22742565 customer relationship management of bank sector

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A

Dissertation

On

Customer Relationship Management AndImportance Of Relationship Marketing

In The Banking Sector

This project report is being submitted as a part of the

requirements of the MBA Program of Bangalore University.

The project has been undertaken

By:

SHRIYA MEHROTRA

Reg. No. 04VWCM 6117

With the guidance and support of

Prof. Raja Sekhar

Faculty: MBA

ALLIANCE BUSINESS ACADEMY

BANGALORE 560 076

Batch: 2004-2006

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Declaration

I, Shriya Mehrotra, student of MBA 4th semester, studying at Alliance Business Academy,Bangalore do here by declare that this project relating to the topic Customer Relationship

Management And Importance Of Relationship Marketing In The Banking Sector had been prepared by me after undergoing the prescribed dissertation requirements a part of theobjective of the MBA program of Bangalore University ( Batch of 2004-2006).

The study has been done under the support and guidance of Prof. Raja Sekhar.

I further declare that this project report has not been submitted earlier to any other Universityor Institute for the award of any Degree or Diploma.

Date:

Place:Shriya Mehrotra

Reg. No. 04VWCM 6117

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Certificate

This is to certify that SHRIYA MEHROTRA, student of MBA 4th semester Reg. No.04VWCM6117 of our Institute has completed his Dissertation report on the topic

Customer Relationship Management and Importance of Relationship marketing In the

Banking Sector, under my guidance, and that no part of this report has been submitted

for the award of any other Degree or Diploma to any other Board or University.

Date:

Place:

Prof. Raja Sekhar

Faculty

Alliance Business Academy

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Acknowledgement

The satiation and euphoric that accompany the successful completion of task, would

be incomplete without the mention of the people who made it possible. After all, the

success is the epitome of hard work, severance, undeterred, zeal, stead fast

determination and most of all encouraging guidance. So with immense gratitude, I

acknowledge all those whose guidance and encouragement served as a beacon

light and crowned our efforts with success.

I sincerely thank Mr.Sudhir.G.Angur, Honorable president- Alliance Business

Academy, for giving us an opportunity to take up this research. I thank him for being

a constant source of inspiration and encouragement. I would like to express my

profound sense of gratitude to Mr.B.V.Krishnamurthy, Director and executive vice

president Alliance Business Academy for providing me support to conduct this

research

With a deep sense of gratitude and indebtedness, I sincerely and whole heartedly

thank Prof. Raja Sekhar, my project guide for giving me valuable suggestions and

advice through out the execution of the project.

Last but not the least, I would like to thank almighty God, my parents, and my friends

who helped me gather these data and have sat with me for hours discussing about

the project.

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TABLE OF CONTENTS

Sl.

NoCHAPTERS Page

no

1a

1b

EXECUTIVE SUMMARY

INTRODUCTION

1.1- BANKING ON CRM1.2- DEFINE CRM1.3- STUDY OF BANKING SECTOR

1-5

2BANKING

2.1- WHAT IS BANKING2.2- KNOW YOUR CUSTOMER (KYC)

6-7

3RELATIONSHIP MARKETING IN BANKS

3.1- CRM IN BANKING3.2- WHAT DOES BANK NEED3.3- HOW CRM HELP BANKS3.4- CRM IN BUSINESS TRANSFORMATION

3.5- CRM IMPLEMENTATION IN INDIAN BANKS

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4SOCIAL CONCERNS

4.1-CONSUMER EXCLUSION & SOCIAL RES INMARKETING DECISIONS.

4.2- FIELD RESEARCH OBJECTIVES4.3- METHODOLOGY4.4- DEMOGRAPHICS OF SAMPLE4.5- DATA ANALYSIS4.6- FINDINGS

13-23

5 CRITICAL ISSUES AND TERMS 24-27

6 SWOT ANALYSIS OF RETAIL BANKS 28-30

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7 RELATIONSHIP BANKING INTROUBLEDTIMES

31

8 CRM IN FINANCIAL SERVICES SECTOR

8.1 DEFINING CRM

8.2 EVOLUTION OF CRM & CHALLENGES

OF PERSONALIZED E-SUPPORT

8.3 CUSTOMER SUPPORT

32-37

9 FINANCIAL &BANKING TECHNOLOGY 38-39

10 WHAT CUSTOMERS WANTTEN MYTHS ABOUT THE CUSTOMERS

WHAT CUSTOMERS WANT

CUSTOMERS DIRECTIVES

40-74

11 BENEFITS OF IMPLEMENTING CRMWARNING & PITFALLS

PRINCIPLES OF SERVICES IN BANKING

SUGGESTIONS

75-78

12 CONCLUSION 79-80

13 REFERENCES

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LIST OF TABLES & FIGURESTable 1 Demographics of the sampleTable 2 Number of financial institution usedTable 3 Frequency of travelling for contacting financial

transactionsTable 4 Importance and availability of technology and bank

servicesTable 5 Access to various banking servicesTable 6 Use of various banking servicesTable 7 Requirements of banking services in the regionTable 8 Use Automatic Teller Machines ( ATMs )

Figure 1 Workforce management systemFigure 2 Evolution of CRMFigure 3 Customer 360 degreesFigure 4 E- SupportFigure 5 Financial & Banking Technologies

Figure 2-1 tell me what I get if I do thisFigure 2-2 Ill do it myself when Im ready; Use what I give

YouFigure 2-3 let me make a valid comparisonFigure 2-4 Helpfulness as hindranceFigure 2-5 Conflicting navigation systemFigure 2-6 too many homesFigure 2-7 Dont lock me out

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Chapter 1

INTRODUCTION

1.1 Banking on CRM

Competition and globalisation of banking services are forcing banks to be productive andprofitable. To retain High Net Worth individuals, banks should focus strongly on relationshipmanagement with customers. Innovative Customer Relationship Management (CRM)strategies and cutting edge software can help, to a great extent, in achieving the desiredresults. To provide customised services, banks are opening Personalised Boutiques whichprovide all the required financial needs of a customer.

The entire service industry is now metamorphosed to become customer- specific. In thiscontext, the management of customer relationship in financial services industry demands

special focus. Gone are the days when customers at a bank did not mind the long serpentinequeues and waited patiently for their turn with a token in their hand. In todays Internet era,no one has the leisure to wait. In this context, online banking is assuming a great significance.Today, banking is more customer-centric, unlike the yester when it was transaction-centric.Banks are increasingly focusing on the premise that customers choose on the service providerwho differentiates through quick and efficient service.

However, there is more to Customer Relationship Management (CRM) than just managingcustomers and analysing their behaviours. Banks are well aware that their success ispredominantly dependent on the CRM strategies adopted by them. Service providers haverecognised that good CRM bonds customers with the organisation for a longer term, resulting

in increased revenues.

With customers expectations becoming even more competitive, banks are coming up with awide array of novel products and services every day. The challenge is for the banks to worktowards ensuring that customers prefer their products and services over that of competingbrands. The key to develop and nurture a close relationship with customers is by appreciatingtheir needs and preferences and catering to their requirements. Leveraging on IT, toappropriately analyse and understand the needs of existing customers better, to ensurecustomer satisfaction, and exploring the possibility of cross-selling products to gain acompetitive advantage are the other issues drawing attention and interest.

With the opening up of the economy, a number of private sector banks have joined the frayand are offering a plethora of products and services- rechristening themselves as FinancialBoutiques. Knowledge dissemination has been propelled by electronic and mass mediacampaigns. Todays knowledgeable consumer is challenging the Indian retail bankingindustry to redefine itself. Thus in this current competitive scenario, for a bank to survivecompetition, succeed and make profit, there is hardly any option but to learn from andactively respond to consumers needs. Banks offering retail products need to reorient their

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strategy from a product-centric to a customer-centric approach to attract and retain High NetWorth Individuals (HNI) and profitable customers as well.The battle of the banks, for gaining a greater slice of the market share, is taking on a newdimension. In the current falling interest rate scenario, banks are finding it increasinglydifficult to meet the high growth expectations. In order to bolster their top lines, banks are in

pursuit of newer ways and means of achieving organic growth through strategies that enableacquisition of new customers and retaining the loyalty of the existing customers. Success of abanks strategy towards customer acquisition will depend on its ability to develop customerinsights and translate these into effective operating models. Ensuring a good customerexperience at every customer touch point is the cornerstone of a successful growth strategy. Agood customer experience will drive customer acquisition and promote customer retention,which translates into increased profits. This, in other words, is the hallmark of a successfulCRM strategy. Emphasis on CRM arises on account of the challenges confronting retailmanagers----- managing to sustain and achieve growth and profits.

Bankers are conscious of the relative costs of acquiring new customers. As top management

emphasizes on delivering results, most bankers resort to customer grabbing, rather thatcustomer cultivation and creation, with the result that customer churn is the call of the day.Incidentally, bankers are fully aware that losing the existing customer and acquiring newcustomers is an expensive affair. Moreover, it acts as a drain on the existing resources of thebank, which can be better employed for growth initiatives. Therefore, the challenge for thebanks is to retain and deepen the profitability of the existing customer relationships, which isborne out by Nat Wests success.

With the shift from a transaction-centric to a relationship-centric business approach,leveraging CRM has become sine qua non. Banks are adopting CRM to converge people,process and products more effectively to embark on the true relationship banking--- with theend result of accelerating the business momentum. Towards this end, experts propose variousideas and approaches to understand the fundamental marketing motivations driving the CRMtrend in banks.

To meet the challenging preferences of the customers and to stay ahead of competitors,bankers are bound to attract customers by providing a spectrum of services. Online banking,ATM banking and telebanking are just a few of them. Banks can enhance customer service byleveraging on technology, maintenance of efficient service delivery standards and businessprocess reengineering. On their part, employees need to demonstrate certain service traitssuch as, putting on pleasing attire. At the end of the day, bankers should display a flair forcultivating a good relationship with customers through the mechanism of better customerservice.

Having understood the significance, it is prudent to plan for CRM in retail banks. To a largeextent, the success of a CRM plan is dependent on the choice of the software. Towards thisend, bankers should identify domain enterprise, credibility in the market, cost implementationand relationship with the vendor as factors on which vendor selection is based. The domainsof software systems, multiply product database and tracking require specific CRM focus.Besides understanding the requirements for CRM implementations such as, the setting up of a

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CRM cell and conducting surveys at a periodic intervals to track their effectiveness, banksneed to understand how CRM assists them n customer identification, acquisition andretention.

As a part of the planning process, frontline executives in banks should thoroughly understand

their organisational structure, infrastructure, as well as the product environment. In thiscontext, the management initiatives for CRM assume importance. A top-down CRM focusedapproach that starts with the top management, percolating and permeating to all levels of theCRM is a necessity in the present business scenario. Initiatives, such as, introducing CRMaudit by independent teams to identify the existing lacunae, and plugging the loopholes in theCRM strategy as per the recommendations of the audit report, are required to be adopted bythe banks for reaping benefits.

It is observed that banks lose their best clients to competitors due to a variety of reasons. Therationale behind losing their best clients to other service providers such as non-brokeragehouses and mutual fund houses needs to be analysed by banks. Experts opine that inefficient

and improper service is one major reason. The remedies suggested by them are that banksshould adopt customer relationship building approaches such as responding to complaintsinstantaneously, analyzing the attrition of the clients in a particular product, and rating ofservices across the network of branches, and the creation of a suggestion box to elicit theviews and suggestion of their employees. Another dimension of the relationship buildingexercise is to obtain an electronic feedback from customers to understand the level ofacceptance of existing products, which will facilitates in developing better products.

Banks can gain a competitive advantage from CRM by becoming low-cost players in themarket, achieving operational efficiency and maintaining customer loyalty. The ability topredict the products that customers are likely to purchase over a period of time, increasedproductivity of managerial executives, sales and customer service staff, and streamlining of business processes are some of the benefits retail banks obtain by taking to successfulmanagement of their customer relationships.

Implementing the right CRM tools can enhance customer satisfaction leading to businessgrowth. CRM enables organisations to motivate customers to initiate revenue-generatingcontacts. Several CRM issues such as, its effectiveness, application and challenges drawattention of the banking industry. Having witnessed the manner in which several global bankshave benefited through CRM, the Indian retail banks too need to focus on and continuouslyinvest in the customer relationship activities. The Indian banking scenario, which is still at anembryonic stage as far as the CRM domain is considered, needs to strive towards CRMimplementation to meet the emerging demands of universal banking.

1.2 Defining CRM

Customer Relationship Marketing is a practice that encompasses all marketing activitiesdirected toward establishing, developing, and maintaining successful customer relationships.The focus of relationship marketing is on developing long-term relationships and improvingcorporate performance through customer loyalty and customer retention.

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Customer Relationship Management (CRM) as the name suggests, the primary focal point is placed on the customer. The key objective is to increase customer value over time byincreasing customer loyalty. If a company develops better customer relationships, it alsoimproves business processes as well as its profits. In general, CRM is a more efficientautomated method used to connect and improve all areas of business to focus on creating

strong customer relationships. All forces are coupled together to save, improve, and acquiregreater business to customer relationships. The most common areas of business that arepositively affected include marketing, sales, and customer service strategies.CRM helps create time efficiency and savings on both sides of the business spectrum.Through correct implementation and use of CRM solutions, companies gain a betterunderstanding of their strongest and weakest areas and how they can improve upon these.Therefore, customers gain better products and services from their businesses of choice. Inorder to achieve better insight on CRM, it is essential to consider all of its components.

CRM- meaning

Customer relationship management (CRM) is a business strategy that spans your entire

organization from front office to back-office. It is a commitment you make to put customersat the heart of your enterprise. The right CRM strategy and solutions can help you securely,reliably and consistently:

Delight your customers every time they interact with your business by empoweringthem with anytime, anywhere, and any channel access to accurate information andmore personalized service.

Reach more customers more effectively, increase customer retention and boostcustomer loyalty by leveraging opportunities to up-sell and cross-sell and drivingrepeat business at lower cost.

Drive improvements in business performance by providing your customers with theability to access more information through self-service and assisted-service

capabilities when it is convenient for them. Enable virtualization in your enterprise as more of your people and resources extend

beyond your offices and around the world.

Balance sophisticated functionality with rapid implementation and effective supportfor a faster return on your CRM investment.

Todays customers face a growing range of choices in the products and services they canbuy. They base their choices on their perception of quality, value, and service. Eachconsumer has a specific behavior. But buying habits are sometimes difficult tounderstand. Therefore companies always want to gain some insight about consumer behavior and habits in order to better control this behavior. Having an impact on

consumer behavior means being able to change consumers perception of the product orservice, to establish a relation between the company and its clients.

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1.3 Study of Banking Sector

The Indian banking can be broadly categorized into nationalized (government owned), privatebanks and specialized banking institutions. The Reserve Bank of India acts a centralized bodymonitoring any discrepancies and shortcoming in the system. Ever since nationalization of

banks took place in 1969, the public sector banks or the nationalized banks have acquired aprominent place and has since then seen tremendous progress.The need to become highly customer focused has forced the slow-moving public sector banksto adopt a fast track approach. The unleashing of products and services through the net hasgalvanized players at all levels of the banking and financial institutions market grid to lookanew at their existing portfolio offering. Conservative banking practices allowed Indian banksto be insulated partially from the Asian currency crisis. Indian banks are now quoting athigher valuation when compared to banks in other Asian countries (viz. Hong Kong,Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets(NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armedwith efficient branch networks focus primarily on the high revenue niche retail segments.

The Indian banking has finally worked up to the competitive dynamics of the new Indianmarket and is addressing the relevant issues to take on the multifarious challenges ofglobalization. Banks that employ IT solutions are perceived to be futuristic and proactiveplayers, capable of meeting the multifarious requirements of the large customer base. PrivateBanks have been fast on the uptake and are reorienting their strategies using the internet as amedium The Internet has emerged as the new and challenging frontier of marketing with theconventional physical world tenets being just as applicable like in any other marketingmedium.The Indian banking has come from a long way from being a sleepy business institution to ahighly proactive and dynamic entity. This transformation has been largely brought about bythe large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (i.e.borrowing and lending). The banking in India is highly fragmented with 30 banking unitscontributing to almost 50% of deposits and 60% of advances. Indian nationalized banks(banks owned by the government) continue to be the major lenders in the economy due totheir sheer size and penetrative networks which assures them high deposit mobilizationThe Reserve Bank of India act as a centralized body monitoring any discrepancies andshortcoming in the system. It is the foremost monitoring body in the Indian financial sector.The nationalized banks (i.e. government-owned banks) continue to dominate the Indianbanking arena. Industry estimates indicate that out of 274 commercial banks operating inIndia, 223 banks are in the public sector and 51 are in the private sector. The private sectorbank grid also includes 24 foreign banks that have started their operations here. Under theambit of these nationalized banks come the specialized banking institutions.

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Chapter 2

BANKING

2.1 Definition of banking

The accepting for the purpose of lending or investment, of deposits from the public, repayableon demand or otherwise and withdrawal by cheques, draft or otherwise. (Banking RegulationAct)

Dr. Paget in Law of Banking states, No one and no body, corporate or otherwise, can be abanker who does not:

i. Conduct Current Accountsii. Pays cheques drawn on himself

iii. Collects cheques for his customers

A bank is therefore Any company that transacts the business of banking in India.Negotiable Instrument Act.

Banker:

Banker is Any person acting as a banker Negotiable Instrument Act.

Customer:

There must be some recognizable course or habit of dealing in the nature of regular banking

business. A single transaction can constitute a customer; must have an account; dealing mustbe of a banking nature; some frequency in transactions is expected but is not essential.

MAHATMA GANDHIS DEFINITION OF CUSTOMER A customer is not an outsider to our business. He is a definite part of it. A customer is

not an interruption of our work. He is the purpose of it. A customer is doing us a favour by letting us serve him. We are not doing him any

favour. A customer is not a cold statistic; he is a flesh and blood human being with feelings

and emotions like our own. A customer is not someone to argue or match wits with. He deserves courteous and

attentive treatment. A customer is not dependent on us. We are dependent on him. A customer brings us his wants. It is our job to handle them properly and profitably -

both to him and us. A customer makes it possible to pay our salary, whether we are a driver, plant or

office employee.

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Bank Customers

Minor

Married women

Pardanashin Woman

Illiterate people Lunatics

Trustees

Executors and Administrators

Power of Attorney Holders

Joint Account

Hindu undivided Family

Partnership firm

Limited companies

Clubs, Societies and Charitable Institutions

Non resident and Persons of India origin

Foreigners

Before getting into the details of how CRM actually works in the financial sector, it isvery important to know your customer.

2.2 Know Your Customer (KYC)

It is very important to know the customer before having any kind of relationship withhim (especially in the banking sector).This is important because of drugs smuggling/ trafficking, money laundering and

terrorism coming up. If one has to build a relationship with the customer one shouldfollow all the KYC norms laid down by RBI.

Under the KYC a customer is:

A person or entity that maintains an account and/ or has a business relationshipwith the bank.

One on whose behalf an account is maintained.

Any person/ entity connected with financial transaction which can posesignificant reputational or other risks.

The RBI States:

KYC must be the key principle for identification of an individual/ corporate for opening anaccount. This would entail verification through an introductory reference from an existingaccount holder, through a person known to the bank or on the basis of documents provided bythe customer.

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Chapter 3

RELATIONSHIP MARKETING IN BANKS

3.1 CRM in banking

Retail banking refers to mass-market banking where individual customers typically use banksfor services such as savings and current accounts, mortgages, loans (e.g. personal, housing,auto, and educational), debit cards, credit cards, depository services, fixed deposits,investment advisory services (for high net worth individuals) etc.

Before Internet era, consumers largely selected their banks based on how convenient thelocation of banks branches was to their homes or offices. With the Advent of newtechnologies in the business of bank, such as Internet banking and ATMs, now customers canfreely chose any bank for their transactions. Thus the customer base of banks has increased,

and so has the choices of customers for selecting the banks.

This is just the beginning of the story. Due to globalization new generations of private sectorbanks and many foreign banks have also entered the market and they have brought with themseveral useful and innovative products. Due to forced competition, public sector banks arealso becoming more technology savvy and customer oriented.

Thus, Non-traditional competition, market consolidation, new technology, and theproliferation of the Internet are changing the competitive landscape of the retail bankingindustry. Today retail banking sector is characterized by following:

Multiple products (deposits, credit cards, insurance, investments and securities)

Multiple channels of distribution (call center, branch, Internet and kiosk)

Multiple customer groups (consumer, small business, and corporate)

Today, the customers have many expectations from bank such as

(i) Service at reduced cost

(ii) Service Anytime Anywhere

(iii) Personalized Service

With increased number of banks, products and services and practically nil switching costs,customers are easily switching banks whenever they find better services and products. Banksare finding it tough to get new customers and more importantly retain existing customers.

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According to a research by Reichheld and Sasser in the Harvard Business Review, 5%increase in customer retention can increase profitability by 35% in banking business, 50% ininsurance and brokerage, and 125% in the consumer credit card market. Therefore banks arenow stressing on retaining customers and increasing market share.

3.2 Needs of a Bank

The banks now need to find out what to sell, whom to sell, when to sell, how to sell and howto be different to increase profitability. Banks need to differentiate themselves by addingvalue-added service, offerings and building long-term relationships with their customersthrough more customized products, enhanced value offerings, personalized services andincreased accessibility. Banks also need to identify customers and products that would bemost profitable and target customers with products that are most appropriate to their needsand serve the customers with greater cost efficiency.

Banks also need to find out the avenues for increased customer satisfaction, which leads to

increased customer loyalty. This may be explained better from two initiatives bank took in thepast:

1. Earlier what drove many bankers to invest in ATMs was the promise of reduced branchcost, since customers would use them instead of a branch to transact business. But what wasdiscovered is that the financial impact of ATMs is a marginal increase in fee incomesubstantially offset by the cost of significant increases in the number of customer transactions.The value proposition, however, was a significant increase in that intangible called customersatisfaction. The increase in customer satisfaction has translated to loyalty that resulted inhigher customer retention and growing franchise value.

2. Bankers invested in Internet banking, believing that the Internet was a lower-cost deliverychannel and a way to increase sales. Studies have now shown, however, that the primaryvalue of offering Internet banking services lies in the increased retention of highly valuedcustomer segments. Again customer satisfaction drives the value proposition.

Thus, banks need to retain existing customers with enhanced personalized services andproducts, which best suits their needs and satisfies them the most.

3.3 Utility of CRM in Banks

CRM primarily caters to all interactions with the customers or potential customers, acrossmultiple touch points including the Internet, bank branch, call center, field organization andother distribution channels.

CRM can help banks in following ways:

Campaign Management - Banks need to identify customers, tailor products andservices to meet their needs and sell these products to them. CRM achieves thisthrough Campaign Management by analyzing data from banks internal applications or

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by importing data from external applications to evaluate customer profitability anddesigning comprehensive customer profiles in terms of individual lifestylepreferences, income levels and other related criteria. Based on these profiles, bankscan identify the most lucrative customers and customer segments, and executetargeted, personalized multi-channel marketing campaigns to reach these customers

and maximize the lifetime value of those relationships.

Customer Information Consolidation - Instead of customer information beingstored in product centric silos, (for e.g. separate databases of savings account & creditcard customers), with CRM the information is stored in a customer centric mannercovering all the products of the bank. CRM integrates various channels to deliver ahost of services to customers, while aiding the functioning of the bank.

Marketing Encyclopedia - Central repository for products, pricing and competitiveinformation, as well as internal training material, sales presentations, proposaltemplates and marketing collateral.

360-degree view of company This means whoever the bank speaks to, irrespectiveof whether the communication is from sales, finance or support, the bank is aware ofthe interaction. Removal of inconsistencies of data makes the client interactionprocesses smooth and efficient, thus leading to enhanced customer satisfaction.

Personalized sales home page CRM can provide a single view where SalesMangers and agents can get all the most up-to-date information in one place,including opportunity, account, news, and expense report information. This wouldmake sales decision fast and consistent.

Lead and Opportunity Management - These enable organizations to effectivelymanage leads and opportunities and track the leads through deal closure, the requiredfollow-up and interaction with the prospects.

Activity Management It helps managers to assign and track the activities ofvarious members. Thus improved transparency leads to improved efficiency.

Contact Center It enables customer service agent to provide uniform service acrossmultiple channels such as phone, Internet, email, Fax.

Operational Inefficiency Removal CRM can help in Strategy Formulation to

eliminate current operational inefficiencies. An effective CRM solution supports allchannels of customer interaction including telephone, fax, e-mail, the online portals,wireless devices, ATMs, and face-to-face contacts with bank personnel. It also linksthese customer touch points to an operations center and connects the operations centerwith the relevant internal and external business partners.

Enhanced productivity CRM can help in enhanced productivity of customers,partners and employees.

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CRM with Business Intelligence - Banks need to analyze the performance ofcustomer relationships, uncover trends in customer behavior, and understand the truebusiness value of their customers. CRM with business intelligence allows banks toassess customer segments, which help them calculate the net present value (NPV) of a

customer segment over a given period to derive customer lifetime value. Customerscan be evaluated within a scoring framework. Combining the behavior key figure andfrequency to monetary acquisition analysis with a marketing revenue quota canoptimize acquisition costs and cut the number of inefficient activities. With suchknowledge, banks can efficiently allocate resources to the most profitable customersand reengineer the unprofitable ones. Data warehousing solutions have beenimplemented in Citibank, Reserve Bank of India, State Bank of India, IDBI, ICICI,MaxTouch, ACC, National Stock Exchange and PepsiCo. And Business Intelligenceplayers hope many more will follow suit.

A word of caution.

Customers may not want what they get: A CRM system apart from improving front officeoperations and customer servicing also helps in coping with many services that do not needmanual intervention. These are serviced by channels like IVR, Internet and ATM. Customerscan get account information, information on credit balance, issue instructions for drafts oreven transact through these. At the same time there may be a few customers who still preferthe traditional methods of banking. Banks need to be flexible enough to continue to extend the"personal touch" that such customers prefer.

Make changes internally before going for CRM: Many banks have spent a lot of money onCRM, finding it easier to buy CRM technology than to make the major internal changes

necessary to really make CRM work for them. Unfortunately for these banks, the software hasoften failed to deliver.

3.4 CRM is Business Transformation

Too often banks have focused on the wrong areas of CRM. CRM is really about businesstransformationchanging the business from services-centric to customer-centric.

Have defined Objectives - Many CRM implementations have been approved withoutexamining aspects like profitability, turnover etc. CRM implementations should have welldefined objectives, such as RoI, Sales etc.

Consider Complete Life Cycle Costs while budgeting - Measurements of profit are oftenconstructed to embrace only the initial cost of sale. This is of little use if the ongoing cost ofservicing a customer outweigh the margin of profit that customer is generating. It is criticalthat banks have recognized and embraced the importance of the trend towards customerdevelopment, and that this is reflected in actual marketing budget allocation.

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3.5 CRM Implementation in Banks in India

According to Nasscom report Strategic Review 2004, Indian CRM market was estimated atUS $ 14 million and is forecast to grow to US $ 26 million in 2005. Banking and financial

services segment has a high growth potential and accounts for 22 percent of CRM licenserevenue. There are many banks such as ICICI Bank, HDFC Bank and Citibank, which areusing CRM products.

Disciplined work along four dimensions can significantly improve results from CRM

initiatives:

Customer Segmentation- Do intensive data analysis and value-based segmentation tohighlight the value of different customer segments and the underlying drivers of that value.

Design programs- Design innovative programs focusing on customer acquisition, cross-sell,

retention, loyalty, and customer service, based on customer insights, experience and industrybest practices.

Design Processes- Design internal and external processes to support and sustain successfulprograms.

Good Decisions based on Right Information- The information from a CRM program canoften guide better operational business decisions at many levels of the organization. Gathercustomer information at a broader set of touch-points, perform in-depth analysis, and makecritical information available to relevant stakeholders.

The retail banking industry is undergoing revolutionary change. There are many players andcompetition is tough. Customer Relationship Management is an important weapon in thisfight. The ability to mass customize the customer experience and refresh the value propositionis necessary to retain the right to do business with the customer. Consolidation and technologywould become must for sustenance and growth. The pressure will be on banks to integratedata from every channel and know what customers say so that the banks deliver what theywant. As the competitions increase, banks will require the robust CRM functionalities in orderto manage their most valued asset their customers.

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Chapter 4

SOCIAL CONCERNS

4.1 Consumer Exclusion and Social Responsibility in Marketing Decisions

The radical changes occurring in the micro and macro environment, which dynamically affectthe marketplace and its participants, are widely known. Both the industrial and the academiccommunities have to realize the need of a re-determination and re-evaluation of many basicand traditional concepts of the strategic marketing plan. The defenders of the concept ofglobalization argue that it ideally leads to a multi/cross cultural and without boundaries world.In this context, there is a need of a worldwide community to capitalize effectively andefficiently the opportunities based on the principles of the "system".

It is certain that technology has a pivotal role in the context of globalization. Moreover,

technology is being presented as the magic "stick" that could eventually overcome anyobstacle or problem and create a worldwide community to sharing equal opportunities inprogress, education, communication and information. This is of great importance only when itis clear that technology has to be user/citizen oriented and publicly accessible.

Considering the implementation of eventual globalization it is crucial to remember some ofthe basic axis of the concept. For example, the creation of a global community has tounderline and incorporate local and regional social characteristics. In practice this can betranslated into specific directions for public and private organizations and their variousorientations in order to provide opportunities at local and regional levels.

What happens in the real world when attempting to create the "global community"? Is thereany re-orientation of the aims and objectives instigated by industries? How do companiestarget the market in terms of geographical dispersion? Which are the main criteria whenevaluating the selected target markets? Is there any "space" to serve small or isolatedcommunities? Is there any possibility, that the traditional marketing concepts as well as globalmanagement principles and foundations, have been used as a cover in various decisionsconcerning the selection of target markets, in contradiction to the new role they have to playin the adoption of the globalization concept?

The focus of this paper is on the companies' role in the implementation of globalization undertheir social responsibility's point of view and the re-thinking about some basic marketing

concepts, as a direct consequence. Moreover, the authors argue that companies have to be re- positioned in the society as well as in front of their selves, in order to create a newcontemporary profile, in tune with the needs and evolution even of the regional and localcommunities. It is known that companies often underline their role within the society as themeaning of their new profile and orientation. However, the concept of societal marketinghaving as its core theme the company's orientation toward the well-being of the customer andgenerally the society creates at the same time a field of dialog between the academiccommunity and the industry.

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Marketing should always be addressed to customers in order to gain the answers it looks for,to all its inquiries. Marketing ethicists have long criticized some marketers for making non-socially responsible or even unethical decisions in the market selection. These issues havebeen referred to as the ethical issues of inclusion and exclusion and these are the basic axis

that marketers have to follow in order to adopt a new orientation in the context ofglobalization (An example of an exclusion decision is not providing a needed product /service to a segment of the population which needs it ).

It is widely accepted that the social role of companies is manifested by the improvement ofthe living standards of the society. But this is to ascertain that when social exclusion occurs,then the living standards become even lower.Financial exclusion could be experienced in many different ways. Its key characteristic is theinability of some customers to access necessary financial services in an appropriate form. Itmight be caused by macro-economic factors and facts or, of course, as the result of decisionsmade by the management of a specific company or even by the whole industry. Particular

conditions related to the marketing mix factors (marketing exclusion), strongly related to aprevious experience (condition exclusions), such as a high - not affordable price (priceexclusion), the lack of accessibility, due to a certain distribution-related decision (accessexclusion), not matching image (as a result of false or "correct" perceptions), may createbarriers between the customer and the company that do not support a further relationship.However, not all customers experiencing financial exclusion are of any interest for acompany.

Financial exclusion also is accepting self-exclusion. A decision made by the customer as aresult of dissatisfaction from a previously related experience. Referring to the specificexample of bank services, offered in isolated areas in India, we can see that in the vastmajority of the small isolated islands in India, not only technology aided banking services, buteven traditional local bank branches are not provided. In these cases, when this kind ofexclusion occurs, the local post office branches are servicing customers. However, asprobably expected, they are providing only the most common banking transactions, and ofcourse, from the strategic point of view, any mentioning about "corporate identity building"and "corporate / brand equity building" is to be avoided. This is because exclusion decisionshave already been taken and implemented.

In any case, particularly when talking about service provision, the customer is definitely anintegral part of the marketing and delivery process. However, the service provider via theimplemented processes and the humans involved is the one with the determining role in itsimplementation .Services are becoming more and more a major competitive tool, even in the physical goods industries, necessitating a close relationship, often called a strategicpartnership Financial exclusion is strongly related to service providing. In some cases the lackof the provision of financial services becomes unjustified having in mind the opportunitiesprovided by information technology. This is exactly the case, when referring to the bankingindustry.

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This piece of research reveals the correlation between the geographical and financialexclusion concerning two geographical remote areas in India. The study identifies the bankingattitudes of a customer segment that hasn't been investigated in the past; those who have neverbeen included. It examines the expectations and the satisfaction of the banking services, theuse of banking technologies and the usage of available banking products, by the inhabitants of

two remote and isolated islands in Greece. In these islands fully developed financial serviceshave never been offered.

4.2 FIELD RESEARCH OBJECTIVES

Financial exclusion is often largely attributed to structural changes in the financial servicessector, including increased competition from new entrants in the markets, mergers andinformation technology. All these characteristics, resulted in the development of acombination of tactics related to the adoption of cost cutting activities and increased emphasison market segmentation and appropriate targeting, are present in the banking sector in India.

The inhabitants of isolated areas cannot satisfy their banking needs although they have ahealthy income profile and financial strength. Only few financial services were traditionallyoffered in these areas. Nowadays, due to the increased competition in the market, theseneglected customer segments can be of interest to the banking industry.

There are many small isolated islands with no traditional local bank branches in India. In thevast majority of them, no technology aided banking services are provided. When available,the most common banking transactions are often provided by the local post office. Bankingneeds, the familiarity with banking services and the use of technology for the consumption ofthese services have been the subject area of previous research. However, little is known aboutthe above and the elements contributing to satisfaction for people who have alwaysexperienced financial exclusion and are not familiar with technology. Lack of awareness inthe use of technology and limited contact with payment systems, such as cheques and creditcards is the norm in isolated areas. Contrary to common belief, these conditions can acceleratethe use of new technologies and modern financial products.

This study was designed to focus on a distant, isolated population and:Investigates the banking services currently used by customers.

Explores their banking needs.

Identifies their perceptions of the existing banking services.

Investigates the usage of virtual banking services.

Investigates their attitudes towards the provision of unmanned banking services via

Information Technology.

The research is exploratory, as the available information in relation to customers living inisolated areas, is insufficient on these elements. However, this paper attempts to examine theissues further.

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4.3 METHODOLOGY

Sampling Frame

Two of the most isolated suburbs, Sitapur and Biswan, were chosen as collecting data from allthe remote Uttar Pradesh cities is almost impossible, due to resource limitations. Sitapur is a

suburb and attracts mostly business class. In 1991 it had a population of 267, living in twovillages. The area of Biswan is somewhat bigger, has a long tradition in sugarcane farmingand attracts manufactures of sugar and allied products.In both places there is a post office,offering a limited range of financial products.

It is worthy to mention that, it rarely happens to the citizens of those areas to be selected asrespondents to surveys. The inhabitants experience a certain kind of "exclusion" by both theprivate sector and the public sector, not only as customers or as audience but even as citizensthat "their opinion counts". So, they feel excluded not only from what is happening but evenfrom what is being planned or prepared by almost all sectors. As expected, this kind ofexclusion leads them to a greater disappointment in conjunction with the other forms of

exclusion.A total of 359 people (representing approximately 51% of the inhabitants of the islands) wereinterviewed (table 1). Of those, 190 were interviewed in Sitapur and 169 in Biswan. The menhad stayed in areas other than the place of origin; further more they were significantly bettereducated than women. It is not surprising to find that a quarter of the inhabitants are retired asthe population of these islands is ageing, and. The education of the sample is representative ofthe educational levels of isolated areas, but not of the whole of Greece, where most peoplegraduate from high school and the majority continue a higher education. Almost 59% of therespondents never went to High school, while only 12.5% of the sample had a highereducation qualification. The educational profiles were more extreme in those that never leftthe islands.

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4.4 TABLE 1. DEMOGRAPHICS OF THE SAMPLE

Data Collection, Research Instrument and Procedures

TABLE 1. Demographics of the sample

Never lived away Lived away>1year

Total

Total % Total % Total %Gender

Male 73 39.04 112 65.12 185 51.53

Female 114 60.96 60 34.88 174 48.47

Age

18 25 26 13.90 19 11.05 45 12.53

25 35 23 12.30 28 16.28 51 14.21

35 45 36 19.25 27 15.70 63 17.55

45 55 32 17.11 33 19.19 65 18.11

55 65 19 10.16 22 12.79 41 11.42

65 + 51 27.27 43 25.00 94 26.18Education

None 13 6.95 8 4.65 21 5.85

Primary School 108 57.75 81 47.09 189 52.65

High School 53 28.34 46 26.74 99 27.6

University 11 5.88 34 19.77 45 12.53

Other 2 1.07 3 1.74 5 1.39

Occupation

Farmer 13 6.95 4 2.33 17 4.74Trader 2 1.07 1 0.58 3 0.84

Salaried 6 3.21 11 6.40 17 4.74

Retired 47 25.13 42 24.42 89 24.79

Housekeeper 75 40.11 34 19.77 109 30.36

7 3.74 4 2.33 11 3.06

Civil Servant 11 5.88 23 13.37 34 9.47

Businessman 14 7.49 35 20.35 49 13.65

Privately employed 4 2.14 5 2.91 9 2.51

Other 8 4.28 13 7.56 21 5.85

Total 187 100.00 172 100.00 359 100.00

The actual study was conducted over a period of two months in three stages:

A draft questionnaire was developed during the first stage. The questionnaire was pre-testedin Lucknow, the capital of Uttar Pradesh. Since the sampling frame contained respondents,who were quite different from those in Lucknow, it was decided that the questionnaire shouldbe pre-tested for a second time, under real circumstances. In addition, it was appreciated that

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identifying and approaching the inhabitants of these isolated areas was very difficult andcontacts with the local opinion leaders should be developed to overcome these problems.

During the second stage, the final research instrument was developed and links with the localcommunities were established. Ten semi-structured in depth interviews were conducted with

local opinion leaders (i.e. the Mukhiya, the priest, teachers in the local schools). Basicinformation and support in reaching the general population was given. Five focus groups withinhabitants of each suburb, helped in the development of a general understanding of thesituation and attitudes towards both technology and banking, followed. During the focusgroups, the questionnaire was pre-tested. It was apparent that the prospective respondents,although helpful and very interested to express their opinions, had difficulties inunderstanding and filling it in. This was mostly due to their limited experience in participatingin research and answering closed questions. To overcome this problem and in order to capturethe true perceptions of this particular sample, it was clear that data should be collected byperson-administered interviews.

During the last stage, the quantitative data was collected via in-home interviews andinterviews in public places that locals tend to visit on a regular basis. The fieldwork for thispart of the study was conducted in four days. I collected the quantitative data.

4.5 Data Analysis

Research on the inhabitants' views in these areas is relatively limited. Because of theexploratory nature of all the issues examined, descriptive statistics are displayed. As a nextstep in our analysis, we performed a series of extensive statistical analysis, using T-Tests, chi-square statistics, in order to identify the exact relationships. More precisely, in order toexamine the hypotheses that the opinion of people in the two samples and the fact that the onegroup has experienced living away from the island was not related, independent samples t-testwas used. To assess the ranking of different variables, by examining the mean rankdifferences, Friedman two-way ANOVA test was conducted. Pearson 2 was also used inorder to examine comparisons of categorical data. For all tests, observed significance level ofthe test (p) less than 0.05, the hypothesis that the variables under investigation areindependent was rejected.

4.6 FINDINGS

A primary objective of this study was to investigate the banking services currently used bycustomers, in order to reveal the provision of those services in the particular areas. Inaddition, the study highlights their perceptions about the provided services. In this section, wediscuss the key findings of this study, in order to provide also a new perspective oncompanies' social responsibility issues combining those with "exclusion", particularly socialand financial one.

As expected, the population of those remote areas is not denied access to financial services, aslong as they make the effort to obtain them. As shown on table 2, almost all respondents havesome sort of bank account. An interesting finding is that a high percentage of the sample

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(56.57%), are banking with more than one financial institution. Those respondents who havelived away does not presents any clear differentiation of those who have spent all their lives inthe island regarding the use a different number of financial institutions from those (Pearson2= 8.97, p= 0.06).

TABLE 2. Number of financial institutions used

Never livedAway

Lived away>1 year

Total

Total % Total % Total %

None 2 1.1 0 0.00 2 0.56

One 90 48.1 65 37.8 155 43.18

Two 76 40.6 75 43.6 151 42.06

Three 15 8.0 27 15.7 42 11.70

Four or more 4 2.1 5 2.9 9 2.51

Total 187 100.0 172 100.0 359 100.00

As far as the conditions of use is concerned, it is clear however that 30.37% of the sampleclaim that they need to travel to another island at least once every two weeks to make theirrequired transactions. Only 5.29% of the sample cited that they are able to make them all inthe island they live on (table 3). The results highlight that it is almost compulsory for someonewho wants to satisfy banking needs to visit another island, while all residents travel with asimilar frequency (Pearson x2= 2.11, p=0.72). This cause additional cost to them associatedwith banking transactions, since staying away overnight or even for a longer period is oftennecessary due to the frequency of the islands' connection by boat and the weather conditions.

TABLE 3. Frequency of travelling for contacting financial transactions

Never livedAway

Lived away>1 year

Total


Once a week 5 2.7 9 5.2 44 12.26

Once per 15 days 12 6.4 11 6.4 65 18.11

Once a month 44 23.5 44 25.6 129 35.93

Less than once a month 62 33.2 56 32.6 102 28.41

Never 64 34.2 52 30.2 19 5.29

TOTAL 187 100.0 172 100.0 359 100.00

An interesting finding on a related topic, i.e. technology and its contribution to the areas well-being is that all respondents identified technology as a key factor in the development of theirarea (table 4), since it was revealed that they believe that unless the area develops, morequalified young people will stay there. Similarly to banking services availability, technologywas also found to be far from being adequate. Those that have lived away were even moredisappointed with the services provided, although the observed difference was not statisticallysignificant.

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Respondents provided low scores regarding their ability to access to the various bankingservices in their area (table 5). Only when referring to the most basic services(withdrawal/deposit) this is not the case. More precisely, the people feel that payment of billsis the service to which they have the most access to in their region, followed by

withdrawal/deposit (x2=1108, a=0.00).

Particularly, those respondents that have been away for a long time, and therefore they haveexperienced ATM and other technologies usage in the past, they feel that they do not receivethe quality of service they perceive as standard.

TABLE 4. Importance and availability of technology and bank services

Never lived

Away

Lived

away>1 year

Total

Mean SD Mean SD Mean SD t-value p

Technology is a key factor for thedevelopment of the region

4.81 0.71 4.83 0.49 4.82 0.61 -0.20 0.84

The needed banking services areavailable in my region

2.10 1.36 1.85 1.25 1.98 1.31 1.79 0.07

The need for financial servicesincrease in summer

4.78 0.73 4.80 0.63 4.79 0.68 -0.22 0.83

1= strongly disagree, 5= strongly agree

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TABLE 5. Access to various banking services

Never livedAway

Livedaway>1 year

Total t-test Friedman

Mean SD Mean SD Mean

SD t-value p MeanRank

Withdrawal Deposit 3.84 1.36 3.35 1.51 3.61 1.45 3.24 0.00 5.75

Loans 1.41 0.88 1.29 0.73 1.35 0.81 1.41 0.16 3.02

Subsidies 1.75 1.23 1.58 1.06 1.67 1.15 1.38 0.17 3.44

Credit cards payments 1.44 1.00 1.31 0.84 1.38 0.93 1.39 0.17 3.03

Payment of bills 3.91 1.36 3.72 1.59 3.82 1.48 1.28 0.20 5.89

Foreign currency exchange 2.23 1.52 2.12 1.51 2.18 1.51 0.71 0.48 4.06

Stock exchangetransactions

1.23 0.73 1.21 0.67 1.22 0.70 0.28 0.78 2.81

1= very difficult, 5= very easy

The great majority of the respondents (67%) claim that they perform bank transactions at leastonce a month. Again, the basic banking services (withdrawals/deposits and payment of bills)are those that are used the most in the area (x2=1158, a=0.00) (table 6). Those that have livedaway, appear to use the basic bank services more than the others and make more stockexchange transactions, although the latter is still one of the least used services. Only a small% of respondents, indicated to make use of any kind of credit cards for their transactions. Itseems that it is the custom of the area to pay in cash.

TABLE 6. Use of various banking services

NeverlivedAway

Livedaway>1 year

Total t-test Friedman

Mean

SD Mean

SD Mean

SD t-value p MeanRank

Withdrawal Deposit 2.84 0.92 3.05 0.94 2.94 0.93 -2.12 0.03 6.08

Loans 1.14 0.47 1.15 0.46 1.14 0.46 -0.25 0.80 3.12

Subsidies 1.29 0.67 1.19 0.47 1.24 0.58 1.67 0.10 3.31

Credit cards payments 1.24 0.77 1.40 0.98 1.31 0.88 -1.67 0.10 3.26

Payment of bills 2.80 1.26 2.83 1.20 2.81 1.23 -0.18 0.86 5.62

Foreign currency exchange 1.52 0.98 1.47 0.94 1.49 0.96 0.53 0.60 3.57

Stock exchangetransactions

1.09 0.47 1.26 0.86 1.17 0.69 -2.43 0.02 3.04

1= very rarely, 5 = very often

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As shown on the following table (table 6/7), the respondents all shared the same perceptionsin relation to the standards of the banking services offered in their region. They did notexpress any major concerns in terms of the security of the banking services and werereasonably content with the reliability of the systems. However they all expressed somediscomfort in relation to the speed of the system. But, their major concern refers to the

coverage of the banking networks. When compared with the others criteria measured, thefindings imply that they all agree that the quality of the service provided was not what theyexpected.

Among all requirements of the banking services in the region, only "personal contact"received a slightly lower mean score, implying that all respondents agreed that reliability,speed, security and convenience are most important features of the provided banking services(table 8). Those that have spent some time away from the native place believed that thisfeature is of less importance than those that have stayed on the island for most of their livesand are used to doing business through personal contact. When paired sample tests wereperformed, it was revealed that there was no difference in the perception of the importance of

all these elements (a=.00).

TABLE 7. Requirements of the banking services in the region

Never livedAway

Lived away>1 year

Total

Mean SD Mean SD Mean SD t-value P

Reliability 4.92 0.31 4.89 0.32 4.90 0.33 0.88 0.40

Speed 4.91 0.32 4.88 0.34 4.90 0.33 0.89 0.38

Security 4.94 0.27 4.93 0.30 4.93 0.28 0.19 0.85

Convenience 4.89 0.39 4.90 0.43 4.89 0.41 -0.31 0.76

Personal contact 3.74 1.54 3.39 1.64 3.57 1.60 2.07 0.041= strongly disagree, 5= strongly agree

The use of ATM services are not at all popular, as 71% of the sample cited to be non users ofATM services, or even in the past "they have never used" an ATM (table 9). However, thisfinding was somewhat supported by the views expressed during the personal interviews andthe focus groups, where the participants linked their desire to have some personal contact withthe bank employees with the fact that they have to make an actual journey to visit the bank.This could be a plausible explanation, since they use other technology. For example, morethan 44% of the respondents reported that they own and use a mobile phone.

Although all respondents appear to have limited experience in using ATMs, the resultsindicated slightly differences among those who have lived away and those who have stayedfor their whole lives on the island, (Pearson x2=8.691, a=.00). Once again, it seems that theexperience of living in other, more technologically developed areas, or in other words, notexcluded areas, appears to influence positively the potentiality of ATMs.

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TABLE 8. Use of Automatic Teller Machines (ATMs')

Never livedAway

Lived away > 1Year

Total


I have used ATMs 42 22.46 63 36.63 105 29.25I have never used ATMs 145 77.54 109 63.37 254 70.75

Total 187 100.00 172 100.00 359 100.00

In the in depth interviews, it was revealed that the inhabitants of these islands wereexperiencing difficulties in using most of the highly sophisticated equipment, and ATMs wereperceived as such. Some of the people interviewed felt that using an ATM machine is risky,and were not willing to trust the equipment. This is mainly due to problems with the telephoneconnections used at present to support the ATM network.

It was not surprising, after all, that less than 2% of the respondents have ever used a bank'sweb site. When they were asked, it was clear that the Internet was only used for informationgathering. None have used the Internet for banking. The inhabitants of these islands weresecurity conscious, and believed that using a computer to perform financial transactions ishighly dangerous.

Moreover, the exclusion of these places entail also very important social and politicalimplications.

By explicitly considering these issues, one can argue, based not only on their intention butalso on their potential, that many of the respondents could (and therefore should) be among

the target-customers of the major banks of the country. However this does not occur. Is thatthe "real world" bank deny their social role, or it is the result of their interpretation of somebasic marketing concepts?

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Chapter 5

CRITICAL ISSUES AND TERMS

5.1 Setting socially responsible Marketing Objectives and Strategy

In the free market economies, business organizations are free to choose what goods andservices they produce, the processes by which they produce as well as the markets they aim toserve. So, a social service does not necessarily mean the offer of specific additional servicesto particular customers. It means the company's orientation in offering its products/services ina more "social way".

In market economies where companies do have a high degree of autonomy, the manner inwhich organizations make strategic decisions, taking into consideration the SocialResponsibility notion, becomes in itself a matter of discretion. As Frederick et al, (1992)

suggests there are 3 broad views of the social contribution of the company. The so called"social obligation", adopted by companies which act, in accordance to what the law requires.The 'social responsiveness", where the companies are more open to moral issues andinfluenced by involving the acting social groups, and finally, "social responsibility" underwhich companies recognize a wider spectrum of relationships with the different stakeholdersand enhance certain levels of interaction with such groups.

So, it is important to recognize that the concepts of "social responsibility" and "any kind ofexclusion" are not theoretical claims or even new, "smart" ways of determination of a"competitive advantage. Instead, it is a certain philosophy of doing business with seriousconsequences to society's well being. The real importance of companys social responsibility

has not to do with its reactions to particular facts or events, but to their view, to theircontribution and role to the society. Therefore, the subject of social responsibility of aparticular company shouldn't be left to ones managers hands, but it should be the core concernbehind a company's existence.

Apart from Societal Marketing, which should also focus on a long-term orientation towardscustomer satisfaction without excluding of course profitability and stable growth,Relationship Marketing focuses on the creation of long-term relationship between variousparticipants - members of the particular network, involved in a process based on the axioms of"mutual exchange and fulfillment of promises".

Moreover, as Kantner claims a "successful partnership manage the relationship, not just thedeal". Therefore, the new emerging marketing paradigm could thus be called relationshiporientation, where strength and quality of the relationship as well as the quality andprofitability of the relationship play significant role. But the question arises exactly there, i.e.in the definition / identification of the "various participants-members of the particular networkwho are going to be involved in a relationship"! Who decides the criteria under whichsomebody will become member of the "network"?

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Even, the societal marketing concept holds that the organization's task is to determine theneeds, wants and interests of target markets and to deliver the desired satisfaction moreeffectively and efficiently than competitors in a way that preserves or enhances theconsumer's and the society's well-being .

So, it is already clear, that the societal marketing concept requires the promotion of "properconsumption values" so that "long-run consumer welfare" may be attained. Thus, it requiresthat the business organization includes social, ethical and ecological considerations in its,product and market planning. But, how much emphasis has been given to the particular targetmarkets and what balances with society as a whole?

Referring to the traditional Marketing concepts of "segmenting - targeting - positioning", onecould claim that the "focused targeting" is among the most successful strategic options. Thequestion is about the criteria this strategic decision will be implemented. The main purpose ofsegmenting is to create substantial, measurable, accessible customer segments in order totarget effectively and efficiently in the future.

Nowadays, "customer valuation" forces to a more rationalized way of usage of the abovementioned strategic tools, since the customer of the company becomes the "consumer of thewealth of the organization". As a result, value is seen as something that has to be extractedfrom customers to create shareholder value and all customers should be shown sufficientreturns to the organization.

Therefore, we strongly believe that under the scope of re-formulating the companies' roles insociety, one should re-define the segmentation criteria as well. Although traditionally, this hasbeen implemented based on product-related variables (i.e. product usage and product benefit)and consumer related variables (i.e. demographics, lifestyle, self-concept etc), communitys"well being" has to become the "compass" of segmentation criteria, setting.

The traditional marketers claim that "consumer/customer is the focus" and that consumer'sneeds and desires are the raison-dieter for marketing (the marketing concept can be describedas an integrated effort aimed at providing customer satisfaction). Is it not the appropriatetime to focus on the consumers' well being and make use of the several variables according tothis notion of well being? Otherwise, the claim "consumer is the focus" is not totally true andit should be modified to "consumer of our convenience is the focus".

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5.2Customer Dialogue Builds Loyalty & Profit

Customers and potential customers are getting more sophisticated. The very marketingtechniques used to separate the customer from their hard earned money are, helping, bytraining both the old and newer generations of customers to be more wary and smarter.

Customers want to trust the companies they buy from and in some case may even value arelationship of a sort.

Managing Customer experience is the biggest challenge faced by businesses today. Theability to acquire, retain and grow customer relationships is determined by an organization'sability to quickly adapt to changing customer needs. This demands an integrated approach tomanaging customer interactions.

5.3 Customer 360

It is in line with these needs that a concept called Customer 360 has been generated - an

integrated framework that addresses every point of the customer lifecycle of a business - fromcustomer support to back office to customer analytics.

What is Customer 360?

Customer 360 is a proprietary framework for integrated Customer Lifecycle Management(CLM) services that touch every point in the customer lifecycle of your business. Customer360 integrates both direct and indirect interactions of a customer along the entire lifecyclefrom prospecting to acquisition to service to retention while also delivering insights throughcustomer analytics. From a business point of view, this translates into reduced service costs,increased business and enhanced profitability. From a customer centric viewpoint, it translates

into customer delight and enhanced customer satisfaction by catering to their current andfuture needs.

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Customer 360 comprises of:

Customer Interaction services

Back-Office services Customer Intelligence service

How will Customer 360 benefit your organization?

Traditional delivery models address short-term business objectives like the need to attract newcustomers or provide support - which caters to a single customer touch point. This approachlacks a holistic view - in terms of customer experience across other touch points and insightinto customer's needs and behavior. Customer 360 is an integrated solution that can ensuremarket adaptability, competitiveness and assured business.

5.4 Inbound Customer Marketing Research Report

The world of targeted marketing is moving on apace. Organizations no longer rely just ondirect mail to get their message across. The norm is fast becoming: multi-channel with the callcentre, website, e-mail and SMS all joining the fray; multi-stage where a number of contactevents are tracked prior to making the sale; and insight driven, where consumers are targetedbased on their predicted behaviors or the occurrence of specific events in their lives.

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Chapter 6

SWOT ANALYSIS OF RETAIL BANKS

6.1 Banking on an Online Future

These are the following opportunities and threats posed to retail banks by online banking.

The development of online banking has proved a mixed blessing for retail banks. By allowingcustomers to service their accounts online, online banking represents a clear opportunity toreduce the costs of face-to-face banking.

However, the study suggests that over a quarter of Internet users are now using onlinebanking, the majority of customers are proving slow to take it up, and even those who do still

demand the reassurance of one-to-one personal support, whether provided online or over thetelephone.

A survey underlines the fact that customers valued the personal touch, with 63% citingresponsive service and being treated as a valued customer as the most important factor drivingtheir overall satisfaction with their bank or other financial institution.

The problem is that for most banks, providing the personal support that customers value sohighly can rarely be justified.

But at the same time bankers admit that the single biggest reason that customers didnt effect

was the inconvenience of changing banks.

6.2 Cost Trap

It seems that banks are caught in a classic cost trap: Customers want detailed, one-to-one,personalized advice, yet neither they nor their financial providers are prepared to pay for it. Inthe past this circle was squared through the medium of an independent financial adviser(IFA), offering free advice in return for the opportunity to sell financial products oncommission.

However, the threat is pensions mis-selling have made many consumers wary of themotivation of the IFA, while the introduction of CAT standards for a number of financial

products is cutting into the commission available to fund, free financial advice.

With the coming of CAT, the selling of financial products will have to be done on a simpler,more direct model, says Dave Patel of financial software developers DPR Consulting: Youcant have five layers of people taking 1% commission and then managing that product for thecustomers lifetime. A lot of the banks are interested in getting away from IFAs and owningthe client directly.

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Banks motivation to move into the provision of advice will be as much about, customerretention as selling products the challenge is to be able to do it cost-effectively. He believesthat the answer is for banks to invest in online, self-service products which use knowledgemanagement techniques to automate the provision of advice which is neverthelesspersonalised to the user.

A suite of products should be created which can be tailored by banks to offer a detailed wealthcheck to their users. Users need to spend about 20 minutes entering their details, but in returnthey receive instant feedback, and by the end will have created an online portfolio from whichthey can continue to manage their affairs.

A financial adviser probably has knowledge of no more than 100 products. Its also more personal that one can say he does not want any IT investments, or that he only wantsenvironment friendly funds. And the software will spot contradictions in his responses.

6.3 The Rewards

The payback for the bank is in the amount of information about customers the online checkdelivers - up to 300 items of information on employment, home ownership and so on. Thisapproach is most applicable to the mass affluent customer with over 10,000 in liquidassets.

Once implemented, online advice systems can be made available at no extra charge to lessvaluable customers, and also be used to underpin the personal advice given to customers withmore complex affairs.

With several retail banks, there seems to be a great deal of caution about creating more andmore online capability.

E-commerce generally has failed to live up to expectations, and the withdrawal of players likeFirst-e from the market has made the prospect of Internet-only banking as distant as thepaperless office.

There are lots of nice things you can do online, but you have to look at the costs andbenefits, says Angela Mackintosh, marketing director of multi-channel bank If.com. Itslike the 1980s when people did all sorts of computerised stuff on the basis that you could doit, rather than that it was what the customer wanted.

Ms Mackintosh says that If.com took a conscious decision when it launched not to offerfinancial advice: About 60-70% of our mortgage business comes from intermediaries, andobviously if a financial adviser introduces business then that creates the opportunity for themto speak face-to-face with the client. In the end the customer doesnt pay anything for thatadvice. The product costs the same, but we do less advertising and pay the intermediarieswhat we would normally pay for acquiring customers through advertising.

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6.4 Understanding Your Customer Base

However, the ability at any time to drop out of the website and contact a human being is seen,as equally important.

The problem for direct operators is that they are heavily dependent on branding, and thereforecannot switch advertisement spendings into customer acquisition through intermediaries. And,like all players in e-commerce, they are discovering that the opening of new channels to thecustomer does not necessarily mean that old ones can be phased out.

There is an assumption that people who are technophiles and who use the telephone andInternet a lot will do that across the board, but thats not so. A lot of people are happy to dotheir banking online but for other things they want to see someone.

A lot of the basic transactional customer calls are going onto the web or to SMS banking viamobile phone.

6.5 Cautious Future Expected

Banks have indicated that while online advice is something that they are looking at in themedium term, in the absence of any strongly expressed customer demand, it is unlikely to be apriority. Either way the tradition of getting financial advice funded by the backdoor looks setto continue for some time.

People are not prepared to pay the money but there is a balance between paying the moneyand spending the time. Ultimately the more affluent will pay for advice simply to free up theirtime.

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Chapter 7

RELATIONSHIP BANKING IN TROUBLED TIMES

In the present uncertain economic climate, can banks and customers benefit from an activelymanaged relationship?

Relationship banking and its effectiveness in todays challenging economic circumstances. Itis observed that despite serving the economy well, banks are generally focused on distributionat the expense of understanding the needs of their customers. The growing fears of recessionmay be reflected in how banks deal with their customers. It can be argued that a banksrelationship with a customer is driven both by the current macroeconomic outlook and by thebanks assessment of the impact of recession on the customers business.

7.1 Strong Power BaseThe big banks in India provide about 75% of domestic lending, and as such enjoy evengreater power than their counterparts.

7.2 A Key Element

In conclusion, relationship banking is the key to successful banking. The bank gains a betterknowledge of the customer, the business and their needs. The customer enjoys a partnershipwith their bank, allowing both sides to manage issues in good times and bad. Despitetechnological advances and change, banking remains a people business, and the successfulcommitted interaction of people is the foundation of true relationship banking.

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Chapter 8

CRM IN FINANCIAL SERVICES SECTOR

CRM is one of the primary initiatives in any industry and more so in financial industry

sector, where competitive pressures from both financial and non-financial services are

fueling the movement toward CRM as the companies are systematically raiding a banks

territory to pick-off the most profitable customers. Thus, one has to begin with a

financial institutions strategic goals, develop a consistent technology platform that is

scalable and support across delivery channels, train people at all levels and incorporate

a customer-centric approach to every customer interaction. This article gives an overall

picture of CRM with reference to financial service industry.

Customer relationship management (CRM) is one of the primary strategic initiatives in

industry today, regardless of whether the company serves retail or wholesale customers,whether it provides services or manufactured goods. In the financial industry, the movementtowards CRM (also known as ERM for enterprise relationship management ) is being fueledby competitive pressures from both financial and non-financial services companies that aresystematically raiding a banks territory to pick off most valuable customers. Although CRMis not a technology, modern high-tech applications, from relational databases, to data mining,to computer telephony integration (CTI), to Internet delivery channels, are providing themeans to implement customer relationship strategies today.

Estimates on the size of the CRM market vary, possibly because of the difficulty in definingCRM. International Data Group predicts the CRM market will grow from $1.9bn in1998 to

$11 bn by 2003. AMR Research says the CRM market will grow from $2.3 bn in sales in1998 to $ 16.8 bn in 2003.

8.1 Defining CRM

One of the greatest problems with CRM is what it means. The whole CRM concept meansdifferent people, depending on what they want to do, says Jimmy Sawyers, consultant,Reynolds, Bone & Griesbeck, Memphis, TN.

Financial services that are transaction based, such as credit card companies or billpayment providers, want to manage the customer relationship to drive up transaction

volumes and squeeze out expenses from individual transactions. One customergenerally has one account and it doesnt matter if others within the same householdhave accounts. The goal is to provide incentives that get the customer to use theservice more. Transactions become commodities. The customer responds to priceincentives and loyalty programs. There is almost no opportunity to cross-sell to theindividual customer.

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Consultative financial services, such as investment advisors and financial planners,use CRM to deepen the trust the customer has in the service provider in order toincrease the fees for services. These companies earn fees regardless of the number oftransactions the customer makes. They may be able to increase their fees base bycross-selling additional financial services to individuals, or obtaining additional

relationships from the same household.

Retail oriented financial institution defines CRM as a combination of the twoextremes- managing the entire customer relationship in order to reduce costs andincrease the depth of the relationship with the customer. Generally, reducing costsmeans getting the customer to use less expensive delivery channels. Increasing thecustomer relationship means either obtaining a larger share of wallet, or increasingthe number of fee-based services the customer uses, or both.

8.2 The Evolution of CRM & The Challenges of Personalized E-Support

Historically, customer relationship management has been the specialty of communitybanks. Bank management came from the community. Bankers knew their customers, theirfamilies, and their businesses. Lending decisions were based as much on good paymenthistories as on good standing in the community. Customers gave all their business to onebank, appreciating the good services they receive as a reward for their loyalty.

As banks automated back-office functions with mainframes, and the number of productsand services a bank offered grew, banks found it increasingly necessary to replace branch-based filing cards with a central information file (CIF). In early 1970s, CIFs in even thelargest banks were centrally located file cards. But by the mid-to-late 1970s, these card-

based systems gave way to mainframe-based, hierarchical database systems.

8.3 Customer Support A historical perspective

The Customer is King. This mantra, although used for a long time, has not been put intopractice until recently. Forget the ideology of royal treatment; customers were not even treatedwith dignity by most organizations. As recently as the 1970s and 80s, the concept of customersupport meant that organizations were doing a favor by answering a few questions for thecustomer on the phone after putting them on hold for an hour! Standing in line to buy somethingwas common and expected. Remember when the customers had to go to the airports to buy ticketsonly because the airlines kept them there? Organizations simply lost touch with the realization that they existed because of these customers.

The 1990s brought two new concepts that challenged the prevailing business landscape:Deregulation and the Internet. These forces brought down the barriers of entry, resulting in anenvironment of intense competition. Stores faced competition from on-line start-ups. Traditionalbricks-and-mortar banks fought for customers with online or virtual banks. Airline tickets wereincreasingly purchased from the convenience of your home. The explosion in

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