DESIGN OF THE STUDY

Objectives
To study Paradigm Shifts In CRM with respect to Banking. To find general working of bank and how staff members response to customer. To find whether the customers are given all types of new services with respect to the latest technologies.

Limitations
The project is only limited to the study of CRM of five banks. CRM of other banks are not disclosed. CRM strategies of banks are not compared with each other. Time, length, and depth of the study are limited as per the requirements of Mumbai University.

Scope

The project begins with a brief introduction of CRM and its need and importance in banks. It further goes on to show the CRM strategy, implementations ,paradigm shifts in crm, benefits, various payments system and lastly with the case study of five banks i.e IDBI, TJSB, Credit Co. Op, Dhanlaxmi bank Ltd. Syndicate,

Methodology of study

Data for the project is obtained in two ways primary source and secondary source.

Primary sourceThe researcher collected primary data by preparing questionnaire and interviewed manager of IDBI, TJSB, Syndicate, Credit Co. Op, Dhanlaxmi bank Ltd.

Secondary sourceSecondary data for the project has been gathered from various CRM books and internet.

CHAPTER . 1 INTRODUCTION

CHAPTER . 2 INTRODUCTION

CHAPTER. 2 INTRODUCTION
In the post reform period a paradigm shift is taking place in the banking sector. The first of these shifts occurred during the 1991-94 phase in which the emphasis shifted from growth to profits, from balance sheet size to a clean, transparent and healthy balance sheet, from regulated regime to a relatively deregulated one. During the next phase (1994-98), the financial markets started giving interest rate signals, links between forex and money market become strong, interest rates were deregulated and competition intensified. The process of economic liberalization and financial sector reforms brought the issue of customer focus to the forefront. Competitive innovations have made bank customers more concerned about their money value and surrounding environment that leads to high customer expectations from service providers. In the present day situation, customers are becoming more and more demanding. Bankers have had to evolve new approaches and produces to keep pace With growing expectations. Customers preferences are keeping on changing at a rapid speed and their demands are turned insatiable. In order to cater to the changing preferences, bankers are bound to provide the services suitable to their needs to survive in the competition. Customers are not ready to accept any delay in service today and are in need of information for instant decisions. It has become a challenging and tough job for bankers in retaining the existing customer base and winning the new customers. Otherwise sustaining in the banking business is a tough phenomenon. It is a 4

goal of bankers to make the customers happy to achieve their targets. The excellent and managing customer relationship is the future of any business or everybodys business. Customer focusing is not being viewed as just a business strategy but should become a corporate mission. Once good service is extended to a customer, a loyal customer will work as an Ambassador to the bank and facilitate growth of business for delivering quality service, it is imperative to have customer orientation as a culture in the bank. The customer orientation builds long term relationships resulting in customer satisfaction and cash flows to the banks Today, the rural customers dont any idea as to how much time is required for any type of banking services. The rural customers are not aware for what purpose the loans are available and how they can be availed. The level of customer service and satisfaction is determined by branch location and design, variety of services, rates and charges, systems and procedures, delegation and decentralization, mechanization and computerization, competitive efficiency, complaint redressed and very importantly staff skills, attitudes and responses A good customer service in banks should have three basic tenets courtesy, accuracy and speed). The customer care has been enjoying the attention of the govt., the RBI and the banks themselves. Various committees have gone into the problem in great detail & made recommendations, many of which have been implemented. Despite so many measures initiated at various levels to improve the standard of customer service, the level of satisfaction perceived by various segments of customers has been low. It is in this context that customer service has to be analyzed and appropriate strategies drawn up, not only to attract new customers, but 5

Also to retain existing ones. With the opening up of the economy customer satisfaction has acquired new meaning and different dimensions as banks are discovering more and more innovative products to meet increasing competition themselves.

Therefore, in the present era, the emphasis is on customer delight so as to exceed customers expectations. Highly satisfied customer can be called delighted customer. Thus it is a need of the hour to delight the customers. This is also an attempt to study the delightness of customers from the existing banking services.

CRM, or Customer relationship management, is a number of strategies and technologies that are used to build stronger

relationships between banks and their customers. Some of the methods connected with CRM are automated, and the purpose of this is to create marketing strategies which are targeted towards specific customers. The strategies used will be dependent on the information that is contained within the system .There are a number of reasons why CRM has become so important in the last 10 years. The competition in the global market has become highly competitive, and it has

become easier for customers to switch banks if they are not happy with the service they receive

Customer relationship management could be better defined as being a methodology, an approach that a bank will use to achieve their goals. It should be directly connected to the philosophy of the bank. It must guide all of its policies, and it must be an important part of customer service and marketing. If this is not done, the CRM system will become a failure. There are a number of things the ideal CRM system should have. It should allow the bank to find the factors that interest their customers the most. A bank must realize that it is impossible for them to succeed if they do not cater to the desires and needs of their customers. Paradigm shifts in corm is a powerful system that will allow them to do this.

CHAPTER . 1 CHAPTER. INTRODUCTION

IMPORTANCE OF PARADIGM SHIFTS IN CRM

CHAPTER. 3 IMPORTANCE OF PARADIGM SHIFTS IN CRM

For long, Indian banks had presumed that their operations were customer-centric, simply because they had customers. These banks ruled the roost, protected by regulations that did not allow free entry into the sector. And to their credit, when the banking sector was opened up, they survived by adapting quickly to the new rules of the game. Many managed to post profits. For them an unexpected bonanza came from government bonds in which most were hugely invested. Ironically, the Reserve Bank of India's moves to cut aggressively the interest rates after 1999, pushed up the prices of bonds. So banks had a windfall doing almost nothing. The bond profits, like manna from heaven, improved the balance-sheets of all banks irrespective of their core performance. However, the era of lazy banking is soon to end. The mesh of rules that propped up the Indian banking industry is now being dismantled rapidly. According to a RBI road-map, India will have a competitive banking market after 2009. As one of the most attractive emerging market destinations, India will see foreign banks come in, what with more freedom to come in, grow and acquire. Therefore, it is imperative that Indian banks wake up to this reality and re-focus on their core asset the customer. A greater focus on Customer Relationship Management (CRM) is the only way the banking industry can protect its market share and boost growth. 9

CRM would also make Indian bankers realize that the purpose of their business is to "create and keep a customer" and to "view the entire business process as consisting of a tightly integrated effort to discover, create, and satisfy customer needs." What is CRM and what will it deliver to the banks? CRM is, probably, one of the least clearly defined business acronyms, as there is no single definition for it. It is probably easier to say what CRM is not. Unfortunately, CRM has also become a misnomer for a range of solutions from IT vendors, each providing its own spin on the idea. CRM is variously misunderstood as a fancy sales strategy, an expensive software product, or even a new method of data collection. It is none of these. Customer Relationship Management (CRM) in the Indian banking system is fundamental to building a customer-centric organization. CRM systems link customer data into a single and logical customer repository. CRM in banking is a key element that allows a bank to develop its customer base and sales capacity. The goal of CRM is to manage all aspects of customer interactions in a manner that enables banks to maximize profitability from every customer. Increasing competition, deregulation, and the internet have all contributed to the increase in customer power. Customers, faced with an increasing array of banking products and services, are expecting more from banks in terms of customized offerings, attractive returns, ease of access, and transparency in dealings. Retaining customers is a 10

major concern for banking institutions which underscores the importance of CRM. Banks can turn customer relationship into a key competitive advantage through strategic development across a broad spectrum. This book examines issues related to changing banking industry in India and the challenges in CRM. CRM is a simple philosophy that places the customer at the heart of a business organizations processes, activities and culture to improve his satisfaction of service and, in turn, maximize the profits for the organization. A successful CRM strategy aims at understanding the needs of the customer and integrating them with the organizations strategy, people, and technology and business process. Therefore, one of the best ways of launching a CRM initiative is to start with what the organization is doing now and working out what should be done to improve its interface with its customers. Then and only then, should it link to an IT solution. While this may sound quite straightforward, for large organizations it can be a mammoth task unless a gradual step-by-step process is adopted. It does not happen simply by buying the software and installing it. For CRM to be truly effective, it requires a well-thought-out initiative involving strategy, people, technology, and processes. Above all, it requires the realization that the CRM philosophy of doing business should be adopted incrementally with an iterative approach to learn at every stage of development.

11

CHAPTER . 1 CHAPTER.4 INTRODUCTION

CRM PRINCIPLES

12

CHAPTER.4 CRM PRINCIPLES

The main principles of CRM can be grouped into seven guiding factors: 1.Customer focus The first and foremost important guiding principle in CRM is customer focus. Who is a customer? This question is very fundamental. A customer is a person or group of persons who receives the product or servicethe final output of a process or group of processes. A customer is the final arbiter of quality, value and price of a product or service. A satisfied customer only assigns value to a service, on the contrary, to a dissatisfied customer a product or service has no value, even if the concerned service or product has been designed with lot of effort, energy and cost after a thorough planning. A satisfied customer motivates his fellow members to go in for the service or product that he has already acquired. But a dissatisfied customer always counsels his friends, and fellow members not to go to banks where his experience proved to be wrong or other-wise. So customers delight or customers satisfaction is the essence of any CRM program. As a part of this focus on customers, banks should ensure that clients are identified; their requirements are determined, understood and met enhancing customers satisfaction.

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2.Leadership Persuasion, judgment and decision-making abilities are the main attributes of quality leadership. When there is a slight chance of getting a business but the client is hesitating or in a fix, or not in a position to decide properly, it should be followed up by the relationship manager by patient hearing, mild counseling and to stand by the side of the prospective client to help clear his doubts and to make him feel happy by realizing that he is going in the right direction and he is very right in choosing his requirements. The following points may be found helpful in this regard: (a) It is to be communicated to all employees that all customers should be given a proper hearing and it should be supported from all levels. (b) Ways and means should be identified and practiced of getting and staying closer to customers. (c) Proper respect should be extended to the customers. All relevant information should be collected from them with humble and polite approach. Proper value should be given to their feedback. 3. Process approach A process transforms an input into desired output by the use of resources, energies and time. In producing an output there may one single process or a group of inter-related processes. In case of inter-related processes, often the output from one process directly forms the input to the next. For effective functioning of an organization, it has to identify and manage numerous linked activities with the help of different processes for accomplishing its goal. 14

Proper attention should be given to the following points: (a) All processes should be de-signed keeping in view the requirements and desires of the customers, within the policy, resource availability, strategy of the company. (b) All processes should meet the legal and statutory requirements to perform the activity or deliver the product or service. (c) Time involved in processing should be minimum with least waiting time to the customers. If required delegation of authority and assignment of account-ability at various executive levels should be addressed, revised and fine-tuned to meet the requirements. (d) All the processes should be properly integrated to meet the goal congruence and should not function at cross-purpose. 4. System approach Customers requirement is one level of commitment. That level implies a system that is reactive and provides to customers what they want but the target should be to achieve more and to exceed the customers expectation to accommodate future requirement and to build a cushion against the competitors attributes. CRM denotes the management of the entire system and is not confined to only one or the other sub-systems or functional departments. CRM is based on a system approach to management. Its primary objective is to increase value to customers on a continuous basis by designing and improving 15

organizational processes and systems on an ongoing basis. Meeting Each sub-system may have its own goal but the goal and objectives of all subsystems are to be integrated to achieve the overall goal. 5. Involvement of people The fundamentals of CRM bear the genes of customer relationship through involvement of people, i.e., the work-force at the disposal of the organization. The whole gamut of CRM is for the people, of the people and by the people. People involvement at all levels is essential for the success of a CRM program. The bank managers and staff must be in a position to exploit the concept of customer relationship completely. Customer relation may be defined as that dimension of relationship marketing that seeks and ensures customer loyalty by fulfilling promises and continuing to satisfy customers wants and needs so that defection is zero. It comprises of three levels of relationships; financial relationship, social relationship and structural relationship. 6. Mutually beneficial customer relationship The relationship with the customer should be based on a mutually beneficial relation-ship. A bank should not concentrate its attention towards earning of profits only, but focus should be directed to the customers wealth creation or value enhancement with the motto of earning through service. As an example we can talk of a savings account thats fixed up to give you more interest. It ensures that any balance in your savings account above a certain amount, say, Rs 3,000 automatically gets transferred to a fixed deposit 16

to give you higher returns, which will be swept back into your savings account, when you need it. 7. Continual improvement Another objective of CRM is the efforts towards continuous improvement in the customer relationship through the provision of value added ser-vices at favorable cost. Business processes in the areas of finance, system integration, human resource management etc. are to be automated and optimized with an aim to increase the efficiency and effectiveness of operations. The major areas to be targeted are: Improving the effectiveness of marketing. Implementing multichannel trigger driven marketing. Implementing a strategic analysis capability to support strategic decision making. The ability to deliver the increasing levels service demanded by customers. Building a transparent communication system and employee participation to better define the needs of the customers and deliver the right services and products

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CHAPTER . 1 INTRODUCTION

CHAPTER . 5

IMPLEMENTATION OF CRM IN INDIAN BANKS

18

CHAPTER. 5 IMPLEMENTATION OF CRM IN INDIAN BANKS

Although CRM as a concept is of recent origin its tenets have been around for some time. Field officers in the banks have always promoted close relation-ship with customers, but the focus on customer orientation rather than product orientation as a commitment has been on the Indian banking scene for nearly a decade. But the fact remains that implementing customer relationship management is not easy.

There are really very few organizations that are actually optimizing customer experiences at all points of contacts. It is necessary to understand who customers are and what they value, select customer carefully, design products and services that deliver the desired value, design effective sales channels and customer touch points, recruit and equip employees to deliver and increase customer value, and constantly refine your value proposition to ensure customer loyalty and retention With the advancement of banking technology and computerization and networking of bank branches, banking customers are becoming more and more dynamic and less loyal in their behavior. The development of the Internet is further adding to this trend and the whole market becomes transparent and customers are in a position to move easily from one bank to another. In such a situation, customer satisfaction is the key to bank

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marketing, which aims at retention of the old customers and their bringing in new customers. CRM deserves differential treatment to

different class of customers at times. Service can be given to customers either personally through individuals such as customer service manager or the process can be automated by using computers. These different approaches are adopted depending on the value of relationship with the customer. Personal management of relationship is extended to business customers and high value personal customers and automated relationship management to lower margin mass- market segments. CRM system can open up new channels of delivery, which are most cost effective. We can cite example of the Internet and call centers. According to an estimate, cost per transaction through these modes can be reduced by 90 per cent when compared to cost of transaction at branch. To offer better and extended services to custom-errs new technology platforms are being created through huge investment in Information Technology in banking sector. The recent development in this field is the introduction of CBS (Core Banking Solutions). A CBS helps in centralizing the transactions of branches and different banking channels and the customers start banking with the bank instead of at different branches. This is the only way to offer seamless transactions across different channels (branches, the Internet, the telephone and Automated Teller Machines or ATMs). As such nowadays a customer is called a customer of the bank rather than of a branch. 20

CHAPTER . 1 CHAPTER. INTRODUCTION

PARADIGM SHIFTS IN CRM

21

CHAPTER. 6 PARADIGM SHIFTS IN CRM

1 Campaign Management Banks need to identify customers, tailor products and services to meet their needs and sell these products to them. CRM achieves this through Campaign Management by analyzing data from banks internal applications or by importing data from external applications to evaluate customer profitability and designing comprehensive customer profiles in terms of individual lifestyle preferences, income levels and other related criteria. Based on these profiles, banks can identify the most lucrative customers and customer segments, and execute targeted, personalized multichannel 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.

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3.Marketing Encyclopedia - Central repository for products, pricing and competitive information, as well as internal training material, sales presentations, proposal templates and marketing collateral.

4. 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.

5.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.

6.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

7.Activity Management It helps managers to assign and track the activities of various members. Thus improved transparency leads to improved efficiency. 8.Contact Centre It enables customer service agent to provide uniform service across multiple channels such as phone, Internet, email, Fax. 23

9.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 faceto-face contacts with bank personnel. It also links these customer touch points to an operations centre and connects the operations centre with the relevant internal and external business partners.

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

11.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.

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CHAPTER . 1 CHAPTER. INTRODUCTION

Payment Systems to the customers

25

CHAPTER. 7 PAYMENT SYSTEMS TO THE CUSTOMERS

The global financial system is increasingly relying on technology to cater to the needs of customers and process vast number of transactions including payment transactions, credit card payment processing, mobile payments and investments etc. In fact as we all are aware, payment and settlement systems form the backbone of any economy. They are the conduits or the arteries for conducting trade, commerce and other forms of economic activities including remittances in any country. An efficient payments system can be envisaged as the lubricant which speeds up the liquidity flow in the economy, thereby creating the necessary impetus and momentum for economic growth. The payments process is a vital aspect of financial intermediation; it enables the creation and transfer of liquidity among different economic agents. A smooth, well functioning and regulated payments system thus not only ensures efficient utilization of scarce resources but also eliminates systemic risks. The payments and settlement system is, therefore, a crucial component of the financial infrastructure of any country and more so of a country like ours.

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The spectacular growth in financial transactions in the country has necessitated certain radical changes in the payments and settlement system, Payment System landscape in India for customers The stage of payment system development in a country to a large extent depends upon the adoption of technology, introduction of new payment instruments and the confidence of the public in using these payment instruments Paper based clearing: Paper based Clearing accounts for 59% of the total volume of transactions while it represents only 10% of the total value of transactions. RBI has taken a number of initiatives to promote efficiency in paper based clearing such as widespread use of MICR technology at 66 major centers in the country. Simultaneously, the introduction of speed clearing in 2008 has facilitated collection of outstation cheques on a local basis leveraging on core-banking infrastructure of banks. Speed clearing is currently available in 240 centers across the country. Cheque Truncation System was operationalised in the National Capital Region, New Delhi in February 2008. Chennai has been identified as the next center for roll out of a grid based CTS (to be operationalised by NPCI) which will cover the states of Tamilnadu, Kerala and Karnataka. All activities pertaining to roll out of CTS for Grid-based CTS at Chennai have been completed and the system is ready for roll-out by NPCI.

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A new automation software package called Express Cheque Clearing System (ECCS) has been developed. ECCS, being implemented jointly by SBI and NPCI, would replace the Magnetic Media Based Clearing Software

employed in automation of Clearing Houses available at 1093 locations. It is expected to be rolled out across all these centers by September 2011 along with the speed clearing facility. Electronic Payment Systems: Electronic Payment Systems accounts for 41% of the total volume of transactions while it represents 90% of the total value of transactions. Introduction of electronic payment products such as Electronic clearing service and electronic funds transfer, which over the years have metamorphosed into National ECS and National EFT and RTGS have ushered in new ways of payment processing. National Electronic Fund Transfer (NEFT): NEFT was introduced in November 2005 now covers 77,821 branches and offers eleven hourly near real-time settlements on week days and five settlements on Saturdays. One of the unique features of the system is a mandatory Positive Confirmation to the originator confirming successful credit to the beneficiarys account. Since its inception, the system has witnessed a surge in the volume and value of transactions with 1.4 million transactions settling on a single day which is the highest volume processed till date.

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Electronic Clearing Service (ECS) suite including NECS: The ECS suite of products enables bulk payments. The ECS suite consists of local ECS (jurisdiction limited to local clearing house branches), Regional ECS (statewide jurisdiction in 9 centers) and National ECS (pan-India coverage). Both RECS and NECS facilitate STP-based processing of bulk payments in a centralized manner in all core-banking enabled bank branches within their jurisdiction. Average monthly volumes are 8.05 million transactions (ECS Credit -NECS, Regional and local) and 13.40 million transactions (ECS

Debit Regional and local), while monthly values are averaging about Rs. 126.43 billion and Rs. 60.60 billion for ECS Credit and ECS Debit respectively. Real time Gross Settlement (RTGS): The RTGS system was introduced in March 2004 and now extends to 77,093 branches as at the end of June 2011. RTGS settles gross inter-bank and customer (Rs.2 laky and above) transactions. On an average RTGS settles 1.8 laky transactions with a value of Rs. 4 trillion on a daily basis. Considering the importance of RTGS for settling large value payment systems, action has been initiated for putting in place a Next-Gen RTGS.

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OTHER RETAIL PAYMENT CHANNELS Credit/Debit Cards: One of the fastest growing segments is the card segment Pre-paid instruments: The pre-paid instrument issuers universe is populated by both banks and non-banks. In fact after the enactment of PSS Act, most of the non-bank entities who have received authorization to operate a payment system are in this business segment. Policy Guidelines for issuance and operation of pre-paid payment instruments in India have been issued to provide for a framework for the orderly growth of this nascent market. Further measures have been recently announced by the Reserve Bank of India permitting banks to issue prepaid payment instruments to corporate for onward issuance to their employees after adhering to the norms prescribed.

Mobile Banking: The operating guidelines for mobile banking issued in October 2008 which were later relaxed in December 2009, facilitating mobile banking transactions up to Rs. 50,000, both for e-commerce and money transfer purposes. Banks have also been permitted to provide money transfer facility up to Rs. 5,000 from a bank account to beneficiaries not having bank accounts with cash payout facility at an ATM or Banking Correspondent. 50 banks have been permitted to offer Mobile Banking transactions, of which 38 30

have started operations. The NEFT platform is used for settlement of all interbank mobile banking transactions. Inter-bank mobile payment system: The IMPS on the other hand is a service operated by NPCI which provides an instant, 24X7, interbank electronic fund transfer service through mobile phones. Publicly launched on November 22, 2010 this system facilitates customers registered with their banks for this service to use mobile instruments as a channel for interbank fund transfers in a secured manner with immediate confirmation features. This service is in consonance with the Mobile Payment Guidelines 2008 issued by RBI which stress on interoperability both across banks and mobile operators in a safe and secured manner. Currently 27 member banks participate in this scheme. National Financial Switch (NFS): The National Financial Switch as its name indicates is a national infrastructure with pan-Indian presence provides a switching service for connectivity across ATMs of banks. The NFS enables customers to perform their transactions (both financial and non-financial) using ATMs under the NFS network without reference to the card issuing banks.

Innovations in Customer Services in Indian Banking Sector Satisfied customers are the best guarantee for the stability and growth. Customers will be satisfied only when the banks provide the customized and innovative products and services at responsible cost. This article focuses on 31

the kind of services provided by developed countries and level of innovative services provided by Indian banks. Many innovative services are currently available from Indian banks like E-Banking, ATMs, Anywhere Banking etc., but there is a wast6 scope of improvement. Globalization, the buzzword, which engulfed all the nations of the world since the beginning of the last decade of the past millennium, did not leave the banking industry untouched. The opening of the world trade has brought out several changes in the global banking map.

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CHAPTER . 1 INTRODUCTION

CHAPTER. 8

CRM IN INDIAN BANKS

33

CHAPTER. 8 CRM IN INDIAN BANKS

In recent years, the banking industry around the world has been undergoing a rapid transformation. In India also, the wave of deregulation of early 1990s has created heightened competition and greater risk for banks and other financial intermediaries. The Cross-border flows and entry of new players and products have forced banks to adjust the product-mix and undertake rapid changes in their processes and operations to remain competitive. The deepening of technology has facilitated better tracking and fulfillment of commitments, multiple delivery channels for customers and faster resolution of miscoordinations.

Unlike in the past, the banks today are market driven and market responsive. The top concern in the mind of every bank's CEO is increasing or at least maintaining the market share in every line of business against the backdrop of heightened competition. With the entry of new players and multiple channels, customers (both corporate and retail) have become more discerning and less "loyal" to banks. This makes it imperative that banks provide best possible products and services to ensure customer satisfaction. To address the challenge of retention of customers, there have been active efforts in the 34

banking circles to switch over to customer-centric business model. The success of such a model depends upon the approach adopted by banks with respect to customer data management and customer relationship

management. Over the years, Indian banks have expanded to cover a large geographic & functional area to meet the developmental needs. They have been managing a world of information about customers - their profiles, location, etc. They have a close relationship with their customers and a good knowledge of their needs, requirements and cash positions. Though this offers them a unique advantage, they face a fundamental problem. During the period of planned economic development, the bank products were bought in India and not sold. What our banks, especially those in the public sector lack are the marketing attitude. Marketing is a customer-oriented operation. What is needed is the effort on their part to improve their service image and exploit their large customer information base effectively to communicate product availability. Achieving customer focus requires leveraging existing customer information to gain a deeper insight into the relationship a customer has with the institution, and improving customer service-related processes so that the services are quick, error free and convenient for the customers.

Furthermore, banks need to have very strong in-house research and market intelligence units in order to face the future challenges of competition, especially customer retention. Marketing is a question of demand (customers) and supply (financial products & services, customer services through various delivery channels). Both demand and supply have to be understood in the

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context of geographic locations and competitor analysis to undertake focused marketing (advertising) efforts. Focusing on region-specific campaigns rather

than national media campaigns would be a better strategy for a diverse country like India.

Customer-centricity also implies increasing investment in technology. Throughout much of the last decade, banks world-over have re-engineered their organizations to improve efficiency and move customers to lower cost, automated channels, such as ATMs and online banking. But this need not be the case.

As it is proved by the experience, banks are now realizing that one of their best assets for building profitable customer relationships especially in a developing country like India is the branch-branches are in fact a key channel for customer retention and profit growth in rural and semi-urban set up. However, to maximize the value of this resource, our banks need to transform their branches from transaction processing centers into customer-centric service centers. This transformation would help them achieve bottom line business benefits by retaining the most profitable customers. Branches could also be used to inform and educate customers about other, more efficient channels, to advise on and sell new financial instruments like consumer loans, insurance products, mutual fund products, etc.

There is a growing realization among Indian banks that it no longer pays to have a "transaction-based" operating model. There are active efforts to 36

develop a relationship-oriented model of operations focusing on customercentric services. The biggest challenge our banks face today is to establish customer intimacy without which all other efforts towards operational excellence are meaningless. The banks need to ensure through their services

that the customers come back to them. This is because a major chunk of income for most of the banks comes from existing customers, rather than from new customers.

Customer relationship management (CRM) solutions, if implemented and integrated correctly, can help significantly in improving customer satisfaction levels. Data warehousing can help in providing better transaction experiences for customers over different transaction channels. This is because data warehousing helps bring all the transactions coming from different channels under the same roof. Data mining helps banks analyses and measure customer transaction patterns and behavior. This can help a lot in improving service levels and finding new business opportunities.

It must be noted, however, that customer-centric banking also involves many risks. The banking industry world over is being thrust into a wild new world of privacy controversy. The banks need to set up serious governance systems for privacy risk management. It must be remembered that customer privacy issues threaten to compromise the use of information technology which is at the very center of e-commerce and customer relationship management - two areas which are crucial for banks' future. The critical issue for banks is that they will not be able to safeguard customer privacy completely without 37

undermining the most exciting innovations in banking. These innovations promise huge benefits, both for customers and providers. But to capture them, financial services companies and their customers will have to make some critical tradeoffs.

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CHAPTER . 1 CHAPTER. INTRODUCTION

DRIVING FORCES FOR RETAIL LENDING

39

CHAPTER. 9 DRIVING FORCES FOR RETAIL LENDING

There are several driving forces to support this move. Firstly, for years together, the Indian retail market was largely untapped. With retail lending at levels far below those prevailing in other Asian countries, the opportunities for exploring the possibility of lending in this segment continues to be immense and all banks, more or less tried to capture this huge market. Secondly, India, being a poor country, it is a matter of realization that the bottom 75 per cent of the consumer pyramid basically relates to the retail sector customers, and if one is looking at a growth opportunity, it must focus its attention with tailor made products and services to meet their needs. Banking is no exception to this reality. Thirdly, in an attempt to market tailor-made innovative products, consumers are being supplied with abundant information through paper advertisement, TV advertisement, cell phone calls, and personal counseling to make them aware of the facilities and opportunities available in the market. This endeavor on the part of the banks is leading the customers in their process of information abundance and thereby acting as customer leader. Customer leadership is a concept to project the product or service of the firm the benchmark for the market (customers), which visualize all competitive stimuli in term of benchmark product or service. But there is another side to the coin. With the entry of several players in the field, particularly foreign banks and private sector banks, the customers today has a wide array of choices which is increasing day by day with the rapid and exponential development of 40

communication technology. With this increased knowledge base and better information they are demanding more and more satisfaction and choosing to optimize the value of their money for goods and services. This had added momentum to the competition. Then, of late, there has been a tremendous improvement in Non-Performing Assets (NPAs) due to introduction of certain new methodologies such as new foreclosure law, the CDR mechanism, the Debt Recovery Tribunals and the provision of one time settlement. The establishment of ARC (Assets Reconstruction Committee) and enactment of Securitization Act have helped in a big way to liquidate a huge amount of unmoved loan being carried forward for years together. Now a clear message has been ventilated in the community that bank loans are not for charity, but are to be repaid and the bank management is there to recover it. Under the changed scenario of NPA management, Bank managers are not hesitating in disbursing new loans. Also, another major force behind this retail revolution is technology involved in todays banking. Technology has developed to such an extent that the customers are in a position to take advantage of AAA banking. (Any time, anywhere and anyhow) banking through ATM, the Internet, CBS (Centralized Banking Solution) etc. In addition, there is enough scope in the case of mortgage loan. According to a study, Indian mortgage market grew from around 15,000 cores in 1997 to 60,000 core at the end of 2002 or at a compound annual growth rate (CAGR) of 32 per cent. It will not be out of place to mention here that at the same time Chinas mortgage grew by a CAGR of 113 per cent. Furthermore, retail loans are considered to be safe and according to the managers of some eminent banks there is less risk involved in managing a fat retail portfolio. 41

CHAPTER. 10
CHAPTER . 1 METHOD INTRODUCTION

OF

EFFECTIVE CRM
IMPLEMENTATION

42

CHAPTER. 10 METHOD OF EFFECTIVE CRM

Banks can take several steps to strengthen their customer relationship management in an effective manner. 1. Acknowledge email enquiries At the very minimum, banks should send out an automated email response that acknowledges receipt of a customer's email and lets the sender know when to expect a more complete response. It is then vital to get back to the customer within the promised time frame. Banks can earn more customer goodwill if they respond faster than the imposed deadline. To handle significant volumes of email, banks need adequate routing technology. Many banks regard a voice call centre as a cost of doing business, but they don't look at it the same way with email. 2. Develop the right contact strategy

By knowing which offers and incentives to offer to which customers and when, banks will not annoy customers with unwanted marketing offers, building customer loyalty along the way. Such goals can be at least as important as realizing cross-sell opportunities

3.

Providing online `chatting'

An alternative to telephone support, online chatting is providing a service via emails or any other form of immediate response. This service also offers 43

some of the immediacy of the phone but primarily allows customers to remain online. With online chatting, service agents can usually handle between one and three customer inquiries at once. Given that the average call lasts about four minutes, a customer-service representative can handle 10 to 12 customers per hour using "chat", compared with six to eight per hour over the telephone. One of chat's important advantages is that it keeps customers in an online store environment where they remain exposed to merchandise and promotions. 4. Reduce costs by improving website design and self-service

Email, telephone support, and chat all involve considerable staffing costs. But to reduce these expenses a site should anticipate customer needs. Sites that is difficult to navigate and don't provide needed information chase away some customers and force those who stay to resort to more expensive channels to satisfy their service needs. 5. Analyses the project's scope

Before recommending or embracing CRM, bank executives must analyses the business issues, the customer relationship model and the exact nature of customer interactions and how they tie together. Banks should not embrace top-line growth as an objective until they can understand precisely how CRM technology will provide those new revenues.

44

6.

Know thy limitations

Many CRM implementations are severely limited because they fail to provide a complete and meaningful view of the customer. CRM is primarily a business program, and it requires a genuine partnership between various

departments to ensure that both business and technology issues are managed effectively.

Furthermore, CRM not only takes existing business processes and makes them more efficient, but it also requires these processes to be modified. For a CRM implementation to be successful, decision makers within the bank need to make sure that all the stakeholders understand and support the required process changes. 7. Change accounts into customer Traditionally banks have closely associated customers with accounts, to the point of calling the account the customer and vice versa. Customers will tend to feel alienated when they are treated like a number instead of a person. A conventional account structure usually contains very little information about customers and their needs, or their relationship with competitors or other divisions within the bank. The way ahead Banks have excellent reasons to adopt comprehensive CRM strategies to cultivate a lifetime customer relationship. As banks move from transaction-centric to a relationship-centric business approach, effective leveraging of customer relationship becomes all the more critical.

45

CHAPTER . 1 CHAPTER. INTRODUCTION

11

BENEFITS OF CRM TO BANKS

46

CHAPTER. 11 BENEFITS OF CRM TO BANKS

Despite the fact that in most banks profits sometimes fail, they seldom pay attention to or adopt any customer strategy. It has long been the misconception that banks need not pay much attention to customer focus just because they had customers. Some banks even if they possess good customer relationships are unable to cross sell as they have not figured out who to target with what product/service. What happens is that customers are often approached for the wrong products.

However the new millennium has resulted in banks and financial agencies rethinking their strategies and goals. They have come to understand the importance of hanging onto the customer and keeping him happy. The rules that once governed the banking industry have changed. They have realized that adopting a customer centric strategy is essential and needs to be compulsorily undertaken. The vast majority of banks now realize they need a customer strategy and are opting for CRM - Customer Relationship Management. Banking CRM software serves to increase the market share and boost growth in the banking industry. What happens in CRM banking solutions is that they change the way the employees think and mould them into customer 47

conscious people. CRM induces bankers to know that they are required to maintain good relationships with their customers and should strive to retain them.

They are made to realize that the business process should consist of efforts to discover and satisfy customer requirements. Since the banking field now boasts of so much of technological innovations there has been a wide variety of innovations in CRM banking as well. Statistics show that bankers will spend $7 billion on CRM. The sector will also evidence an increase in expenditure of 14 percent each year. With such phenomenal statistics it is but a surety that CRM banking solutions sales will soar in the coming years.

FOLLOWING ARE THE BENEFITS OF CRM TO BANKS:

1.CRM Banking Focuses on the Customer CRM manages to places the customer at the focal point of the organization in order to cater to his needs, satisfy him and thus maximize the profits of the organization. Banking CRM understands the needs of the customer and integrates it with people, technology, resources and business recesses. It focuses on the existing data available in the organization and uses it to improve its relationship with customers. Banking CRM uses information and analytical tools to secure customer focus. Thus it is completely essential that banks implement CRM in order to secure this.

2.Overall Profitability

48

CRM enables banks to give employee's better training that helps them face customers easily. It achieves better infrastructure and ultimately contributes

to better overall performance. The byproducts of CRM banking solutions are customer acquisition, retention and profitability. Banks that don't implement CRM will undoubtedly find themselves with lesser profitability coupled with a sharp decline in the number of customers.

3.Satisfied Customers It is important to make a customer feel as if he / she is the only one - this will go a long way in satisfying and retaining them. Bankers need a return on investment and it has been proved that increase in customer satisfaction more than contributes a fair share to ROI. The main value of CRM banking lies in satisfaction and increased retention of customers.

4.Centralized Information CRM banking solutions manage to clearly integrate people, processes and technology. CRM banking provides banks with a holistic view of all bank transactions and customer information as well and stores it in a single data warehouse where it can be studied later.

5.CRM Banking Boosts Small Banks Banking CRM software meets the needs of banks of all sizes in terms of attaining the required accuracy and understanding of customers. Merely assuming that banks that are considerably smaller in size have a better

49

customer approach and are able to deal with their customers in a better manner is wrong. They are just as much in need of CRM aid as the others. Small banks on account of a limited amount of money have had to realize that a large

contribution to profits is directly the result of good customer service. CRM makes sure that the bank delivers exactly what the customer expects.

6.Customer Segregation CRM enables a bank to see which customers are costing them and which are bringing benefits. CRM provides them with the required analytical tools that will help them focus on the importance of segregating these two and doing what is required to avail of the maximum returns. After this segregation is done CRM easily enables banks to increase their communication and cross-selling to their customers effectively and efficiently.

7.Aggressive Customer Acquisition CRM solution supports the creation of demand generation through multichannel and multi-wave campaigns. The solution ensures the banks marketing message is appropriately personalized and targeted towards the most suitable segment of prospects. This optimizes marketing efforts and results in greater conversion of prospect

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BENEFITS OF CRM TO CUSTOMERS

Customer relationships are becoming even more important for banks as market conditions get harder. Competition is increasing, margins are eroding, customers are becoming more demanding and the life-cycles of products and services are shortening dramatically. All these forces make it necessary for banks to intensify the relationship with their customers and offer them the services they need via the channels they prefer.

CRM helps banks to provide lot of benefits to their customers; some key benefits are as follow. 1. Service provisioning throughout the entire life cycle of the corporate customer, From the initial stages to the establishment of a close, long-term relationship with profitable clients, 2. Optimization of the use of bank resources, such as alternative channels of distribution (internet and home banking), 3. Significant reduction in and limitation of operational costs through system automation and standardization, 4. Low maintenance and expansion costs owing to the use of modern administration tools which allow bank employees to make a wide range of modifications to the system

51

5. CRM permits businesses to leverage information from their databases to achieve customer retention and to cross-sell new products and services to existing customers. 6. Companies that implement CRM make better relationships with their customers, achieve loyal customers and a substantial payback, increased revenue and reduced cost. 7. According to a study conducted in the sector of banking, convenience of Location, price, recommendations from others and advertising are not important selection criteria for banks. From customers point of view, important criteria are: account and transaction accuracy and carefulness, efficiency in correcting mistakes and friendliness and helpfulness of personnel. Thus, CRM, high-quality attributes of the product / service and differentiation proved to be the most important factors for customers.

52

Chapter 12 Case study

53

CHAPTER. 12 CASE STUDY

The case study describes how customer relationship management has made a major impact on the banks. It gives a detail insight into how the banks streamline strategies based on an understanding of its customers requirements. The banks attributes the loyalty to a tight focus on the customer. At its core, CRM seeks to leverage information to present a unified institutional face to customers. By segmenting customers into discrete groups differentiating services, banks hope to boost retention. The case study is based upon five banks - IDBI, TJSB, Syndicate, Credit Co. Op, Dhanlaxmi bank Ltd. With the survey conducted it was noted that all the banks try to track individual problems of its customers. They offer personal banking services. Banks provide various benefits to its customers and one of the important services provided them is the call centers.

54

Call centers in banks

yes

no

40% 60%

With the survey report it was stated that some banks have call centers whereas, some dont. 20% of the banks provide additional services to privilege customers due to their loyalty. Some banks use various strategies to build relationships with their customers. For example, Respond to clients complaints and requests in timely manner, to undertake various programs for women and children. And also try to find out the reason behind customers closing their account. Banks follow various steps for customer retention. Banks with long track records in CRM, as well as outside experts, agree that good training is a long term, ongoing process. It begins before implementation. By instilling in employees a basic understanding of the objectives of a customer centric 55

strategy and their role in it. With the various CRM measures undertaken, some banks have received award for good customer relationship management

Awards received for good CRM

Yes 40%

No 60%

The road to CRM success is a long journey and many factors come into play. But the odds success are clearly improved if the journey begins with an effective CRM training program. Thus a paradigm shift is essential in banks for their customer retention

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CHAPTER. 13 CONCLUSION
Providing excellent customer service is no easy task. This aspect of business is a major force that can make or break profits. However, customer service is rarely mentioned in an organization's mission statement nor is it the top of the discussion list for staff meetings or training sessions. Providing the type of customer service that is expected by customers take a lot of thought and flexibility on the part of management as well as staff members. The challenges faced by banks and their customers are many but the trick lies in de-mystifying complex financial relationships. Technical solutions deployed by banks today are flexible, user friendly and meant to facilitate specific workflow and requirements in implementation processes. In order to simplify lives, banks have begun to implement end-to-end technology through all departments with the intention of removing human error from processes previously existing manual environments could not have been adequate for future visions, growth plans and strategies. In this day and age, customers enjoy complete luxury in terms of customized technical solutions and banks us the same for long term, mutually beneficial relationships.

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BIBLIOGRAPHY

Customer Relationship Management-Mohamed HP Marketing Management-PhilipKotler

WEBLIOGRAPHY

www.crm.com www.businessline.com www.customerrelation.com www.marketing.com

58

ANNEXURE

59

QUESTIONNAIRE

1. Does the bank track individual problems of the customer?

o o

Yes No

2. Does your bank offer personal banking services?

o o

Yes No

3. Are call centers of the bank available?

o o

Yes No

4. Are all the customers given equal services in banks?

o o

Yes No

5. Do you use strategies in building relationships with your customers? Can you explain?
o o

Yes No

6. If the customer closes their account from your bank, do you try to find the reason behind it? 60

o o

Yes No

7.Does CRM as a sole factor affected the profits of the bank?

o o

Yes No

8.Does your bank follow any steps for customer retention? Can you give some examples?
o o

Yes No

9.According to you are customers satisfied with your bank?

o o

Yes No

10.Has bank received any award for good customer management or services?
o o

Yes No

61