Customer Relationship Management: The new service mantra

There is a need of constant innovation and thrust on marketing services in retail banking. In bracing for tomorrow, a paradigm shift in bank financing through innovative products and mechanisms involving constant up gradation and revalidation of the internal system and processes of banks is called for. Banks need to use retail as a growth trigger given the fact that most banks in the past decade have burnt their fingers by focusing extensively on corporate credit. This requires product development and differentiation, innovation and business process reengineering, micro-planning, marketing, prudent pricing, customization, technological up gradation, electronic or mobile banking, and cost reduction and cross selling. 

While retail banking offers phenomenal opportunities for growth, the challenges are equally daunting. The challenges emerge from two areas:

1. The intangible nature of banking products where the customer cannot actually ‘sense’ the item with his sensory organs
2. Cut throat competition from all Banks who have started focusing on retail after realizing that is where lies the growth story

  How far retail banking is able to lead the growth of the banking industry in future would depend upon the capacity building of the banks to meet the challenges and make use of the opportunities profitably. However, the kind of technology used and the efficiency of operations would provide the much needed competitive edge for success in retail banking business. Furthermore, in all this, the interest of the customer is of paramount importance.

Before the LPG era, the customer was unaware of the whatever limited  products which his Bank had on offer and relied completely on the bank staff to explain the salient features of each ,which to a maximum extent would fulfill only about 75 % of his requirements. But he did not have much of a choice as no bank could be able to satisfy all his requirements in one go. Moreover, customers in those days had an ‘emotional connect’ with their respective banks and did not switch Banks easily. Hence Banks found it easier to sell whatever products were available in their kitty.  This is an example of a product centric model of business. A fewer number of products are put on offer and the customer is required to customize his needs around those products. Every effort is made on developing the product. Back then the choices were limited, hence this model survived for a long time. You would choose a bank because it is close to your home or office or the staff over there were friendlier with you.

But today the entire scenario is different. The customer is well aware of the different products of not only his bank offers but what other banks are offering too, thanks to the power of technology. The customer spells out his needs and the Bank customizes the product just as per his requirements. This is what we call the customer centric model of business. In this model, the customer is the king and the focus is on consistently giving him a great and relevant experience with the help of information about his past transactions with the Bank. This process is known as Customer Tracking. It is the process of using customer data to better understand and segment the customer base and then create products and services relevant to the customer. The idea is to create a lifelong relationship with the customer by not just satisfying but delighting him every time he transacts with the bank. Now a days most banks talk of ‘Relationship banking” rather than ‘transactional banking’ as its economical in terms of time, money and effort to retain a present loyal customer than acquiring a new one. Also, a single or couple of transactions carried out for a ‘casual’ customer is costlier than performing the entire banking business for a loyal customer. Towards this, Banks strive to not just satisfy their customers but constantly delight them. Here, the ‘wow’ factor comes into play. Banks are aware that they need to walk that extra mile to wow their customers to buy their loyalty, who is spoilt for choice and expects a level of service beyond his imagination. If the customer is not delighted in a couple of transactions, the customer moves elsewhere. `

Globalization and deregulation has changed the entire face of banking. Even the best intent to foster a personalized relationship with the customers is defeated with the sheer increase in the volume of customers, number of products and the wide array of channels of interaction and transaction. In this context CRM plays a vital role in developing personalized relationships to retain and maximize customer value.

Customer Relationship Management: Customer Relationship Management is a nomenclature given to all activities undertaken by business organizations to delight their loyal customers beyond mere satisfaction levels derived from the core services. In other words, while it is easier to satisfy a customer by giving him a basic value for the price paid for his services, the customer does not necessarily feel delighted or continue in a long term relationship with the service firm. A service firm has to offer more than the value or value plus, in the form of additional services and activities that are much beyond the realm of simple buying and selling. All these activities and strategies that organizations undertake to provide additional benefits to the customers beyond the price paid for the services can be categorized under a single head of customer relationship management.

Customer relationship management and advertising are an integral part of marketing. However, CRM and advertising are two different sides of the coin called marketing. Advertising is too expensive. CRM is based on the word-of-mouth experience. Meeting customer needs is most important in the competitive banking scenario.

Although CRM is a recent concept, it’s tenets have been around for some time. CRM has three application areas. They are as follows:

1. Customer acquisition
2. Customer value maximization
3. Customer retention

CRM ensures that in a bank, the customers remain repeat buyers. Customers want to save three things-time, money and effort. Usually customer complaints generate when there is a delay in transactions. Banks should ensure service delivery to maintain customer relationship. CRM puts the customer at the centre for servicing his needs. It helps the Bank to understand the needs and behavior of the customers in a better and faster way with the help of information technology. CRM tools help in forecasting and analysis of customer trends and behaviors, which ultimately serve to enhance the customer’s overall experience. CRM helps to create business leads by identifying the exact needs of a particular customer. If a new loan or deposit product is launched, CRM will scan the database for customers in the particular age group, particular income level, and particular stage in the life cycle and generate a list of such potential customers who can be targeted for marketing that product.

Benefits of CRM to the Bank:

1. Consolidated view of customers across various products, services and transactions of delivery.
2. Increased quality and credibility of customer data.
3. Helps to view the customers through multiple dimensions and predict what is his next need will be and when it is likely to arise
4. Helps the Bank to align its products to the needs of the customers by analyzing the transaction history of the customer
5. Helps the counter staff with information to assess the need of the customer, which can be used for cross selling or up selling activities
6. Helps in identifying high risk areas and high risk customers, thus enabling the bank to take necessary precautions and corrective actions in order to avoid frauds and reduce losses
7. Helps in reducing marketing costs to a great extent
8. Helps in increasing productivity and efficiency of the Branch 

Benefits of CRM to the customer: The entire initiative of CRM is focused around the customer. It is entirely for the benefit of the customer, which will eventually bring in profits for the bank. The following are the direct benefits of CRM to the customer:

1 Personalized service

2. Increased customer satisfaction

3. Availability of multiple choices

4. Better turnaround time

5. Informed and professional advice from the front office.

The service firm can optimize the customer relationship management by undertaking a six point strategic optimization of the communication process i.e., objectively analyzing the CRM, segmenting customer data by business volume and value, identifying customer influencers, appraising each customer’s affinity and responsiveness and appraising the frequency of contact.

References:

1. Ramneek Kapoor, Justin Paul , Biplab Halder: Services Marketing: Concepts & Practices 

Poppy Sharma: Smart Manager-Retail Banking Decoded(Taxmann)