Report On CRM

Customer Relationship Management
Executive Summary
Customer Relationship Management (CRM) is a philosophy that directs the organization
to build its processes around its customers needs.
A firms capacity to establish, to maintain and to manage privileged relationships with

external actors is considered as its competitive advantage. And with an increase in
volume of customers and competition in the global market CRM has become a globally
recognized and almost an inevitable business practice.
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. And when it comes to
banking customer is the core component in banking business.
The business of banking cannot function without customers, nor is the business done by
acquiring certain number of customers. It is a continuous process of transactions
culminating in a long-term banker-customer relationship. Most business institutions
thrive more on keeping old customers happy rather than getting new customers. In order
to retain customers we must work harder on managing individual customer relationship.
It has been found that keeping existing customers happy and satisfied in turn brings in
new customers and becomes easier to market the products. The old paradigm was price,
quality, and service. The paradigm is price, quality, service, speed, convenience,
value, solutions…..the list is endless.
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.
No bank can possibly meet of its customers given to diversity of their wants. In such a
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situation, the secret key factor of company’s success is effective Customer Relations
Management or CRM.
The secret is that the organization should be doing the right thing for the right
customer at the right time.
Objectives of study: -
 To study the importance of CRM in today’s competitive world 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.
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Index
Page. No.
CHAPTER 1 – Conceptual Framework
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What is Customer Relationship Management
5
Key CRM Principles
8
Advantages of CRM
10
Who needs CRM
11
Can CRM drive Revenue?
12
Key Challenges in Implementing CRM Solutions
17
Purpose Of CRM
CHAPTER 2 – CRM in Banking Sector
Introduction 19
Banking – CRM Makes the Difference 22
CRM – As A Tool To Edge-Out Competition 29
CRM: Benefits and Strategies 45
Retail Banking – Going the CRM Way 55
CHAPTER 3 – Research on CRM practices in

Banks
CRM Practices in ICICI Bank 62

CRM Practices in HDFC bank 70
CHAPTER 4 – Emerging Strategies in Banks 74
CHAPTER 5 – Recommendations And Suggestions 79
CHAPTER 6 -Conclusion 82
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“Listening to customers must become everyone’s business. With most competitors moving
ever faster, the race will go to those who listen and respond more intently”.
- Tom Peters, Thriving on Chaos
Conceptual Framework for CRM
What is Customer Relationship management?

Before we begin to examine the conceptual foundations of CRM, it will be useful to
define what is CRM.
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.
Customer Relationship Management is all about building long-term business
relationships with customers. Another narrow, yet relevant, viewpoint is to consider
CRM only as customer retention in which a variety of after marketing tactics is used for
customer bonding or staying in touch after the sale is made.
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 value-added contacts over a period of time”.
The core theme of all CRM and relationship marketing perspectives is its focus on co-
operative and collaborative relationships between the firm and its customers, and/or other
marketing actors.
CRM is based on the premise that, by having a better understanding of the customers’
needs and desires we can keep them longer and sell more to them.
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.
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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. In some cases, it could even lead to
“Outsourcing of some customers” so that a company better utilize its resources on those
customers it can serve better and create mutual value. However, the objective of a
company is not to really prune its customer base but to identify appropriate customer
programs and methods that would be profitable and create value for the firm and the
customer. 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.
As is implicit in the above definition, the purpose of CRM is to improve marketing
productivity. Marketing productivity is achieved by increasing marketing efficiency and
by enhancing marketing effectiveness. In CRM, marketing efficiency is achieved because
cooperative and collaborative processes help in reducing transaction costs and overall
development costs for the company. Two important processes for CRM include proactive
customer business development and building partnering relationship with most important
customers. These lead to superior value creation.
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The basic concept is that the customer is not someone outside the organization, he is a
part of the organization.
Having defined CRM, here are some generalizations. Any CRM initiative is and has the
potential of providing strategic advantages to the organization, if handled right. Most
CRM initiatives begin with a strategic need to manage the process of handling customer
related information more effectively. For beginners it could simply mean better lead
management capabilities or sales pipeline visibility. However, as organizations mature in
their CRM initiatives, they begin to look at CRM as tool to acquire strategic
differentiators.
Despite the immense benefits that the CRM solutions can deliver, they are not entirely
without their share of problems. Many organizations have burned their fingers trying to
implement the technology and manage costs. To successfully undertake CRM initiatives
it is essential to
• Clearly define the management objective & strategy
• Evolve the right process around it
• Identify the right software solution for implementation
• Understand the hidden costs and hurdles
• Back it up with good training and support
While selecting the software solution for your implementation, ensure that
• It can manage both your data and process
• It is easy to implement and roll out
• It is simple to use
• You understand the total cost of ownership
• You evaluate the risk exposure
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
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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 trends.
CRM helps businesses use technology and human resources to gain insight into the
behavior of customers and the value of those customers.
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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 customers who
require a high level of
→ High value customer requiring low value service service are maintained
Low value customers who without expanding the
High require high levels of service costly offering to the entire
must either purchase the higher customer population
level of service or become our
competitors low value/high
Service Requirement
cost customers
Low
Keeping Existing
Low Customers Customer Value High
Fig. 1 Customer value – Service Matrix
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Grading customers from very satisfied to very dissatisfied should help the organisation in
improving its customer satisfaction levels and scores. As the satisfaction level for each
customer improves so shall the customer retention with the organisation.
Maximizing Life time value

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.
Summarizing CRM activities:

The CRM cycle can be briefly described as follows:
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1. Learning from customers and prospects, (having in depth knowledge of

customer)
2. Creating value for customers and prospects
3. Creating loyalty
4. Acquiring new customers
5. Creating profits
6. Acquiring new customers
Learning from
customers a&
Creating prospects
Profits
Acquiring new
customers
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CRM Activities 5
3 Creating value
for customers &
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prospects
Creating loyal 2
customers
Customer Life Cycle Management
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
Advantages of CRM
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CRM solutions help companies boost their business efficiency, thereby increasing profit
and revenue generation capabilities. Let us take a quick look at some of the measurable
benefits that your organization can gain by implementing a CRM solution.
• 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.
• 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
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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.
Who Needs CRM ?
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Putting it simply, CRM is ideally embraced by that organization which besides making
and retaining clients also makes serious effort to optimize their revenue potential.
This organization is one that aims at organizational growth through sharp focus on
customer relationship management, which it achieves through an intelligent
tracking system.
In here, the customer relationship executive stays terrifically organized, since he can view
his pipeline even while on the move and stay informed of the latest customer
status which helps him plan his short time strategy and long time goals. The
management, on the other hand doesn’t have to rely on the week end/month
end/year end etc cumbersome reports to know how the organization is faring.
Instead, it is empowered with real time access (anywhere, anytime and totally web
based) to the progress, performance and profits of the entire organization (broken
right down to the individual level ) through comprehensive, smart and informative
analytics. All this and more at a cost that is affordable, software that is easy to
deploy and an adoption time that is unbelievably low!
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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
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Companies around the world have leveraged CRM strategies to gain competitive
advantage. As more and more companies rush to implement CRM, precautions
must be taken to do it right. It is approximated that 50-70% CRM
implementations fail, depending on the Industry vertical. Hence, it is essential to
identify the key challenges, address risks and build a strategy that can make your
CRM successful.
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. Rather, a holistic change in an
organisation's philosophy which places emphasis on the customer.
A successful CRM strategy cannot be implemented by simply installing and integrating a
software package and will not happen over night. 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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When setting up a CRM segment for a company it might first want to identify
what profile aspects it feels are relevant to its business, such as what information
it needs to serve its customers, the customer's past financial history, the effects of
the CRM segment and what information is not useful. Being able to eliminate
unwanted information can be a large aspect of implementing CRM systems.
When designing a CRM's structure, a company may want to consider keeping more
extensive information on their primary customers and keeping less extensive
details on the low-margin clients
Architecture of CRM
There are three parts of application architecture of CRM:

• Operational - automation to the basic business processes (marketing, sales,
service)
• Analytical - support to analyze customer behavior, implements business
intelligence alike technology
• Collaborative - ensures the contact with customers (phone, email, fax, web, sms, post,
in person)
Operational CRM
Operational CRM means supporting the "front office" business processes, which include
customer contact (sales, marketing and service). Tasks resulting from these
processes are forwarded to resources responsible for them, as well as the
information necessary for carrying out the tasks and interfaces to back-end
applications are being provided and activities with customers are being
documented for further reference.
Operational CRM provides the following benefits:
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• Delivers personalized and efficient marketing, sales, and service through multi-channel
collaboration
• Enables a 360-degree view of your customer while you are interacting with them
• Sales people and service engineers can access complete history of all customer
interaction with your company, regardless of the touch point
According to Gartner Group, the operational part of CRM typically involves three
general areas of business:
Sales force automation (SFA)
SFA automates some of the company's critical sales and sales force management
functions, for example, lead/account management, contact management, quote
management, forecasting, sales administration, keeping track of customer
preferences, buying habits, and demographics, as well as performance
management. SFA tools are designed to improve field sales productivity. Key
infrastructure requirements of SFA are mobile synchronization and integrated
product configuration.
Customer service and support (CSS)
CSS automates some service requests, complaints, product returns, and information
requests. Traditional internal help desk and traditional inbound call-center support
for customer inquiries are now evolved into the "customer interaction center"
(CIC), using multiple channels (Web, phone/fax, face-to-face, kiosk, etc). Key
infrastructure requirements of CSS include computer telephony integration (CTI)
which provides high volume processing capability, and reliability.
Enterprise marketing automation (EMA)
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EMA provides information about the business environment, including competitors,

industry trends, and macro environmental variables. It is the execution side of
campaign and lead management. The intent of EMA applications is to improve
marketing campaign efficiencies. Functions include demographic analysis,
variable segmentation, and predictive modeling occurs on the analytical (Business
Intelligence) side.
Integrated CRM software is often also known as "front office solutions." This is
because they deal directly with the customer.
Many call centers use CRM software to store all of their customer's details. When a
customer calls, the system can be used to retrieve and store information relevant
to the customer. By serving the customer quickly and efficiently, and also keeping
all information of a customer in one place, a company aims to make cost savings,
and also encourage new customers.
CRM solutions can also be used to allow customers to perform their own service via a
variety of communication channels. For example, you might be able to check your
bank balance via your WAP phone without ever having to talk to a person, saving
money for the company, and saving your time.
Analytical CRM
In analytical CRM, data gathered within operational CRM and/or other sources are
analyzed to segment customers or to identify potential to enhance client
relationship. Customer analysis typically can lead to targeted campaigns to
increase share of customer's wallet. Examples of Campaigns directed towards
customers are:
• Acquisition: Cross-sell, up-sell

• Retention: Retaining customers who leave due to maturity or attrition.
• Information: Providing timely and regular information to customers.
• Modification: Altering details of the transactional nature of the customers' relationship.
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Analysis of Customer data may relate to one or more of the following analyses:
• Campaign management and analysis

• Contact channel optimization
• Contact Optimization
• Customer Acquisition / Reactivation / Retention
• Customer Segmentation
• Customer Satisfaction Measurement / Increase
• Sales Coverage Optimization
• Fraud Detection and analysis
• Financial Forecasts
• Pricing Optimization
• Product Development
• Program Evaluation
• Risk Assessment and Management
Data collection and analysis is viewed as a continuing and iterative process. Ideally,
business decisions are refined over time, based on feedback from earlier analysis
and decisions. Therefore, most successful analytical CRM projects take advantage
of a data warehouse to provide suitable data.
Business Intelligence is a related discipline offering some more functionality as separate
application software.
Collaborative CRM
Collaborative CRM facilitates interactions with customers through all channels (personal,
letter, fax, phone, web, e-mail) and supports co-ordination of employee teams and
channels. It is a solution that brings people, processes and data together so
companies can better serve and retain their customers. The data/activities can be
structured, unstructured, conversational, and/or transactional in nature.
Collaborative CRM provides the following benefits:
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• Enables efficient productive customer interactions across all communications channels

• Enables web collaboration to reduce customer service costs
• Integrates call centers enabling multi-channel personal customer interaction
• Integrates view of the customer while interaction at the transaction level
Collaborative CRM seems to be the new paradigm to succeed the leading Efficient
Consumer Response concept in the industry/trade relationship. Many
organizations are searching for new ways to achieve and retain a competitive
advantage via customer intimacy and CRM. In this context, new strategic
frameworks and cooperation with everybody along the whole value chain are
needed to allow managers to deal with the changes in shopping patterns of
consumers. New management concepts such as Collaborative Forecasting and
Replenishment, CRM, Category Management, and Mass Customization are
integrated into one holistic approach with a view to jointly develop customer
bonding and loyalty.
Purposes of CRM
CRM, in its broadest sense, means managing all interactions and business with
customers. This includes, but is not limited to, improving customer service. A
good CRM program will allow a business to acquire customers, service the
customer, increase the value of the customer to the company, retain good
customers, and determine which customers can be retained or given a higher level
of service. A good CRM program can improve customer service by facilitating
communication in several ways:
Provide product information, product use information, and technical assistance on web
sites that are accessible 24 hours a day, 7 days a week.
Identify how each individual customer defines quality, and then design a service strategy
for each customer based on these individual requirements and expectations.
Provide a fast mechanism for managing and scheduling follow-up sales calls to assess
post-purchase cognitive dissonance, repurchase probabilities, repurchase times,
and repurchase frequencies
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Provide a mechanism to track all points of contact between a customer and the company,
and do it in an integrated way so that all sources and types of contact are included,
and all users of the system see the same view of the customer (reduces confusion).
Help to identify potential problems quickly, before they occur.
Provide a user-friendly mechanism for registering customer complaints (complaints that
are not registered with the company cannot be resolved, and are a major source of
customer dissatisfaction)
Provide a fast mechanism for handling problems and complaints (complaints that are
resolved quickly can increase customer satisfaction).
Provide a fast mechanism for correcting service deficiencies (correct the problem before
other customers experience the same dissatisfaction).
Use internet cookies to track customer interests and personalize product offerings
accordingly.
Use the Internet to engage in collaborative customization or real-time customization.
Provide a fast mechanism for managing and scheduling maintenance, repair, and on-
going support (improve efficiency and effectiveness).
The CRM program can be integrated into other cross-functional systems and thereby
provide accounting and production information to customers when they want it.
Improving customer relationships
CRM programs also are able to improve customer relationships. This is because:
CRM technology can track customer interests, needs, and buying habits as they progress
through their life cycles, and tailor the marketing effort accordingly. This way
customer gets exactly what they want as they change.
The technology can track customer product use as the product progresses through its life
cycle, and tailor the service strategy accordingly. This way customer gets what
they need as the product ages.
In industrial markets, the technology can be used to micro-segment the buying centre and
help coordinate the conflicting and changing purchase criteria of its members.
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When any of the technology-driven improvements in customer service (mentioned above)

contribute to long-term customer satisfaction, they can ensure repeat purchases,
improve customer relationships, increase customer loyalty, decrease customer
turnover, decrease marketing costs (associated with customer acquisition and
customer “training”), increase sales revenue, and thereby increase profit margins.
Repeat purchase, however, comes from customer satisfaction - which in turn comes from
a deeper understanding of each customer, their individual business challenges and
proposing solutions for those challenges rather than a "one size fits all" approach.
CRM software enables sales people to achieve this one on one approach to selling and
can automate some elements of it via tailorable marketing communications..
CRM IN BANKING SECTOR
Introduction
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.
Today’s 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
customer’s expectations, there is always danger that he might shift his business
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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.
What is CRM?
Customer relationship management (CRM) is a major business buzzword of 2000’s.
CRM is a means to gain trust from customers by meeting the needs of each customer in a
more personalized way.
For an information industry, CRM is a term for methodologies; software and Internet
capabilities that help an enterprise manage customer relationship in an efficient and
organized way. Here, technology can be a boon.
A successful CRM solution depends on the ability to interact with customers, through any
channel they choose, as well as a way to track and maintain real-time records of customer
interactions so that a holistic view of the customer can be established. Effective CRM
delivers the personalized informed service on demand.
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
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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 other’s support from time to time.
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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 non-interest 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
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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.
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 company’s business model. Ideally, the whole
idea of CRM is to be decisive. It’s not about let’s just make everybody happy.
Shareholders want good customers, and that’s the greatest value that CRM
brings. CRM technologies are also designed to help identify the appropriate
channels to lower the cost of servicing lower-value customers.
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
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Customer
Identification Cross Selling/Up Selling
CRM
Customer Solution
Satisfaction Acquisition
And Delight
Customer Retention
Customer Identification
It refers to acquiring the entire customer-centric data such as knowledge of customer’s
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.
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
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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 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.
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 bank’s call center, the
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operational CRM can alert the call center of the customer’s account status and other
details.
Analytical CRM helps banks make sense of the information collected. It is aimed at
utilizing the customer’s potential to the maximum. It helps tracking the activities of the
customer on a real-time basis. For example, if there is a regular monthly debit of a certain
amount in the customer’s 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 Analytical CRM

(Provides required (Traces activities and
information) makes information
move sensible)
Key Problems Requiring CRM Solutions Customer
 Lack of Software Systems

Banking industry in India is still not computerized, though there has been a
tremendous improvement in this area. Customer and transaction data continue t o be
maintained in physical ledgers and books. Even where software systems are in
operation, there is no proper inter-departmental / inter-branch linkages.
 Multiple Product Database

Multiple industry databases such as core, credit cards, ATMs etc. do not provide
relationship linkages of customer. They are not integrated to share customer data,
Transaction data and interaction data.
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 Multiplicity of Contact
Presence of multiple software systems such as call centers, e-banking, Internet
banking etc. leads to a situation where the same customer would be approached for
various products without prior history. There is no common customer view across the
banks desk and communication channels. There is a lack of system that would
identify duplication of customers.
 Ineffective Tracking Mechanism

Marketing campaigns are normally done manually leading to an ineffective tracking
mechanism. There is always a delay in response to a customer-existing or prospect-
due to lack of required information. There is no proper coordination between
marketing and functional departments resulting in loss of leads.
There is no facility of creating and tracking opportunity to up-sell or cross-sell the
products.
 Absence of Exclusivity
It is not possible to delight every customer of the bank. Bankers need attitudinal shift
in selecting exclusive customers in terms of business and profitability to whom
special CRM solutions are to be targeted.
CRM System to Bridge the Gap
CRM solutions have to be proposed based on the above problems, keeping in mind the
CRM goals as explained earlier. Technologies such as data warehousing/data mining are
increasingly used with CRM solutions to be more effective in streamlining the channels
and tracing the potential customers.
An effective CRM solution should provide the following:
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 Integrated communications from various channels to deliver a unified customer

view across the bank.
Lack of software CRM Unified customer

system view
Multiple product Collaboration tools

databases Customer for employees
data
Multiplicity of Operational Customer support
contacts data activities
Communic -Personalized
Ineffective tracing ation data offers
mechanism
 Provide collaboration tools for the employees using-e-mail,
Cross selling
messaging, chat etc.
 Provide for customer support activities such as contact management, Accounts
management, Opportunity management, Activity and Calendar management,
Campaign management, Product management etc.
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CRM – As A Tool To Edge-out Competition
With hot winds of competition blowing across Indian banking industry, developing a
close, symbiotic relationship with the customers has become highly important than ever
before. Banks have come out with innovative measures to satisfy the needs of their
present customers, acquire new ones and at the same time adopt procedures to win back
the lost customers. This problem gets compounded as customer expectations for quality,
service and value are increasing rapidly on a continuous basis. Thanks to the
development of IT and Internet, which are changing the possibilities in terms of customer
contact, service and insight, today banks can aim at meeting this expectation by only
adopting a strategy that is commonly known as Customer Relationship Management.
Banks can leverage on these new inventions of science to develop, design and implement
CRM strategies in their processes. Most of the Indian banks are now turning to CSM as
they are increasingly realizing that the cost of acquiring new customer is far higher than
the cost of retaining existing ones. This quest for new effective ways to woo and retain
customers ends with the implementation of CRM models in their business practices. They
no longer see CRM as an optional and expensive add-on but as a “must” to survive in this
ever-increasing competitive market.
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The importance of sustainable customer relationship and role of CRM in its effective
implementation is highlighted as follows.
Customer Relationship : What And How?
Before we discuss about the “customer relationship” in detail, let us first examine “who a
customer is?” Quite often people wrongly perceive customers as individuals who use the
services of a bank i.e., the end users. However, the definition of ‘customer’ is broader and
covers partners, agents, third parties, employees and of course the end customer. Put
simply, a customer is any individual who has a relationship with the bank from time to
time.
Relationships are not built overnight. They pass through different stages namely contact,
involvement, intimacy, deterioration, repair, and dissolution. A relationship can terminate
from any of these stages. It is, therefore, essential for a bank to understand the stage at
which it could better sell banking services. Cross selling or up selling can be attempted at
certain stages to get better results. The recent research indicates that some of the
behavioral traits such as adaptation, trust, commitment, communication, cooperation,
conflict, resolution, independence, past satisfaction, power equation etc., pave the way to
build up relations as also to sustain them over a long period.
‘Adaptation’ is the prime skill that banks need to cultivate to tailor their resources to meet
the specific needs of the individual customer. Alignment of bank resources with
customer’s needs is directly proportional to the quantum of trust injected into
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relationship, both by bank as well as customer. ‘Commitment’ is another essential

ingredient for nurturing a fruitful relationship. Secondly, it should reflect a multi-
dimensional approach that encompasses the dimensions of continuance, normative
components and effective components. ‘Continuity’ of a relationship is a function of the
communication used in extending the cooperation, tracing the disagreement that creeps
into the business transaction and style in which this conflicts are resolved. In the final
analysis it is the power equation the ability of one party to evoke a change in other
partner that greatly influence the continuity of any relationship.
Contact
Involvement
Intimacy
Exit
Deterioratio
n
Repair
Dissolution
Stage Model of Relationship

As the strategy behind the management of customer relationship is basically concerned
with sustaining relationships, it moves around the management of Customer life cycle. A
typical customer relationship starts with acquisition of customers through personal
visits, media advertisements or through referrals from existing customers. Then the cycle
moves on to customer development by way of personalized communication and offer him
customized products and services based on What is mutually considered as good. Once
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the customer equity is built up, bank branches can easily afford cross-selling and up-
selling. But there is a danger of the customer migrating from the relationship, but at
what stage and for what reasons the customer is migrating has to be assessed by the
individual bank branches. Using the historical data base, branches can identify the
underline causes for such migration and accordingly redraft their relationship
management strategies to minimize future attritions.
A bank being an intermediary essentially collects deposits from savers and lends to
entrepreneurs at a spread. In the process it assumes the role of a repository of the
national economy. As a result the decisions needs to be timely, rational and more apt in
the given context. This multi-dimensional goal calls for a wealth data, of which, the
customer related data is sizeable. A bank to function with the laid down laws of the
nation has to necessarily known its customers and any decision to sell a credit
product/service demands a through scrutiny of the customer profile. And that is where
the modern concept of CRM through IT-enabled services applies to the banking system
CRM – What Does It Mean?
CRM is neither a product nor a service, but a business strategy to learn more and more
about customers behaviour and requirements in order to create long term relationships
with them. In other words, CRM is a comprehensive approach that provides seamless
integration of every aspect of banks business that comes in contact with the customer at
various stages such as marketing, service delivery, after-sales-services etc. through the
integration of people, processes and technology. It is a comprehensive strategy and
process of acquiring, retaining and partnering with selective customers to create superior
value for the banks and its customers. The generic constituents of CRM are :
CR
CA
I ICV IVC
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Components Of CRM
CA – Customer Acquisition encompasses:
Counter staff automation
Marketing
CR – Customer Retention through:

Data warehousing and analytical tools
Customer Service
Call service
Contact center
IVC – Improved Customer Value through:
Marketing automation and campaign management for cross-selling and up-selling.

Data warehousing and analytical tools.
How Does CRM Affect The Business Of Banking
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:
 Speed and accuracy in information analysis.

 Foundation for organization-wide data and information.
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 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.
CRM Implementation
The following are some of the essential requirements for implementing CRM
successfully:
 CRM Cell
The bankers must 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 may 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
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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 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.
Implementing CRM in Indian Banks
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A banks success in the field of CRM fully depends on its ability to achieve ‘customer
intimacy’. And ‘customer intimacy’ can be achieved by understanding and influencing
the customer’s behaviour through relevant, uninterrupted, and personalized
communication. CRM’S very motto is not only to attract new clients/ customers or hold
valuable ones, but also to boost the profitability of every individual client/ customer and,
hence, the bank as a whole. In other words, the major goal of CRM is to built a single,
integrated, organization-wide view of the customer, enabling the bank to maximize
customers experience. By integrating front- and back-office systems to include reports of
all customer contact, purchase of services/products, requests for information and
technical support, the bank can present a single face to the customer and offer better
services. Such an interface enables bank to access the potential of customer from time to
time and offer him the customized products to augment profits.
Suffice to say, getting the CRM philosophy work in a bank is quite complex as well as a
challenging task for the strategists for it demands them master some Key Principles of
CRM such as:
Offerings Vs. Customer Classification

To start with banks must realize that all customers are not equal. Customers profitability
varies from person to person/context to context and not all customers are evenly desirable
for the banks. Banks must differentiate their customers based on the ‘value criteria’ i.e.
how valuable the customers? Value is nothing but the profit the customer adds to the
banks account. Put simply, more profitable customer is a ‘high value’ customer and a less
profitable customer is a ‘low value, customer. A banks CRM system must also capture
customer’s taste, preference, behaviour, living style, age, education, cultural background,
and physical and psychological characteristics, sensitivity etc., while differentiating them
by the value criteria into low and high value customers. By combining the profitability
potential of a given customer and his/her personality profile including their expectations,
customers can be grouped into four categories as follows:
 Low value/less profitable customer desiring high grade services.
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 Low grade/less profitable customer with potential to become high value in

coming days.
 High value/more profitable customer desiring high grade services.
 High value/more profitable customer requiring low-grade service.
Once the banks differentiate their customers vis-à-vis the profitability and their other
traits, it becomes easy for banks to customize their services and offerings to maximize the
overall value of their customer portfolio.
Sticking to Existing Clients

According to Magic Software Enterprises White Paper-2000, “it is five to ten times
cheaper to retain present clients/customers than to acquire new ones”. Understanding the
needs and imperatives of every individual existing client is at the heart of CRM. A
customer has only a single relationship with the bank when he purchases products and
services, and so understands the bank. Banks, on contrary, have thousands and millions
of customer relationships in their portfolio. Hence, it is practically impossible to satisfy
subsequent needs of each and every existing customer to the same level what he/she had
enjoyed at the beginning of the relationship. Thus, retention of customer becomes a
challenging task. But acquiring a new customer is costlier than retaining the existing one,
banks must always try to retain their existing customers to the extent possible by
thoroughly and regularly meeting their needs. It, however, does not mean that the banks
should not add new customers to their portfolio. Rather, they must acquire new customers
while keeping their present customers satisfied.
How to Retain a Customer

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 must 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
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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’.
Nourishe
Suspect Prospect Client
d
Advertise
r
Journey of a customer
Where to Start CRM?
A bank’s competitive advantage lies in how it understands its customers and meets their
expectations. Any bank that is in the race of implementing CRM technology in its
business should chase the following steps:
Data Warehousing
The effort begins with building the data warehouse. An organization data warehouse is an
architectural component that is- subject oriented, integrated, non-volatile and time
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variant. The data warehouse exists to enhance banker’s ability to make informed
decisions.
Data can be of two types:
 Function oriented data and
 Subject oriented data.
Subject oriented data is the data that is organized along the lines of the subjects of the
bank. Similarly, function oriented data is the data that is organized around the functions
of the bank. The functions of the bank might include such things as – demand deposits,
commercial savings, home loans, corporate loans, agricultural loans, loan for consumer
durables, and so on. In a move to understand the difference between a subject orientation
and a functional orientation, one needs to examine the difference between subjects and
functions. Each function will have some data that relates to each subject. Demand deposit
processing has customer data, as do commercial savings, corporate loans, home loans,
and loans for customer durables. In the similar line, commercial savings have product
data, as do demand deposits, corporate loans and loan for consumer durables.
Mapping of the data from each function to each subject area shows that there is a
fundamental restructuring and realignment of data that must be done in order to build a
data warehouse. Data must be read in a functional format and written in a subject-
oriented format.
Designing the Database
The next step in this process is to design a comprehensive database. The database acts as
a ‘memory box’ where summary data about the business carried out, customers
entertained, services/products bought by them etc., are stored. Summary data means
average information, average decisions and average performance.
Designing the data base without having full clarity about database design principles and
without a well-structured plan of the ‘input-output’ of the database, the tables and their
relationships, may work out for a relatively smaller database. However, to build a
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database that actually serves the purpose of producing something materialistic, a well-
structured plan as well as the application of database rules and terminology are must. A
good starting point is to first consider what output the bank needs from the database and
what the bank wants the database to do for it. Often, it is more than one thing, and thus,
the bank must make a list of things it wants the database to do. In addition, the bank must
make a list of all the outputs that it anticipates the database to produce e.g. reports,
screens etc.
Initial
organization
Technical
Preliminary Data
infrastructur
design modeling
e
Data mart
Data base Exploration

design Warehouse
System of
Respecification
record
End user Sourcing/

access, population
analysis
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Back flow
Normal Data
Warehouse Development Methodology
Data Mining
Database designing is followed by data mining where banks strategists analyze the past
trends/patterns to forecast the future behaviour/demand from customers for varied
services and products and take action accordingly. They carry out various analyses on the
collected data to determine customer’s behaviour with respect to product, price and
distribution channel. Banks need not always go for expensive and highly sophisticated
data mining systems. The customer information gathered by banks in their day-to-day
business is often sufficient for effective data mining. Answers to simple questions such as
‘what happened to service offered by the bank during a particular period?’
‘What was the customer’s reaction towards the service – positive or negative?’ “If
negative, why so?’ ‘Are the present economic activities of the customer and the needs
thereof fully met with?’ ‘If not, how to bridge the gap?’ ‘How much of the customers’
financial businesses does the bank actually handle?’ ‘How many products does it sell to
these customers?’ ‘What is the history of institutional clients’ transactions?’ Are there
any imbalances in clients’ investments, debts, equities and capital structures wherein
bank could chip in to grab new business opportunities?’ are enough to form a precise
picture of the business.
ACRM set consists of front-end operations that interact with the customers such as
counter staff, call centers, target marketing initiatives etc., and gather data about them.
This is generally merged from various ‘touch points’ and channeled into the database.
The database consolidates not only business transactions data but also data collected from
outside sources/agencies. The availability of huge data (both internal and external) helps
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in creating an environment for better analysis. The output is interpreted and new
information is transferred to a central customer database that would be assessed to a
central customer database that would be assessed by all the bank
employees working with different terminals. Needless to say that data mining provides
the intelligence behind the CRM initiative.
Tools and Techniques of Data Mining

A range of data mining tools, techniques and algorithms are available to support the data
mining operations. They differ from each other in the type of data handled, assumption
regarding the data, scope and interpretations of the output. Examples of some data mining
tools and techniques include – decisions trees, rule induction, case-base reasoning,
visualization techniques, nearest neighbor techniques, clustering algorithms etc.
Information Needed for an Effective CRM Solution
Bankers planning to implement CRM would require a large amount of information about
their bank and customer base covering the following:
 Information about the bank
 Market information
 Demographic distribution of present segment of customers by:
 Age
 Sex
 Level of income
 Qualification
 Marital status
About bank’s valuable/best customer:

 Products/services they purchase for
 The segment they belong to
 Their habits, tastes, preferences
 Their businesses and future prospects
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Customer information at the individual level:

 Personal information (name, address, family, background, qualification
etc.)CRM
 The customer group/segment to which the individual belongs
 Present and past behaviour record
 Interests, disinterests, habits, and preferences
Responsibility of Bank Staff in the Successful Implementation of CRM
Like other applications and programs, the success of CRM programs to depends on
corporate management and vision. CRM needs the bank culture to shift from being
“task-oriented to result-oriented.” This change must be initiated by the top management,
and must allow the participation of lower-level staff members. Over the years, many
CRM programs have failed primarily due to inadequate staff support.
CRM Vs ERP
The major difference between CRM and ERP is that the former is a front-office
automation solution while the latter is a back-office automation solution. It is necessary
that these two systems integrate with each other and compliment information as well as
business work flows. Thus one can rightly say that CRM and ERP are complimentary.
Seamless integration of CRM with ERP will help bank to provide quicker customer
service through an enabled network that can direct all customer queries and issues
through appropriate channels to the right place for prompt decision.
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
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2003 in the Business Intelligence Category for its Teradata enterprise data warehouse
solutions.
However, CRM market in India is still in a nascent stage. Indian banks haven’t yet seen
big results from CRM solutions, probably because of improper implementation. Being
short-sighted, they have adopted new technology without clear understanding of how to
integrate it with the existing systems and processes.
Indian banking industry should aim to formulate strategies incorporating people,

processes and technology issues. In accordance with the strategies, current and future IT
initiatives can be formulated, prioritizing the related activities and their feasibility. Once
this is done, implementation in a phased manner will definitely lead to organization’s
success in achieving the goals.
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CRM: Benefits and Strategies
CRM is about finding, getting and retaining customers. Its main thrust is to develop new
products, render value creation, gain market leadership and spread risks and
vulnerabilities besides facing competition. The strategic framework for CRM could
clarify CRM functions fitted within the organization and optimize their use. Value
creation process of CRM concentrates on creation and delivery of value to customers. For
CRM to be truly effective an organization must decide what kind of customer
information it is looking for and what it intends to do with the information. Data mining
renders customer relationship profitable. E-CRM is the integration of the customer
relationship with e-business application.
CRM is at the core of any customer-focused business strategy and includes the people,
processes, and technology questions associated with marketing, sales, and service.
Simply stated, CRM is about finding, getting and retaining customers. The aim of these
systems is to assist in building lasting customer relationships to turn customer satisfaction
into customer loyalty.
Ever increasing customer power creates the need for customer-driven organization. The
CRM concept is creating a strong customer supplier alliance and the pressure forging
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these alliances are stiff competition, emerging/new technologies, shorter product life
cycles and quality revolution and just-in-time concept.
Application of CRM
Banks are one of the prime users of CRM. Any bank would have such a customer base
that would not be able to monitor manually and find out various customer buying trends
and patterns. So it is essential to attract, retain and grow customer base with effective
management of the information about the customers and enhance the relationship with
them. This is where CRM comes in for the banks. 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?
Will CRM Benefit the Bank?
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
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 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 strategy in banks
The bank has to decide on the strategy or pathway to go ahead with CRM. Here two
major issues must be addressed: The need to approach CRM in a strategic and systematic
manner and the need to understand what constitutes CV.
For this purpose a strategic framework has been developed to help clarify CRM
functions, to fit it within the organization and optimize its use as a strategic management
approach. This framework is comprised of the following inter-related cross-functional
processes. They are:
 Strategic development process
 Value creation process
 Multi channel integration process
 Information management process
 Performance assessment process
These processes though have universal application need to be formalized by applying the
framework, depending on each organizations unique framework.
 Strategic development process

 Where I am and what do I want?
 Who are my customers and how do I segment them?
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 Value Creation Process

 How should I create and deliver value for my customer?
 How to maximize lifetime value of customers whom I want?
Multi channel Integration process

 What are the best ways to communicate between the bank and the
customers?
 What is the picture of an outstanding customer experience at an
affordable cost?
Information management Process

 How should I organize information on customers?
 How to replicate the mindset of the customers?
Performance Assessment Process

How to create increased profits and shareholder value?
How to set standards, develop metrics, measure results and improve performance?
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Information Management Process
Strategy Value Multi-channel Performance

Development Creating Integration Assessment
Business Process
Business Value Shareholde
strategy Customer r Results
Receives Salesforce
Business Employee
Value
vision Value
proposition Outlets
Competiti
Customer
Value Value
ve assessment Shareholder
characteri Telephony
stic. Value
Cost
Reduction
Direct
Value Marketing
Organizati
on Receives Electronic Performanc
Commerce
Acquisition e
Customer economics Monitoring
Strategy
Mobile
Retention Commerce
Customer Standards
economics
choice Metrics and
KPIs
Customer
Results
characteri
stics
Data Repository
Segment
granularit
y IT Analysis Front Office Back Office
Systems Tools Applications Applications
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Five New Approaches to Customer Value
When bank wants to focus on its most valuable customers, it must ensure that it is based
on:
 The total value of their relationship with the bank
 The potential value of their relationship
 The profitability of their relationship
 The insights they can provide to the bank
 The influence that they wield over other customers.
By thinking more insightfully about what the customers are really worth, the bank can
focus its resources on attracting and keeping the right type of customers. This focus, in
turn, will improve the productivity of its CRM efforts and will position it better for
innovation and growth.
CRM – A technological Perspective
After all, good customer relationships are at the heart of business success. There are
many technological components to CRM, but thinking about CRM in primarily
technological terms is a mistake. The better way to think about CRM is as a process that
will help brig together lots of pieces of information about customers, sales, marketing
effectiveness, responsiveness and market trends. 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 what it intends to do with that
information.
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Next, the organization must look into all of the different ways information about
customers comes into a business, where and how this data is stored and how it is
currently used.
From a perspective, it involves capturing customer data from across the organization and
consolidating all internally and externally acquired customer-related data in a central data
in a central database. This data is then analyzed and the results of the analysis are
distributed via customer touch points like mobile sales force, inbound and outbound call
centers, websites, point-of sale, e-mail, etc. for use while dealing with customers at this
points. The Internet has revolutionized the way business is done and has virtually taken
the enterprise information system within the reach of the customer. It can be accessed
through call centers, Internet and increasingly through mobile devices.
One bank, for instance, may interact with customers in a myriad of different ways
including mail campaigns, websites, brick-and-mortar stores, call centers, mobile sales
force staff and marketing and advertising efforts. Solid CRM systems link up these
points. This collected data flows between operational systems and analytical systems that
can help sort through these records for patterns. Bank analyst can then comb through the
data to obtain holistic view of each customer and pinpoint areas where better services are
needed. For example, if someone has mortgage a business loan, an IRA and a large
commercial account with one bank, behooves the bank to treat this person well each time
it has any contact with him or her.
Until recently, the most CRM software has focused on simply the organization and
management of customer information. Such software, called Operational CRM, has
focused on creating a customer database that presents a consistent picture of the
customer’s relationship with the bank, and providing that information in specific
applications such sales force automation and customer service in which the company
‘touches’ the customer.
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However, the sheer volumes of customer information and increasingly complex

interactions with customers have propelled data mining to the forefront of making
customer relationships profitable. Data mining is a process that makes use of a wide
variety of data analysis and modeling techniques to discover unknown patterns and
relationships in the data that may be used for making near accurate predictions. It can
help the banks to select whom the right customers are to focus on, offer the right products
at the right time to existing customers and identify good customer who are about to leave
the bank. The outcome of all this is increased revenue because of greatly improved ability
to leave the bank. The outcome of all this is increased revenue because of greatly
improved ability to respond to each individual contact in the best way and reduced costs
due to proper allocation of resources. These CRM applications that use data mining
techniques are called analytical CRM.
CRM- an Implementation Perspective
Here it is important to mention the two types of CRM that the bank must understand
before starting to implement the module. One of them is Operational CRM, while the
other is analytical CRM. The following diagram would help better understand the
concept.
The steps to successful CRM implementation are outlined as follows:
 Break the CRM project down into manageable pieces by setting up pilot programs
and short-term milestones. Starting with a pilot project that incorporates all the
necessary departments and groups projects quickly but is small enough to allow
tinkering along the way.
 Make sure CRM plans include a scalable architecture framework.
 Don’t underestimate how much data that might be collected (there will be LOTS)
and make sure that if needed provision to expand the systems are made.
 Be thoughtful about what data is collected and stored. The impulse will be to grab
and then store EVERY piece of data that is available, but there is often no reason
to store data. Storing useless data wastes time and money.
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 Recognize the individually of customers and respond appropriately. A CRM

system should, for example, have built-in pricing flexibility.
E-CRM in Banks
E-CRM is the Integration of the customer relationship with e-business application. The
CRM enables banks to have new economies and reach the border customer base. This
needs to categorize or segment the customers. With IT in place, we have inexpensive but
powerful computers which work at very high speed and low-cost of storing huge data and
will make E-CRM more productive.
Attitudes and opinions are extremely important in relation to e-CRM. Ho and Wu (1999)
explain how “virtual products” are sold to customers, who need not have inventory, by
display only images. The Web offers opportunities to market products through
multimedia presentation capabilities such as animation, audio, and video. Such complex
multimedia stimuli are perceived through the senses differently than verbal and written
communication stimuli.
Giner-siner et al. (2000) asserts that interpretation of evaluations as response to most

stimuli in the environment necessitates presentation of stimuli similar in form to object
perceived through the sense. Romano et al. (2000) demonstrated that new techniques can
enable marketers to gather customer information anonymously through free forum
comments. Understanding how consumers think and feel about products, companies, and
brands at a very detailed level may provide a competitive advantage in e-commerce
markets. This is particularly useful in case of bank as their products are mostly intangible.
So it is time the banks started making use of this fact and using this technology optimally.
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CRM helps companies improve the profitability of their interactions with the customers
while at the same time making the interactions appear friendlier through customizations.
To succeed with CRM, companies need to match their products and campaigns to
prospects and customers, in other words, to intelligently manage the customer life cycle.
CRM is a topic on which there is a plethora of literature according to Romano, but no

overarching frame work to guide and focus IS research in this area. The integration of the
five-research areas viz., technology, human factors, markets, business models and
knowledge management, provide a novel approach to examine the emerging area of e-
CRM. Finally, the notions of e-CRM processes and outcomes being affected by the five-
research areas provides a direction for theory development and empirical study in both
the lab and the field that may yield meaningful and useful results with both theoretical
and practical implications.
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Retail Banking – Going the CRM Way
Attracting and retaining the individual high net worth and profitable customer is a key
challenge for banks, today. Customer Relationship Management (CRM) can help the
retail bank managers in facing this challenge. In order to drive the maximum benefit from
CRM, banks must prepare their processes compatible to the CRM.
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 knowledge savvy customer is challenging the India
retail banking industry to redefine itself. In the current competitive scenario – for a bank
to survive competition, succeed and profit, it has little choice but to learn from and
actively respond to ‘customer’ needs. Banks offering retail products need to reorient their
strategy from a product-centric to a customer centric focus to attract and retain High Net-
worth Individuals (HNIs) and profitable customers. Emphasis on CRM arises on account
of the challenges confronting retail managers – managing multiple customer touch points
through which to sell the burgeoning complex products, which the attendant risks and
rewards, to sustain and achieve growth and profits.
We thus need to understand the dynamics of a ‘relationship’. ‘Relationship’ according to

Liljander and Strandvik arises when a customer buys a service on two or more occasions.
Banker-customer relationships are becoming more complex and demanding. Retail bank
customers have high levels of expectations with a plethora of alternatives, routinely
demand reduction in user charges, expect rapid response to requests, look forward to
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customized and personalized products and services. Unless retail banks understand the
range of factors that impact customer-relationships, they may fail to judge the value
proposition represented by individual customers and consequently miss out on business
opportunities.
The art of ‘managing’ the banker-customer relationship is the hallmark of successful

retail managers. There is an urgent need to clearly understand the potential long-term
value of present and prospective customers – focus on profitability and not on revenue
generation.
Preparing for CRM
Preparing for CRM essentially involves the following steps:

 Understand the organization environment
There are essentially two components to the service provided by banks. Customer
interface and transaction execution. While both the components are
complementary in nature, the skills required for each component are unique.
Components of customer interface are field sales staff, customer call centers,
Web-portals and written queries/complaints.
Transaction execution is the forte of the operations staff and IT. Inputs received
from customer interface staff are executed and delivered by the transaction
processing personnel.
Very often we come across a situation where there is a dichotomy between what
the field staff assures the customer and what the transaction executive delivers.
This is common in the case of loan products. The reasons are:
 Lack of understanding of the line and staff functions and overall structure
of the organization;
 Inadequate knowledge of the sphere of operations at different levels;
 Failure to judge the idiosyncrasies of superiors, peers and subordinates.
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Customer interface executives who do their homework on the above issues are less
likely to make commitments to customers, both internal and external, which cannot
be delivered.
 Understand the Bank’s products

Despite the bank’s organizing internal campaigns and contests on the theme ‘know
your products’, experience has shown that except the winners of the contest, the rest
of the pack are woefully lacking in product knowledge. Walk into any bank - private
or public sector – and enquire about a demat account operation or the procedure for
obtaining cash credit limits. Chances are that the executive would answer one query
and refer you to another table for the second. Your worst nightmare is when you call
the bank for the above information and are informed that the person who can provide
the exact details is not on his seat and you are politely requested to call back again.
Improvements in the area of CRM are evident, since the executives in some banks ask
you to leave your phone number so that the concerned executive can call back.
What is being suggested is not to do away with the policy of having experts to answer
customer enquiries but to equip every executive with an in-depth knowledge about
his/her ‘baby’, while acquiring adequate inputs to nurture your colleague’s ‘baby’ in
his/her absence. Adequate knowledge on all the products offered by the bank would
ensure that CRM efforts are firmly entrenched.
 Know Your Product Environment:

Enhanced service competency and product/market knowledge are the building blocks
in a relationship building exercise. A ‘professional’ banker should be equipped with
adequate information relating to:
 Competitors by rank.
 Marketing strategies adopted by companies that catapulted them to the top
slot.
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 Our rank/status vis-à-vis our competitors as also the relative market niche
being catered to.
 Knowledge of our strengths and weaknesses in relation to the
product/organization.
Information called from the first two points would provide necessary inputs in
assimilating and analyzing this data.
To capture the attention of the customer within the shortest possible time frame, focus
ought to be on specific information relating to the personal preferences and needs of
the customer at the time of interaction. A banker thoroughly trained on the above
issues would ensure deepening of the customer relationship and enhance a firm’s
ability to differentiate itself.
Management Game – Plan for CRM
Some of the time-tested popular strategies adopted by the banks towards relationship
building and management efforts, range from sending out greetings, message on
special occasions, data mining and cross selling to organizing mega events or ‘melas’.
Experience has shown that each interaction at an event may not result in a sale;
nevertheless, the aim is to make each interaction a potentially profitable opportunity
to offer additional value to the customer. Again, banks embarking on event-driven
marketing strategies are in a better position to feel the pulse of the customers and
channel their energies towards meeting customer expectations. The other advantage is
that this strategy results in a greater return on marketing investment coupled with
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reduced marketing costs, lesser cost of communication, reaching out to a larger
targeted audience and a higher response rate.
Campaign – management in retail banks is also growing by leaps and bound from
single channel mass campaigns to multichannel targeted campaigns. Technologies
have evolved to an extent that the management can keep a tab on the real-time status
of a campaign, complete with client history to enable devising an appropriate action
plan.
Proliferation of services due to intense competition has turned the banking industry into a
buyer’s paradise. “The more you give the more I (the customer) want” seems to be the
adage. Consider the introduction of the ATM facility that was meant to reduce the
pressure on routine transactions. Instead, the banking industry has seen not a shift of
transaction from the branch to the ATM but an explosion of transaction in both of the
outlets. In their anxiety to reach out to more customers and grab a bigger piece of the
cake, bank branches appear to be mushrooming all over the cities, more branches entail
deployment of more staff. Recruitment and deployment of personnel without adequate
inputs relating to issues explained above have a detrimental effect on CRM. S ‘top-down’
CRM-focused approach that starts with the top management, percolates and permeates all
levels of organization, is the need of the hour. Success of such a strategy will be possible
only when an exclusive CRM team ensures dissemination of the CRM philosophy,
conducts a regular CRM audit and offers suggestions and ideas while filing the ‘CRM
performance report’ with the top management.
CK prahalad an Venket Ramaswamy in their book ‘The Future of Competition’ argue

that the future of competition lies in an altogether new approach to value creation, based
on an individual-centered co-creation of value between consumers and companies. They
claim that product variety has necessarily not resulted in better consumer experiences.
Moreover, co-creation does not emerge when events are staged or services outsourced. A
larger picture encompasses co-creation of value through personalized interactions that are
meaningful and sensitive to a specific customer. Since a large number of customers will
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seek different interactions, the value creation process must accommodate a variety of co-
creation experiences. The bottom line for the future of competition is the quality of
interaction between the customer and the bank.
Research on CRM practice in banks
Customers typically use banks for services such as savings and current accounts,
mortgages, loans (e.g. personal, housing, auto, and educational), debit cards, credit cards,
depository services, fixed deposits, investment advisory services (for high net worth
individuals) etc.
Before Internet era, consumers largely selected their banks based on how convenient the
location of bank’s branches was to their homes or offices. With the Advent of new
technologies in the business of bank, such as Internet banking and ATMs, now customers
can freely chose any bank for their transactions. Thus the customer base of banks has
increased, and so has the choices of customers for selecting the banks.
This is just the beginning of the story. Due to globalization a new generation of private
sector banks and many foreign banks have also entered the market and they have brought
with them several useful and innovative products. Due to forced competition, public
sector banks are also becoming more technology savvy and customer oriented.
Thus, Non-traditional competition, market consolidation, new technology, and the

proliferation of the Internet are changing the competitive landscape of the retail banking
industry.
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With increased number of banks, products and services and practically nil switching
costs, customers are easily switching banks whenever they find better services and
products. Banks are finding it tough to get new customers and more importantly retain
existing customers.
Therefore banks are now stressing on retaining customers and increasing market
share. Thus banks like ICICI bank and HDFC bank are following CRM practices.
Research Methodology: -
Objective of the research: -
To learn and understand the changes in Relationship marketing.

Analyze the impact of Customer relationship Management in the Service Sector
with the help of case studies.
Methodology adopted during the study involved 2 stages, which are as follows-
Stage 1: -
Literature review:
Available literature was studied to understand the main issues involved in

implementation of CRM. The source of literature review was magazines, Internet,
banks pamphlets and brochures and books.
Stage2: -
Interviews: -
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Interviews through questionnaire were conducted in order to get maximum

response and view points. The interviews were taken in ICICI Bank and HDFC
Bank.
CRM practices in 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
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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.
The CRM Roadmap
CRM, at ICICI, is viewed as a discipline as well as a set of discrete software

technologies, which will focus on automating and improving the business processes
associated with the customer – face –to-face, call Centre, ATM, web, telephone, kiosk,
bank branch, sales associates, etc – so as to allow ICICI to carry out cradle-to-grave
customer management more efficiently. It should allow ICICI to engage in one-to-one
marketing by tracking complete customer life-cycle history. To begin with it will
automate process-flow tracking in the product sales process, and be able to generate
customized reports and promote cross selling. It will also enable efficient campaign
management by providing a software interface for definition, tracking, execution, and
analysis of campaigns.
From an architecture perspective, the enterprise-wide CRM solution should seamlessly

integrate non-transactional related customer information housed in the front-office with
the transactional information housed in the back office.
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Implementing CRM
A very detailed and comprehensive CRM action plan was developed based on the
understanding that CRM will require enterprise wide transformation.
The CRM Business Transformation Map below shows the various aspects of that change.
BUSINESS FOCUS
Product Sales Channel Marketing Service Customer
ORGANISATIONAL STRUCTURE
Product Place Promotion Channel Contact Customer

Management
Management Management Management Management Management
BUSINESS METRICS
Product Place Program Customer Customer Customer

Patterns &
Performance Performance Performance Revenues Lifetime Value
Profitability
and Loyalty
MARKETING FOCUS
Mass Sales Marketing Integrated Marketing Segment CRM

Specific
Advertising Promotion Campaigns Communications
Marketing
TECHNOLOGY
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Transaction Data Data Access Data Warehouse Data Marts Customer

Processing Maintenance Touch point
Systems
Interviews with key individuals throughout the organisation helped identify different
initiatives that have been launched, all focused on CRM.
The next step in the planning process was a Gap Analysis. This analysis essentially
compared current stage against optimal relative to the five aspects of business, to identify
and specifically describe the gaps.
The CRM Business Cycle:
 Understand and Differentiate

Organisations cannot have a relationship with the customer unless they
understand them… what they value, what types of services are important to them,
how and when they like to interact, and what they wan to buy. True understanding
is based on a combination of detailed analysis and interaction. ICICI group’s
customers need to see that the company is differentiating service and
communication based on both what they have learned independently and on what
the customer has told them. At the same time, differentiation should be based on
the value customer are expected to deliver.
 Develop and Customize

ICICI believes that the extent of customization should be based on the potential
value delivered by the customer segment.
 Interact and Deliver

ICICI is strongly of the opinion that value is not just based on the price of the
product or the discounts offered. In fact, customer perceptions of value are based
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on a number of factors including the quality of products and service, convenience,

speed, ease of use, responsiveness, and service excellence.
 Acquire and Retain

The more ICICI learns about customers, the easier it is to pinpoint those that are
producing the greatest value for the organisation. Successful customer retention
basically involves getting it “right” on an ongoing basis. And that is exactly what
ICICI group aims to achieve out of its CRM initiatives.
Successful customer retention is based very simply on the organization’s ability to
constantly deliver on three principles:
 Maintain interaction; never stop listening to customers
 Deliver on customer’s value definition. Remember that customers change as
they move through differing life stages; be alert for the changes and be
prepared to modify the service and value proposition as they change.
 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
organisation’s 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

 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
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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 organisation’s readiness to assess the change.
Selecting and Implementing a Technology Based Solution

Technology
The success of the CRM initiatives were contingent on various decisions pertaining to
technology. Some of the key issues were: -
 Make or Buy: - The decision to buy was based on an evaluation of an identified
set of criteria. Some criteria were Functionality, Flexibility, Scalability, Fit with
existing architecture, etc. was decided to purchase an off-the-shelf CRM solution
and customize it to suit ICICI’s requirements.
 From whom to buy: Some Criteria included were CRM expertise, Retail Finance
Experience, Credentials including financials, client list, life history, etc. A
detailed Request for Information (RFI) was sent to each of the short listed
companies. After receiving the RFIs, another round of evaluation was done. After
short listing two product vendors and system integrators, reference calls were
made to several of the past clients of all short listed companies.
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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 Sales Process – Pre CRM and Post Implementation of CRM
Independent Databases
Call Centre Sales Agent Scrutiny Credit Agent Operations
Database
Call Centre Sales Agent Scrutiny Credit Agent Operations
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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? Hasn’t 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 customers…understanding 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.
CRM practices in HDFC Bank
HDFC bank is India’s leading private sector bank. The bank that gives you access to the
widest range of financial services. As far as the CRM practices that are followed by
HDFC bank is concerned the Relationship Managers say just one thing “You just think
about it and it will be done.”
According to him the bank has to take adequate measures to maintain and increase their
customer base. This is where the CRM practices are very helpful. Three important
measures adopted by the banks are:_
 Maintain a better relationship with its customers.
 Take all necessary steps to avoid losing and of its customer to its competitors.
 Increase its customer group by providing better facilities and services to them.
CRM Strategies:-
In order to fulfill the above objectives, the bank has adopted various long-lasting
strategies like: -
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 The relationship manger provides multiple financial products and services that
include Banking transactions, Forex, Wealth Management, Demat, Loan against
shares and Auto/Personal loans. Needless, to say, that the customers are offered
preferential rates over a host of HDFC bank products.
 To encourage the customers regular visits to the banks website other regular front
office transactions with customers are made online or on phone. And thus in this
way customers convenience is also taken care of.
 The relationship manager is always on call for all customers banking needs. Be it
banking transactions, expert advice on investments or even delivering demand
drafts at customers doorsteps.
 Providing cost effective and timely financial services/products, which enables
them to generate customer loyalty.
 Even promotional campaigns like gift vouchers, discount coupons etc. helps them
to attract customers.
 At HDFC bank their main objective is to have a good relationship with “Any and
Every Customer”. So there is a regular interaction between the staff and the
customer. The customer’s problem are immediately tackled and solved.
 The products, services and channels used by the customers are exhaustively
researched and categorization of customers by transaction volumes and business
volumes is done. For e.g. High network customers having an high amount i.e.
more than 2 lakh rupees in savings account and 5lakhs rupees in current account
directly deal with the relationship manager and the bank tries to maintain
maximum relationship with such individuals.
 Customer information systems are regularly updated and they are very effective
while dealing with the customers.
 Training is provided to relationship manager. The relationship manger directly
deals with some special customers. These customers do not visit the banks. In
such cases the relationship manger visits the customer and in case of any
problems the customer directly contacts the relationship manger.
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How CRM helps the bank?
CRM primarily caters to all interactions with the customers or potential customers, across
multiple touch points including the Internet, bank branch, call center, field organization
and other distribution channels.
CRM can help banks in following ways:
 Campaign Management –
HDFC Bank need to identify customers, tailor products and services to meet their
needs and sell these products to them. CRM achieves this through Campaign
Management by analyzing data from banks internal applications or by importing
data from external applications to evaluate customer profitability and designing
comprehensive customer profiles in terms of individual lifestyle preferences,
income levels and other related criteria. Based on these profiles, bank can identify
the most lucrative customers and customer segments, and execute targeted,
personalized multi-channel marketing campaigns to reach these customers and
maximize the lifetime value of those relationships.
 Customer Information Consolidation –
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In case of HDFC Instead of customer information being stored in product centric

silos, (for e.g. separate databases of savings account & credit card customers), with
CRM the information is stored in a customer centric manner covering all the
products of the bank. CRM integrates various channels to deliver a host of services
to customers, while aiding the functioning of the bank.
 360-degree view of bank–
CRM enables the bank to speaks to whomever , irrespective of whether the

communication is from sales, finance or support, the bank is aware of the
interaction. Removal of inconsistencies of data makes their client interaction
processes smooth and efficient, thus leading to enhanced customer satisfaction.
 Personalized sales home page –
CRM provides HDFC a single view where Sales Mangers and agents can get all the
most up-to-date information in one place, including opportunity, account, news, and
expense report information. This would make sales decision fast and consistent.
 Lead and Opportunity Management –
These enable HDFC to effectively manage leads and opportunities and track the leads
through deal closure, the required follow-up and interaction with the prospects.
 Activity Management –
It helps managers of various branches to assign and track the activities of various
members. Thus improved transparency leads to improved efficiency.
 Contact Center –
It enables customer service agent to provide uniform service across multiple channels
such as phone, Internet, email, Fax.
CRM helps HDFC in providing
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 Service at reduced cost
 Service “Anytime Anywhere”

 Personalized Service
Emerging Strategies in Banks
A customer is the core component in banking business. The business of banking cannot
function without customers, nor is the business done by acquiring certain number of
customers. It is a continuous process of transactions culminating in a long-term banker-
customer relationship. Most business institutions thrive more on keeping old customers
happy rather than getting new customers. In order to retain customers we must work
harder on managing individual customer relationship. It has been found that keeping
existing customers happy and satisfied in turn brings in new customers and becomes
easier to market the products. The old paradigm was price, quality, and service. The
paradigm is price, quality, service, speed, convenience, value, solutions…..the list is
endless.
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.
No bank can possibly meet of its customers given to diversity of their wants. In such a
situation, the secret key factor of company’s success is effective Customer Relations
Management or CRM.
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CRM means different things to different people. According to John A.Young former
CEO of Hewlett Packard, CRM is “The chain of events that lead to customer
satisfaction which begins with design decision and runs through marketing all of
manufacturing and field sales and culminates in after sales report.” It is thus, a
customer driven business strategy designed to optimize profitability, revenue and
customer satisfaction. The CRM is also a paradigm shift from “product centric and mass
marketing” to “customer centric” way of business. It is an integrated business strategy
that places the customer at the center of a business consciousness. CRM provides a
holistic view of the customer across all of an organization’s products and channels. CRM
involves relationship marketing which is to establish, maintain, enhance (long term)
relationships with customers and other partners so that the objectives of the parties
involved are met. This is achieved by a mutual exchange and fulfillment of promises.
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 secret is that the organization
should be doing the right thing for the right customer at the right time.
With the increase in volume of customers and competition in the global market, CRM has
become a globally recognized business practice and yet needs to be well defined and is
rarely well executed. The age-old practice of using CRM based on the short-term
orientation of the management. The focus was on short-term results. Previous studies on
CRM stresses on the following drives:
 Attract new customers.

 Increase sales per customer.
 Reduce costs through optimization of business process.
 Improve customer relationship/increase loyalty.
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The present study, on the other hand, is aimed at stressing on improving customer loyalty
i.e., the fourth objective rather than the first three objectives. It also explains how
customer loyalty can, in turn, result in repurchase decisions. Customers’ needs are
relative to their life events. By being closely associated with the customer at all times
during their lives, major events and at times of decision-making and most importantly
being aware of it goes a long way in increasing profitability of banks.
CRM in perspective:-
The diagram below brings out the critical place of CRM in the present environment:
Challenges in the Financial Service Market
MARKET PRESSURE COMPETITIVE
MUST DIFFERENTITATE ACQUIRE NEW

THROUGH PRODUCTS CUSTOMERS RETAINING
AND SERVICES EXISTING CUSTOMER.
CROSS SELLING TO
CUSTOMER TO ENHANCE
SUITE OF SERVICES
CRM
MUST OPTIMISE USE INFORMATION

MARKETING TECHNOLOGY TO THE
DISTRIBUTION AND FULL WHEN
SERVICE PROCESS COMMUNICATING WITH
THE CUSTOMER
COST PRESSURE TEHNOLOGY PRESSURE

HUMAN RESOURCE PRESSURE
CHANGE MINDSET AND
ATTITUDES OF THE BANK STAFF
TO ACCEPT CHALLENGES AND 8
0 IMPROVE CUSTOMER
RELATIONSAND GET RIGHT
TYPE OF MANPOWER
Similarly, the following diagram sets out the strategy for implementing an effective
CRM.
HITTING A PEAK
CRM STRATEGY FRAMEWORK
VISION
GOAL &
STRATEGIES
ORGANIZATION
CESS
RICS
MET
PRO
INFRASTRUCTURE
TECHNOLOGY DATA APPLICATION
SOLUTION IMPLEMENTATION INFORMATION
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New Strategies:
CRM is the latest catch word across the banking industry all over the world. Special
CRM foundations are being set up to provide a platform for ORGANISATIONS TO
SHARE CUSTOMER MANAGEMENT PRACTICES. The new mantra of CRM is
that it provides complete solutions to the institutions. It includes technology processes,
systems and most importantly, human resources. CRM provides solutions in term of
quality, cost and delivery while bringing together the man and the machine. The name of
the game is: “have a strong customer base or perish”. The banks are willing to go to any
extent to achieve this. Some interesting practices are listed below.
 Interiors are part of marketing efforts of banks these days to bring in retail
customers and hold on to them. There’s bit of life style in banking these days.
Plush AC interiors with soft sofas to sink into and creating warm interiors to make
banking pleasant experience. Since the focus of bankers have shifted to retail
customers from corporate customers, the good interiors are aimed at loan seekers,
saving account holders and creating a far more personalized relationship. The
customer loyalty increases when they are treated in a warm exclusive anteroom
rather than over the counter.
 An executive of a foreign bank feels bankers have to follow the basis of the hotel
and airline industry to put customers at ease and in an environment he relates to.
 Some of the countries oldest private sector banks have made revolutionary
changes and launched products just to offer quality service to the customers.
 A senior executive of an old Private Bank says “it is the age of value addition.
There is a new challenge for banks to get innovative with their products”.
 Hospitality such as offering coffee to customers is followed in some banks.
 With the advent of IT, ATM and net banking have become a reality. Many Indian
banks have introduced “Anywhere Banking”. An account holder can transact
business anywhere in the country in select branches.
 Some foreign banks have started displaying work of famous artists just to create
difference.
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 The loan seeker need not make trips to the bank. Today, the banker is going to the
doorstep of a prospective loan seeker and offering him different payment options.
 No more going to banks and referring files for all transactions because today,
banking is literally made paperless and banks are made building less.
Recommendations and Suggestions
 The banks can be made more customers friendly.

 Top management and senior executives must be committed and dedicated so that
the lower employees are adequately motivated to implement better CRM.
 More funds to be allotted for implementation of which not only speeds up
transactions for customers but also avoids unnecessary friction between
employees and customers.
 It pays to appoint well-educated, young, and smart, highly trained and motivated
relationship managers.
 The bank employees must be informed about new products and services at regular
intervals. The communication channel needs to be more efficient between the
management and employees. Handbooks can be printed and circulated for this
purpose.
 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.
 Bank employees of all cadres need to be trained in effective implementation of
CRM.
 Top most priority should be given to listening to the customers. Regular customer
meets, surveys etc., assist the bank in knowing the wants and grievances of
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customers. The complaints must be looked into immediately and they should be
rectified for better CRM.
 The net banking concept needs to be tapped fully by banks. Computerisation
needs to be done in more and more branches and they should be connected
through computer network, E-mail etc.
 The belief that public sector banks have poor customer relationship needs to be
shattered by improving their image; wide publicity campaigning by the media will
help to a great extent.
 The efficient employees who have effectively implemented CRM need to be
rewarded within the limits of management. It has been revealed that untimely
transfers and lack of rewards are the main factors that discourage practicing better
CRM by employees. The management can work up schemes to award cash prizes
or give additional points for promotion to those employees maintaining good
relations with customers.
 In many cases negative attitude of higher authorities, insufficient opportunities for
promotions, union interference with transfers and non co-operative junior staff are
some of the reasons which hinder the employee in better practice of CRM.
 Adequate staff needed to be provided depending upon the volume of work. An
atmosphere of impartiality must be created.
 New are to be launched keeping in view the services offered by foreign banks.
The fact that customers are ready to pay more for good service must be kept in
mind.
 Unlike the traditional approach where customers are acquired through mass media
advertising, CRM normally gets its customers through referrals.
The above-mentioned new strategies require the collection and maintaining of an
extensive database on the customer. In this regard, the banker should collect the
following data from the customer:
Who the customers are

 The professional information
 Their family information
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 History
 Classification based on demography
 Their preferences
 Purchase/payment pattern
 Accounts with other banks
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.
 Identify the customer growth for promoting a new product.
 Propensity modeling of customer behaviour.
 Initial analysis of customer and account data only.
 Non-usage and non-renewal and cancellations.
 Develop propensity models for increased usage of credit-cards and credit-card
renewal.
 Develop segmentation models for Dormant Card Holders.
 Response analysis of campaigns.
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Conclusion
CRM is a comprehensive business strategy that helps banks to convert their ‘near’
customers to ‘dear’ ones. Collecting in-depth information about customers helps the bank
to develop customer insight and increase customer interaction. In addition, integration of
CRM with back-end systems such as ERP enables banks to offer quality solutions to
customer problems with increased speed.
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. Being
customer centric rather product centric goes a long way in laying the right foundation for
better CRM. Listening to the customers assists the employees and listening to the
employees assists the management in maintaining better relationship between the two.
“Cradle to grave “ strategy of customer treatment by the management is a positive
attitude. 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
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management. The components aligned must be in concert across the organization to

succeed. This can be achieved by practice over a period of time.
The banking industry in India has undergone volatile changes during the last decade and
one of the major areas of change has been customer. Service. Customers of today demand
‘universal banking’. This is possible if CRM is implemented in its true spirit. ‘Dogs eats
dog’ competition in the banking industry has almost made CRM inevitable solution.
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.
The implementation of CRM in banks can be summed up in one line; “it’s like
putting the wiring with electricity on”.
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Bibliography:-
 CRM at the speed of light – Paul Greenbaug
 Businessworld 2004– Selected Case Studies on

Understanding Customer Behaviour
 ICFAI Publications/journals – Special Issue August 2004
 Indian Banks Association Bulletin – September 2002
Webliography:-
 www.icicibank.com
 www.hdfcbank.com
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Customer Relationship Management

A firms capacity to establish, to maintain and to manage privileged relationships with

CHAPTER 2 – CRM in Banking Sector

CHAPTER 3 – Research on CRM practices in

CRM Practices in ICICI Bank 62

CHAPTER 4 – Emerging Strategies in Banks 74

CHAPTER 5 – Recommendations And Suggestions 79

Conceptual Framework for CRM

What is Customer Relationship management?

The conclusions of the study were:

An important facet of CRM is “customer selectivity”. As several research studies have

Many companies are turning to customer-relationship management systems to better

Customer Relationship Management is a strategy, not a specific software or hardware;

Key CRM principles

Maximizing Life time value

Summarizing CRM activities:

1. Learning from customers and prospects, (having in depth knowledge of

Customer Equity Leverage through

• Increase Customer Lifecycle Value

• Customer Lifecycle Management

Who Needs CRM ?

Can CRM Drive Revenue ?

The important considerations of any organization looking forward to incorporating a

Key Challenges in implementing CRM solutions

• Identify customer success factors

There are three parts of application architecture of CRM:

Sales force automation (SFA)

Customer service and support (CSS)

Enterprise marketing automation (EMA)

EMA provides information about the business environment, including competitors,

• Acquisition: Cross-sell, up-sell

• Campaign management and analysis

• Enables efficient productive customer interactions across all communications channels

When any of the technology-driven improvements in customer service (mentioned above)

CRM IN BANKING SECTOR

CRM can be helpful in customer identification, cross selling of products, customer

What is Customer Relationship Management (CRM) all about?

According to Kotler, CRM principally revolves around marketing. It involves integrating

Banking – CRM Makes the Difference

Need for CRM

 Understand your customers

Goals Requiring CRM Solutions

Cross Selling/Up Selling

Customer Satisfaction and Delight

CRM Tools for Banking

Operational CRM Analytical CRM

Key Problems Requiring CRM Solutions Customer

 Lack of Software Systems

 Multiple Product Database

 Ineffective Tracking Mechanism

CRM System to Bridge the Gap

 Integrated communications from various channels to deliver a unified customer

Lack of software CRM Unified customer

Multiple product Collaboration tools

CRM – As A Tool To Edge-out Competition

Customer Relationship : What And How?

relationship, both by bank as well as customer. ‘Commitment’ is another essential

Stage Model of Relationship

CRM – What Does It Mean?

CR – Customer Retention through:

IVC – Improved Customer Value through:

Marketing automation and campaign management for cross-selling and up-selling.