12 zijbemr vol2 issue2 feb2012 jgbuyg ytftuyf uyguytg

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ZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 2, February 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/

CUSTOMER RELATIONSHIP MANAGEMENT:A GROWTH CATALYST FOR HDFC BANK

DR. ASHOK SHARMA*; DR. TAPASYA JULKA**; MS. SONALI BHARDWAJ***

*Assistant Professor,Department of Business Administration,University of Rajasthan, Jaipur, India.

**Coordinator,School of Business Management,

Jaipur National University, Jaipur, India.***Ph.D. Scholar,

School of Business Management,Jaipur National University, Jaipur, India.

ABSTRACT

This study explores the role of CRM in enhancing organisational growth in reference to thebanking industry (HDFC bank) by trend analysis method. Hence, CRM is the tool which ishelping the organisation to build long lasting brand image in customer‟s mind. This paperanalyses the actual impact of CRM in enhancing the organisational performance. This study isundertaken through the use of trend analysis method of banking sector specifically taking HDFCbank as the universe of study. A descriptive approach will be followed in this paper for analysis.Some key parameters affecting the organisational growth of the HDFC bank will be identifiedand studied in relation to CRM. Based on the analysis of these relation of CRM and these keyparameters of growth will be established. This paper concludes with the suggestions to adoptspecific measures to enhance the impact of CRM in organisational growth of Banks.

KEYWORDS: CRM, Banks, ROI, Growth.______________________________________________________________________________

INTRODUCTION

As the liberalisation has taken place the banking industry has been facing competitionfrom the services of the foreign and private sector banks. This led to the surging of the banks intonew initiatives and strategies. One such initiative for stopping the decrease in market share ofIndian banks and making more profit is CRM (Customer Relationship Management). Not onlybanks but all other kinds of industries has identified the importance of CRM as strategy forretaining the existing customer segments which are profitable and focusing on the long termvalue of the customer. As all the products and services offered by the banks being same, the keydifferentiator in the banking services which helps developing customer base and sales capacity isCRM.

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THE BENEFITS OF CRM

Rapid growth of business through retention of the profitable customer segment.

Through CRM only those customers are acquired whose characteristics are known whichresults in increased profits and hence drives growth.

CRM enables the banks (organisations) to offer the right product at right time, due towhich individual customer margins can be increased.

CRM decreases the cost of customer management.

Ease in introduction of new products as they are customer need specific and it is foundthat the loyal customers readily buy 50 % of the new products rather than the newcustomers.

As soon as the business philosophy is made this philosophy is enacted in the form oftechnological processes where the customer centric approach is used. CRM focuses on the needof the organisations to understand the customer behaviour patterns. It improves theunderstanding between the organisation and the customer. This increases one – to - onerelationship with the customers of the organisation. It has been seen that 80 % of the profits aregenerated by the loyal customers of the organisation.

EVOLUTION OF CRM

In the beginning of the civilised society the main focus was on the consumption whichmeans that people use their produce for their own consumption and for exchanging the goods. Asthe civil society established its roots, the manufacturing and industrial era augmented. This eraled to the concept of production. In this concept, the production practices evolved forconsumption as well as for sales. As the production scale became larger the amount of producedgoods exceeded the demand and hence supply was abundant. To sell these produced goods theconcept of selling came into play. This concept follows the rule that sell everything which isrequired or not required by the consumer. This was known as the transaction orientation. Finally,when customers stopped accepting the goods which they didn‟t required, the era of consumerismbegan. This consumer based concept states that, produce whatever is required by the consumerand sell the products which are needed by the consumer in such a way that the consumerpurchases again and again from the same marketer or organisation. The customer should besatisfied by the pre sales services, post sales services and the products/Services offered by theorganisation. While selling the product/services, the front liners try to make relationships withthe customers by identifying their needs, preferences, tastes and behaviour patterns etc. Thisconcept is called relationship marketing.

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Consumption

TransactionProduction Marketing Oriented

Selling

Relationship MarketingCustomer oriented

-

FIGURE 1: APPROACHES OF TRANSACTION MARKETING AND RELATIONSHIPMARKETING

These relationships are based on:

1. The prior purchases made by the customer from an organisation,

2. Good behaviour of the employee who interacts with the customer,

3. Extra beneficial offerings such as home delivery, good ambience, extra working hours,etc,

4. The quality of products / services offered by the organisation.

Now days, due to the technological advances these relationships are maintained on thebasis of the data base of the consumers which is available with the organisation through:

1. Different researches,

2. Market studies,

3. Census reports,

4. Observation

5. Competitor‟s data hacking

6. Direct interaction with the customers, etc.

With reference to the banking sector, these databases serve as the basis of relationshipmaintenance, and in order to differentiate every single customer the banks provides unique no. toevery customer known as account no. as whenever a client approaches the front desk thecustomer care executive asks for account no. and by just feeding the account no. in the system all

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the relevant information gets displayed on the screen and then the problem of the customer canbe easily resolved by viewing these records. This is also known as e – CRM. This is the latestbuzzword in the services industry.

IMPORTANCE OF CRM

Gartner predicted that the market for Social CRM software will be $1 billion by 2012whereas AMR projected that the market size of CRM software will be $22 billion by 2012. At agrowth rate of 28% per annum. It has been expected that the overall worldwide softwarespending will increase 31 per cent this year which is 9% more than the 2010. ABI marketresearch predicts that the global market for hosted services will exceed $ 34 billion in 2012, theNorth American Market will be accounting for $11.6 billion out of this. Worldwide market,which was at $13.1 billion in 2009 and expected to rise to $40.5 billion in 2014, is representingan annual compounding growth rate of 25.3%. Hence, we can see there is a steep rise insoftware as a service (SAAS)

The trend in success of CRM came in notice in early 2004 which was reported by IDC.They surveyed different companies using the CRM software and reported that:

a) 19% of companies have positive ROI up to 50%.

b) 52% companies with ROI of 51% to 500%.

c) 30% companies reported returns of higher than 500%

The timeliness of ROI on the CRM initiative taken by various companies was also foundout to be positive i.e.:

a) 58% companies experienced payback within one year or less.

b) 35% got their payback after one to three years.

c) 8% had a payback of three years or more.

All these investments and rise in spending in the CRM has made Indian organizationsrealise of the worldwide inclination of using CRM. It has been identified that in 80% ofcompanies CRM have proved to be profitable, therefore it has to be understood by theorganisations that in spite of heavy costs involved in CRM it is profitable for them. Time takenfor implementation was also less and it ultimately resulted in increasing customer retention andloyalty. If the CRM is implemented and measured in a right way it may result into high ROI(Return on Investment) for the organisations.

OBJECTIVE

CRM has evolved from just a good behaviour to software based big investments made bythe companies, these cater the needs of their customer, in such a way that the customer remainssatisfied and build a long lasting relationship with the organisation. This paper is an effort tosupport that the CRM is a worthy investment for organisations and CRM is a very strong factor

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for the organisational growth, it increases the efficiency and profitability of the organisationwhich implements it properly.

REVIEW OF LITERATURE

CRM is defined as “a management process of acquiring customers by understanding theirrequirements, retaining customers by fulfilling their requirements more than their expectationsand attracting new customers through customer specific strategic marketing approaches. Theprocess invites total commitment on the part of the entire organisation in evolving andimplementing relationship strategies that would be rewarding to all concerned” (A Sagadevan&H Peeru Mohamed, 2010). Moreover another definition can be “The infrastructure that enablesthe delineation of and an increase in customer value, and the correct means by which to motivatevaluable customers to remain loyal- indeed, to buy again” (Jill Dyche‟, 2009). After defining andgetting a clear vision of CRM its use in the private and public banking sectors has beenhighlighted. It has been found out that through maintaining the customer service qualitycustomer satisfaction can be attained. This leads to the growth of the organisation andprofitability (Ipshita Bansal and Rinku Sharma, 2008). “By satisfying the internal customers andbuilding good relationship with them the relationship with the externalcustomers can also be retained and satisfied by the banks”(Seema Girdhar, 2009). “Any bank that wishes to either grow in size of its banking operation orimprove its profitability must consider the challenges affecting its customer relationship” (AshokKumar M. & Rajesh R., 2009)

UNIVERSE OF STUDY

HDFC Bank Limited started operating as a Scheduled Commercial Bank in January1995. The previously known Housing Development Finance Corporation Limited (HDFC) wasone of the first to get an „in principal‟ approval by (RBI) Reserve Bank of India to set up a bankin the private sector. HDFC was incorporated in the name of HDFC Bank Limited in August1994 and its registered office is in Mumbai, India.

The bank has a huge presence all over India with its distribution network of 1,986branches and 5, 471 ATMs in 996 different cities as on March 31st 2011. The size of its balancesheet is 277,353 crore as on March 31, 2011. The bank earned a net profit of 3,926 crore,which has increased about 33% from the last year. While the deposits increased to 24.6% i.e.208,586 crore and advances grew by 27.1% i.e. 159,983 since last year. The Capital adequacyratio (CAR) of the bank as on March 31st, 2011 was at 16.2% as against the regulatory minimumof 9.0% Tier 1 ratio at 12.2.%.

The HDFC Bank has made a mark in the Indian banking as it has bagged many awardsfor the best bank such as:

1. Forbes Asia - Fab 50 companies in Asia Pacific

2. Asian Banker Excellence Awards 2011.

3. Dun And Bradstreet Banking Awards 2010

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4. NDTV Business Leadership Awards 2010

5. Outlook Money 2010 Awards

6. The Banker & PWM 2010 Global Private Banking Awards.

Not only these but more than these are received in best customer service category as wellas best technology and IT usage and infrastructure bank by:

1. IBA Banking Technology Awards 2010

2. IDC FIIA Awards 2011

3. Business World Best Bank Awards 2010

4. IDRBT Technology 2009 Awards: Established by RBI

5. Financial Express – EVI green business leadership Award

6. Avaya global connect 2010

7. Celent‟s 2010 Banking Innovation Award.

8. Business World Best Bank Awards 2009 & 2010.

This establishes that this bank is very customer centric Bank. Hence there is no surprisethat the mission of the bank is to become a “world Class Indian Bank”. Through the focus onproduct quality and service excellence in conjunction with benchmarking its services against theinternational standards the bank is becoming nearer to its aim. The bank has adopted bestpractices in offering products, technology, services, risk management, audit and compliance. Itsmain objective is to become the preferred banking service provider by building strong customerbase amongst different categories of businesses. For this the bank always ensure that the highestlevels of ethical standards, professional integrity are followed and full compliance of corporategovernance regulatory norms is ensured.

The strategy followed by the bank emphasises on three aspects i.e. a) market shareexpansion by following a path of disciplined growth strategy which focuses on balancing qualityof services and growth of volume by delivering the high quality customer service: b) maximisethe use of its technological platforms to deliver more products to more customers with minimumoperating costs: c) through disciplined credit risk management high standards of asset quality ismaintained.

CRM SOFTWARE USED BY HDFC BANK

HDFC Bank uses CRM Next as CRM software while the cash management is done throughusing software from a Pune based company i.e. Cash Tech. Moreover the depository system ofthe bank runs on software provided by the Mumbai - based Kalptaru. Some of the other ITenabled initiatives are:

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1) Nucleus Software for loans.

2) Mainframe - class UNIX machine (the E10000 system) from Sun Microsystems for itsbanking needs.

3) iFlex‟s Microbanker and Finware as a software for core banking operations.

4) Internet banking software for internet based channel.

CRM INITIATIVES BY THE BANK

A customer is an asset if he/she is loyal to the organisation, HDFC bank has got majorityof these assets in its customer base as 76% of its existing customers are found out to be loyal.This is attained due to holistic CRM approach adopted by the bank. As the bank‟s directorhimself mentions in his annual; report that “the bank‟s data warehouse, customer relationshipmanagement and analytics solutions have helped it target its existing and potential customers in acost effective manner and offer them products appropriate to their profile and needs.” The Bankrealises the value of CRM and IT initiatives offered to the customers for becoming more loyal tothe bank. The frauds and credit losses are also lowered by imbibing this approach of CRM. Someof the major initiatives taken by the bank for strengthening its customer experience are:

1) The bank provides Highly IT enabled services in the form of Internet banking. It hasbeen discovered that 60% of the registered bank‟s customers transact through onlinebanking.

2) Mobile banking and ATM are also providing multi-channel service delivery system tothe customers which are discovered to be 80% initiated by the customers which areserviced through non-branch channels.

3) Service quality projects are carried out by the bank using lean Sigma Tool-kit, 5Sand other business excellence initiatives are undertaken by the bank just to deliver„customer delight‟. The service quality objectives and the business objectives aremerged so that the customer delight and improved profitability can be obtained.

4) Customer service committee which monitors quality of services, formulatescomprehensive deposit policy ( in terms of issues arising due to death of a depositorfor his account operations), gets approval for the products, surveys customersatisfaction annually and triennially.

5) The bank also offers the customer helpdesk in case of any query, grievance, or directcontact to the bank, through call centres, in branch counters, email address, andthrough bank‟s website.

ANALYSIS AND FINDINGS

The parameter of growth for any organisation is profit which it earns. Hence a trendanalysis is done on the basis of data available to researcher.

YEAR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

PAT

( crore)

297 388 510 666 871 1,141 1,590 2,245 2,949 3,926

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TABLE 1: PROFIT AFTER TAX ( CRORE)

CHART 1: PROFIT AFTER TAX ( CRORE)

4500

4000

3500

3000

2500

2000

1500

1000

500

02002 2003 2004 2005 2006 2007 2008 2009 2010 2011

SOURCE: HDFC BANK ANNUAL REPORT 2011.

Year 2009 2010 2011

BALANCE SHEET SIZE( crore)

183,271 222,459 277,353

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The Chart 1 clearly shows an increasing trend in the profit after tax (PAT), since 2002 to 2011 ofthe bank this increase in the PAT has become significant from the year 2006 from when the bankstarted adopting the CRM as its strategy. PAT increased 33.2% over the last financial year.

TABLE 2: BALANCE SHEET SIZE ( CRORE)

CHART 2: BALANCE SHEET SIZE ( CRORE)

300,000

250,000

200,000

150,000

100,000

50,000

02009 2010 2011


Year 2009 2010 2011

Advances ( crore) 98,883 125,831 159,983

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The second most important parameter of growth is Balance sheet size. If it shows increasingtrend than the bank is showing higher performance in the industry. Here, the bank has shown anincrease of 24.7% over the last year as depicted by the chart 2.

TABLE 3: ADVANCES ( CRORE)

CHART 3: ADVANCES ( CRORE)

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

02009 2010 2011


Year 2009 2010 2011

Deposits ( crore) 142,812 167,404 208,586

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An increase of 26.8% was witnessed in gross advances in comparison to the previous year.Advances give a figure that how much amount of loan is provided by the bank, as depicted in thechart 3. The trend shows that the advances are increasing which means the customers areavailing loans from the bank, which is only possible when the customer is more satisfied andloyal.

TABLE 4: DEPOSISTS ( CRORE)

CHART 4: DEPOSITS ( CRORE)

250,000

200,000

150,000

100,000

50,000

02009 2010 2011


Year 2009 2010 2011

Branches (in nos.) 1,412 1,725 1,986

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Chart 4 shows a great rise in the deposits of the bank. This increase is 24.6% from the previousyear in total deposits of the bank.

TABLE 5: BRANCHES (NOS.)

CHART 5: BRANCHES ( NOS.)

2,500

2,000

1,500

1,000

500

02009 2010 2011


Year 2009 2010 2011

ATMs ( Nos.) 3,295 4,232 5,471

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According to the Chart 5, bank opened 261 new branchesin the year 2011 which resulted in morestaffing and hence gave jobs to many unemployed skilled people. This led to the increase in thepresence of the bank in new areas and hence will also increase the customer base of the bank.

TABLE 6: ATMS ( NOS.)

CHART 6: ATMS ( NOS.)

6,000

5,000

4,000

3,000

2,000

1,000

02009 2010 2011


Year 2009 2010 2011

DEBIT CARDS ( Nos. inlac)

90.8 98.3 115.5

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TABLE 7: DEBIT CARDS ( NOS. IN LAC)

CHART 7: DEBIT CARDS ( NOS. IN LAC)

140

120

100

80

Series 1

Column1

60

40

20

0

Column2

2009 2010 2011


Year 2009 2010 2011

CITIES ( Nos.) 528 779 996

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The Chart 6 and 7 shows that the increase in the ATM transactions increased by 14% coupledwith the growth of the number of ATMs and debit cards. And as alreay been stated that 80%customers prefer using these non-branch channels for availing the services of the bank.

TABLE 8: CITIES ( NOS.)

CHART 8: CITIES (NOS.)

1,200

1,000

800

600

400

200

02009 2010 2011


Year 2009 2010 2011

Customer Base (inMillion)

18 19 21.9

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The Chart 8 suggests that the banks customer base will grow due to its presence and penetrationhas increased in several new cities.

TABLE 9: CUSTOMER BASE (IN MILLION)

CHART 9: CUSTOMER BASE (IN MILLION)

25

20

15

10

5

02009 2010 2011


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Chart 9 states that customer base of the bank has increased to 21.9 million from 18 million in2009 this is a result of holistic approach adopted by the bank for providing CRM in the bank.

CONCLUSION

It is an continuous process, more the services will be offered more the customer base will growand more the customers grow more the services has to be offered . Instead of having broadcustomer base, the bank‟s aim is to get broad loyal customer base and the same is achieved byoffering better service quality and customer relationship management to its customers.

CRM is an important catalyst for the growth of the HDFC bank. The bank is able to attaingrowth as a whole due to its emphasis on the customer centricity as a key objective. As the bankis providing multi-channel services through ATMs, internet, phone, and mobile banking inaddition to its expanding branching network and deeper penetration in untapped areas, thecustomer base is increasing and hence the bank‟s profitability is increasing. This ensures thebank‟s growth.

SUGGESTIONS

1. The banks must use CRM software not only core banking software to improve its serviceexperience such as SAP or People Soft. This software helps in handling large datavolume and integrating with the IT.

2. The bank should take care of employee behaviour towards the CRM and customers as ithas been seen during the study that many bank employees yet lack customer centricity inproviding service to the customers.

3. The bank should position itself as a more customer friendly bank as it is the secondlargest private sector bank in India.

FUTURE SCOPE

This study is mainly based on the secondary data but in further research the primary data incombination with this secondary data may further prove the relevance of CRM in the Growth ofHDFC Bank.

REFERENCES

H Peeru Mohamed A. Sagadevan, 2010, “Customer Relationship Management – a step by stepapproach”, New Delhi, Vikas Publications.

IDC, 2004, “The Financial Impact of CRM”, a report.

Jill Dyche‟, 2009, “The CRM Handbook- a business guide to customer relationshipManagement”, New Delhi, Pearson Education.

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JOURNALS

Ashok Kumar M. and Rajesh R., (2009), “Whether Today‟s Customers are Satisfied? – A studywith Banks”, Indian Journal Of Marketing, New Delhi, Vol. XXXIX, No.9

IpshitaBansal and Rinku Sharma, (2008), “Indian Banking Services: Achievement s andchallenges”, The Icfai University Journal of services marketing, Hyderabad. Vol.VI No.2.

SeemaGirdhar, (2009), “Building Relationship through Internal customer: a study of south asianselected co-operative banks with special reference to Surat district of Gujarat State” Pranjana -The Journal of management awareness, Delhi, Vol. 12 No.2

MAGAZINES

Business today

WEBSITES

http://www.hdfcbank.com/

http://www.crminfoline.com/

http://www.webopedia.com/

http://www.destinationcrm.com/

http://www.crmlandmark.com/

12 zijbemr vol2 issue2 feb2012 jgbuyg ytftuyf uyguytg

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