CUSTOMER RELATIONSHIP MANAGEMENT IN BANKS

SYLLABUS
YEAR: II
SEMESTER: IV
COURSE OBJECTIVES
1. To impart skill based knowledge of Customer Relationship Management
2. To understand the concepts and principles of CRM
3. To understand the need and importance of maintaining a good customer relationship
4. To gain knowledge of strategic customer acquisition and retention techniques in CRM
5. To teach the conceptual aspects of service quality
OUTCOME:
 The students will be able to understand the concepts and principles of CRM and the
conceptual aspects of service quality
UNIT I Understanding customers:
Goals requiring CRM in Banks-CRM opportunities and challenges in Banks- Customer information
Database – Customer Profile Analysis – Customer perception- Expectations analysis – Customer
Behavior in relationship perspectives; individual and group customers – Customer life time value –
Selection of Profitable customer segments
UNIT II CRM structures:
Elements of CRM – CRM Process – Strategies for Customer acquisition in banks – Retention and
Prevention of defection in banks– Models of CRM – CRM road map for business applications in
banks Benefits of CRM to banks.
UNIT III CRM Planning and Implementation:
Strategic CRM planning process – Implementation issues – CRM Tools- Analytical CRM –
Operational CRM – Collaborative CRM -Call centre management – Role of CRM Managers – CRM
Implementation Road Map- Developing a Relationship Orientation – Customer-centric Marketing
Processes – Customer retention plans
UNIT IV Service quality:
Concept of Quality – Meaning and Definition of Service Quality - Factors influencing customer
expectations and perceptions – Types of Service Quality – Service Quality Dimensions – Service
Quality Gaps – Measuring Service Quality – Service Quality measurement Scales-Quality circles in
Banks-Nature and Types of Customer - Customer Service Committees - Talwar, Goiporia.
Damodaran Committee and such other committees’s recommendations- Customer Service
Committee, Customer Day – Complaint Redressed Methods- Copra Forum – Ombudsman.
UNIT V Trends in CRM:
e CRM- CRM Solutions – Data Warehousing – Data mining for CRM – CRM software packages –
The Technological Revolution: Relationship Management – Changing Corporate Cultures.
Suggested Readings
1. Alok Kumar et al, (2015), Customer Relationship Management: Concepts and
Applications, Biztantra
2. Jim Catheart, (2016), The Eight Competencies of Relationship selling, Macmillan India
3. Peeru H Mohamed and A Sahadevan, (2017), Customer Relationship Management, Vikas
Publishing
4. Shainesh, Jagdish, N.Sheth, (2015), Customer Relationships Management Strategic
Perspective, Macmillan
5. Zikmund, (2201), Customer Relationship Management, Wiley
 UNIT – I
MEANING OF CRM:
Customer Relationship Management concept is tendency of banking sector to establish and
maintain long-term relationships with customers in order to provide value for customers and
banks. This concept allows bank to identify, segment, communicate and build long-term
relationships with customers on individual basis.
Customer relationship management (CRM) is a necessity in any customer-focused
industry. For banks, it's an especially useful tool for meeting sales and marketing goals and
exceeding customer expectations. CRM software is a tailored solution that helps banks implement
customer-centric strategies.
USES OF CRM IN BANKS:

1. Better Segmentation for Customers

Banks need to work towards a customer-centric business model which is needs-
based. CRM in banking enables banks to correctly stratify their customers based on a
variety of factors such as:

 Gender
 Demography
 Age
 Income
 Credit rating and so on.
Moreover, it will also allow segmentation based on investment scheme preference,
investment size, customer ship duration, and more.

This classification will act as a specific parameter to evaluate the data provided by the
CRM tool. Eventually, the personalized approach will significantly support banks in
targeting and reaching out to each customer, as well as nurturing the business relationship
with them.

2. Boosted Sales
By implementing the right BFSI CRM, banks will be able to provide the digital-first
banking experience that consumers expect. A Mobile CRM can help banks launch
digitization across both online and mobile banking experiences, just from simple on
boarding to real-time service solutions. The tool will help identify, nurture and convert
leads for the better and enhanced functioning of the banks.

3. 360- Degree of View for Every Customer

 A banking CRM is a unified system that combines with banking software
applications to provide you a single picture of all of your customers’ accounts.

Every predetermined action a consumer makes can be logged in the CRM, from
making an ATM transaction to requesting information about a specific sort of loan. This
makes gaining deeper insights into their habits and personal preferences quick and
straightforward, which can help banks match particular goods to their financial goals.

4. Personalize Customer Journey

With the end number of private banks available, as customers, we all use multiple
banks for varied requirements instead of just one. Therefore, a personalized customer
experience can make their banking experience stand out from the crowd.

A CRM eliminates all loopholes and enables you to assist each customer along
their journey from opening an account to transactions, loans, and more. This and in turn
allows banks to value customer’s presence and satisfy their banking needs on time and
without hassle. Keep up and follow-up, up in order to show that you care about your
customers and their association with the bank, which is appreciated.

5. Insights that help improve Sales and Marketing

Data available through the CRM tool can be compiled into reports which in turn
give a strategic and deeper understanding of your customers. Bankers can then easily
identify trends, campaigns, and areas for improvement that will help them implement new
strategies and tailor future marketing campaigns accordingly.

Banks can also use the information in their customer profiles to identify potential
cross-selling and upselling opportunities.

When a customer makes a deposit inside the bank, for example, the teller has access
to their entire profile and can notify them about new products they might be interested in or
eligible for, such as credit cards or special loans.

Cast an eye over 500+ reporting formats with Kapture’s Reports &
Analytics feature that lets you acquire expertise in all sales operations that eventually steers
you in the right direction.

6. Improved Customer Retention

A CRM tool best offers real-time data that helps banks evaluate the next- course of
action. One always needs to remember that the more effective strategy, the happier the
customer. With a customer-oriented strategy and on-time resolution, your bank
will outperform your competitors.

There have been times when poor customer service has led us to think about
switching banks altogether. It is a banker’s duty to address as and when they come across
any dissatisfied customer, find the problem and reassure the client with remedies in order to
retain them from leaving the bank.

7. Inter-Department Data Tracking

With all the data available in one place, the CRM tool can make any banker’s life
easier than ever before. CRMs can assist banks in keeping all departments on the same
page so that customers do not have to move from department to department. It can also
provide a digital experience that matches what customers would anticipate from a face-to-
face encounter with their banker.
 Since the correct CRM can track data from multiple departments. Therefore, a call
to customer care or a missing account can be used to prepare future customers to embrace
banking with you even before they speak to a banker. For an interdepartmental lead, there
will be no need to start a new conversation every time.

8. Train your Workforce

One of the key benefits of CRM in the banking sector is the elimination of repetitive
administrative activities when all customer information is stored in one system. This allows
employees to spend less time trawling through data and more time nurturing client
relationships. Conduct monthly training sessions for your employees in order to make
them more efficient and productive.

Kapture’s Learning Management System enables banks to maintain a healthy yet

innovation driven environment by keeping track of their employee’s performance. Design
various custom training programs and resources available at a click.

9. Better Service

CRM with all things in real-time makes it effortless for bank representatives to add
notes about client requirements and hence makes following up much easier.

With online banking available at our fingertips, bankers should be able to

proactively offer personalized services and experiences to their customers. Strengthen your
customer service with a CRM’s omnichannel experience that allows you to efficiently
manage customers reaching out through calls, chat, email, social media, or mobile
applications.

10. Increased Customer Loyalty

Customers don’t have enough time to explain their problems or previous
interactions with a new agent. Instead, bankers may pull up every service ticket, purchase,
and data point at the exact moment consumers require assistance, allowing them to
intervene and rescue the day. And transform challenges into opportunities for
growing loyalty and satisfaction by using a CRM solution to stay on top of customer care
and tailor their response.

GOALS REQUIRING CRM IN BANKS:

Establish a Customer-centric, Needs-Based Model

CRM systems help banks communicate with customers on diverse channels to address
the latter’s needs and align financial products and services to their goals. By using a robust
CRM system your bank can make its business customer-friendly, understand the needs of its
clients better and ensure high levels of engagement throughout the customer lifecycle.

Personalize Customer Service at Scale

Personalization is not a thing of the future anymore. A powerful CRM system will
help banks track customer data across various departments in the bank, including loan
disbursal and customer service teams to get a 360-degree view of each customer. With this
information at hand, you can facilitate tailored customer experiences that help exceed client
expectations and ingrain trust in your bank for a lifetime.

Deliver Digital-First Engagements

Digital-first banks are the ones that are bound to grow; these organizations represent
the future of banking. With digital channels being widely used to perform financial
transactions, banks need to deliver digital-first experiences to customers. A good CRM
system can help you embark on your digital transformation journey.

Enhance the Efficacy of Marketing Efforts

A constant challenge that marketers struggle with is creating valuable reports that
enable seamless use of customer data. The right CRM platform helps marketers in the
banking sector create reports highlighting customer engagement channels, data points,
purchase trends, and other key information effortlessly. With this information, marketing
teams can explore new customer engagement opportunities and facilitate personalized
customer journeys.

Make Your Banking Operations More Efficient

CRM systems can make your banking business highly efficient, by helping you
automate mundane administrative tasks, keep all the teams on the same page by providing the
latest customer information and streamline customer interactions across various touchpoints,
with just a few clicks. It can help you get a glimpse into customers’ needs, preferences,
financial goals and relationships at any given time, on any device, thus increasing the overall
visibility.

CRM CHALLENGES IN BANKS:

Data security and the integration with existing systems are the most emerged
challenges while adopting CRM in banking sector. The banking industry is very sensitive to
data and needs an extra level of security for data transfers. Cyber-attacks and malicious
activities in the financial sector are comparatively higher than in any other industry. Modern
cloud-based solutions that include Bankfokuz ensure complete protection for the data in the
banking sector. Cloud-based sales CRM software stores data at the central database that can
be assessable at any time. Also, it promotes secured data transfers across multiple channels
for securely completing business tasks at the earliest.

Integration of new solutions to the existing IT infrastructure without system failure and data
loss is another serious complication. Bankfokuz can help you solve this problem by
seamlessly integrating the CRM system into your company’s existing operational system.

Manage on boarding customers with existing ones alike is a tedious task for
businesses, especially in the banking sector. CRM in banking helps the banking industry to
elevate business functions as systematized for attracting more customers. Data security, on-
time lead management, any time access to customer information and business reports keep
banking fields alive in the market to make more business and sales. Never get delayed in
implementing a suitable solution for your financial sector as it takes your business to the next
level.
CUSTOMER INFORMATION DATABASE:

A customer database is the collection of information that is gathered from

each person. The database may include contact information, like the person's name, address,
phone number, and e-mail address. The database may also include past purchases and future
needs.
INFORMATION TO BE INCLUDED IN CUSTOMER DATABASE

 Contact names
 Job title and job definitions
 Demographic or psychographic information
 Name of the company
 Address
 Methods of contact
 Buying history
 Sources of lead
 Sources of sale
 Special needs of customers

BENEFITS OF A CUSTOMER DATABASE

By using a customer database to keep in touch with, and market to, your customers, you can:

 Increase awareness of your brand

 Enhance marketing opportunities
 Build and strengthen relationships between you and your customers
 Build trust in your products and services
 Increase your profits.

DEVELOPING A CUSTOMER INFORMATION DATABASE

1. Define the database functions
• Strategic CRM: Data about markets, market offering, customers, channels,
competitors, performance and potential.
• Operational CRM: Customer related data to help in the everyday running of the
business.
• Analytical CRM: Data to support the marketing, sales and services decisions that aim
to enhance the value created for and from the customers.
• Collaborative CRM: It includes two subsets of operational and analytical purpose.
(OLTP, OLAP) online-transaction, A-analytical processing.

2. Define the information requirements

• Customer information fields

• Contact data
• Contact history
• Transactional history
• Current pipeline
• Opportunities: It looks forward after sales.
• Products
• Communication preferences

3. Identify the information sources

• Internal data:
Market size, market segmentation, customer profile, customer acquisition
channel, competitor product and pricing, customer requirement
• External data:
 a) Compiled list data:
b) Census data: obtained from Govt records.
c) Modelled data generated by third parties includes variety of sources.
• Secondary and primary data:

a) Competition entries
b) Subscriptions: customer Subscribe of newsletter or magazine
c) Registrations: customers are invite to register their purchase
d) Loyalty programs

4. Select the database technology and hardware platform

• Hierarchical
• Network
• Relational: assign unique number in rows and columns and assign other data's of
marketing, service, payments and so on.

5. Hardware Platform

 Size of the databases: using of PC and server

 Existing technology: using software
 Number and location of users
 Relational Database Management System (RDBMS)
 Populate the database
 Sourcing: obtain information from customers
 Verification
 Validation

1. Range validation: Does an entry lie outside the possible range for a field.
2. Missing values: Check for values that are missing in column.
3. Check against the external values: check the details with mail authority.
4. De-duplication:
o Remove the record that should be retained
o Retain the record that should be removed

6. Maintain the Database

• All new transactions, campaigns and communications are inserted immediately.

• Regularly re duplicates the database.
• Get customers to update their own records.(online purchase)
• Audit the subset of files every year.
• Drip-feed

CUSTOMER PERCEPTION:
Customer perception is how customers feel about your product and brand. It's an
opinion that they've formed through every interaction they've had with your company, both
direct and indirect.

4 Stages of Customer Perception

Customer Perception is a three stage process that translates raw stimuli into
meaningful information.
Each individual interprets the meaning of stimulus in a manner consistent with his/her own
unique biases, needs and expectations. Three stages of perception are exposure, attention,
interpretation and memory
1. Exposure
Exposure includes the elements like colours, logo, and sound, ambience which a customer
experiences when they interact with a brand or a product. When we see a particular colour
and taste a unique flavour it can get our attention which forms the second stage.
2. Attention
Attention comes into picture when the exposure stage completes and the customer takes
notice of the message and product being marketed. If the attention results in positive
experience, it may get into the interpretation stage.
3. Interpretation
Interpretation is how a customer assigns meaning or some value to the inputs and experience
in the first 2 stages of customer perception. It can lead to comparison with another similar
product or some similar experience from the past. Overall the customer assigns some
meaning to the overall experience with the product.
4. Retention
Now the final stage is when the customer remembers the interaction for future references by
storing it in the memory. This means that the customer perception is now formed. It may be
positive or it may be negative as well.

What is Customer Perception?

Customer perception is the customer's overall opinion, thought, awareness and
feelings about a company and its product and service offerings. Customer perception is also
referred to as Consumer perception. Customer perception refers to the process by which a
customer selects, organizes, and interprets information/stimuli inputs to create a meaningful
picture of the brand or the product through various stages.

4 Stages of Customer Perception

Customer Perception is a three stage process that translates raw stimuli into
meaningful information.
Each individual interprets the meaning of stimulus in a manner consistent with his/her
own unique biases, needs and expectations. Three stages of perception are exposure, attention
, interpretation and memory
1. Exposure
Exposure includes the elements like colors, logo, sound, ambience which a customer
experiences when they interact with a brand or a product. When we see a particular color and
taste a unique flavor it can get our attention which forms the second stage.
2. Attention
Attention comes into picture when the exposure stage completes and the customer
takes notice of the message and product being marketed. If the attention results in positive
experience, it may get into the interpretation stage.
3. Interpretation
Interpretation is how a customer assigns meaning or some value to the inputs and
experience in the first 2 stages of customer perception. It can lead to comparison with another
similar product or some similar experience from the past. Overall the customer assigns some
meaning to the overall experience with the product.
4. Retention
 Now the final stage is when the customer remembers the interaction for future
references by storing it in the memory. This means that the customer perception is now
formed. It may be positive or it may be negative as well.

Importance of Customer Perception

Customer Perception is very important for companies or brands as it tells them how
their potential customers think about them. It is very important because if the customer form
a negative perception then no amount of work on brand or product will improve sales. The
companies need to know at all times how customer perceive them so as to tweak the
positioning or offers to make sure that the brand image and identity are in sync.
Also, it is very important as many a times the customer perception stays for a long
time in the minds of the consumers and sometimes it can be permanent as well. Initial
Customer Perceptions needs to be positive as that will lead to the future scope of the brand.
The negative image of the brand affects the overall customer perception affecting the bottom
line. The customer perception can be improved by following the customer perception cycle as
stated below as a fresh start listing to what the customers perceive and expect from the
product/service offered by the organization.
Customer Perception is equally valid in pre-sales as well as after-sales customer
journey. Sometimes poor customer service after the sales can affect the perception and cause
reduced repeat business. Ineffective sales and marketing can cause negative perception even
before sale is made. Managing Customer Perception is one of the most critical tasks for a
company looking to launch and maintain a big brand.
Creating & Improving Customer Perception:
Creating customer perception is a careful process which is conducted with customers
to create the desired customer perception
1. Customer Survey
2. Response Analysis and Customer Journey Mapping
3. Formulation of tactics to create perception
4. Reach to Customers with redefined/tweaked messaging
EXPECTATION ANALYSIS:
In statistics and probability analysis, the expected value is calculated by multiplying
each of the possible outcomes by the likelihood each outcome will occur and then summing
all of those values. By calculating expected values, investors can choose the scenario most
likely to give the desired outcome.
EXPECTATION OF A CUSTOMERS:
 They are looking for faster and easier services for routine banking transactions.
 Customers expect that the bank will provide them with enough information on how its
services work and how safe they are. They are also expecting real-time support every
time they have questions or doubts about their data security.
 Faster and more efficient services mean real benefits for customers but also reduced
costs for banks. Your customers expect their bank to rationalize their operation so as
to provide competitive pricing and a full benefits package: personalized experience at
an affordable price.
 The banking environment is competitive and customers migrate from a bank to
another very often. Until enrolling them in any loyalty program, banks must provide
them with flexible and personalized services that respond correctly to their specific
needs.
 Customers expect that the bank’s voice expresses strong social values such as respect
for the environment, support for national businesses, and involvement in educational
programs.
CUSTOMER BEHAVIOUR:
A customer behaviour analysis involves researching customer habits, identifying
the steps your customer takes in their banking journey, and knowing how external factors
such as social trends impact their decision-making. That way, you can find ways to
personalize their experience.

NATURE OF CONSUMER BEHAVIOUR - IN INDIVIDUAL AND GROUP

CUSTOMER:

1. Influenced by various factors:

The various factors that influence the consumer behaviour are as follows:

a. Marketing factors such as product design, price, promotion, packaging, positioning and
distribution.
b. Personal factors such as age, gender, education and income level.
c. Psychological factors such as buying motives, perception of the product and attitudes
towards the product.
d. Situational factors such as physical surroundings at the time of purchase, social
surroundings and time factor.
e. Social factors such as social status, reference groups and family.
f. Cultural factors, such as religion, social class—caste and sub-castes.

2. Undergoes a constant change:

Consumer behaviour is not static. It undergoes a change over a period of time
depending on the nature of products.
3. Varies from consumer to consumer:

All consumers do not behave in the same manner. Different consumers behave
differently. The differences in consumer behaviour are due to individual factors such as the
nature of the consumers, lifestyle and culture.

4. Varies from region to region and country to county:

The consumer behaviour varies across states, regions and countries. For example, the
behaviour of the urban consumers is different from that of the rural consumers. A good
number of rural consumers are conservative in their buying behaviours.

5. Information on consumer behaviour is important to the marketers:

Marketers need to have a good knowledge of the consumer behaviour. They need to
study the various factors that influence the consumer behaviour of their target customers.

6. Leads to purchase decision:

A positive consumer behaviour leads to a purchase decision. A consumer may take
the decision of buying a product on the basis of different buying motives. The purchase
decision leads to higher demand, and the sales of the marketers increase. Therefore,
marketers need to influence consumer behaviour to increase their purchases.

7. Varies from product to product:

Consumer behaviour is different for different products. There are some consumers
who may buy more quantity of certain items and very low or no quantity of other items.

8. Improves standard of living:

The buying behaviour of the consumers may lead to higher standard of living. The
more a person buys the goods and services, the higher is the standard of living. But if a
person spends less on goods and services, despite having a good income, they deprives
themselves of higher standard of living.

9. Reflects status:
The consumer behaviour is not only influenced by the status of a consumer, but it also
reflects it. The consumers who own luxury cars, watches and other items are considered
belonging to a higher status. The luxury items also give a sense of pride to the owners.

CUSTOMER LIFE TIME VALUE:

The key inputs into the customer lifetime value (CLV) banking calculation
include: Average balances of loans and savings on a per customer basis. Average interest rate
margin (as a percentage) Average income/revenue per customer generated from non-interest
income sources (e.g. fees, commissions, and other sales)

The Value of Knowing Your CLV

Calculating the CLV for different customers helps in a number of ways, mainly regarding
business decision-making. Knowing your CLV you can determine, among other things:
• How much you can spend to acquire a similar customer and still have a profitable
relationship
• What kinds of products customers with the highest CLV want
• Which products have the highest profitability
• Who your most profitable types of clients are

How to calculate customer lifetime value (CLV) for a bank

 Banks tend to focus a considerable amount of their marketing efforts on trying to build
more profitable relationships with existing customers. Essentially direct marketing and
relationship marketing efforts are used to:

1. Retain the loyalty of the customer (greater customer lifetime in years)

2. Increase the value/profitability of the customer (through up-selling and migration to
higher value products).

The ROI on the investment in the various direct and relationship marketing efforts can be
measured quite effectively using a customer lifetime calculation. To assist in this CLV
calculation for a bank, a free customer lifetime value Excel template has been provided on
this site.

The customer lifetime value calculation for banking

Customer lifetime value is calculated primarily the same way for a bank as it is for
the main CLV calculation. Please refer to additional information on this website as required –
please navigate by the above menu.
The key inputs into the customer lifetime value (CLV) banking calculation include:
 Average balances of loans and savings on a per customer basis
 Average interest rate margin (as a percentage)
 Average income/revenue per customer generated from non-interest income sources
(e.g. fees, commissions, and other sales)
 Costs of providing customer services and access (which would include transaction
costs, statement costs, and potentially a provision for infrastructure costs, and so on)

SELECTION OF PROFITABLE CUSTOMER SEGMENT:

What is customer segmentation in banking?

Customer segmentation is the approach of dividing a large and diverse customer base
into smaller groups of related customers that are similar in certain ways and relevant to the
marketing of a bank’s products and services.

What are the business benefits of customer segmentation in banking?

Customer segmentation is often a top marketing priority for banks, and for good reason.
Because segmentation solutions help banks group customers by behaviour, they can offer
more tailored products and services. Moreover, by better understanding customer
preferences, marketers can maximize cross and up-selling opportunities and encourage
customers to explore related services. Other ways that segmentation can help banks:
 Decide on the right kind of promotional content to send each customer
 Select the right marketing channels for the right audience
 Identify new and profitable segments and launch innovative products and services