Customer Relationship Management (CRM)


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Customer Relationship Management (CRM) in Banks : 

Customer Relationship Management (CRM) in Banks Pooja Garg

Abstract : 

Abstract Customer is the king in the present business scenario CRM is the Key to attract and retain customer Attracting, maintaining and nurturing relationship with a customer Banking sector which was a domain of public sector till a decade ago is in the process of transformation to become customer friendly due to the entry of private sector and foreign banks and stiff competition in this sector. It takes five to six times more to acquire a new cutomer than to retain an existing customer.

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What is Customer Relationship Management (CRM)? CRM is “the development and maintenance of mutually beneficial long-term relationships with strategically significant customers” (Buttle, 2000) CRM is “an IT enhanced value process, which identifies, develops, integrates and focuses the various competencies of the firm to the ‘voice’ of the customer in order to deliver long-term superior customer value, at a profit to well identified existing and potential customers”. (Plakoyiannaki and Tzokas, 2001)

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Understanding Customer Relationship Management (CRM)? CRM is a business philosophy based on upon individual customers and customised products and services supported by open lines of communication and feedback from the participating firms that mutually benefit both buying and selling organisations. The buying and selling firms enter into a “learning relationship”, with the customer being willing to collaborate with the seller and grow as a loyal customer. In return,, the seller works to maximize the value of the relationship for the customer’s benefit. In short, CRM provides selling organisations with the platform to obtain a competitive advantage by embracing customer needs and building value-driven long-term relationships.

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Determinants of CRM Trust The willingness to rely on the ability, integrity, and motivation of one company to serve the needs of the other company as agreed upon implicitly and explicitly. Value The ability of a selling organisation to satisfy the needs of the customer at a comparatively lower cost or higher benefit than that offered by competitors and measured in monetary, functional and psychological terms.

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Determinants of CRM In addition to trust and value, banker must: Understand customer needs and problems; Meet their commitments; Provide superior after sales support; Make sure that the customer is always told the truth (must be honest); and Have a passionate interest in establishing and retaining a long- term relationship (e.g., have long-term perspective).

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Functions of Customer Relationship Management Direct functions (are the basic requirements of a company that are necessary to survive in the competitive marketplace) Profit; Volume; and Safeguard Indirect functions (are the actions necessary to convince the customer to participate in various marketing activities). Innovation: Market; Scout: (search for information) Access. (feedback)

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The role of salespeople as relationship builders and promoters Salespeople by: identifying potential customers and their needs; approaching key decision makers in the buying firm; negotiating and advancing dialogue and mutual trust; coordinating the cooperation between the customers and their company; encouraging the inter-organisational learning process; contributing to constructive resolution of existing conflicts; and leading the customer relationship development team are the individuals in any organisation who act both as relationship builders and as relationship promoters.

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Stages in the development of a Customer Relationship The Pre-relationship Stage The event that triggers a buyer to seek a new business partner. The Early Stage Experience is accumulated between the buyer and seller although a great degree of uncertainty and distance exists. The Development Stage Increased levels of transactions lead to a higher degree of commitment and the distance is reduced to a social exchange. The Long-term Stage Characterised by the companies’ mutual importance to each other. The Final Stage The interaction between the companies becomes institutionalized.

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A Relationship Life Cycle Model High cooperation Low competition Low cooperation High competition Time Pre- relationship stage Development stage Maturity stage Decline stage (Wilkinson and Young, 1997)

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Managing Customer Relationships The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Initiating the relationship (pre-relationship) Engage in strategic prospecting and qualifying; Gather and study pre-call information; Identify buying influences; Plan the initial sales call; Demonstrate an understanding of the customer’s needs; Identify opportunities to build a relationship; and Illustrate the value of a relationship with the customer

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Managing Customer Relationships The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Developing the relationship (Development) Select an appropriate offering; Customise the relationship; Link the solutions with the customer’s needs; Discuss customer concerns; Summarize the solution to confirm benefits; and Secure commitment.

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Managing Customer Relationships The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Enhancing the relationship (maturity stage) Assess customer satisfaction; Take action to ensure satisfaction; Maintain open, two-way communication; and Work to add value and enhance mutual opportunities.

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Managing Customer Relationships Qualifying prospects for relationship building Opportunities for adding value Potential profitability of customer High Low Low High Use a non customized approach Seek better opportunities elsewhere Build a strong and lasting relationship Focus on loyalty-building program

Gap analysis : 

Gap analysis CRM tries to close the gap in the customer perception and the firms perception by finding and analysing the gap. First gap: Expected Services Company’s Perception of Customer’s Expectation Reasons: Inadequate market research orientation Lack of upward communication Insufficient relationship focus

Gap analysis : 

Gap analysis Second Gap Customer-driven Service Standards and Designs Company’s Perception of Customer’s Expectation about Service Designs and Standards Reasons: Absence of Customer-driven standards Poor service design Inadequate service leadership

Gap analysis : 

Gap analysis Third Gap Expected delivery of Service by Customer Company’s Perception of Customer’s Expectation about Delivery of Service Reasons: Deficiencies in HR policies Failure to match supply and demand

Gap analysis : 

Gap analysis Fourth Gap Service delivered to Customer External communication to Customer by the firm’s representatives Reasons: Ineffective management of Customer’s expectations Over-promising Inadequate horizontal communication

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Sales Force Automation (SFA) mainly involves enabling the sales force with some software tools thereby : Increasing their efficiency Reducing time to share data Shortening sales cycles Enabling field reporting Gaining access useful customer information At the heart of SFA is a contact management system for tracking and recording every stage in the sales process for each prospective client, from initial contact to final disposition . Siebel Customer Relationship Management (CRM) Applications The world's most complete customer relationship management (CRM) solution, Oracle's Siebel CRM helps organizations differentiate their businesses to achieve maximum top-and bottom-line growth., Siebel CRM delivers: Comprehensive on premise and on demand CRM solutions Tailored industry solutions Role-based customer intelligence Sales force automation(SFA)

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Finacle CRM solution is a modular, multilingual, Web-based customer-centric application that enables banks to leverage ready-to-deploy CRM functionality for competitive differentiation. Finacle CRM solution offers end-to-end functionality to effectively address the needs of the complete cycle of marketing, sales and service for banking products. Benefits Aggressive Customer Acquisition Improved Cross-sell Framework Increased Operational Efficiencies and Collaboration

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Social media Social media sites like Twitter, LinkedIn and Facebook are amplifying the voice of people in the marketplace and are having profound and far-reaching effects on the ways in which people buy. Customers can now research companies online and then ask for recommendations through social media channels, making their buying decision without contacting the company Many CRM vendors offer Web-based tools (cloud computing) and software as a service (SaaS), which are accessed via a secure Internet connection and displayed in a Web browser. These applications are sold as subscriptions, with customers not needing to invest in purchasing and maintaining IT hardware, and subscription fees are a fraction of the cost of purchasing software outright.

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Models of Customer Relationship Management The Evans and Luskin (1994) model for effective Relationship Marketing Relationship marketing inputs Understanding customer expectations Building service partnerships Empowering employees Total quality management Relationship marketing outcomes Customer Satisfaction Customer loyalty Quality products Increased profitability Assessment state Customer feedback Integration (Evans and Luskin, 1994)

Generic Model of CRM : 

Generic Model of CRM There is a need of Generic Model towards providing a single unified view of customer for CRM in financial services. Abstract Financial services are badly in need of an effective knowledge reuse paradigm for bolstering its CRM initiatives This is a primary 2-dimensional problem where on one side there is an ever-increasing number of services offerings and hybrid services in the financial institutions offers portfolio (i.e. product-dimension), and on the other side, a number of communication channels through which customer relations are maintained (customer dimension) Therefore, holding a single unified view of each customer across these dimensions i.e. creating a single version of truth about each customer that integrates the whole picture about his portfolio across products and communication across channels to and fro the organization, is a real challenge.

Need for Generic Model : 

Need for Generic Model Help bankers to handle demanding an increasingly aware customers Help bankers to handle customers who are looking for individualized but quality attention, advice and response with proper justification New products can be designed by applying their benefits to a set of customers. Inculcate structuredness Organized and a modern view to manage customers Remembering the profile of a customer in entirety

Generic model -CRM : 

Generic model -CRM Inputs: Product Dimensions E.g. Company introducing some new product e.g. with Current account a zero balance savings account Inputs: Communication channels used by customer. E.g. SMS, calls, emails, face-to-face, questionnaires responses, chat sessions recorded, blogs, etc. Outputs: Integrated unified view of each customer, combining all dimensions analytically Customer profile data: Demographic data Financials-asset, liability, property, loans, etc. Personal data Risk profile, contingency plans, insurance, liquidity requirement Time of work, schedules, travel frequencies, currency conversion requirements, support services requirements Processing: Analytical engine, Mining, Case-base analysis = Associations, clusters, segments, profiles, maps

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ICICI Bank has recently introduced a 3-in-1 services offering in it’s portfolio. The three services in the offering include : trading account ,demat and a savings account .so the product side description of this offering is a hybrid services product = F(trading,demat,savings) CASE STUDY

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Customer A has been a high value customer at ICICI Bank in it’s branch B. He is a high ranking corporate who keeps travelling across the globe most of the time ,but still wants to keep in touch with his financial portfolio i.e keeps checking his accounts , investment instruments and share portfolio and tracks their performance routinely. To do this , most frequent channel he uses apart from the Internet is SMS for which he solicits quick responses from his financial services provider. Then he usually follows up with e-mails. On the other hand he has intimated the bank to send any of the promotional offers only via email. The customer already has a savings account and a number of FDs but his demat and trading account is with another financial services provider. ICICI bank wants to bring his trading portfolio also under their umbrella and with this new offering they are planning to promote this new value proposition to him as a simpler , more convenient way to manage his finances.

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Inputs: Product Dimensions E.g. Company introducing some new product e.g. with savings a free demat and trading account Inputs: Communication channels used by customer. E.g. SMS, emails Processing: Analytical engine, Mining, Case-base analysis = Associations, clusters, segments, profiles, maps Customer profile Data : already has a savings account ,FDs Opportunity exists for promoting the recent offering Invests in socks, frequent traveler, currency requirements, demanding customer Needs seamless transactions and transfers from one product to another in his folio to optimize returns vs risks needs communicational and transactional support across time zones multiple currencies needs quick responses

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Summary CRM is a new business philosophy based on trust and value; The core function of CRM is the value creation process; Customer relationships develop over time; The role of global salespeople in the process is that of both relationship builders and relationship promoters; and The basic premise of CRM is to offer superior value to customers in an effort to turn prospects into customers, customers into loyal customers, and loyal customers into partners.

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