A the scenes like utilities.” – J P Nicols

A Study on the Importance of Customer Relationship Management
in the Banking Sector in Bangalore.

 

 

Ben Chuttiparayil Ninan

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Hebron AG Church, 11th
cross,

Oil Mill Road,

Lingarajapuram,

Bangalore – 560 084.

Email-ID: [email protected]

Phone: +91- 8050189196

 

 

 

Sandra Elizabeth. A

#35, 1st main,

Old Manjunatha Layout,

Ramamurthy Nagar,

Bangalore – 560 016.

Email-ID: [email protected]

Phone: +91-9535236132

 

 

 

 

 

 

Abstract

 

“If
banks cannot truly be customer intimate, they are doomed to be just dumb
commodities, acting behind the scenes like utilities.” – J P Nicols

 

Customer relationship management has been
the back bone of the any banking sector so far, because without customers there
is no bank. Customer relationship management is the process in which the
organization manages, controls and retains their customers by giving them all
possible provisions to make their task easier in their current scenario. In
this vying world where technology is taking its toll on everyone possible, the
banking sectors are on their toes to keep up to the technological trend ever
changing and upgrading all around them. For growth and sustainability in this
competitive sector customer relationship management has become ineluctable.
These kinds of innovative practices are adopted as it becomes easy for any
organization to connect with its own customers at the grass root level. And
primarily these strategies act as an important channel to get to know the
actual needs of their customers at any point of time. Once these needs are made
known to the organization, they work upon it and fulfill their needs in the
satisfying and the most efficient way possible. In this paper, a simple attempt
has been made to find if these innovative trends have been successful in its
implementation and the benefits the bank has reaped after its implementation.
We authors are making an empirical study into the comparative advantage between
the traditional methods used by the banks and the modern innovative techniques
used in the banking sector to keep up the customer relationship and the
benefits realized out of customer relationship management with reference to a
few banks in Bangalore.

 

Keywords – Customer relationship, Management,
Traditional methods, Innovative techniques.

 

 

 

 

INTRODUCTION

Indian Banking system has witnessed rapid growth in the recent past with
the initiation of financial sector reforms. The thrust of financial sector
reforms is to improve efficiency, competitiveness and productivity of the
financial system. A customer is the core component in the banking sector.
Building relationship with the customers is now recognized as overriding goal
of marketing and especially emphasized in service based sectors. The business
of banking can neither function without its customers nor does just acquiring a
certain number of customers do the business. It is a continuing process of
transactions culminating in a long-term banker-customer relationship. Customer
relationship management (CRM) is a vital factor to improve the performance of
the banks and ensure customer satisfaction. Customer relationship management is
a term that refers to practices, strategies and technologies that companies use
to manage and analyze customer interactions and data throughout the customer
lifecycle with the goal of improving business relationship with customers and
customer retention. Banking institutions thrive more on keeping old customers
happy rather than getting new customers, no banks can possibly meet all the
needs of their customers given to the diversity of their wants. In such   situations the secret key factor of the
bank’s success is effective customer relationship management. Customer
relationship management involves organizing activities around a sole customer
which can ensure differentiation at each point of service by creating a unique experience.
Customer relationship management is neither a product nor a service, but a
business strategy designed to optimize profitability and revenue through
customer satisfaction. Customer relationship management is a paradigm shift
from product centric and mass marketing to customer centric way of business.

 

CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

Customer relationship management is a strategy for managing the bank’s
relationships and interactions with their customers and their potential
customers. It helps in the improvement of the profitability of the bank. It
enables the bank to focus on organizing healthy relationships with the
customers.  Customer relationship
management is a process by which a bank or an institution takes initiative to
please their existing customers through many innovative methods. (e.g., Reward
points) Their agenda is to mainly establish trust between the customers and the
banks which in return would result in inflow of funds. This process is more
like a win-win for the both the sides of the coin i.e., the customer gets the
desired quality services and the banks get their deposits. If there is a good
customer relationship undertaken by the banks then there would be a good
customer base, as the customers trust their bank or their institution.

One of the most important aspect of customer relationship management
approach is the systems of customer relationship management that complies data
from a range of different communication channels, including a bank’s website,
telephone, email, social media etc. through the customer relationship
management approach and the systems used to facilitate it, banks learn more
about their target customers.

 

IMPORTANCE OF CUSTOMER RELATIONSHIP MANAGEMENT IN BANKING

 “A good bank is not only the
financial heart of the community, but also one with an obligation of helping in
every possible manner to improve the economic conditions of the common people”
– Lal Sri Ammembal Subbarao Pai

·     
When the bank is having a
good customer relationship management team and it maintains good customer
relations, the customers itself will act as advertising agents, as they
propagate the message to their close circle and hence they or the outsiders would
be influenced to be a part of the bank.

·     
When the bank gains more
number of customers, the amount of inflow of funds and deposits increase.

·     
When the amount of
deposits increases, the amount of lending also increases hence becoming
profitable through the interest rates levied on the amount lent out from the
bank.

·     
As more people would
invest in the banks, banks gain more amount of income and their profit
gradually increases they expand and grow to more branches.

·     
When the banks grow and
become large they would be able to declare incentives and rewards to their
customers which would help in customer retention and make the customers happy
on the other hand.

·     
When there is a good
customer relationship management the risk of competition is reduced or it
increases the customers comparative advantage towards other banks.

·     
As the banks have gained
trust and income of their potential customers they would be able acquire small
banks outside of the domestic market and enter the international market.

·     
When the banks go
international the amount of inflow of foreign currency would increase and help
in economic development of the country.

·     
When a country is
developed, it increases the standard of living of the citizens.

·     
When standard of living
increases, the awareness of saving money increases and help banks to promote
themselves and hence play a vital role in the economy.

 

REVIEW OF LITERATURE

Kamath in his thesis
entitled “Marketing of bank services with special reference to branches in
Bombay city of Syndicate Bank” has concluded that fastest and high-quality services
offered by any bank will be the most critical variable in attracting and
retaining customers.

T S
Ravisankar in his study “Marketing strategies and planning for business growth
in banks” emphasised that, the marketing plan for business service should be supported
by the most appropriate marketing strategies. He recommends that any market
strategy for banks must be oriented to the customer’s current potential.

B C
Sarasvathi in her review has stated that the main objectives of customer relationship
management are building a long term sustainable relations with customers by
delivering superior customer value and satisfaction. Instead of trying to
maximise the banks profit for every transaction, customer relationship management
focuses on maximising profits over the life time value of the customers. Undoubtedly,
customer relationship management is a potential tool in sustaining and boosting
sales in this era of hyper-competitive world.

John
Brooks states that “Customer care is emerging as the critical factor in
the banking industry and bankers are fully conscious of the need for attaining international
standard for service.”

 

 

OBJECTIVES

The objectives of this study are as follows –

·     
To understand the efforts
taken by the banks to establish customer relationship.

·     
To identify the services
and incentives given by the bank to help customers.

·     
To understand if the
method of customer relationship management is customer friendly and effective.

·     
To understand if banks
are being benefitted out of customer relationship management

 

RESEARCH QUESTIONS

In this section, research questions which are designed in the
questionnaire are being analyzed, interpreted and presented by the authors.
These questions give a clear view as to how customer relationship
management is important and how it is undertaken in different banks. It is
presented with the help of a pie chart, for effective communication.

 

Question 1 – Is Customer
Relationship Management adopted by your bank?

 

 

From the above figure, we can understand that majority of the banks has
adopted customer relationship management. 95% of the total population has
adopted customer relationship management because they realized that customer
plays an important role in their business. There is no bank without its
customers. 5% of the total population thinks customer relationship management
is being outdated. They also said that some banks are already removing customer
relationship management.

 

Question 2 – What are the
factors that led to the expansion/growth of banks?

 

 

The interpretation of the above diagram is as follows – when asked what
was the reason for the expansion/ growth of the banks the reply that most of
the banks gave was the customer centric approach followed by the banks. This is
because the expansion of banks takes place if there is a large customer base.
In-order to increase their customer base, banks adopt customer relationship
management techniques. If the customers are happy with the services provided by
the banks, then the customers themselves will act as a marketing agent for that
bank by telling their friends or family about the services provided by their
bank. Apart from this, the banks must provide best quality services and
innovative products to the customers. Incorporation of the latest technology
replaces the old traditional methods of banking which in turn makes it
convenient for the customers to do their banking activities easier on daily
basis. These are the various reasons for the expansion or growth of the banks by
implementing customer relationship management.

 

Question 3
– Did the number of customers increase after the implementation of Customer
Relationship Management?

 

 

When asked if there was an increase in the customer
base 65% of the total population said ‘yes’, the rate of the customers
increased due to the customer centric approach, best quality services and
innovative products provided by the banks to the customers. The main reason for
this increase is the implementation of customer relationship management. 30% of
the banks told there was no increase because they focused more on retaining the
existing customers by catering to their needs. And 5% of the total population
said no, because they didn’t believe in the concept of customer relationship
management.

 

Question 4 – What are the
customer relationship management practices followed by banks?

In-order to retain existing customers and gain new
customers, few customer relationship management practices are followed by the
banks. Some of the customer relationship management practices are as follows:

·     
Customer-first attitude
among the banks.

·     
Forming database of
customers.

·     
Finding customer demands
and complaints.

·     
Developing solutions to
the problems.

·     
Establishing trust
between the banks and the customers.

·     
Meeting customer
aspirations with professional banking services.

·     
Customer relationship
management

·     
Customer satisfaction and
loyalty.

Apart from this the banks also provide reward points
and similar kind of services to the loyal customers, for serving the purpose of
retention of existing customers.

 

METHODOLOGY

Methodology contains information regarding the various procedures and processes
involved in this study to obtain the desirable results. Some of the methods
adopted in this study are as follows –

Tools for data collection – Under
this study of the importance of customer relationship management in the banking
sector, the source of this study was primary data which was obtained by
preparing a questionnaire of fifteen questions and by meeting the concerned
bank officials and by jotting down their response. We authors have also
referred to secondary data along with primary data, in-order to collect the
necessary information required for this study.

Sample Size – In this study we
have focused only on private sector banks. The number of such banks in
Bangalore are twenty-two. Since this is an exploratory study and the number of banks
available are twenty-two our sample size is twenty which were found to be
adequate. The respondents mainly concentrated are bank officials i.e., bank
mangers. All the samples drawn i.e., banks, were situated in the urban areas of
Bangalore and the data obtained were considered valid.

Period of Study – This study
was conducted for a period of three weeks, as we author’s personally met all
the twenty respondents i.e., bank managers in their respective banks by
interviewing them and giving out questionnaires to them. Hence the data
collected represents the view of these twenty bank managers.

Testing – Hypothesis testing
was not done for this study because quantitative data was unavailable. All the
data pertaining to this study is qualitative in nature.

 

FINDINGS

1.    
In this study, it was
found that almost 95% of the private banks adopt Customer relationship
management in their banking activities.

2.    
When banks implemented
Customer relationship management, it focused on being customer-centric rather
than being profit-centric, which in turn resulted in obtaining more customers
and keeping the existing customers happy.

3.     Establishing
good customer relations benefits both the parties i.e., the customers and the
banks. The customers get the required services at the right time and banks get
more potential customers who is willing to deposit their hard-earned money into
the banks, through this the banks’ deposits increases, it creates more loans
which naturally increases the net-worth of the banks.

4.     Implementation
of Customer relationship management led to the expansion of banks because Customer
relationship management helps in gaining new customers to cater to the needs of
all customers, the banks must expand by establishing different branches.

5.     All
banks adopt certain Customer relationship management practices to provide
updated services to the customers.

6.     The
implementation of latest technology in the banking sector like ATMs,
Biometrics, Mobile banking, Online bill payments made the life of all the young
customers easy, on the other hand the old generation customers who follows the
traditional methods of banking are not satisfied with this innovation.

 

CONCLUSION

When the smallest
of the products can be bought online and the amount being debited and in the
aspect of sale the amount being credited, why not banking services and
activities? Incorporation of latest technology like CRM software, Internet
Banking, ATMs etc., in the banking sector, makes it easy for the customers to
carry out their day to day transactions like withdrawal, deposits. In this
study, the authors like to state that, customer relationship management is a critical
factor in the banking business today. The dollar bills the customer gets from
tellers in each bank are the same. What is different is, ‘the tellers’, meaning
to say effective customer relationship management is the key to gain potential
customers.

 

REFERENCES

 

1 Berry, M.J.A. .S., Mastering Data Mining: The Art
and Science of  Customer Relationship Management, John Wiley
& Sons, Inc.

2.      Cabena, P., Choi H.H., Kim I.S., Otsuka S., Reinschmidt J.
., Intelligent Miner for Data
Applications Guide, IBM Redbooks, SG24-5252-00.

3.      Cook, W.D., , M.,
2001, Sales Performance
Measurement in Bank

      Branches, Omega, 29,
299 –307.

4.   Mihelis, G., Grigoroudis, E., Siskos, Y., Politis, Y., , Y., 2001,

 Customer Satisfaction Measurement in the Private
Bank Sector, European Journal of Operational Research, 347-360.

5. Peppard, J.,
2000, Customer Relationship
Management (CRM) in Financial Services, European Management Journal, Vol. 18,
No. 3, pp. 312–327,

6.   Peppers, D., ,
M., A New Marketing Paradigm,
Planning Review, 23(2),   14–18.

7. Ryals, L.,
& Knox, S., Cross-Functional
Issues in the Implementation of Relationship Marketing Through Customer
Relationship Management, European Management Journal, Vol. 19, No. 5, pp.
534–542.

8. Yli-Renko,
H., Sapienza,
H.J., Hay, M., The Role of Contractual Governance
Flexibility in Realizing the Outcomes of Key Customer Relationships, Journal of

      Business Venturing, 16, 529–555.

9.  Yuan,
S.T., & Chang, W.L.,  Mixed-Initiative
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