Executive Summary

CRM is a business model that aligns product and sales strategies with customer requirements and preferences. Services are then provided in a timely manner using the channels that are preferred by the customers. Meeting the rapidly changing needs of customers is at the heart of a successful banking enterprise. How well a bank knows its customers and how effectively it leverages that knowledge in the face of intense competition, shrinking margins, new technologies, and increasing customers demands can make the difference between thriving and barely holding on. This paper explores the traditional approaches to implementing CRM projects in the banking or financial industry. It also highlights the major issues facing the industry in implementing such solutions. Listening to customers and seeing their perspective, offering excellent service, having IT installed to make sure that the service strategy happens, rectifying mistakes, developing team spirit etc., are some imperatives that lead to success. Differentiating services according to different customers is also important. The old paradigm was price, quality, and service. The paradigm is price, quality, service, speed, convenience, value, solutions..the list is endless. Thus this report contains details about customer relationship in banking sector. It focuses on advantages of CRM solutions, Key factors of CRM , Challenges faced in this sector.

Thus, the present day customer is becoming more and more demanding. He wants all the services under one roof and expects to save time while doing business and wants transactions to be as simplified as possible. The list of customer wants, can go on and on.. In such a situation, the secret key factor of companys success is effective Customer Relations Management or CRM. The report explains the concept of CRM in Private Bank with the case study on ICICI Bank

Objectives of study: To study the importance of CRM in general and its importance in the banking sector in specific.

Analyze CRM practices in banks at present. Identify the present status of relationship between the banks and its customers. Find out practices required to be followed in banks to implement CRM. Keeping in view, the above mentioned aspects, offering suitable recommendations and suggestions.

TABLE OF CONTENTS

Conceptual Framework of CRM Key CRM Principles Advantages of CRM solution Challenges Faced In Implementing CRM solution Indian Banking Industry CRM in Banking Sector CRM in Private Bank Tools for CRM CRM Implementation Customer Retention CRM practices at ICICI Bank Key things to do Conclusion Bibliography

08-11 12 14 15 17 18 20 21 22 23 26 27 38 39 41 42 43 44 45 46 55 56 57 58 59 60

Conceptual Framework of CRM What is Customer Relationship management? 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 longterm superior customer value, at a profit to well identified existing and potential customers. (Plakoyiannaki and Tzokas, 2001) Customer Relationship Management (CRM) can be widely defined as company activities related to developing and retaining customers. It is a blend of internal business processes: sales, marketing and customer support with technology and data capturing techniques. 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. 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. Shani and Chalasani define relationship marketing as an integrated effort to identify, maintain, and build up a network with individual consumers and to continuously strengthen the network for mutual benefit of both sides, through interactive, individualized and valueadded contacts over a period of time. The core theme of all CRM and relationship marketing perspectives is its focus on cooperative and collaborative relationships between the firm and its customers, and/or other marketing actors. Growth Strategies International (GSI) performed a statistical analysis of Customer satisfaction data encompassing the findings of over 20,000 customer surveys conducted in 40 countries by Infoquest. 4

The conclusions of the study were: A Totally Satisfied Customer contributes 2.6 times as much revenue to a company as a Somewhat Satisfied Customer. A Totally Satisfied Customer contributes 17 times as much revenue as a Somewhat Dissatisfied Customer. A Totally Dissatisfied customer decreases revenue at a rate equal to 1.8 times what a Totally Satisfied Customer contributes to a business. By reducing customer defection (by as little as 5%) will result in increase in profits by 25% to 85% depending from industry to industry. An important facet of CRM is customer selectivity. As several research studies have shown not all customers are equally profitable ( Infact in some cases 80% of the sales come through 20% of the customers). The company must therefore be selective and tailor its program and marketing efforts by segmenting and selecting appropriate customers for individual marketing programs. Hence, CRM is defined as: Customer Relationship management is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer.

Many companies are turning to customer-relationship management systems to better understand customer wants and needs. Customer Relationship Management applications, used in conjunction with data warehousing, E-commerce applications, and call centres, allow companies to gather and access information about customers' buying histories, preferences, complaints, and other data so they can better anticipate what customers will want and how to best retain them. The adoption of Customer Relationship Management is being fuelled by a recognition that long-term relationships with customers are one of the most important assets of an organization, providing competitive advantage and improved profitability.

Customer Relationship Management is a strategy, not a specific software or hardware; but it encompasses the technology and strategy needed to completely integrate a business in order to get a holistic view of customers and their relationship to the entire enterprise. The software that links the back office to the front office, the technology needed to make the call centre customer-friendly, and integrating each component seamlessly with the customers' point of contact, web-based or other means, are all part of Customer Relationship Management. It is thus a process or methodology used to learn more about customers' needs and behaviors in order to develop stronger relationships with them. There are many technological components to CRM, but thinking about CRM in primarily technological terms is a mistake. The more useful way to think about CRM is as a process that will help bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market of customers and the value of those customers. trends. CRM helps businesses use technology and human resources to gain insight into the behavior

Key CRM principles

Differentiate Customers: All customers are not equal; recognize and reward best customers disproportionately. Understanding each customer becomes particularly important. And the same customers reaction to a cellular company operator may be quite different as compared to a car dealer. Besides for the same product or the service not all customers can be treated alike and CRM needs to differentiate between a high value customer and a low value customer. What CRM needs to understand while differentiating customers is: - Sensitivities, Tastes, Preferences and Personalities - Lifestyle and age - Culture Background and education - Physical and psychological characteristics Differentiating Offerings Low value customer requiring high value customer offerings Low value customer with potential to become high value in near future High value customer requiring high value service High value customer requiring low value service High Low value customers who require high levels of service must either purchase the higher level of service or become our competitors low value/high cost customers High value customers who require a high level of service are maintained without expanding the costly offering to the entire customer population

Keeping Existing Customers Low Grading customers from very satisfied to very dissatisfied should help the High Low Customer Value organisation in improving its customer satisfaction levels and scores. As the satisfaction level Fig. 1 Customer customer retention with for each customer improves so shall the value Service Matrix the organisation. Maximizing Life time value 8

Service Requirement

Exploit up-selling and cross-selling potential. By identifying life stage and life event trigger points by customer, marketers can maximize share of purchase potential. Thus the single adults shall require a new car stereo and as he grows into a married couple his needs grow into appliances. Increase Loyalty Loyal customers are more profitable. Any company will like its mindshare status to improve from being a suspect to being an advocate. Company has to invest in terms of its product and service offerings to its customers. It has to innovate and meet the very needs of its clients/ customers so that they remain as advocates on the loyalty curve. The effective use of CRM principles requires a three-pronged approach. First, all CRM efforts should begin with a well-defined strategy. Second, an infrastructure must be developed to achieve appropriate objectives. Specifically, the infrastructure should align product and sales goals to meet customer needs, according to their preferences, in the most cost-efficient manner. Third, continuous analytic intelligence should be used to determine and modify customer interaction. In addition to the above approach, implementing CRM involves collecting and reviewing the most relevant customer data. Relevant customer data can uncover needed information about behavior patterns and attitudes. Once identified, the customer data should be incorporated into the infrastructure so that effective marketing plans can be developed.

Summarizing CRM activities: The CRM cycle can be briefly described as follows: 1. 2. 3. 4. 5. 6. Learning from customers and prospects, (having in depth knowledge of Creating value for customers and prospects Creating loyalty Acquiring new customers Creating profits Acquiring new customers
Creating Profits Acquiring new customers Learning from customers a& prospects

customer)

1
Creating value for customers & prospects

CRM Activities 4

5 3

2 Creating loyal Customer Life Cycle Management

customers

Customer Need Assessment & Acquisition

Customer Retention and referrals for new customers

Customer Development through personalization and customization

Customer Equity Leverage through Cross Selling and Up Selling

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Advantages of Implementing CRM solutions

It help companies boost their business efficiency, thereby increasing profit and revenue generation capabilities. Some of the measurable benefits of implementing a CRM solution are: Increase Customer Lifecycle Value

In most businesses, the cost of acquisition of customers is high. To make profits, it is important to keep the customer longer and sell him more products (cross sell, up sell, etc) to him, during his lifecycle. Customer stay, if they are provided with value, quality service and continuity. CRM solutions enable you to do that. Execution Control Once the business strategy is put into motion, the management needs feedback and reports to judge how the business is performing. CRM solutions provide management with control and a scientific way to identify and resolve issues. The benefits include a clearer visibility of the sales pipeline, accurate forecasts and more. Customer Lifecycle Management To keep the customers happy, you need to know them better. At the minimum, you need a centralize customer database, that captures most of the information from your entire customer facing departments and partners. Integrated CRM solutions, like CRM next enable you to manage customer information, throughout all stages of their life cycle, from contact to contract to customer service.

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Strategic Consistency Because CRM offers business and technological alignment, it enables companies to achieve strategic company goals more effectively, like enhanced sales realization, higher customer satisfaction, better brand management and more. Additionally, the alignment results in a more consistent customer communication creating a feeling of continuity.

Business Intelligence Due to the valuable business insights that CRM provides, it becomes easier to identify the bottlenecks, their causes and the remedial measures that need to be taken. For example, CRM next provides real-time business focus dashboards with extensive drill down capabilities that provide the decision makers with the depth of information required to identify the causes and spot trends.

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Can CRM Drive Revenue? The important considerations of any organization looking forward to incorporating a CRM are understandably, more business related than technical. CRM is not just a guarantee for quicker growth and bigger revenues but also a means to keep up with competition. Through CRM, you can determine the Customer Lifetime Value or in other words, the present and projected business worth of a customer to your organization. This once known, acts as the basis on which you can formulate marketing strategies targeting customers individually. Customer intelligence and CRMs predictive analysis capabilities help you generate a highly accurate demand forecast which leads to better and more informed inventory management, thus, curtailing significantly, the internal costs through new and efficient processes. Further, the simplification and streamlining of the sales process, significantly reduces the time spent by sales reps on their paperwork and administrative engagements, and lets them focus on selling instead. The ROI gained out of implementing a CRM is what makes the experience worthwhile. It is best measured by comparing the past and the present customer acquisitions, enhancements in customer value/worth, long-term customer retention, etc, all of which contribute to the organizations revenues.

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Key Challenges in implementing CRM solutions

Customer relationship management is a corporate level strategy which focuses on creating and maintaining lasting relationships with its customers. Although there are several commercial CRM software packages on the market which support CRM strategy, it is not a technology itself The following are the key challenges faced in implementing CRM solutions: Limited Scope Many existing CIS tools are very limited in scope, and do not support customer equity management. Complex Technology Technology solutions sold by vendors have become very complex to use, expensive to maintain, and contain irrelevant information for data mining. No Pertinent Data Most of the existing data warehouses lack information on recency, frequency, and monetary values. They also offer information that is insufficient for supporting predictive modeling and predictive scoring. Extended Time to Market The addition of new capabilities to existing data warehouses is cost prohibitive and takes a long time to bring into production stage capabilities (or even to catch up with the fastchanging dynamic nature of the market place). Multi-Vendor Tools and Capabilities Over the years, many major financial organizations have developed data warehouses by purchasing diverse sets of software tools and then building data warehouses in-house. For example, Data Quality and Cleansing tools, Extract Transform Load (ETL) tools, database management and storage tools, data mining, and campaign management solutions from various vendors. Overburdened Internal Information Technology Organization

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Information technology organizations have had to employ individuals who have specialized vendor product skill sets to support multi-vendor tools. This can increase organizational expenses significantly. Lack of Integrated Capabilities The focus of many CIS systems has shifted to service only ad hoc reporting and to provide simple querying capabilities rather than becoming an infrastructure for efficient customer equity management.

A successful CRM strategy cannot be implemented by simply installing and integrating a software package and will not happen overnight. Changes must occur at all levels including policies and processes, front of house customer service, employee training, marketing, systems and information management; all aspects of the business must be reshaped to be customer driven. To be effective, the CRM process needs to be integrated end-to-end across marketing, sales, and customer service. A good CRM program needs to: Identify customer success factors Create a customer-based culture Adopt customer-based measures Develop an end-to-end process to serve customers Recommend what questions to ask to help a customer solve a problem Recommend what to tell a customer with a complaint about a purchase Track all aspects of selling to customers and prospects as well as customer support.

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Thus the key components of CRM are

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INDIAN BANKING INDUSTRIES

The Indian banking market is growing at an astonishing rate, with Assets expected to reach US$1 trillion by 2010. An expanding economy, innovations are all contributing to this growth. The countrys middle class accounts for over 320 million people. In correlation with the growth of the economy, rising income levels, increased standard of living, and affordability of banking products are promising factors for continued expansion. middle class, and technological

The Indian banking Industry is in the middle of an centric in

IT

revolution, Focusing on the

expansion of retail and rural banking. Players are becoming increasingly customer their approach, which has resulted in innovative methods of offering new Banks are now realizing the importance of being a and acquisitions to regulation. Indian banking products and services.

big player and are beginning to focus their attention on mergers take advantage of economies of scale and/or comply with Basel II

banking industry assets are reached US$1 trillion by 2010 and are poised to receive a greater infusion of foreign capital, says Prathima Rajan, analyst in Celent's banking group and author of the report. players." Thus many Private banks Like ICICI, HDFC etc follow the 80:20 rule i.e. 80% of the revenue earned through 20% of the preferred HNI clients and this is possible only because of CRM. Thus comes the role of CRM in Banking sector. The banking industry should focus on having a small number of large players that can compete globally rather than having a large number of fragmented

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CRM in Banks - Indian Scenario One industry best suited for CRM implementation is the Indian banking and financial services sector, which has the highest growth potential and accounts for 22% of CRM license revenue in 2002. Banks such as ICICI bank, HDFC bank and Citibank are using CRM products. ICICI bank, in fact, has won the DM review World Class Solution Award 2003 in the Business Intelligence Category for its Teradata enterprise data warehouse solutions.

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CRM IN BANKING SECTOR

Introduction: In banking sector, relationship management could be defined as having and acting upon deeper knowledge about the customer, ensure that the customer such as how to fund the customer, get to know the customer, keep in tough with the customer, ensure that the customer gets what he wishes from service provider and understand when they are not satisfied and might leave the service provider and act accordingly. CRM in banking industry entirely different from other sectors, because banking industry purely related to financial services, which needs to create the trust among the people. Establishing customer care support during on and off official hours, making timely information about interest payments, maturity of time deposit, issuing credit and debit cum ATM card, creating awareness regarding online and e-banking, adopting mobile request etc are required to keep regular relationship with customers. The present day CRM includes developing customer base. The bank has to pay adequate attention to increase customer base by all means, it is possible if the performance is at satisfactory level, the existing clients can recommend others to have banking connection with the bank he is operating. Hence asking reference from the existing customers can develop their client base. If the base increased, the profitability is also increase. Hence the bank has to implement lot of innovative CRM to capture and retain the customers.

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The key challenges faced by the banking industry today are: Identify customers that have the most assets and would be the most profitable Identify the most profitable products Cross-sell and up-sell products that are most relevant to a customers life stage and financial needs Improve customer service while reducing service costs in basic areas, such as account inquiry, transfers, the trading of financial instruments, and cash management Find strategies to eliminate current operational inefficiencies Implement technology that leads to enhanced productivity of customers, partners, and employees CRM can be helpful in customer identification, cross selling of products, customer acquisitions or retention etc. Operational CRM, which provides required information and analytical CRM, which traces activities and makes information more sensible are two things of CRM. CRM cells, portfolio of products, customer metric and latest technology are some of the requirements for efficiently implementing the CRM. In India only few banks like ICICI bank and HDFC bank are using CRM products.

Todays world is distinct with its hyper competitive environment. Survival of the fittest is the mantra of this century and banking, being a service industry, is definitely no exception to it. Managing customers is one of the main issues faced by the banks. The demands and expectations of the customers grow at a much faster rate than the banks can equip themselves to deal with them. If the service levels or the product levels are not up to the customers expectations, there is always danger that he might shift his business elsewhere. In banking, as products can be copied very fast, it is the customer service levels that really matter. This is where CRM plays an important role. CRM is a sound business strategy to identify the banks most profitable customers and prospects, and devotes time and attention to expanding account relationships with those 20

customers through individualized marketing, repricing, discretionary decision making, and customized service-all delivered through the various sales channels that the bank uses. Under this case study, a campaign management in a bank is conducted using data mining tasks such as dependency analysis, cluster profile analysis, concept description, deviation detection, and data visualization. Crucial business decisions with this campaign are made by extracting valid, previously unknown and ultimately comprehensible and actionable knowledge from large databases. Finally, a cluster profile analysis is used for revealing the distinct characteristics of each cluster, and for modeling product propensity, which should be implemented in order to increase the sales.

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What is Customer Relationship Management (CRM) all about? According to Kotler, CRM principally revolves around marketing. It involves integrating information gathered from all the distribution channels and analyzing the data, with the help of IT, to understand customer behaviour. The continuous analysis and improvement over a long period of time should result in enhancing customers lifetime value with the firm. In the light of the above, customers of a bank can broadly be classified into two categories: Internal and External. In the case of a bank employee, all his colleagues are his internal customers. A banking transaction typically involves more than one or two individuals clearing the same. Unless there is a perfect harmony among the different individuals involved, the customer is put to a great deal of inconvenience. In addition to the pressure to perform and attain set targets, the added tension and frustration caused by an unhappy internal customer is well experienced by bankers. External customer are all those with whom a banker has to interact in the course of managing daily business. In addition to the regular customers who have an account with the bank, there are a number of potential customers whose issues need to be addressed. A real life incident is worth recalling here. A contractor had a regular account with a private sector bank while his brother had fixed deposits of a large amount in a nationalized bank. Once a contractor urgently required a demand draft. As he was at great distance from his bank, and time being a constraint, he approached a nationalized bank. The stall there refused to entertain him on two grounds one, he had come after the banking hours and two, and more importantly, he was not transacting his normal business through them. When approached, the private sector bank obliged their customer well past the normal time with the draft. The next day the nationalized bank was in for a shock when their customer walked in and closed his deposits and shifted his account to a bank where his brother had an account. A heavy price for appalling CRM practices! Some other external customers to a bank are other bankers. While banks interalia compete with one another for business, they also need each others support from time to time.

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CRM in Private Banks:

There is a shift from bank centric activities to customer centric activities are opted. Private Banks have traditionally viewed themselves as exceedingly 'Customer Centric' offering what they believe to be highly personalized services to the High Net Worth Customers. However, changes in the customer behavior and accumulation of wealth are resulting in the needs of HNW customers becoming more diverse and complex in terms of the sorts of products they want, the channels through which they want to access them and the associated range of advice. Customer Experiences: The first step towards successfully winning, retaining and growing the profitability of private banking customers is to understand what their wants and needs are, so that the organization can be built around serving those needs. Only when an organization has done this and incorporated this into its strategy can it start to design its value proposition and a customer experience that will enable it to achieve a differentiated competitive position in the private banking market, and more importantly, do so in an economically viable way.

There is a basic 'generic' customer experience that many private banking customers are seeking. To be a credible player in the market, a private bank must be able to deliver this base' experience. This represents a common set of needs that are shared by most HNW customers. Therefore, the private bank must have the capabilities required to meet these needs for the majority of its customer base. 23

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All customers, regardless of wealth levels, have similar emotional needs, which drive their need for advice and their purchase of products. Different wealth levels impose different priorities on meeting these needs and open up new avenues for doing so. Take a simple example, HNW customers can afford on it to fund their retirement, so their priorities may be associated with growing wealth, rather than preserving it, allowing them to choose a product option with a higher risk/reward ratio. If this is true, it means all HNW customers start with a basic, common set of what they want and need from a bank, which might include: 1 0 2 3 Personal, long-term relationship Advice combining industry expertise and knowledge of personal

circumstance High quality, consistent quality Security, privacy, confidentiality

At this basic level, grouping together these core wants and needs produces a set of generic characteristics that an HNW individual seeks from an organization before he or she will even consider placing any of his or her wealth with it.

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Underlying these generic characteristics is a set of capabilities covering organization, process and technology, which the private bank must process to operate in the high net worth market. The Segment-Specific Experience To build this 'base' experience, private banks also need to consider the segment-specific needs of their target customers. This in itself requires a capability to identify and justify target customers and understand their needs beyond banking, to ensure that their emotional needs are met. It is here that the customer is made to feel like an individual, but it is also at this point that costs and infrastructure spiral, as customers' needs start to diverge.

The segmentation process identifies groups of customers with similar wants and needs, who are seeking a similar experience from the provider. Importantly, from the organizations' viewpoint, this means that they can also be served by similar sets of capabilities

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The experience at this level is made up of: - The channel preferences of each segment and associated channel experience - for example, a self-directed group of customers will use internet for transacting, information gathering and even some advice, whereas advice seekers and less financially sophisticated segments require more access to an adviser / relationship manager and a more basic experience over the Internet. The product and service preferences of that segment - for example, the more sophisticated customers are more likely to demand more complex products such as alternative investments, whilst others may prefer discretionary portfolio management.

The new components are added to the experience and the 'base' experiences elements become defined in more depth, according to the specific needs of the customer segment. Once the segment experiences have been defined, the associated capabilities must again be identified.The hierarchical approach to defining customer experiences helps filter these capabilities as: 1 2 3 It is possible to identify experience elements that are common to more than one segment The segmentation exercise will provide comparative sizings for the target segments. Capabilities required for the larger, more profitable segments take precedence over those

- this will carry a higher priority for development as they will benefit more customers;

needed for smaller segments.

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The Organisation-Specific Experience Having identified the base and segment specific elements of HNW customer experience, the final step is to identify how the experience that each organization offers its customers is distinct from other banks. Now this would mean that one has to distinctly identify the components of the experience that are not only associated with a particular bank but also be the key differentiator. This process will define: 1 2 Elements of the organization style and culture. Products and Services to be provided.

In the same way, every brand is different, so is the experience.

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CRM Objectives in Banking Sector

The idea of CRM is that it helps businesses use technology and human resources gain insight into the behavior of customers and the value of those customers. If it works as hoped, a business can: provide better customer service, make call centers more efficient, cross sell products more effectively, help sales staff close deals faster, simplify marketing and sales processes, discover new customers, and increase customer revenues. It doesn't happen by simply buying software and installing it. For CRM to be truly effective, an organization must first decide what kind of customer information it is looking for and it must decide what it intends to do with that information. For example, many financial institutions keep track of customers' life stages in order to market appropriate banking products like mortgages or IRAs to them at the right time to fit their needs.

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Banking CRM Makes the Difference

Need for CRM Banking industry has undergone tremendous changes during the past decade, during which consolidation and reform became inevitable. Banks have realized the significance of customer service not only for business expansion but also for their very survival. They have woken up to the fact that they need to understand and manage their customers better. Falling interest rates are making corporate lending a low revenue business, promoting banks to look for traditional noninterest related business. Thus, consolidation in the market has increased the need for CRM, which ensures banks to build and retain close relationships with their customers, especially the most profitable ones. This is aimed not only to prevent the customers from taking their business elsewhere but also to ensure that they are offered the products and services that are most appropriate and most likely to result in new revenue for the bank. CRM helps categorize and segment customers and align products that best suit them. The customers were being acquired from the target segment using tools and techniques developed for mass marketing. But in present era of liberalization, Privatization and Globalization (LPG) the existing mass marketing tools have proved to be ineffective. So has emerged CRM, which is a natural extension of market segmentation and the competitive necessity makes it essential to focus on specific market segment where organizations can demonstrate distinctive competence and in which they can create sustainable competitive advantage.

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The various broad heads into which a bank can look into while evaluating the need for a CRM are:

Who are my customers and what information do I have about them to find out about their needs and requirements? Who are my profitable customers and what are my profitable products? Are my customers satisfied with the services and products and what more can I offer them based o their behavioral pattern? Which are my profitable and in-demand channels of customer interaction? Who are my most loyal customers and who are my prospective customers?

The fundamental steps to effective CRM may be stated as: Understand your customers What products and services they buy What are their needs and behaviour What is the level of current and potential profitability.

Align the organization capabilities to better deliver appropriate value to each type of customer. The purpose is to improve the quality as well as quantity of market share. While it is good to keep all customers happy, there is a time to say goodbye to some customers when they no longer fit a companys business model. Ideally, the whole idea of CRM is to be decisive. Its not about lets just make everybody happy. Shareholders want good customers, and thats the greatest value that CRM brings. CRM technologies are also designed to help identify the appropriate channels to lower the cost of servicing lowervalue customers.

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Goals Requiring CRM Solutions The primary redundant goals of banks that require CRM solutions are:

Customer Identification Cross Selling or Up selling Customer Acquisition Customer Retention Customer Satisfaction and Delight

Customer Identification

Cross Selling/Up Selling

Customer Satisfaction And Delight

CRM Solution

Acquisition

Customer Retention

Customer Identification It refers to acquiring the entire customer-centric data such as knowledge of customers current demographic details, related products and their holding pattern with the bank. This should allow the banks to generate a single, comprehensive view of every one of its customers. With this base, the banks must identify prime customers who require to be specially treated under CRM.

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Cross Selling/Up Selling Cross Selling and Up Selling are huge untapped opportunities for banks. CRM solution should adopt an integrated approach to customer needs, which not only would build customer loyalty and business, but also enable banks to offer their customers the additional services they might really want. For example, a minor customer may be offered an educational loan; a savings bank customer may be offered a credit card or a housing loan, a busy businessman may be offered Internet banking etc. Customer Acquisition CRM is aimed at optimizing processes and functions related to the customer. All operations can be optimized and systemized to enhance efficiency and effectiveness, on a continuous basis. This continuous learning process would help banks to bring out better products that target potential as well as existing customers. The operations can be aimed at getting the right customers and then retaining them by extending special treatment under CRM environment. Customer Retention Retention is the most important focus of CRM. Banks should employee a CRM solution that consolidates information from all customer interactions, whether it is personal contact or inquires to the call centers or the Internet. It should be kept in mind that it is many times costlier to obtain a new customer than to retain an existing one. Every banking representative should have an ability to access a 360-degree view of any customer, in time, to enhance the competitive advantage and customer retention. Customer Satisfaction and Delight When a customer receives a higher level of service than what he expects, he is satisfied. On the contrary, if he receives a level of service lower than his expectations, he is dissatisfied. A dissatisfied customer tells at least 10 other people about what went wrong with the bank, which can trigger an exodus of customers from the bank. Else, it will definitely stem the flow of new customers into the bank. Hence, the banker should make all efforts to improve services on a continuous basis. Banks operate in a very dynamic market and it is important to be proactive to

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delight a customer, at least, the prime ones, beyond the level of satisfaction. To achieve this, bank must continuously innovate new products and features, using technology as a tool.

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CRM Tools for Banking

CRM tools can be broadly classified into Operational tools and Analytical tools. Operational CRM provides the software support for business that requires customer contact. It is aimed at providing information to employees and documenting all customer interactions across channels such as personal contacts, telephonic, electronic and wireless. For example, if an important customer dials to the banks call center, the operational CRM can alert the call center of the customers account status and other details. Analytical CRM helps banks make sense of the information collected. It is aimed at utilizing the customers potential to the maximum. It helps tracking the activities of the customer on a realtime basis. For example, if there is a regular monthly debit of a certain amount in the customers account by means of cheques in favor of some other bank, it is an indication that the customer is having a loan with that bank. Analytical CRM can trace this activity and the banker can offer him a loan with better benefits and in the process benefit himself.

CRM Tools

Operational CRM (Provides required information)

Analytical CRM (Traces activities and makes information move sensible)

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Benefits Of CRM Availed By the Banks

The primary purpose of organizing a company based on CRM is to respond to customer driven environment in order to develop he overall business and thereby enhance the return on investment for shareholders. The financial performance ultimately of an organization depends upon Customer Value (CV). The main thrust of CRM is to :

Develop new product business Increase added value Gain market leadership Spread risk and vulnerability Maintain existing business Keep competition in check Address operational problems Identify the business from which the bank will like to exit. The ability to implement a customer-centric approach focused on optimizing the lifetime value of the customer The ability to concentrate on financial budgeting, cost control, and risk management.

One way to assess the need for a CRM project is to count the channels a customer can use to access the company. The more channels one have, greater is the need for the type of single centralized customer view a CRM system can provide. CRM has a number of positive effects on the running of a bank. It provides management with a clear picture of the business, facilitating decision making. Using a common architecture and data model, customer information can de shared faultlessly between fronted staff facing the customers to deliver services and the back office staff who structure the deals. Fronted staff of a bank can profile a customer, create and maintain a customer account with contacts, manage activities and explore business development possibilities. Similarly, a call center agent can maintain client data/information, produce call notes, replies to customer inquiries, and address and track customer service requests. In a nutshell, implementation of the CRM concept in banks can result in the following advantages: 36

Speed and accuracy in information analysis. Foundation for organization-wide data and information. Understanding customer behaviour. Facilitating business process re-engineering. Multiple products-credit, deposits, investments, insurance etc. Multiple distribution channels-branch, internet, call centre, field sales etc. Multiple customer groups-customers, small business, corporation etc.

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CRM Implementation The following are some of the essential requirements for implementing CRM successfully: CRM Cell

The bankers establish a CRM cell to take care of all CRM-related activities. It can serve as an Adviser, Coordinator and Controller of CRM activities of all bank branches. Banks also select say around 100, prime, profitable and exclusive customers whose requirements will be directly dealt with by the cell. This cell has to be adequately staffed with exceptional track records for this highly specialist functions. Portfolio of Products

Banks have to constantly update their products, keeping in mind the technological developments. Innovations like paperless banking, digital signature, e-banking etc. are most likely to attract more customers. Customer metrics

Bankers have great concern over their profits, which in turn may hamper their enthusiasm for CRM. Even globally, the spending growth rate on CRM has started declining since 2001. Bankers are looking for a way to qualify their return on investment. Whenever a new product is introduced or a new facility or technology is offered to customers, bankers do undertake a cost-benefit analysis. For example, when bankers invest in ATMs their expectation is that it would reduce the branch cost, as the customer would use them instead of a branch. However, studies reveal the fact that ATMs have only a marginal impact on cost, but at the same time there is a significant increase in customer satisfaction, which, ultimately leads to customer loyalty and customer retention. CRM is not a product to be sold it is a way of life. It is not a tangible thing that a customer should know. When it is intangible, can it be expected to produce any direct financial return that can be linked back to the investment? Party, yes. Banks have to measure CRM in terms of 38

increased customer satisfaction and customer retention, cost of marketing effort etc. together with and ROI.

Technology

Technology plays a major role in CRM implementation. There are a lot of CRM vendors like SAP, Oracle Telisma, TriVium, Saleslogic, Smiles etc. The CRM system to be implemented should be competent and versatile enough to resolve the problems of the banks and enhance its efficiency to serve the customers. Surveys

It is also important to undertake surveys at periodical interval to measure the effect of CRM implementation. This enables banks to take corrective action, wherever necessary and adapt themselves to the ever-changing demands of the customers.

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Customer Retention
A customer can be retained by boosting his loyalty. Loyalty can be defined as making a customer bank again and again with the same bank. Banks are trying to keep their customers serviced and happy so that they keep transacting with them. Customers loyalty can be differentiated into two categories:

Active loyalty Passive loyalty

Active loyalty means repeat purchases and contracts made within an appropriate time period may be indicative of an actively loyal customer. Similarly, Passive loyalty is a term used to describe customers who have not transacted with the bank for a long time, or those who stick with the bank in the absence of a better alternative. Unfortunately most of the Indian banks fail to distinguish between active loyalty and passive loyalty. They make the mistake of assuming customer satisfaction is present in the case of passive loyalty in the process fail to retain their customers. To boost customer loyalty, banks must have a clear understanding of their customers unfulfilled needs and must come out with the products/services that will satisfy those needs. Banks must have the ability to promote an individual from being a suspect to become an advertiser. They have to be innovative to meet every need of their customers so that they become their active advertisers while remaining on the loyalty arc. Turning a suspect into an active advertiser will definitely boost the referral sales that are otherwise known as low cost + high margin sales.
Suspect Prospect

Client

Nourishe d

Journey of a customer

Advertise r

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One of the best example for Active Loyalty is HDFC Bank. It has a very strong base of Customer Equity. In banking sector New customers are acquired through word of mouth or referrals. Thus building a strong and active loyalty is of utmost importance. CRM is the driver to this Journey of the Customer i.e. from Suspect to Advertiser.

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CRM PRACTICES AT ICICI BANK

ICICI set up as Development Bank over four decades ago to provide products and services for the corporate segment, diversified into the retail segment of the financial markets in the early 1990s. In 1994, it established ICICI bank as a commercial bank that is flexible, innovative and prompt in meeting customer requirements. In addition to the bank, the retail initiatives include Prudential ICICI AMC, ICICI Personal Financial Services, ICICI Capital Services, and ICICI web trade, Prudential ICICI Life Insurance, ICICI Lombard General insurance. This apart the retail initiatives also include a plethora of web based businesses including city portals and various other utility sites such as billjunction.com, icicimoneymanager.com, and magiccart.com, among others. The Retail Strategy As part of plans, it is implementing various projects to establish world class CRM practices, which would provide an integrated view of its customers to everyone in the organisation. CRM at ICICI involves increased communication between the virtual universal bank and its customers and prospects, as well as within the group itself. The underlying idea is to enhance every instance of contact with the customer. ICICI believes that a true customer centric relationship can only be accomplished by considering the unique perspectives of every single customer of the organisation. Hence the pressing need to put in place a technology enabled CRM solution Emphasizing on the importance of CRM one of the ICICI employees said, With the overall improvement in the ETL1 process made possible by PowerCenter, we benefited from greater data immediacy for business users and more reliable information, which resulted in quicker analysis and timely reporting. Gurnam Saini, Assistant General Manager, ICICI Bank CRM at ICICI Bank involves increased communication between the bank and its present and prospective customers. Its philosophy focuses on each and every customers satisfaction. CRM facilitated coordination of multiple business functions & multiple channel of communication with the customers to carry out customer management more efficiently. It also automated the process

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flow tracking in the product sales process and helped generate customized reports and promote cross-selling. The typical components of a CRM strategy at ICICI are as follows:

Understand and differentiate: Understanding customers is important in order to develop a sound relationship with them. Customer profiling is done in order to understand demographics, purchase pattern and channel preference. CRM also helped ICICI in valuation of its customers to understand customer profitability and Customer Life Time Value (CLV).

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Develop and customize: - In a customer centric business environment, the products and processes have to be according to customers needs and preferences. ICICI has always focused on developing channels of service delivery according to customers need and service expectation. Interact and Deliver: To foster a strong customer relationship ICICI ensured that all areas of the bank have easy access to relevant, actionable customer information and employees should be trained on how to use customer information to tailor interactions based on both customer needs and potential customer value. Acquire and Retain: CRM helped ICICI to figure out valuable customers and made it easy to formulate retention strategies for them. It also helped it cope up with the change in customers life cycle and offer services accordingly. 1 IMPLEMENTING Prioritizing Changes Because there might be many gaps, therefore many changes that an organisation will need to make, prioritization was critical. The evaluation of each of the strategies identified to resolve the gaps at ICICI were based on: Cost to implement including initial one time costs, as well as anticipated ongoing expenses. Overall benefit some changes may have higher impacts on an organisations ability to increase customer value and loyalty. Feasibility based on the organisation readiness, data and systems support, resource skill sets and a number of other factors. Time Required including the time necessary for training and addressing cultural change management issues related to a specific strategy

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Creating an Action Plan The next step in the planning process was the development of a very detailed action plan. While the complete plan might span three or more years, it was based on three-month phases with clear deliverables that will demonstrate both progress and quick hits or measures of success. The plan identified interdependent activities and should comprehensively detail the time and resources required for each activity. Another key factor for the planning process was the Leadership Action Plan. Advancing on the CRM transformation map required significant organisation change. This part of the action plan helped assess the drivers and restraints of change and the organisations readiness to assess the change. Processes All processes were mapped on to product by understanding the details. During the course of the process mapping, several opportunities for improvement were identified and implemented.

The key to implementing CRM was in understanding organization and customers in a better way.

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There are five interrelated areas that were taken care of before implementing CRM: - Business Focus - Organizational Structure - Business Metrics - Marketing Focus and Technology

Business Focus: There are various components of CRM like customer information, sales, marketing trends and marketing efficacy that acted in tandem to improve relationship between ICICI and its consumers. ICICI captured customer data and analyzed them while dealing with customers at these very touch points.

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A CRM solution from Siebel was implemented for the automation of customer handling in all key retail products of the Group. The solution allows customer service agents to track all customer complaints and requests. It also allows target setting and centralized tracking of turnaround times for request fulfillment. The solution went live in phases during fiscal 2002. The Bank has also undertaken a retail data warehouse initiative to achieve customer integration at the back-office. This central view of the total customer relationship is being used extensively for identifying opportunities to cross-sell new products and services to the existing customer base. Technology Focus: ICICI Bank continues to leverage ICT2 as a strategic tool for its business operations to gain competitive advantage. Its technology strategy emphasizes enhanced level of processing, and cost efficiency through optimal use of electronic channels, wider and focused market reach and opportunities for cross-selling. The Technology Management Group (TMG) is the focal point for the ICICI Groups technology strategy and Group-wide technology initiatives. This group reports directly to the Managing Director & CEO. A key to ICICIs success has been its ability to harness business information to CRM initiatives that have fueled growth and helped attract more than 30 million customers. The foundation for ICICI Banks wide-ranging CRM programs is a Sybase IQ-based data warehouse. Developers had used a combination of PL/SQL and BTEQ scripting, a proprietary technology specific to the data warehouse, for data extraction, transformation, and loading (ETL). With its growing customer base, IT administrators recognized that the bank needed a more powerful, sophisticated data integration system to help ensure the warehouse lived up to its potential as an analytic CRM engine that delivered tangible bottom-line results. To step up to the next level of data integration, ICICI Bank officials agreed with a recommendation from Teradatas professional services division, which provided systems integration support for the data warehouse, to implement the Informatica PowerCenter 47

enterprise data integration platform. (The Bank initially used Teradata as its data warehouse platform and migrated to Sybase IQ a year ago.) ICICI Bank deployed PowerCenter in 2003 as it embarked on the next phase of its warehouse, which would add data from five new sources, in addition to the initial three sources of retail banking, credit cards, and securities information. The next step in the CRM implementation process was gap analysis which essentially is assessing different loopholes in: - Marketing, sales and service practices - Collection, capture, processing and deployment of customer information - Distribution and operations effectiveness at customer touch points

BENCHMARKS/ RESULTS Time-Norms for Various Banking Transaction of ICICI

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In the first table, we can see that the benchmarks set by ICICI are definitely of world class and clearly values customers precious time. Similarly, in the second table its evident that ICICI Bank and HDFC Bank have done very well compared to other banks in terms of CRM best practices. Moreover, the standard deviation is also very less compared to most of the other banks. Clearly this has helped ICICI bank acquire a large customer base (about 30 million) in a short span of time.

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Conclusions: ICICI has used CRM not only as a tool but also as a strategy to gain competitive advantage over other new generation private banks. It has invested a lot in ICT and spared no pains in giving best to the customers. Its multi-pronged approach towards managing customer relationship is paying dividends constantly and as a result we see millions of happy satisfied customers determined to make it one of the most successful banks in India. Lessons so far from the ICICI experience If CRM involves optimizing product, price, place of distribution, promotion, sales and service, why are so many companies struggling? Hasnt anyone really mastered the art and science of CRM, and if not, why is it so difficult? CRM is difficult because it is an enterprise wide initiative. CRM is not a technology initiative. Many have confused CRM as a technology initiative, and assigned the CRM implementation project to their information system or information technology group. CRM conferences often equate to technology exhibits and demonstrations. Technology is needed in order to implement CRM particularly the customization part but technology is not the driver of CRM, or the solution to successful CRM implementation. CRM is not exclusively a marketing initiative. Many organisation have merely equated CRM with customer focused marketing, or data-driven/database marketing. CRM results in more effective, data driven marketing efforts; CRM requires marketing experience. But CRM is strictly not a marketing initiative. CRM is not exclusively a sales initiative. Similar to marketing, CRM is often lodged within the sales department. The sales-force, after all, is extremely close to their customersunderstanding their needs and wants., and trying to fulfill them. Sales, however, is just one functional area that can benefit from CRM, and that is necessary for effective CRM.

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CRM is not exclusively a service initiative. As with sales and marketing, customer service is one functional aspect of successful CRM implementation. But customer service is not the sole driver of the process

CRM involves marketing, sales, service, and technology, as well as the other inner workings of the organisation. Having even one broken spoke in the wheel. One area of the organisation that is less than committed to CRM can make the difference between success and failure.

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Key Things To Follow:

Measuring client potential accurately to focus the relationship effort and ensure its profitability. Recognizing the clients trigger points in his or her relationship to the bank in light of the multichannel customer experience, so the advisor can provide informed support at those critical times. Building customer loyalty through trust that the advisor is the clients advocate and that the bank offers clear pricing and excellent service. A relationship is a two-way dialogue: listening to what customers have to say about themselves, their objectives, their preferences, and their needs, and taking it truly into account when proposing a solution. Developing a specialized sales force for the relationship approach through internal recruiting, appropriate training, ongoing competence management, and a long-term effort to ensure people change and adhere to the new approach. The preparation of customer profile is very necessary to have a customer database. Data mining needs to be done at regular intervals for effective gross selling of products. Unlike the traditional approach where customers are acquired through mass media advertising, CRM normally gets its customers through referrals and Word of Mouth publicity. Thus Employees are the face of the Banks

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The above-mentioned strategies require the collection and maintaining of an extensive database on the customer. Customer or Household Identification (name, phone, address, title, company name) Rating (size, value level, or profitability contribution) Background (demographic, lifestyle characteristics) Communication Record (contact with company, participation in marketing programs, types of information or services required, channels of contact, requests for information, complaint frequency or recency) Purchase Behavior (recency, frequency, monetary value) Credit-worthiness Customer Survey Data Collection

The data will enable the banker to understand the following aspects: Which customers should I select? For what kind of product campaigns? To understand customer credit-card usage and value When to deliver communications to specific customers? Identify high profit, high value, and low risk customers. Segment customer data (demographic) for selecting appropriate marketing. Potential customers who may leave. Non-usage and non-renewal and cancellations.

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Conclusion
For the next three years especially, increasing share of wallet from high-value customers represents a significant challenge for banks operating in mature markets.Most banks recognize that implementing a relationship approach for these high-potential/low-share-ofwallet clients represents an effective way to grow revenue and profit. In addition to providing excellent advisors, a bank that succeeds with relationship management will have a flexible IT architecture aligned with the operating model, and user-friendly systems to help advisors meet their clients needs. People throughout the institution will recognize that the relationship approach is a multichannel customer experience, and let customers choose their channels. While advisors offer consistent solutions and service levels, the bank will also deliver seamless data across channels.All client contacts, through whatever channel,will be captured and learned from so the relationship will continuously grow and prosper. Maximizing profit growth depends on the advisors effectiveness and efficiency. With the appropriate incentives, the best of them will focus on the right clients, be guided in the relationship by a robust, standardized process, and be supported with excellent technology in conducting analyses, providing advice, and managing the relationship.With all the relationship management components in place, they will offer service levels that delight their clients and ensure the banks long-term position as a marketplace leader.

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It is evident that the concept of CRM needs to make its impact in the banking scenario, especially in the Nationalized Banks, State Bank Group and Old Private Banks. The banks can achieve maximum profitability by offering services which are of international standards. The benchmarks of CRM in Indian banking environment have already been provided by the success of foreign and new private banks operating in India. Retention of old customers must be given precedence over new customer acquisition. This promotes cross selling of products and thus increases profitability. CRM is 10% strategy and 90% action. The components of CRM already exist, but needs to be put together like pieces of jigsaw puzzle. The pieces to be strategically aligned are people, processes, IT and leadership. This strategic connectivity has to be done by the management. The components aligned must be in concert across the organization to succeed. Undoubtedly, effective implementation and monitoring of these approaches by the Indian banks will result in providing superior experience to their customers, gaining long-term loyalty, and finally pocketing more revenues..

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Bibliography: World Wealth Report: 2009 Handbook of CRM- By Adrian Payne www.netmba.com www.123management.com www.managementparadise.co www.wikipedia.com www.icici.com www.google.com

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