CRM In Retail Banking

Sanjeev Kumar | April 30,2014 11:36 am IST

Executive Summary:-
CRM has been in India for over seven years now. But its penetration in the Industry in general and that in the financial services market in particular has been rather uninspiring.

The surprising aspect that came out from the study was that though the banks were aware of the CRMs' benefits, they are skeptical about its applicability to their organization. The root cause for this is the astonishing growth that the banks are experiencing at the moment.
 

The study involved delving deeper into the CRM retail banking application and finding out any hidden undercurrent that have been affecting the CRM adoption in the said segment. Additionally, an effort has been made to present a relative weightage among various factors that goes into making the vendor selection decision which can additionally be used by software vendors for benchmarking purposes.
 

The study is presented in the form of results and its analysis and methodology used for the arriving at the same has not been detailed herein.
 

Banks And Technology: A Symbiotic Association
Worldwide, banking institutions have been in the forefront of technology adoption. This behavior can be attributed to a range of operational characteristics that banks inherently work with. Some of them being:

 

Huge volume of operations
Geographically scattered nature of its networks
Security concerns
Scattered workforce
Customer centric competitive business landscape
 

The above factors apply to banks in general irrespective of nation of operations. Some India specific factors that lead to an explosive growth in technology spending since 'opening up' of the sector are:

 

Increased competition
Advent of cutting edge technologies and competition aggressively adopting them
Penetration of the Internet
Realization that technology adoption is cost effective in the long run
Tremendous growth in scale of operations - the banks have been expanding at a rapid pace - in terms of customer base, range of offering as well as in geographical penetration
 

And in the recent past, guided by the philosophy of placing customer first, one key area of technology investments by the banks has been Customer Relationship Management (CRM).
 

CRM: Introduction
In this competitive world order, companies strive to attain a competitive edge vis-à-vis their competitors. A firm can gain competitive advantage by:

 

Becoming a low cost player
Achieving operational efficiency
By cultivating customer loyalty
 

For obvious reasons of margins involved, the last option is most profitable for any firm. Furthermore, the low cost and operational efficiency can provide competitive edge only in the short to medium run.

 

Once someone comes up with matched/ better proposition the customers don't think twice before switching over. In this backdrop, it's no wonder that companies, large and small, strive to turn themselves into customer-driven enterprise. A loyal and happy customer is difficult for competition to wean away even if there are some cost differentials etc. But, fostering a sense of relatedness in customers is at best a daunting task. The customers have become more and more informed and, as an obvious extension, much more demanding regarding what he expects. As a means of satisfying the ever-increasing customer expectation and as a tool for retaining existing customers and appropriating new customers, the CRM philosophy was conceived. It is not a tool or a technology but a way of thinking that has developed and which keeps customer at the forefront of every strategy/action.
 

CRM is a comprehensive approach that aligns business strategy, corporate culture and organization and supporting information technology, so that the customer relationship proves mutually beneficial to both customer and enterprise. Through widespread implementation of sales, customer service, marketing, field support and other customer touching functions, CRM integrates people, process and technology to maximize relationships with all customers.
 

The ultimate objective is to enhance the customer experience whenever there is interaction with him at one of numerous possible touch-points. This enhanced customer experience translates into happy and loyal customer and thereby, into a greater wallet share.
 

Benefits that banks can look forward to from CRM
In highly competitive and dynamic market landscape, a key differentiator for retail banks is the way their customers' view them: how satisfied/ dissatisfied they are from their respective banks services- in short, how loyal the customers are towards the banks. Its found in a research that the cost of acquiring a new customer is over 5 times the cost of retaining an existing customer. Add to this the fact that the competition is always on lookout to wean away your customers; one cannot be complacent as far as customer satisfaction is concerned. Apart from enhancing the customer satisfaction, the adoption of CRM philosophy and its tool leads to the following benefits:

 

Real-time forecasting for true sales pipeline visibility and more accurate decisions owing to the ability to predict what all products the customers are expected to purchase over a period of time.
Providing an integrated view of customers or prospects across companies and channels, which makes cross selling and up selling easier. Research shows the more products a customer buys from a firm, the less likely that person is to leave it. Cross selling to existing customers produces incremental revenue at little cost, increases customer loyalty and improves underwriting accuracy.
Increased productivity of managerial executives, sales and customer service staff.
Reduced training costs.
Streamlining of the business process across different functions aligned to the best practices.
Giving customers the ability to transact/interact through multiple channels (phone etc).
Turn Around Time (TAT) for closing leads, opening accounts and closing service requests can be drastically improved.
Campaign definition and performance tracking on a periodic basis (for different financial programs/promotions).
 

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Sanjeev Kumar,PGDIM,NITIE Mumbai ...