Crm Banking Sector Essay Example for Free

Crm Banking Sector leavenA need of client perception of CRM initiatives in the Indian Banking Sector Vanisha Oogarah-Hanuman Lecturer Faculty of legality and Management University of Mauritius Sharmila Pudaruth Lecturer Faculty of Law and Management University of Mauritius Vinod Kumar Research Scholar Department of Management Studies train of Management Pondicherry University Victor Anandkumar Reader Department of Management Studies School of Management Pondicherry University ABSTRACT Purpose To enquire the front-end effectiveness of CRM strategies in the banking argonna in India by get wording the client perception of CRM initiatives. This is an empirical explore which is descriptive in nature and relied mainly on primary data collected through a structured questionnaire to study the perception of Indian customers. Findings Banks operating in India have failed to impress their customers on their CRM efforts. unlike CRM initiates and dimensions measured in this stud y report unfavorable response. This under-performance has occurred in spite of technological developments and raw(a) processes in place Practical implications The findings will have useful implications for Banks operating in India in ramble to regard in line with the customers response.The study emphasizings the importance of retaining paid customers for a lifetime and the growing importance of CRM in order to better satisfy customers in the Indian Banking Industry. Originality/ appreciate Crucial aspects pertaining to CRM in the Indian banking orbit had been under-researched and the aim of the present study is to have a broadened investigation of the CRM initiatives select by Indian banks. The study set asides a discussion on the concept of CRM in the Indian banking sector and proposes recommendations to assist the banking sector on how to nurture profitable, long-run relationships with the customers chroma01, Number04, August-2011 www. theinternationaljournal. org Page 1 1 . Introduction In todays banking environment, it is becoming difficult to build and cite strong and lasting relationships with customers. In fact, the challenges of building strong customer relationships have become even greater for banks with the emergence of e-business, diffusion of innovations and agile new competitors in the banking sector. The entering of Customer Relationship Management has provided banks with a driving philosophy, a reoriented education system and a communicating tool that helps to create invaluable and knowledge based relationships.Therefore, banks are developing a continuing long-term business relationship with customers and they are shifting their focus from market dowry to mind share of customers. The lit review has focussed on the importance of CRM in the banking sector and the importance of maintaining profitable relationships with banking customers, which in originate leads to advantageousness through customer dedication. Close relationship with customers will withdraw a strong coordination surrounded by IT and market departments to provide a long-term retention of selected customers.Accordingly, this paper will aim to examine classic attributes which customers value as far as customer relationships in the Indian banking sector is concerned. No doubt, big literature on CRM is available worldwide but there is limited research throwing light everyplace the importance of CRM in the Indian banking sector. Therefore, the paper reviews pertinent literature on CRM in the banking sector. Then, the methodology utilise to collect and analyse data is outlined.Then the findings are discussed, implications are described and the paper further keys strategic recommendations towards enhancing customer relationships in the Indian banking sector. Directions for future research are also proposed in the arena of customer relationship management and banking sector. 2. The Indian Banking Sector and CRM The economic reforms initiated by the Government of India roughly about a decade ago have changed the landscape of several sectors of the Indian economy 1. The Indian banking sector is no exception.The economic reforms have also generated new and powerful customers (huge Indian middle class) and new mix of players (public sector units, private banks, and foreign banks). The emerging competition has generated new expectations from the existing and the new customers. The new rules of competition require recognition of the importance of consumers and the necessity to correspondress the needs through innovative products supported by new technology. Perceptions and expectations of the customers have undergone a sea change, with the innovative and modern banking services offered to the customers.This necessitates banks to include a customer-oriented approach shot whereby they build, maintain and manage longstanding relationships with their profitable customers in order to gain sustainable war-ridden edge. 3. Conceptua l priming Over the past two decades, the literature has argued that businesses across all sectors will have to change their approach to marketing, which should now be carried out through relationships, networks, and interactions 2, 3, 4, 5, 6, 7.Such a marketing approach is very Volume01, Number04, August-2011 www. theinternationaljournal. rg Page 2 different from the much traditional one based on proceeding affecting the Four Ps (product, price, place and promotion). 3. 1. CRM in the Banking sector Customer relationship management (CRM) has been as important to the banking industry at the start of the 21st century as it has been to any other industry. many another(prenominal) banks have used CRM tools to acquire more(prenominal) customers and to improve relationships with them. A key aspect in banks embracement technological platforms and delivery systems is the impact this will have on bank-customer relationships.Therefore, in order to achieve banking excellence, concussion c ustomer needs and offering innovative products is not sufficient in itself. The balance between relatively high costs of relationships with customers and the need to maintain profit growth needs to be finely tuned, if marketing is not to revert back to a transactional paradigm 8. Likewise, increased customer expectations have created a competitive climate whereby the quality of the relationship between the customer and the institution has taken a greater meaning 9, 10.The development of effective customer relationships is widely advocated as a key element of marketing strategies in the service sector (Ennew, 1996). Therefore a binding and long-term customer relationship seems to be incumbent for many banks to react to the changed conditions and to guarantee the continuity. For many customers, a strong banking relationship is as vital as any other business relationship they maintain. This gives CRM-driven banks an advantage in that customers want the benefits of a solid relationshi p. commonality benefits for customers of banks using CRM include wider access with branch locations, Internet and ATMs access to service and support discount quote rates and enhanced savings and other customization opportunities. Attracting new customers should be viewed only as an intermediate blackguard in the marketing process. Developing close relationships with these customers and turning them into loyal ones are equal aspects of marketing. Thus relationship marketing ought to be perceived as attracting, maintaining, and in multi service organizations, enhancing customer relationships 12, 13, 14, 15.Another important expression of CRM is customer selectivity. As several research studies have shown not all customers are equally profitable for an individual company 16. 3. 2. Role of Service Providers in the Banking Sector Although CRM has become widely recognized as an important business approach, there is no universally accepted definition of CRM. Swift defined CRM as an ente rprise approach to understanding and influencing customer behaviour through meaningful communications in order to improve customer learning, customer retention, customer loyalty, and customer profitability 17.Kincaid viewed CRM as the strategic use of information, processes, technology, and citizenry to manage the customers relationship with your company (Marketing, Sales, Services, and Support) across the whole customer life motorcycle 18. Parvatiyar and Sheth defined CRM as a comprehensive schema and process of acquiring, retaining, and partnering with selective customers to create superior value for the company and the customer 19. 3. 3.Customer Loyalty, Customer Retention and Customer Relationships Customer satisfaction and loyalty are roughly key elements of business success and profitability. The more fulfill the customer, the more loyal the customer and the more Volume01, Number04, August-2011 www. theinternationaljournal. org Page 3 durable the relationship. And the lo nger this lasts, the more profit the company stands to make and the higher the market share. Getting existing customers to provide referrals should be one of the effective ways to add new business 20.A referral from a customer can often open the gates and provide a salesperson access to previously unr separatelyable prospects. Huntley found that when the quality of relationship is high, customers are more willing to recommend the sellers offerings to colleagues and they purchase more from the seller 21. Maintaining high-quality relationships with customers appears to increase their willingness to provide referrals 22. Customer satisfaction and loyalty are highly correlated 23, but they form two distinct constructs 24.Customer satisfaction with a bank relationship is a good basis for loyalty 25, 26, although it does not guarantee it, because even satisfied customers switch banks 27. One important reason for switching is pricing 28, 29. Hence, banks have launched customer loyalty pro grammes that provide economic incentives. Although the effectiveness of loyalty programmes has been questioned 30, 31, 32, research has shown that they have a significant, positive impact on customer retention and share of customer purchases 33, 34.In a similar vein, Reinartz and Kumar suggest that customers can be sort according to share-of-wallet and profitable lifetime duration, and that each customer group should be targeted with a specific strategy 35. By adopting such a customer focused strategy, organisations can maximise the lifetime value of each customer by anticipating needs and offering timely solutions 36. Likewise, according to Hartfeil, Products are not profitable customers are, and we analysed our customer base, segment by segment, we found that each required a different strategy to maximize its profitability to the bank 37.For instance, every customer (both business and personal) is assigned to a banker at National Australia Bank Ltd whereby bankers are required to actively manage their portfolios according to volume of business, interest margin spread, fee income, profitability, customer retention, and the acquisition of new customers 38. While ample literature is available on generic CRM today, hardly any information is forthcoming on the gains from CRM initiatives in the Indian banking sector. There is scarce literature on how the customers respond to the CRM measures adopted by the banks.This research has attempted to study the customer perceptions pertaining to the CRM initiatives adopted by the banks in India. Thus it helps to investigate the front-end effectives of CRM strategies in the banking sector. 4. Research Methodology This is a descriptive study using primary data collected through an experience survey. The data collection instrument used was a 3-part structured questionnaire using a 5-point Likert Scale. Part-1 was pertaining to the relationship building aspect of CRM and it had 19 questions which were framed using the relevan t variables identified from literature review.Part-2 focused specifically on the interaction with the customer service representatives. Part-3 was concerned with customer perceptions on complaint discourse and his/her behavioural intentions. Necessary demographic details were also collected to serve as categorizing variables. Prior to data collection, a pilot test was conducted to ensure comprehensiveness, clarity and reliability of the questionnaire. The pretesting of the questionnaire was done among 10 customers randomly, resulting in some minor modifications of the wordings of some survey Volume01, Number04, August-2011 www. theinternationaljournal. rg Page 4 items.The method used to circularise the questionnaire was through a personal interview so as to obtain more accurate, reliable and valid information and to make the respondents at ease by maintaining a social rapport with them. The target race to be sampled was the individual customers of the Indian banking sector. Owing to the need for a relatively large sample size while at the same time keeping the research costs down, the sample size of this study amounted to 150 customers and the quota sampling technique was adopted based on the net profit and market share figure as shown in Table-1 below.