A customer intimate, they are doomed to be

A Study on the Importance of Customer Relationship Managementin the Banking Sector in Bangalore.  Ben Chuttiparayil NinanHebron AG Church, 11thcross,Oil Mill Road,Lingarajapuram,Bangalore – 560 084.Email-ID: ben.ninan2008@gmail.

comPhone: +91- 8050189196   Sandra Elizabeth. A#35, 1st main,Old Manjunatha Layout,Ramamurthy Nagar,Bangalore – 560 016.Email-ID: [email protected]: +91-9535236132      Abstract “Ifbanks cannot truly be customer intimate, they are doomed to be just dumbcommodities, acting behind the scenes like utilities.” – J P Nicols  Customer relationship management has beenthe back bone of the any banking sector so far, because without customers thereis no bank. Customer relationship management is the process in which theorganization manages, controls and retains their customers by giving them allpossible provisions to make their task easier in their current scenario.

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Inthis vying world where technology is taking its toll on everyone possible, thebanking sectors are on their toes to keep up to the technological trend everchanging and upgrading all around them. For growth and sustainability in thiscompetitive sector customer relationship management has become ineluctable.These kinds of innovative practices are adopted as it becomes easy for anyorganization to connect with its own customers at the grass root level. Andprimarily these strategies act as an important channel to get to know theactual needs of their customers at any point of time. Once these needs are madeknown to the organization, they work upon it and fulfill their needs in thesatisfying and the most efficient way possible. In this paper, a simple attempthas been made to find if these innovative trends have been successful in itsimplementation and the benefits the bank has reaped after its implementation.We authors are making an empirical study into the comparative advantage betweenthe traditional methods used by the banks and the modern innovative techniquesused in the banking sector to keep up the customer relationship and thebenefits realized out of customer relationship management with reference to afew banks in Bangalore.

 Keywords – Customer relationship, Management,Traditional methods, Innovative techniques.    INTRODUCTIONIndian Banking system has witnessed rapid growth in the recent past withthe initiation of financial sector reforms. The thrust of financial sectorreforms is to improve efficiency, competitiveness and productivity of thefinancial system. A customer is the core component in the banking sector.Building relationship with the customers is now recognized as overriding goalof marketing and especially emphasized in service based sectors. The businessof banking can neither function without its customers nor does just acquiring acertain number of customers do the business. It is a continuing process oftransactions culminating in a long-term banker-customer relationship.

Customerrelationship management (CRM) is a vital factor to improve the performance ofthe banks and ensure customer satisfaction. Customer relationship management isa term that refers to practices, strategies and technologies that companies useto manage and analyze customer interactions and data throughout the customerlifecycle with the goal of improving business relationship with customers andcustomer retention. Banking institutions thrive more on keeping old customershappy rather than getting new customers, no banks can possibly meet all theneeds of their customers given to the diversity of their wants. In such   situations the secret key factor of thebank’s success is effective customer relationship management. Customerrelationship management involves organizing activities around a sole customerwhich can ensure differentiation at each point of service by creating a unique experience.Customer relationship management is neither a product nor a service, but abusiness strategy designed to optimize profitability and revenue throughcustomer satisfaction.

Customer relationship management is a paradigm shiftfrom 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’srelationships and interactions with their customers and their potentialcustomers. It helps in the improvement of the profitability of the bank.

Itenables the bank to focus on organizing healthy relationships with thecustomers.  Customer relationshipmanagement is a process by which a bank or an institution takes initiative toplease their existing customers through many innovative methods. (e.g.

, Rewardpoints) Their agenda is to mainly establish trust between the customers and thebanks which in return would result in inflow of funds. This process is morelike a win-win for the both the sides of the coin i.e., the customer gets thedesired quality services and the banks get their deposits. If there is a goodcustomer relationship undertaken by the banks then there would be a goodcustomer base, as the customers trust their bank or their institution.

One of the most important aspect of customer relationship managementapproach is the systems of customer relationship management that complies datafrom a range of different communication channels, including a bank’s website,telephone, email, social media etc. through the customer relationshipmanagement approach and the systems used to facilitate it, banks learn moreabout their target customers. IMPORTANCE OF CUSTOMER RELATIONSHIP MANAGEMENT IN BANKING “A good bank is not only thefinancial heart of the community, but also one with an obligation of helping inevery possible manner to improve the economic conditions of the common people”– Lal Sri Ammembal Subbarao Pai·     When the bank is having agood customer relationship management team and it maintains good customerrelations, the customers itself will act as advertising agents, as theypropagate the message to their close circle and hence they or the outsiders wouldbe influenced to be a part of the bank. ·     When the bank gains morenumber of customers, the amount of inflow of funds and deposits increase.·     When the amount ofdeposits increases, the amount of lending also increases hence becomingprofitable through the interest rates levied on the amount lent out from thebank.·     As more people wouldinvest in the banks, banks gain more amount of income and their profitgradually increases they expand and grow to more branches.·     When the banks grow andbecome large they would be able to declare incentives and rewards to theircustomers which would help in customer retention and make the customers happyon the other hand. ·     When there is a goodcustomer relationship management the risk of competition is reduced or itincreases the customers comparative advantage towards other banks.

·     As the banks have gainedtrust and income of their potential customers they would be able acquire smallbanks outside of the domestic market and enter the international market.·     When the banks gointernational the amount of inflow of foreign currency would increase and helpin economic development of the country.·     When a country isdeveloped, it increases the standard of living of the citizens. ·     When standard of livingincreases, the awareness of saving money increases and help banks to promotethemselves and hence play a vital role in the economy. REVIEW OF LITERATUREKamath in his thesisentitled “Marketing of bank services with special reference to branches inBombay city of Syndicate Bank” has concluded that fastest and high-quality servicesoffered by any bank will be the most critical variable in attracting andretaining customers.T SRavisankar in his study “Marketing strategies and planning for business growthin banks” emphasised that, the marketing plan for business service should be supportedby the most appropriate marketing strategies. He recommends that any marketstrategy for banks must be oriented to the customer’s current potential.

B CSarasvathi in her review has stated that the main objectives of customer relationshipmanagement are building a long term sustainable relations with customers bydelivering superior customer value and satisfaction. Instead of trying tomaximise the banks profit for every transaction, customer relationship managementfocuses on maximising profits over the life time value of the customers. Undoubtedly,customer relationship management is a potential tool in sustaining and boostingsales in this era of hyper-competitive world.JohnBrooks states that “Customer care is emerging as the critical factor inthe banking industry and bankers are fully conscious of the need for attaining internationalstandard for service.”  OBJECTIVESThe objectives of this study are as follows -·     To understand the effortstaken by the banks to establish customer relationship.·     To identify the servicesand incentives given by the bank to help customers.·     To understand if themethod of customer relationship management is customer friendly and effective.·     To understand if banksare being benefitted out of customer relationship management RESEARCH QUESTIONSIn this section, research questions which are designed in thequestionnaire are being analyzed, interpreted and presented by the authors.

These questions give a clear view as to how customer relationshipmanagement is important and how it is undertaken in different banks. It ispresented with the help of a pie chart, for effective communication. Question 1 – Is CustomerRelationship Management adopted by your bank?  From the above figure, we can understand that majority of the banks hasadopted customer relationship management. 95% of the total population hasadopted customer relationship management because they realized that customerplays an important role in their business. There is no bank without itscustomers. 5% of the total population thinks customer relationship managementis being outdated. They also said that some banks are already removing customerrelationship management.

 Question 2 – What are thefactors that led to the expansion/growth of banks?  The interpretation of the above diagram is as follows – when asked whatwas the reason for the expansion/ growth of the banks the reply that most ofthe banks gave was the customer centric approach followed by the banks. This isbecause the expansion of banks takes place if there is a large customer base.In-order to increase their customer base, banks adopt customer relationshipmanagement techniques. If the customers are happy with the services provided bythe banks, then the customers themselves will act as a marketing agent for thatbank by telling their friends or family about the services provided by theirbank.

Apart from this, the banks must provide best quality services andinnovative products to the customers. Incorporation of the latest technologyreplaces the old traditional methods of banking which in turn makes itconvenient for the customers to do their banking activities easier on dailybasis. These are the various reasons for the expansion or growth of the banks byimplementing customer relationship management. Question 3– Did the number of customers increase after the implementation of CustomerRelationship Management?  When asked if there was an increase in the customerbase 65% of the total population said ‘yes’, the rate of the customersincreased due to the customer centric approach, best quality services andinnovative products provided by the banks to the customers.

The main reason forthis increase is the implementation of customer relationship management. 30% ofthe banks told there was no increase because they focused more on retaining theexisting customers by catering to their needs. And 5% of the total populationsaid no, because they didn’t believe in the concept of customer relationshipmanagement. Question 4 – What are thecustomer relationship management practices followed by banks?In-order to retain existing customers and gain newcustomers, few customer relationship management practices are followed by thebanks.

Some of the customer relationship management practices are as follows:·     Customer-first attitudeamong the banks.·     Forming database ofcustomers.·     Finding customer demandsand complaints.

·     Developing solutions tothe problems.·     Establishing trustbetween the banks and the customers.·     Meeting customeraspirations with professional banking services.·     Customer relationshipmanagement·     Customer satisfaction andloyalty.Apart from this the banks also provide reward pointsand similar kind of services to the loyal customers, for serving the purpose ofretention of existing customers.  METHODOLOGYMethodology contains information regarding the various procedures and processesinvolved in this study to obtain the desirable results.

Some of the methodsadopted in this study are as follows -Tools for data collection – Underthis study of the importance of customer relationship management in the bankingsector, the source of this study was primary data which was obtained bypreparing a questionnaire of fifteen questions and by meeting the concernedbank officials and by jotting down their response. We authors have alsoreferred to secondary data along with primary data, in-order to collect thenecessary information required for this study. Sample Size – In this study wehave focused only on private sector banks.

The number of such banks inBangalore are twenty-two. Since this is an exploratory study and the number of banksavailable are twenty-two our sample size is twenty which were found to beadequate. The respondents mainly concentrated are bank officials i.e., bankmangers.

All the samples drawn i.e., banks, were situated in the urban areas ofBangalore and the data obtained were considered valid.Period of Study – This studywas conducted for a period of three weeks, as we author’s personally met allthe twenty respondents i.

e., bank managers in their respective banks byinterviewing them and giving out questionnaires to them. Hence the datacollected represents the view of these twenty bank managers.Testing – Hypothesis testingwas not done for this study because quantitative data was unavailable. All thedata pertaining to this study is qualitative in nature. FINDINGS1.    In this study, it wasfound that almost 95% of the private banks adopt Customer relationshipmanagement in their banking activities.

2.    When banks implementedCustomer relationship management, it focused on being customer-centric ratherthan being profit-centric, which in turn resulted in obtaining more customersand keeping the existing customers happy.3.

     Establishinggood customer relations benefits both the parties i.e., the customers and thebanks. The customers get the required services at the right time and banks getmore potential customers who is willing to deposit their hard-earned money intothe banks, through this the banks’ deposits increases, it creates more loanswhich naturally increases the net-worth of the banks.4.     Implementationof Customer relationship management led to the expansion of banks because Customerrelationship management helps in gaining new customers to cater to the needs ofall customers, the banks must expand by establishing different branches.

5.     Allbanks adopt certain Customer relationship management practices to provideupdated services to the customers.6.     Theimplementation of latest technology in the banking sector like ATMs,Biometrics, Mobile banking, Online bill payments made the life of all the youngcustomers easy, on the other hand the old generation customers who follows thetraditional methods of banking are not satisfied with this innovation. CONCLUSIONWhen the smallestof the products can be bought online and the amount being debited and in theaspect of sale the amount being credited, why not banking services andactivities? Incorporation of latest technology like CRM software, InternetBanking, ATMs etc., in the banking sector, makes it easy for the customers tocarry out their day to day transactions like withdrawal, deposits. In thisstudy, the authors like to state that, customer relationship management is a criticalfactor in the banking business today.

The dollar bills the customer gets fromtellers in each bank are the same. What is different is, ‘the tellers’, meaningto say effective customer relationship management is the key to gain potentialcustomers. REFERENCES 1 Berry, M.J.A. .S.

, Mastering Data Mining: The Artand Science of  Customer Relationship Management, John Wiley& Sons, Inc.2.      Cabena, P.

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, 2001, Customer Satisfaction Measurement in the PrivateBank Sector, European Journal of Operational Research, 347-360.5. Peppard, J.,2000, Customer RelationshipManagement (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-FunctionalIssues in the Implementation of Relationship Marketing Through CustomerRelationship Management, European Management Journal, Vol.

19, No. 5, pp.534–542.8. Yli-Renko,H., Sapienza,H.

J., Hay, M., The Role of Contractual GovernanceFlexibility in Realizing the Outcomes of Key Customer Relationships, Journal of      Business Venturing, 16, 529–555.9.

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