Competition and globalization of banking services are forcing banks to be productive and profitable. To retain High Net Worth individuals, banks should focus strongly on relationship management with customers. Innovative Customer Relationship Management (CRM) strategies and cutting edge software can help, to a great extent, in achieving the desired results. To provide customized services, banks are opening Personalized Boutiques which provide all the required financial needs of a customer.
The entire service industry is now metamorphosed to become customer- specific. In this context, 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 serpentine queues and waited patiently for their turn with a token in their hand. In today’s 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 yesterday when it was transaction-centric. Banks are increasingly focusing on the premise that customers choose on the service provider who differentiates through quick and efficient service.
However, there is more to Customer Relationship Management (CRM) than just managing customers and analyzing their behaviors. Banks are well aware that their success is predominantly dependent on the CRM strategies adopted by them. Service providers have recognized that good CRM bonds customers with the organization for a longer term, resulting in increased revenues.
With customers’ expectations becoming even more competitive, banks are coming up with a wide array of novel products and services every day. The challenge is for the banks to work towards ensuring that customers prefer their products and services over that of competing brands. The key to develop and nurture a close relationship with customers is by appreciating their needs and preferences and catering to their requirements. Leveraging on IT, to appropriately analyze and understand the needs of existing customers better, to ensure customer satisfaction, and exploring the possibility of cross-selling products to gain a competitive 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 fray and are offering a plethora of products and services – rechristening themselves as ‘Financial Boutiques’. Knowledge dissemination has been propelled by electronic and mass media campaigns. Today’s knowledgeable consumer is challenging the Indian retail banking industry to redefine itself. Thus in this current competitive scenario, for a bank to survive competition, succeed and make profit, there is hardly any option but to learn from and actively respond to consumers’ needs. Banks offering retail products need to reorient their strategy from a product-centric to a customer-centric approach to attract and retain High Net Worth 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 new dimension. In the current falling interest rate scenario, banks are finding it increasingly difficult 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 enable acquisition of new customers and retaining the loyalty of the existing customers. Success of a bank’s strategy towards customer acquisition will depend on its ability to develop customer insights and translate these into effective operating models. Ensuring a good customer experience at every customer touch point is the cornerstone of a successful growth strategy. A good customer experience will drive customer acquisition and promote customer retention, which translates into increased profits. This, in other words, is the hallmark of a successful CRM strategy. Emphasis on CRM arises on account of the challenges confronting retail managers 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 that customer 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 new customers is an expensive affair. Moreover, it acts as a drain on the existing resources of the bank, which can be better employed for growth initiatives. Therefore, the challenge for the banks is to retain and deepen the profitability of the existing customer relationships, which is borne out by Nat West’s 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 the end result of accelerating the business momentum. Towards this end, experts propose various ideas and approaches to understand the fundamental marketing motivations driving the Customer Relationship Management in the Banking Sector.
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 by leveraging on technology, maintenance of efficient service delivery standards and business process reengineering. On their part, employees need to demonstrate certain service traits such as, putting on pleasing attire. At the end of the day, bankers should display a flair for cultivating a good relationship with customers through the mechanism of better customer service.
Having understood the significance, it is prudent to plan for CRM in retail banks. To a large extent, the success of a CRM plan is dependent on the choice of the software. Towards this end, bankers should identify domain enterprise, credibility in the market, cost implementation and relationship with the vendor as factors on which vendor selection is based. The domains of 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 CRM cell and conducting surveys at a periodic intervals to track their effectiveness, banks need to understand how CRM assists them in customer identification, acquisition and retention.
As a part of the planning process, frontline executives in banks should thoroughly understand their organizational structure, infrastructure, as well as the product environment. In this context, the management initiatives for CRM assume importance. A top-down CRM focused approach that starts with the top management, percolating and permeating to all levels of the CRM is a necessity in the present business scenario. Initiatives, such as, introducing CRM audit by independent teams to identify the existing lacunae, and plugging the loopholes in the CRM strategy as per the recommendations of the audit report, are required to be adopted by the banks for reaping benefits.
It is observed that banks lose their best clients to competitors due to a variety of reasons. The rationale behind losing their best clients to other service providers such as non-brokerage houses and mutual fund houses needs to be analyzed by banks. Experts opine that inefficient and improper service is one major reason. The remedies suggested by them are that banks should adopt customer relationship building approaches such as responding to complaints instantaneously, analyzing the attrition of the clients in a particular product, and rating of services across the network of branches, and the creation of a suggestion box to elicit the views and suggestion of their employees. Another dimension of the relationship building exercise is to obtain an electronic feedback from customers to understand the level of acceptance of existing products, which will facilitates in developing better products.
Banks can gain a competitive advantage from CRM by becoming low-cost players in the market, achieving operational efficiency and maintaining customer loyalty. The ability to predict the products that customers are likely to purchase over a period of time, increased productivity of managerial executives, sales and customer service staff, and streamlining of business processes are some of the benefits retail banks obtain by taking to successful management of their customer relationships.
Implementing the right CRM tools can enhance customer satisfaction leading to business growth. CRM enables organizations to motivate customers to initiate revenue-generating contacts. Several CRM issues such as, its effectiveness, application and challenges draw attention of the banking industry. Having witnessed the manner in which several global banks have benefited through CRM, the Indian retail banks too need to focus on and continuously invest in the customer relationship activities. The Indian banking scenario, which is still at an embryonic stage as far as the CRM domain is considered, needs to strive towards CRM implementation to meet the emerging demands of “universal banking”.