at all levels of the banking and financial institutions market grid to look
anew at their existing portfolio offering. Conservative banking practices allowed Indian banks
to be insulated partially from the Asian currency crisis. Indian banks are now quoting at
higher valuation when compared to banks in other Asian countries (viz. Hong Kong,
Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets
(NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armed
with efficient branch networks focus primarily on the ‘high revenue’ niche retail segments.
The Indian banking has finally worked up to the competitive dynamics of the ‘new’ Indian
market and is addressing the relevant issues to take on the multifarious challenges of
globalization. Banks that employ IT solutions are perceived to be ‘futuristic’ and proactive
players, capable of meeting the multifarious requirements of the large customer base. Private
Banks have been fast on the uptake and are reorienting their strategies using the internet as a
medium The Internet has emerged as the new and challenging frontier of marketing with the
conventional physical world tenets being just as applicable like in any other marketing
medium.
The Indian banking has come from a long way from being a sleepy business institution to a
highly proactive and dynamic entity. This transformation has been largely brought about by
the large dose of liberalization and economic reforms that allowed banks to explore new
business opportunities rather than generating revenues from conventional streams (i.e.
borrowing and lending). The banking in India is highly fragmented with 30 banking units
contributing to almost 50% of deposits and 60% of advances. Indian nationalized banks
(banks owned by the government) continue to be the major lenders in the economy due to
their sheer size and penetrative networks which assures them high deposit mobilization
The Reserve Bank of India act as a centralized body monitoring any discrepancies and
shortcoming in the system. It is the foremost monitoring body in the Indian financial sector.
The nationalized banks (i.e. government-owned banks) continue to dominate the Indian
banking arena. Industry estimates indicate that out of 274 commercial banks operating in
India, 223 banks are in the public sector and 51 are in the private sector. The private sector
bank grid also includes 24 foreign banks that have started their operations here. Under the
ambit of these nationalized banks come the specialized banking institutions.

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Chapter 2
BANKING
2.1 Definition of banking

The accepting for the purpose of lending or investment, of deposits from the public, repayable
on demand or otherwise and withdrawal by cheques, draft or otherwise. (Banking Regulation
Act)

Dr. Paget in Law of Banking states, “No one and no body, corporate or otherwise, can be a
banker who does not:
i. Conduct Current Accounts
ii. Pays cheques drawn on himself
iii. Collects cheques for his customers

A bank is therefore “Any company that transacts the business of banking in India”.
Negotiable Instrument Act.

Banker:

Banker is “Any person acting as a banker” Negotiable Instrument Act.

Customer:

There must be some recognizable course or habit of dealing in the nature of regular banking
business. A single transaction can constitute a customer; must have an account; dealing must
be of a banking nature; some frequency in transactions is expected but is not essential.

MAHATMA GANDHI’S DEFINITION OF CUSTOMER
• A customer is not an outsider to our business. He is a definite part of it. A customer is
not an interruption of our work. He is the purpose of it.
• A customer is doing us a favour by letting us serve him. We are not doing him any
favour.
• A customer is not a cold statistic; he is a flesh and blood human being with feelings
and emotions like our own.
• A customer is not someone to argue or match wits with. He deserves courteous and
attentive treatment.
• A customer is not dependent on us. We are dependent on him.
• A customer brings us his wants. It is our job to handle them properly and profitably -
both to him and us.
• A customer makes it possible to pay our salary, whether we are a driver, plant or
office employee.

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Bank Customers

• Minor
• Married women
• Pardanashin Woman
• Illiterate people
• Lunatics
• Trustees
• Executors and Administrators
• Power of Attorney Holders
• Joint Account
• Hindu undivided Family
• Partnership firm
• Limited companies
• Clubs, Societies and Charitable Institutions
• Non resident and Persons of India origin
• Foreigners

Before getting into the details of how CRM actually works in the financial sector, it is
very important to “know your customer”.

2.2 Know Your Customer (KYC)

It is very important to know the customer before having any kind of relationship with
him (especially in the banking sector).
This is important because of drugs smuggling/ trafficking, money laundering and
terrorism coming up. If one has to build a relationship with the customer one should
follow all the KYC norms laid down by RBI.

Under the KYC a customer is:
• A person or entity that maintains an account and/ or has a business relationship
with the bank.
• One on whose behalf an account is maintained.
• Any person/ entity connected with financial transaction which can pose
significant reputational or other risks.

The RBI States:
KYC must be the key principle for identification of an individual/ corporate for opening an
account. This would entail verification through an introductory reference from an existing
account holder, through a person known to the bank or on the basis of documents provided by
the customer.

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Chapter 3
RELATIONSHIP MARKETING IN BANKS
3.1 CRM in banking

Retail banking refers to mass-market banking where individual customers typically use banks
for services such as savings and current accounts, mortgages, loans (e.g. personal, housing,
auto, and educational), debit cards, credit cards, depository services, fixed deposits,
investment advisory services (for high net worth individuals) etc.

Before Internet era, consumers largely selected their banks based on how convenient the
location of bank’s branches was to their homes or offices. With the Advent of new
technologies in the business of bank, such as Internet banking and ATMs, now customers can
freely chose any bank for their transactions. Thus the customer base of banks has increased,
and so has the choices of customers for selecting the banks.

This is just the beginning of the story. Due to globalization new generations of private sector
banks and many foreign banks have also entered the market and they have brought with them
several useful and innovative products. Due to forced competition, public sector banks are
also becoming more technology savvy and customer oriented.

Thus, Non-traditional competition, market consolidation, new technology, and the
proliferation of the Internet are changing the competitive landscape of the retail banking
industry. Today’ retail banking sector is characterized by following:

• Multiple products (deposits, credit cards, insurance, investments and securities)

• Multiple channels of distribution (call center, branch, Internet and kiosk)

• Multiple customer groups (consumer, small business, and corporate)

Today, the customers have many expectations from bank such as

(i) Service at reduced cost

(ii) Service “Anytime Anywhere”

(iii) Personalized Service

With increased number of banks, products and services and practically nil switching costs,
customers are easily switching banks whenever they find better services and products. Banks
are finding it tough to get new customers and more importantly retain existing customers.

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According to a research by Reichheld and Sasser in the Harvard Business Review, 5%
increase in customer retention can increase profitability by 35% in banking business, 50% in
insurance and brokerage, and 125% in the consumer credit card market. Therefore banks are
now stressing on retaining customers and increasing market share.

3.2 Needs of a Bank

The banks now need to find out what to sell, whom to sell, when to sell, how to sell and how
to be different to increase profitability. Banks need to differentiate themselves by adding
value-added service, offerings and building long-term relationships with their customers
through more customized products, enhanced value offerings, personalized services and
increased accessibility. Banks also need to identify customers and products that would be
most profitable and target customers with products that are most appropriate to their needs
and serve the customers with greater cost efficiency.

Banks also need to find out the avenues for increased customer satisfaction, which leads to
increased customer loyalty. This may be explained better from two initiatives bank took in the
past:

1. Earlier what drove many bankers to invest in ATMs was the promise of reduced branch
cost, since customers would use them instead of a branch to transact business. But what was
discovered is that the financial impact of ATMs is a marginal increase in fee income
substantially offset by the cost of significant increases in the number of customer transactions.
The value proposition, however, was a significant increase in that intangible called customer
satisfaction. The increase in customer satisfaction has translated to loyalty that resulted in
higher customer retention and growing franchise value.

2. Bankers invested in Internet banking, believing that the Internet was a lower-cost delivery
channel and a way to increase sales. Studies have now shown, however, that the primary
value of offering Internet banking services lies in the increased retention of highly valued
customer segments. Again customer satisfaction drives the value proposition.

Thus, banks need to retain existing customers with enhanced personalized services and
products, which best suits their needs and satisfies them the most.

3.3 Utility of CRM in Banks

CRM primarily caters to all interactions with the customers or potential customers, across
multiple touch points including the Internet, bank branch, call center, field organization and
other distribution channels.

CRM can help banks in following ways:

• 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

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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.

• Activity Management – It helps managers to assign and track the activities of
various members. Thus improved transparency leads to improved efficiency.

• Contact Center – It enables customer service agent to provide uniform service across
multiple channels such as phone, Internet, email, Fax.

• 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.

• Enhanced productivity – CRM can help in enhanced productivity of customers,
partners and employees.

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• 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 Citibank, Reserve Bank of India, State Bank of India, IDBI, ICICI,
MaxTouch, ACC, National Stock Exchange and PepsiCo. And Business Intelligence
players hope many more will follow suit.

A word of caution….

Customers may not want what they get: A CRM system apart from improving front office
operations and customer servicing also helps in coping with many services that do not need
manual intervention. These are serviced by channels like IVR, Internet and ATM. Customers
can get account information, information on credit balance, issue instructions for drafts or
even transact through these. At the same time there may be a few customers who still prefer
the traditional methods of banking. Banks need to be flexible enough to continue to extend the
"personal touch" that such customers prefer.

Make changes internally before going for CRM: Many banks have spent a lot of money on
CRM, finding it easier to buy CRM technology than to make the major internal changes
necessary to really make CRM work for them. Unfortunately for these banks, the software has
often failed to deliver.

3.4 CRM is Business Transformation

Too often banks have focused on the wrong areas of CRM. CRM is really about business
transformation—changing the business from services-centric to customer-centric.

Have defined Objectives - Many CRM implementations have been approved without
examining aspects like profitability, turnover etc. CRM implementations should have well
defined objectives, such as RoI, Sales etc.

Consider Complete Life Cycle Costs while budgeting - Measurements of profit are often
constructed to embrace only the initial cost of sale. This is of little use if the ongoing cost of
servicing a customer outweigh the margin of profit that customer is generating. It is critical
that banks have recognized and embraced the importance of the trend towards customer
development, and that this is reflected in actual marketing budget allocation.

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3.5 CRM Implementation in Banks in India

According to Nasscom report “Strategic Review 2004”, Indian CRM market was estimated at
US $ 14 million and is forecast to grow to US $ 26 million in 2005. Banking and financial
services segment has a high growth potential and accounts for 22 percent of CRM license
revenue. There are many banks such as ICICI Bank, HDFC Bank and Citibank, which are
using CRM products.

Disciplined work along four dimensions can significantly improve results from CRM
initiatives:

Customer Segmentation- Do intensive data analysis and value-based segmentation to
highlight the value of different customer segments and the underlying drivers of that value.

Design programs- Design innovative programs focusing on customer acquisition, cross-sell,
retention, loyalty, and customer service, based on customer insights, experience and industry
best practices.

Design Processes- Design internal and external processes to support and sustain successful
programs.

Good Decisions based on Right Information- The information from a CRM program can
often guide better operational business decisions at many levels of the organization. Gather
customer information at a broader set of touch-points, perform in-depth analysis, and make
critical information available to relevant stakeholders.

The retail banking industry is undergoing revolutionary change. There are many players and
competition is tough. Customer Relationship Management is an important weapon in this
fight. The ability to mass customize the customer experience and refresh the value proposition
is necessary to retain the right to do business with the customer. Consolidation and technology
would become must for sustenance and growth. The pressure will be on banks to integrate
data from every channel and know what customers say so that the banks deliver what they
want. As the competitions increase, banks will require the robust CRM functionalities in order
to manage their most valued asset – their customers.

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Chapter 4
SOCIAL CONCERNS

4.1 Consumer Exclusion and Social Responsibility in Marketing Decisions

The radical changes occurring in the micro and macro environment, which dynamically affect
the marketplace and its participants, are widely known. Both the industrial and the academic
communities have to realize the need of a re-determination and re-evaluation of many basic
and traditional concepts of the strategic marketing plan. The defenders of the concept of
globalization argue that it ideally leads to a multi/cross cultural and without boundaries world.
In this context, there is a need of a worldwide community to capitalize effectively and
efficiently the opportunities based on the principles of the "system".

It is certain that technology has a pivotal role in the context of globalization. Moreover,
technology is being presented as the magic "stick" that could eventually overcome any
obstacle or problem and create a worldwide community to sharing equal opportunities in
progress, education, communication and information. This is of great importance only when it
is clear that technology has to be user/citizen oriented and publicly accessible.

Considering the implementation of eventual globalization it is crucial to remember some of
the basic axis of the concept. For example, the creation of a global community has to
underline and incorporate local and regional social characteristics. In practice this can be
translated into specific directions for public and private organizations and their various
orientations in order to provide opportunities at local and regional levels.

What happens in the real world when attempting to create the "global community"? Is there
any re-orientation of the aims and objectives instigated by industries? How do companies
target the market in terms of geographical dispersion? Which are the main criteria when
evaluating the selected target markets? Is there any "space" to serve small or isolated
communities? Is there any possibility, that the traditional marketing concepts as well as global
management principles and foundations, have been used as a cover in various decisions
concerning the selection of target markets, in contradiction to the new role they have to play
in the adoption of the globalization concept?

The focus of this paper is on the companies' role in the implementation of globalization under
their social responsibility's point of view and the re-thinking about some basic marketing
concepts, as a direct consequence. Moreover, the authors argue that companies have to be re-
positioned in the society as well as in front of their selves, in order to create a new
contemporary profile, in tune with the needs and evolution even of the regional and local
communities. It is known that companies often underline their role within the society as the
meaning of their new profile and orientation. However, the concept of societal marketing
having as its core theme the company's orientation toward the well-being of the customer and
generally the society creates at the same time a field of dialog between the academic
community and the industry.

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Marketing should always be addressed to customers in order to gain the answers it looks for,
to all its inquiries. Marketing ethicists have long criticized some marketers for making non-
socially responsible or even unethical decisions in the market selection. These issues have
been referred to as the ethical issues of inclusion and exclusion and these are the basic axis
that marketers have to follow in order to adopt a new orientation in the context of
globalization (An example of an exclusion decision is not providing a needed product /
service to a segment of the population which needs it ).

It is widely accepted that the social role of companies is manifested by the improvement of
the living standards of the society. But this is to ascertain that when social exclusion occurs,
then the living standards become even lower.
Financial exclusion could be experienced in many different ways. Its key characteristic is the
inability of some customers to access necessary financial services in an appropriate form. It
might be caused by macro-economic factors and facts or, of course, as the result of decisions
made by the management of a specific company or even by the whole industry. Particular
conditions related to the marketing mix factors (marketing exclusion), strongly related to a
previous experience (condition exclusions), such as a high - not affordable price (price
exclusion), the lack of accessibility, due to a certain distribution-related decision (access
exclusion), not matching image (as a result of false or "correct" perceptions), may create
barriers between the customer and the company that do not support a further relationship.
However, not all customers experiencing financial exclusion are of any interest for a
company.

Financial exclusion also is accepting self-exclusion. A decision made by the customer as a
result of dissatisfaction from a previously related experience. Referring to the specific
example of bank services, offered in isolated areas in India, we can see that in the vast
majority of the small isolated islands in India, not only technology aided banking services, but
even traditional local bank branches are not provided. In these cases, when this kind of
exclusion occurs, the local post office branches are servicing customers. However, as
probably expected, they are providing only the most common banking transactions, and of
course, from the strategic point of view, any mentioning about "corporate identity building"
and "corporate / brand equity building" is to be avoided. This is because exclusion decisions
have already been taken and implemented.

In any case, particularly when talking about service provision, the customer is definitely an
integral part of the marketing and delivery process. However, the service provider via the
implemented processes and the humans involved is the one with the determining role in its
implementation .Services are becoming more and more a major competitive tool, even in the
physical goods industries, necessitating a close relationship, often called a strategic
partnership Financial exclusion is strongly related to service providing. In some cases the lack
of the provision of financial services becomes unjustified having in mind the opportunities
provided by information technology. This is exactly the case, when referring to the banking
industry.

a.


This piece of research reveals the correlation between the geographical and financial
exclusion concerning two geographical remote areas in India. The study identifies the banking
attitudes of a customer segment that hasn't been investigated in the past; those who have never
been included. It examines the expectations and the satisfaction of the banking services, the
use of banking technologies and the usage of available banking products, by the inhabitants of
two remote and isolated islands in Greece. In these islands fully developed financial services
have never been offered.

4.2 FIELD RESEARCH OBJECTIVES

Financial exclusion is often largely attributed to structural changes in the financial services
sector, including increased competition from new entrants in the markets, mergers and
information technology. All these characteristics, resulted in the development of a
combination of tactics related to the adoption of cost cutting activities and increased emphasis
on market segmentation and appropriate targeting, are present in the banking sector in India.

The inhabitants of isolated areas cannot satisfy their banking needs although they have a
healthy income profile and financial strength. Only few financial services were traditionally
offered in these areas. Nowadays, due to the increased competition in the market, these
neglected customer segments can be of interest to the banking industry.

There are many small isolated islands with no traditional local bank branches in India. In the
vast majority of them, no technology aided banking services are provided. When available,
the most common banking transactions are often provided by the local post office. Banking
needs, the familiarity with banking services and the use of technology for the consumption of
these services have been the subject area of previous research. However, little is known about
the above and the elements contributing to satisfaction for people who have always
experienced financial exclusion and are not familiar with technology. Lack of awareness in
the use of technology and limited contact with payment systems, such as cheques and credit
cards is the norm in isolated areas. Contrary to common belief, these conditions can accelerate
the use of new technologies and modern financial products.

This study was designed to focus on a distant, isolated population and:
Investigates the banking services currently used by customers.
• Explores their banking needs.
• Identifies their perceptions of the existing banking services.
• Investigates the usage of virtual banking services.
• Investigates their attitudes towards the provision of unmanned banking services via
Information Technology.

The research is exploratory, as the available information in relation to customers living in
isolated areas, is insufficient on these elements. However, this paper attempts to examine the
issues further.

a.


4.3 METHODOLOGY
Sampling Frame

Two of the most isolated suburbs, Sitapur and Biswan, were chosen as collecting data from all
the remote Uttar Pradesh cities is almost impossible, due to resource limitations. Sitapur is a
suburb and attracts mostly business class. In 1991 it had a population of 267, living in two
villages. The area of Biswan is somewhat bigger, has a long tradition in sugarcane farming
and attracts manufactures of sugar and allied products.In both places there is a post office,
offering a limited range of financial products.

It is worthy to mention that, it rarely happens to the citizens of those areas to be selected as
respondents to surveys. The inhabitants experience a certain kind of "exclusion" by both the
private sector and the public sector, not only as customers or as audience but even as citizens
that "their opinion counts". So, they feel excluded not only from what is happening but even
from what is being planned or prepared by almost all sectors. As expected, this kind of
exclusion leads them to a greater disappointment in conjunction with the other forms of
exclusion.
A total of 359 people (representing approximately 51% of the inhabitants of the islands) were
interviewed (table 1). Of those, 190 were interviewed in Sitapur and 169 in Biswan. The men
had stayed in areas other than the place of origin; further more they were significantly better
educated than women. It is not surprising to find that a quarter of the inhabitants are retired as
the population of these islands is ageing, and. The education of the sample is representative of
the educational levels of isolated areas, but not of the whole of Greece, where most people
graduate from high school and the majority continue a higher education. Almost 59% of the
respondents never went to High school, while only 12.5% of the sample had a higher
education qualification. The educational profiles were more extreme in those that never left
the islands.

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4.4 TABLE 1. DEMOGRAPHICS OF THE SAMPLE

Data Collection, Research Instrument and Procedures

TABLE 1. Demographics of the sample

Never lived away Lived away>1 Total
year
Total % Total % Total %
Gender
Male 73 39.04 112 65.12 185 51.53
Female 114 60.96 60 34.88 174 48.47
Age
18 – 25 26 13.90 19 11.05 45 12.53
25 – 35 23 12.30 28 16.28 51 14.21
35 – 45 36 19.25 27 15.70 63 17.55
45 – 55 32 17.11 33 19.19 65 18.11

55 – 65 19 10.16 22 12.79 41 11.42
65 + 51 27.27 43 25.00 94 26.18
Education
None 13 6.95 8 4.65 21 5.85
Primary School 108 57.75 81 47.09 189 52.65
High School 53 28.34 46 26.74 99 27.6
University 11 5.88 34 19.77 45 12.53
Other 2 1.07 3 1.74 5 1.39
Occupation
Farmer 13 6.95 4 2.33 17 4.74
Trader 2 1.07 1 0.58 3 0.84
Salaried 6 3.21 11 6.40 17 4.74
Retired 47 25.13 42 24.42 89 24.79
Housekeeper 75 40.11 34 19.77 109 30.36
7 3.74 4 2.33 11 3.06
Civil Servant 11 5.88 23 13.37 34 9.47
Businessman 14 7.49 35 20.35 49 13.65
Privately employed 4 2.14 5 2.91 9 2.51
Other 8 4.28 13 7.56 21 5.85
Total 187 100.00 172 100.00 359 100.00

The actual study was conducted over a period of two months in three stages:

A draft questionnaire was developed during the first stage. The questionnaire was pre-tested
in Lucknow, the capital of Uttar Pradesh. Since the sampling frame contained respondents,
who were quite different from those in Lucknow, it was decided that the questionnaire should
be pre-tested for a second time, under real circumstances. In addition, it was appreciated that

a.


identifying and approaching the inhabitants of these isolated areas was very difficult and
contacts with the local opinion leaders should be developed to overcome these problems.

During the second stage, the final research instrument was developed and links with the local
communities were established. Ten semi-structured in depth interviews were conducted with
local opinion leaders (i.e. the Mukhiya, the priest, teachers in the local schools). Basic
information and support in reaching the general population was given. Five focus groups with
inhabitants of each suburb, helped in the development of a general understanding of the
situation and attitudes towards both technology and banking, followed. During the focus
groups, the questionnaire was pre-tested. It was apparent that the prospective respondents,
although helpful and very interested to express their opinions, had difficulties in
understanding and filling it in. This was mostly due to their limited experience in participating
in research and answering closed questions. To overcome this problem and in order to capture
the true perceptions of this particular sample, it was clear that data should be collected by
person-administered interviews.

During the last stage, the quantitative data was collected via in-home interviews and
interviews in public places that locals tend to visit on a regular basis. The fieldwork for this
part of the study was conducted in four days. I collected the quantitative data.

4.5 Data Analysis

Research on the inhabitants' views in these areas is relatively limited. Because of the
exploratory nature of all the issues examined, descriptive statistics are displayed. As a next
step in our analysis, we performed a series of extensive statistical analysis, using T-Tests, chi-
square statistics, in order to identify the exact relationships. More precisely, in order to
examine the hypotheses that the opinion of people in the two samples and the fact that the one
group has experienced living away from the island was not related, independent samples t-test
was used. To assess the ranking of different variables, by examining the mean rank
differences, Friedman two-way ANOVA test was conducted. Pearson χ2 was also used in
order to examine comparisons of categorical data. For all tests, observed significance level of
the test (p) less than 0.05, the hypothesis that the variables under investigation are
independent was rejected.

4.6 FINDINGS

A primary objective of this study was to investigate the banking services currently used by
customers, in order to reveal the provision of those services in the particular areas. In
addition, the study highlights their perceptions about the provided services. In this section, we
discuss the key findings of this study, in order to provide also a new perspective on
companies' social responsibility issues combining those with "exclusion", particularly social
and financial one.

As expected, the population of those remote areas is not denied access to financial services, as
long as they make the effort to obtain them. As shown on table 2, almost all respondents have
some sort of bank account. An interesting finding is that a high percentage of the sample

a.


(56.57%), are banking with more than one financial institution. Those respondents who have
lived away does not presents any clear differentiation of those who have spent all their lives in
the island regarding the use a different number of financial institutions from those (Pearson
χ2= 8.97, p= 0.06).

TABLE 2. Number of financial institutions used

Never lived Lived away> Total
Away 1 year
None 2 1.1 0 0.00 2 0.56
One 90 48.1 65 37.8 155 43.18
Two 76 40.6 75 43.6 151 42.06
Three 15 8.0 27 15.7 42 11.70
Four or more 4 2.1 5 2.9 9 2.51
Total 187 100.0 172 100.0 359 100.00

As far as the conditions of use is concerned, it is clear however that 30.37% of the sample
claim that they need to travel to another island at least once every two weeks to make their
required transactions. Only 5.29% of the sample cited that they are able to make them all in
the island they live on (table 3). The results highlight that it is almost compulsory for someone
who wants to satisfy banking needs to visit another island, while all residents travel with a
similar frequency (Pearson x2= 2.11, p=0.72). This cause additional cost to them associated
with banking transactions, since staying away overnight or even for a longer period is often
necessary due to the frequency of the islands' connection by boat and the weather conditions.

TABLE 3. Frequency of travelling for contacting financial transactions

Away 1 year
Once a week 5 2.7 9 5.2 44 12.26
Once per 15 days 12 6.4 11 6.4 65 18.11
Once a month 44 23.5 44 25.6 129 35.93
Less than once a month 62 33.2 56 32.6 102 28.41
Never 64 34.2 52 30.2 19 5.29
TOTAL 187 100.0 172 100.0 359 100.00

An interesting finding on a related topic, i.e. technology and its contribution to the areas well-
being is that all respondents identified technology as a key factor in the development of their
area (table 4), since it was revealed that they believe that unless the area develops, more
qualified young people will stay there. Similarly to banking services availability, technology
was also found to be far from being adequate. Those that have lived away were even more
disappointed with the services provided, although the observed difference was not statistically
significant.

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Respondents provided low scores regarding their ability to access to the various banking
services in their area (table 5). Only when referring to the most basic services
(withdrawal/deposit) this is not the case. More precisely, the people feel that payment of bills
is the service to which they have the most access to in their region, followed by
withdrawal/deposit (x2=1108, a=0.00).

Particularly, those respondents that have been away for a long time, and therefore they have
experienced ATM and other technologies usage in the past, they feel that they do not receive
the quality of service they perceive as standard.

TABLE 4. Importance and availability of technology and bank services

Never lived Lived Total
Away away>
1 year
Mean SD Mean SD Mean SD t-value p
Technology is a key factor for the 4.81 0.71 4.83 0.49 4.82 0.61 -0.20 0.84
development of the region
The needed banking services are 2.10 1.36 1.85 1.25 1.98 1.31 1.79 0.07
available in my region
The need for financial services 4.78 0.73 4.80 0.63 4.79 0.68 -0.22 0.83
increase in summer
1= strongly disagree, 5= strongly agree

a.


TABLE 5. Access to various banking services

Never lived Lived Total t-test Friedma
Away away> n
1 year
Mean SD Mean SD Mea SD t-value p Mean
n Rank
Withdrawal– Deposit 3.84 1.36 3.35 1.51 3.61 1.45 3.24 0.00 5.75
Loans 1.41 0.88 1.29 0.73 1.35 0.81 1.41 0.16 3.02
Subsidies 1.75 1.23 1.58 1.06 1.67 1.15 1.38 0.17 3.44
Credit cards payments 1.44 1.00 1.31 0.84 1.38 0.93 1.39 0.17 3.03
Payment of bills 3.91 1.36 3.72 1.59 3.82 1.48 1.28 0.20 5.89
Foreign currency exchange 2.23 1.52 2.12 1.51 2.18 1.51 0.71 0.48 4.06
Stock exchange 1.23 0.73 1.21 0.67 1.22 0.70 0.28 0.78 2.81
transactions
1= very difficult, 5= very easy

The great majority of the respondents (67%) claim that they perform bank transactions at least
once a month. Again, the basic banking services (withdrawals/deposits and payment of bills)
are those that are used the most in the area (x2=1158, a=0.00) (table 6). Those that have lived
away, appear to use the basic bank services more than the others and make more stock
exchange transactions, although the latter is still one of the least used services. Only a small
% of respondents, indicated to make use of any kind of credit cards for their transactions. It
seems that it is the custom of the area to pay in cash.

TABLE 6. Use of various banking services

Never Lived Total t-test Friedma
lived away> n
Away 1 year
Mea SD Mea SD Mea SD t-value p Mean
n n n Rank
Withdrawal– Deposit 2.84 0.92 3.05 0.94 2.94 0.93 -2.12 0.03 6.08
Loans 1.14 0.47 1.15 0.46 1.14 0.46 -0.25 0.80 3.12
Subsidies 1.29 0.67 1.19 0.47 1.24 0.58 1.67 0.10 3.31
Credit cards payments 1.24 0.77 1.40 0.98 1.31 0.88 -1.67 0.10 3.26
Payment of bills 2.80 1.26 2.83 1.20 2.81 1.23 -0.18 0.86 5.62
Foreign currency exchange 1.52 0.98 1.47 0.94 1.49 0.96 0.53 0.60 3.57
Stock exchange 1.09 0.47 1.26 0.86 1.17 0.69 -2.43 0.02 3.04
transactions
1= very rarely, 5 = very often

a.


As shown on the following table (table 6/7), the respondents all shared the same perceptions
in relation to the standards of the banking services offered in their region. They did not
express any major concerns in terms of the security of the banking services and were
reasonably content with the reliability of the systems. However they all expressed some
discomfort in relation to the speed of the system. But, their major concern refers to the
coverage of the banking networks. When compared with the others criteria measured, the
findings imply that they all agree that the quality of the service provided was not what they
expected.

Among all requirements of the banking services in the region, only "personal contact"
received a slightly lower mean score, implying that all respondents agreed that reliability,
speed, security and convenience are most important features of the provided banking services
(table 8). Those that have spent some time away from the native place believed that this
feature is of less importance than those that have stayed on the island for most of their lives
and are used to doing business through personal contact. When paired sample tests were
performed, it was revealed that there was no difference in the perception of the importance of
all these elements (a=.00).

TABLE 7. Requirements of the banking services in the region

Away 1 year
Mean SD Mean SD Mean SD t-value P
Reliability 4.92 0.31 4.89 0.32 4.90 0.33 0.88 0.40
Speed 4.91 0.32 4.88 0.34 4.90 0.33 0.89 0.38
Security 4.94 0.27 4.93 0.30 4.93 0.28 0.19 0.85
Convenience 4.89 0.39 4.90 0.43 4.89 0.41 -0.31 0.76
Personal contact 3.74 1.54 3.39 1.64 3.57 1.60 2.07 0.04
1= strongly disagree, 5= strongly agree

The use of ATM services are not at all popular, as 71% of the sample cited to be non users of
ATM services, or even in the past "they have never used" an ATM (table 9). However, this
finding was somewhat supported by the views expressed during the personal interviews and
the focus groups, where the participants linked their desire to have some personal contact with
the bank employees with the fact that they have to make an actual journey to visit the bank.
This could be a plausible explanation, since they use other technology. For example, more
than 44% of the respondents reported that they own and use a mobile phone.

Although all respondents appear to have limited experience in using ATMs, the results
indicated slightly differences among those who have lived away and those who have stayed
for their whole lives on the island, (Pearson x2=8.691, a=.00). Once again, it seems that the
experience of living in other, more technologically developed areas, or in other words, not
excluded areas, appears to influence positively the potentiality of ATMs.

a.


TABLE 8. Use of Automatic Teller Machines (ATMs')

Never lived Lived away > 1 Total
Away Year
I have used ATMs 42 22.46 63 36.63 105 29.25
I have never used ATMs 145 77.54 109 63.37 254 70.75
Total 187 100.00 172 100.00 359 100.00

In the in depth interviews, it was revealed that the inhabitants of these islands were
experiencing difficulties in using most of the highly sophisticated equipment, and ATMs were
perceived as such. Some of the people interviewed felt that using an ATM machine is risky,
and were not willing to trust the equipment. This is mainly due to problems with the telephone
connections used at present to support the ATM network.

It was not surprising, after all, that less than 2% of the respondents have ever used a bank's
web site. When they were asked, it was clear that the Internet was only used for information
gathering. None have used the Internet for banking. The inhabitants of these islands were
security conscious, and believed that using a computer to perform financial transactions is
highly dangerous.

Moreover, the exclusion of these places entail also very important social and political
implications.

By explicitly considering these issues, one can argue, based not only on their intention but
also on their potential, that many of the respondents could (and therefore should) be among
the target-customers of the major banks of the country. However this does not occur. Is that
the "real world" bank deny their social role, or it is the result of their interpretation of some
basic marketing concepts?

a.


Chapter 5
CRITICAL ISSUES AND TERMS
5.1 Setting socially responsible Marketing Objectives and Strategy

In the free market economies, business organizations are free to choose what goods and
services they produce, the processes by which they produce as well as the markets they aim to
serve. So, a social service does not necessarily mean the offer of specific additional services
to particular customers. It means the company's orientation in offering its products/services in
a more "social way".

In market economies where companies do have a high degree of autonomy, the manner in
which organizations make strategic decisions, taking into consideration the Social
Responsibility notion, becomes in itself a matter of discretion. As Frederick et al, (1992)
suggests there are 3 broad views of the social contribution of the company. The so called
"social obligation", adopted by companies which act, in accordance to what the law requires.
The 'social responsiveness", where the companies are more open to moral issues and
influenced by involving the acting social groups, and finally, "social responsibility" under
which companies recognize a wider spectrum of relationships with the different stakeholders
and enhance certain levels of interaction with such groups.

So, it is important to recognize that the concepts of "social responsibility" and "any kind of
exclusion" are not theoretical claims or even new, "smart" ways of determination of a
"competitive advantage. Instead, it is a certain philosophy of doing business with serious
consequences to society's well being. The real importance of company’s social responsibility
has not to do with its reactions to particular facts or events, but to their view, to their
contribution and role to the society. Therefore, the subject of social responsibility of a
particular company shouldn't be left to ones managers hands, but it should be the core concern
behind a company's existence.

Apart from Societal Marketing, which should also focus on a long-term orientation towards
customer satisfaction without excluding of course profitability and stable growth,
Relationship Marketing focuses on the creation of long-term relationship between various
participants - members of the particular network, involved in a process based on the axioms of
"mutual exchange and fulfillment of promises".

Moreover, as Kantner claims a "successful partnership manage the relationship, not just the
deal". Therefore, the new emerging marketing paradigm could thus be called relationship
orientation, where strength and quality of the relationship as well as the quality and
profitability of the relationship play significant role. But the question arises exactly there, i.e.
in the definition / identification of the "various participants-members of the particular network
who are going to be involved in a relationship"! Who decides the criteria under which
somebody will become member of the "network"?

a.


Even, the societal marketing concept holds that the organization's task is to determine the
needs, wants and interests of target markets and to deliver the desired satisfaction more
effectively and efficiently than competitors in a way that preserves or enhances the
consumer's and the society's well-being .

So, it is already clear, that the societal marketing concept requires the promotion of "proper
consumption values" so that "long-run consumer welfare" may be attained. Thus, it requires
that the business organization includes social, ethical and ecological considerations in its,
product and market planning. But, how much emphasis has been given to the particular target
markets and what balances with society as a whole?

Referring to the traditional Marketing concepts of "segmenting - targeting - positioning", one
could claim that the "focused targeting" is among the most successful strategic options. The
question is about the criteria this strategic decision will be implemented. The main purpose of
segmenting is to create substantial, measurable, accessible customer segments in order to
target effectively and efficiently in the future.

Nowadays, "customer valuation" forces to a more rationalized way of usage of the above
mentioned strategic tools, since the customer of the company becomes the "consumer of the
wealth of the organization". As a result, value is seen as something that has to be extracted
from customers to create shareholder value and all customers should be shown sufficient
returns to the organization.

Therefore, we strongly believe that under the scope of re-formulating the companies' roles in
society, one should re-define the segmentation criteria as well. Although traditionally, this has
been implemented based on product-related variables (i.e. product usage and product benefit)
and consumer related variables (i.e. demographics, lifestyle, self-concept etc), community’s
"well being" has to become the "compass" of segmentation criteria, setting.

The traditional marketers claim that "consumer/customer is the focus" and that consumer's
needs and desires are the raison-dieter for marketing (the marketing concept can be described
as an integrated effort aimed at providing customer satisfaction…). Is it not the appropriate
time to focus on the consumers' well being and make use of the several variables according to
this notion of well being? Otherwise, the claim "consumer is the focus" is not totally true and
it should be modified to "consumer of our convenience is the focus".

a.


5.2 Customer Dialogue Builds Loyalty & Profit

Customers and potential customers are getting more sophisticated. The very marketing
techniques used to separate the customer from their hard earned money are, helping, by
training both the old and newer generations of customers to be more wary and smarter.
Customers want to trust the companies they buy from and in some case may even value a
relationship of a sort.

Managing Customer experience is the biggest challenge faced by businesses today. The
ability to acquire, retain and grow customer relationships is determined by an organization's
ability to quickly adapt to changing customer needs. This demands an integrated approach to
managing customer interactions.

5.3 Customer 360°

It is in line with these needs that a concept called Customer 360° has been generated - an
integrated framework that addresses every point of the customer lifecycle of a business - from
customer support to back office to customer analytics.

What is Customer 360°?

Customer 360º is a proprietary framework for integrated Customer Lifecycle Management
(CLM) services that touch every point in the customer lifecycle of your business. Customer
360º integrates both direct and indirect interactions of a customer along the entire lifecycle
from prospecting to acquisition to service to retention while also delivering insights through
customer analytics. From a business point of view, this translates into reduced service costs,
increased business and enhanced profitability. From a customer centric viewpoint, it translates
into customer delight and enhanced customer satisfaction by catering to their current and
future needs.

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Customer 360° comprises of:

• Customer Interaction services
• Back-Office services
• Customer Intelligence service

How will Customer 360º benefit your organization?

Traditional delivery models address short-term business objectives like the need to attract new
customers or provide support - which caters to a single customer touch point. This approach
lacks a holistic view - in terms of customer experience across other touch points and insight
into customer's needs and behavior. Customer 360º is an integrated solution that can ensure
market adaptability, competitiveness and assured business.

5.4 Inbound Customer Marketing Research Report

The world of targeted marketing is moving on apace. Organizations no longer rely just on
direct mail to get their message across. The norm is fast becoming: multi-channel with the call
centre, website, e-mail and SMS all joining the fray; multi-stage where a number of contact
events are tracked prior to making the sale; and insight driven, where consumers are targeted
based on their predicted behaviors or the occurrence of specific events in their lives.

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Chapter 6
SWOT ANALYSIS OF RETAIL BANKS
6.1 Banking on an Online Future

These are the following opportunities and threats posed to retail banks by online banking.

The development of online banking has proved a mixed blessing for retail banks. By allowing
customers to service their accounts online, online banking represents a clear opportunity to
reduce the costs of face-to-face banking.

However, the study suggests that over a quarter of Internet users are now using online
banking, the majority of customers are proving slow to take it up, and even those who do still
demand the reassurance of one-to-one personal support, whether provided online or over the
telephone.

A survey underlines the fact that customers valued the personal touch, with 63% citing
responsive service and being treated as a valued customer as the most important factor driving
their overall satisfaction with their bank or other financial institution.

The problem is that for most banks, providing the personal support that customers’ value so
highly can rarely be justified.

But at the same time bankers admit that the single biggest reason that customers didn’t effect
was the inconvenience of changing banks.

6.2 Cost Trap
It seems that banks are caught in a classic “cost trap”: Customers want detailed, one-to-one,
personalized advice, yet neither they nor their financial providers are prepared to pay for it. In
the past this circle was squared through the medium of an independent financial adviser
(IFA), offering free advice in return for the opportunity to sell financial products on
commission.

However, the threat is pensions mis-selling have made many consumers wary of the
motivation of the IFA, while the introduction of CAT standards for a number of financial
products is cutting into the commission available to fund, “free” financial advice.

“With the coming of CAT, the selling of financial products will have to be done on a simpler,
more direct model,” says Dave Patel of financial software developers DPR Consulting: “You
can’t have five layers of people taking 1% commission and then managing that product for the
customer’s lifetime. A lot of the banks are interested in getting away from IFAs and owning
the client directly.”

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Banks’ motivation to move into the provision of advice will be as much about, customer
retention as selling products – the challenge is to be able to do it cost-effectively. He believes
that the answer is for banks to invest in online, self-service products which use knowledge
management techniques to automate the provision of advice which is nevertheless
personalised to the user.

A suite of products should be created which can be tailored by banks to offer a detailed wealth
check to their users. Users need to spend about 20 minutes entering their details, but in return
they receive instant feedback, and by the end will have created an online portfolio from which
they can continue to manage their affairs.

A financial adviser probably has knowledge of no more than 100 products. It’s also more
personal that one can say he does not want any IT investments, or that he only wants
environment friendly funds. And the software will spot contradictions in his responses.”

6.3 The Rewards

The payback for the bank is in the amount of information about customers the online check
delivers - up to 300 items of information on employment, home ownership and so on. This
approach is most applicable to the “mass affluent” customer with over £10,000 in liquid
assets.

Once implemented, online advice systems can be made available at no extra charge to less
valuable customers, and also be used to underpin the personal advice given to customers with
more complex affairs.

With several retail banks, there seems to be a great deal of caution about creating more and
more online capability.

E-commerce generally has failed to live up to expectations, and the withdrawal of players like
First-e from the market has made the prospect of Internet-only banking as distant as the
paperless office.

“There are lots of nice things you can do online, but you have to look at the costs and
benefits,” says Angela Mackintosh, marketing director of “multi-channel” bank If.com. “It’s
like the 1980s when people did all sorts of computerised stuff on the basis that you could do
it, rather than that it was what the customer wanted.”

Ms Mackintosh says that If.com took a conscious decision when it launched not to offer
financial advice: “About 60-70% of our mortgage business comes from intermediaries, and
obviously if a financial adviser introduces business then that creates the opportunity for them
to speak face-to-face with the client. In the end the customer doesn’t pay anything for that
advice. The product costs the same, but we do less advertising and pay the intermediaries
what we would normally pay for acquiring customers through advertising.”

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6.4 Understanding Your Customer Base

However, the ability at any time to drop out of the website and contact a human being is seen,
as equally important.

The problem for direct operators is that they are heavily dependent on branding, and therefore
cannot switch advertisement spendings into customer acquisition through intermediaries. And,
like all players in e-commerce, they are discovering that the opening of new channels to the
customer does not necessarily mean that old ones can be phased out.

There is an assumption that people who are technophiles and who use the telephone and
Internet a lot will do that across the board, but that’s not so. A lot of people are happy to do
their banking online but for other things they want to see someone.

A lot of the basic transactional customer calls are going onto the web or to SMS banking via
mobile phone.

6.5 Cautious Future Expected

Banks have indicated that while online advice is something that they are looking at in the
medium term, in the absence of any strongly expressed customer demand, it is unlikely to be a
priority. Either way the tradition of getting financial advice funded by the backdoor looks set
to continue for some time.

People are not prepared to pay the money but there is a balance between paying the money
and spending the time. Ultimately the more affluent will pay for advice simply to free up their
time.

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Chapter 7
RELATIONSHIP BANKING IN TROUBLED TIMES
In the present uncertain economic climate, can banks and customers benefit from an actively
managed relationship?

Relationship banking and its effectiveness in today’s challenging economic circumstances. It
is observed that despite serving the economy well, banks are generally focused on distribution
at the expense of understanding the needs of their customers. The growing fears of recession
may be reflected in how banks deal with their customers. It can be argued that a bank’s
relationship with a customer is driven both by the current macroeconomic outlook and by the
bank’s assessment of the impact of recession on the customer’s business.

7.1 Strong Power Base
The “big” banks in India provide about 75% of domestic lending, and as such enjoy even
greater power than their counterparts.

7.2 A Key Element
In conclusion, relationship banking is the key to successful banking. The bank gains a better
knowledge of the customer, the business and their needs. The customer enjoys a partnership
with their bank, allowing both sides to manage issues in good times and bad. Despite
technological advances and change, banking remains a people business, and the successful
committed interaction of people is the foundation of true relationship banking.

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Chapter 8
CRM IN FINANCIAL SERVICES SECTOR

CRM is one of the primary initiatives in any industry and more so in financial industry
sector, where competitive pressures from both financial and non-financial services are
fueling the movement toward CRM as the companies are systematically raiding a bank’s
territory to pick-off the most profitable customers. Thus, one has to begin with a
financial institution’s strategic goals, develop a consistent technology platform that is
scalable and support across delivery channels, train people at all levels and incorporate
a customer-centric approach to every customer interaction. This article gives an overall
picture of CRM with reference to financial service industry.

Customer relationship management (CRM) is one of the primary strategic initiatives in
industry today, regardless of whether the company serves retail or wholesale customers,
whether it provides services or manufactured goods. In the financial industry, the movement
towards CRM (also known as ERM for enterprise relationship management ) is being fueled
by competitive pressures from both financial and non-financial services companies that are
systematically raiding a bank’s territory to pick off most valuable customers. Although CRM
is not a technology, modern high-tech applications, from relational databases, to data mining,
to computer telephony integration (CTI), to Internet delivery channels, are providing the
means to implement customer relationship strategies today.

Estimates on the size of the CRM market vary, possibly because of the difficulty in defining
CRM. International Data Group predicts the CRM market will grow from $1.9bn in1998 to
$11 bn by 2003. AMR Research says the CRM market will grow from $2.3 bn in sales in
1998 to $ 16.8 bn in 2003.

8.1 Defining CRM

One of the greatest problems with CRM is what it means. “The whole CRM concept means
different people, depending on what they want to do,” says Jimmy Sawyers, consultant,
Reynolds, Bone & Griesbeck, Memphis, TN.

• Financial services that are transaction based, such as credit card companies or bill
payment providers, want to manage the customer relationship to drive up transaction
volumes and squeeze out expenses from individual transactions. One customer
generally has one account and it doesn’t matter if others within the same household
have accounts. The goal is to provide incentives that get the customer to use the
service more. Transactions become commodities. The customer responds to price
incentives and loyalty programs. There is almost no opportunity to cross-sell to the
individual customer.

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• Consultative financial services, such as investment advisors and financial planners,
use CRM to deepen the trust the customer has in the service provider in order to
increase the fees for services. These companies earn fees regardless of the number of
transactions the customer makes. They may be able to increase their fees base by
cross-selling additional financial services to individuals, or obtaining additional
relationships from the same household.

• Retail oriented financial institution defines CRM as a combination of the two
extremes- managing the entire customer relationship in order to reduce costs and
increase the depth of the relationship with the customer. Generally, reducing costs
means getting the customer to use less expensive delivery channels. Increasing the
customer relationship means either obtaining a larger “share of wallet,” or increasing
the number of fee-based services the customer uses, or both.

8.2 The Evolution of CRM & The Challenges of Personalized E-Support

Historically, customer relationship management has been the specialty of community
banks. Bank management came from the community. Bankers knew their customers, their
families, and their businesses. Lending decisions were based as much on good payment
histories as on good standing in the community. Customers gave all their business to one
bank, appreciating the good services they receive as a reward for their loyalty.

As banks automated back-office functions with mainframes, and the number of products
and services a bank offered grew, banks found it increasingly necessary to replace branch-
based filing cards with a central information file (CIF). In early 1970s, CIFs in even the
largest banks were centrally located file cards. But by the mid-to-late 1970s, these card-
based systems gave way to mainframe-based, hierarchical database systems.

8.3 Customer Support – A historical perspective

The Customer is King. This mantra, although used for a long time, has not been put into
practice until recently. Forget the ideology of royal treatment; customers were not even treated
with dignity by most organizations. As recently as the 1970s and 80s, the concept of customer
support meant that organizations were doing a favor by answering a few questions for the
customer on the phone – after putting them on hold for an hour! Standing in line to buy something
was common and expected. Remember when the customers had to go to the airports to buy tickets
only because the airlines kept them there? Organizations simply lost touch with the realization –
that they existed because of these customers.

The 1990s brought two new concepts that challenged the prevailing business landscape:
Deregulation and the Internet. These forces brought down the barriers of entry, resulting in an
environment of intense competition. Stores faced competition from on-line start-ups. Traditional
bricks-and-mortar banks fought for customers with online or virtual banks. Airline tickets were
increasingly purchased from the convenience of your home. The explosion in

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Customer relationship management and importance of relationship marketing in the banking sector

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