Entrance, hard work gradual progress and an exciting year that
is how I reached this level and now as I stand at the threshold of the aside
world. I take a look of the part year which I have spend in this college my
performance with the devotion of profession.
So, first of all I like to thank our college SHRI CHINAI COLLEGE OF
COMMERCE & ECONOMICS and principal of this college Mrs. MALINI
JOHRI for this continuous faith, and MUMBAI UNIVERSITY who gave
this opportunity to do this project in this curriculum. I would also like to
thank our co-coordinator and project guide Prof. NISHIKANT JHA for
being very supportive and helped me to complete this project. I would like to
thank Mr. ALOK KUMAR who is PROBATIONARY OFFICER of
ORITENTAL BANK OF COMMERCE instead of their busy schedule they
had answer to my questions and also I like to thank our Liberian for
providing with the book which I needed.
So, this goes to all those who have knowingly or unknowingly been a
great support for me to accomplish the price of work.
- 1 -
I, Mr.Jamshed Readymoney student of T.Y.B.COM (Banking & Insurance)
Semester Vth Shri Chinai College Of Commerce & Economics. Hereby,
declare that I have completed this project on RETAIN BANKING in the
academic year 2007-08. The information submitted is true & original to the
best of my knowledge.
Signature of Student
I, Prof Nishikant Jha hereby certify that Mr.Jamshed Readymoneyof
T.Y.B.COM (Banking & Insurance) Semester Vth, Shri Chinai College of
Commerce & Economics, has completed project on RETAIN BANKING in
the Academic year of 2007-2008. The information submitted is true &
original to the best of my knowledge.
Signature (Project Guide)
- 2 -
The most important aspect of retain banking is customer service without
which the working of it would become very difficult. Every customer should
achieve perfect service from the bank in order to build a good relation with
the customer. To allow any kind of profit to the bank there should be a
healthy atmosphere and a good relation with the customer as a result the
bank would be able to retain the customer and also help in achieving
different type of wealth management services which would help the bank to
grow and fight competition.
Once the customer is pleased with good customer service it would help in
creating a good rapport between the customer and the bank as a result it
would retain the customer for life time.
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WHOM SO EVER IT MAY CONCERN
SUBJECT :SURVEY CONDUCTED RELATING TO THE PROJECT
This is to inform you that Mr Jamshed Readymoney of
Shri Chinai College of Commerce and Economics (TYBBI) Roll no 37
has successfully completed his survey on RETAIN BANKING under
our guidance and I have seen the sincere efforts put by him in making
I have even tried to solve all his queries and doubts that he asked me
with regards to the project. I appreciate his efforts that he has put in
for this project.
- 4 -
Introduction to banking 1-3
• Services offered by banking 1-3
Retain banking 4-13
• Introduction to retain banking
• Advantages of retain banking
• Objective of retain banking
• Introduction to relationship banking
• Types of relationships
• Retention of credit card customers
Attraction for customers
• ATM management
• Electronic bill payment
Competitions faced by the
• Besides increased
competition or lowering of cost
• At low cost, customer
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• Tipping point
• Pressing issues
• Measures to be taken, in order to retain the customer
• Cost pressure
• Cost reduction
• Customer centric model
Online banking 28-30
• Web banking bonanza
Scenario of retain banking 30-33
CRM in next generation
Acknowledging the value of gold customers 33-36
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• Treatment for gold customers
• Integrated Marketing Communication (IMC)
• Growth & retention through personal sales
o Conclusion 39
Introduction to banking
1. The business of a bank.
2. The occupation of a banker.
3. Primarily the business of dealing in money and instruments of credit.
Banks were traditionally differentiated from other financial
institutions by their principal functions of accepting deposits—subject
to withdrawal or transfer by check—and of making loans.
Services offered by banking
• Demand deposit accounts (DDA) –
Most individuals and virtually all business maintain some form
of demand account,usually in the form of a checking account.The funds in
a demand accountcan be withdrawn by the customer upon “demand” in the
form of cash , a cheque or electronically.
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• Time Deposits (TDS) –
The funds of time accounts are placed on deposit with a bank
for a definite or indefinite period of time. In return, the bank pays the
depositor interest on those funds. The most common types of TDs are
savings accounts and Certificates of Deposit (CDs).
• Safe deposit boxes –
Banks rent these boxes inside their vaults for the storage of
their customers’ valuable documents and assets.
• Insurance and investment services –
Many banks now offer a wide range of these products in an
effort to expose customers to their need for, as well as the ease and
convenience of purchasing, such services.
• Credit –
The extension of credit is one of the most well-known services
provided by banks e.g vehicle loan , house loan.
• Merchant credit services –
Every business that accepts Visa, MasterCard, American
Express, or Discover credit cards must have a merchant account through
which to process those charges. Banks provide these accounts as well as
account management tools and support.
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When requesting a loan, you as a borrower should keep in
mind the bank’s desire for your use of these other offered services. If you
can demonstrate to the lender that their extension of credit to you will also
provide to them a loyal and more deeply rooted customer, the lender might
be persuaded to is more compromising in some ways to approve your loan
request or grant more favorable terms. A combination of a few of these
accounts could mean thousands of dollars in fee income to the bank and
provide a new source of inexpensive deposits for them.
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Of course, new relationship accounts won’t make a bad loan
proposal good (whether personal or business), but in can enhance a
questionable or “borderline” application and provide the lender with
incentive to give you a chance. If you’re a very strong borrower and don’t
need any type of assistance, additional relationship accounts can help to
improve the interest rate or other loan terms that the bank may offer.
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Meaning Of Retain
1. To maintain possession of.
2. To keep or hold in a particular place, condition, or position.
3. To keep in mind; remember.
4. To hire (an attorney, for example) by the payment of a fee.
5. To keep in one's service or pay.
Retain banking is also known as relationship banking. It is
building a strong relationship with your customer base so as to ensure their
continued support and business brought about by the customers. It involves
not only retaining and maintaining a strong relationship with the existing
customers but also ensuring the flow of new and potentially long lasting
Importance and advantage of retain banking
In today’s fast paced and cruel business world, businesses are
competing with each other to stay afloat. The only way to ensure the
continued succession of the business is to develop a good relationship with
the customer base so as to ensure their faithful and trustworthy business
ventures. Businesses are stepping on each other to get ahead and obtain
customers from any source available even if it means the complete
annihilation of another business organization
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This retain banking or relationship banking can be obtained by
implementing a good and renowned retain banking program which enables
the banking industry or the banking organization which implements it to
ensure succession through the customer base. A vast customer base projects
a positive outlook on the banking organization.
Objective of retain banking
The basic and most fundamental objective of retain banking is
to retain its customer base by whatever means may be possible. By
achieving a trustworthy and sure customer base the bank can ensure its
succession and even its survival in the banking industry. As we all know the
main and fundamental resource of a bank is the general public through
which it generates income through deposits and loans. If a bank does not
have this basic resource of deposits it is unlikely to succeed in the long run.
1. Find out who your profitable customers are
Many business customers are unprofitable. Why would you
want to spend money trying to retain them? Before you try to build loyalty,
determine the profitability of each customer, and divide them into five
groups, from the most profitable (Gold) to the least profitable (the losers).
To determine profitability you will have to get some software written that
includes sales, margins, recency and frequency. The software should
calculate every customer’s profitability on a monthly basis.
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2. Spend service Rupees on the gold customers.
Banks top 20% customers typically represent 80% of Banks
profits. Don’t deluge them with marketing. Instead, figure out ways to give
them super service things that banks could not afford to do for all other
customers. Airlines let their gold customers fly first class. Banks pick up
their phone calls on the first ring. Rupees should be spent on customers in
the second, third and fourth quintiles. Don’t waste marketing rupees on the
losers at the bottom.
3. Create advisory councils.
Suppose that most of your business customers consist of
environmental companies, transportation companies and construction
companies. Set up three advisory panels, one for each group. Find out who
the key influencers or decision makers are in each of the most profitable
companies in each group, and invite them to become members of your
advisory panel. Get their advice by email. Create stationery with their names
and companies listed prominently. You can use this for acquisition, and you
will have these advisory panel members as customers for life.
4. Get Caller ID for your customer service.
Whenever a regular business customer calls you up, your customer
service reps should be able to see their entire purchase history on the screen
before they answer the call. This can be done by storing your customer’s
phone numbers in the database, and tying the DB to your phone service
caller ID, so that the appropriate record is on the screen. Your reps will
know when they are talking to a Gold customer. They will know the
problems that occurred in the past, and how they were resolved. You will
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make each customer feel that they are really well known and appreciated by
your company – even though the customer service rep has never spoken to
them before. This one, inexpensive, innovation could do more for retention
than a thousand "we appreciate you" letters.
5. Have contests for the best use of your product.
IMarket Inc. of Waltham, MA has an annual Bull’s Eye contest for
customers who use their business name lists and SIC coding system. All
customers are encouraged to enter, and many of them do. The winners
receive free trips and recognition. IMarket uses the entries to advertise their
services. The results are announced at a major trade show. It is a win-win
situation for all.
6. Debrief your defecting customers.
Why do your business customers stop trading with you? In most
cases, marketers haven’t a clue. Frederick Reichheld in The Loyalty
Effect outlines the use of a customer defection study. Such a study needs to
be conducted by phone, and in depth to determine the root causes of the
departure, business practices that need fixing, and sometimes to win the
customer back. In one such study at MicroScan, they discovered that
customers were concerned about the reliability of MicroScan’s instruments.
MicroScan took corrective action. They shifted R&D priorities, redesigned
their customer service protocols, and developed a new low-end model for
small labs. The result: they began to retain more customers, and became
market leaders. There is real gold in such studies, providing that your
company is prepared to take the results seriously, and act to correct the
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7. Learn your repurchase rate.
What is the real test of customer loyalty? It is the repurchase rate.
How many of your existing customers will buy from you the next time that
they buy in your category? Customer satisfaction surveys are, in many cases,
worthless. American automobile manufacturers typically have satisfaction
survey results of close to 90%, but repurchase rates of 30% to 40%. Many
companies have not calculated their repurchase rates. If you are interested in
customer loyalty, find a way to determine your current repurchase rate, and
compare it with other rates in the industry. It may be a sobering experience.
Once you know what it is, find a way to improve it. This is the way to build
true, measurable, customer loyalty.
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Relationship banking means banks maintain constant
consultations with their clients through various seminars , customers meets
etc to evaluate, improve and widen the range of service to customer
.However all customers are requested to keep banks imformed of their
experiences about the various services renedered by banks and feel free to
comment. Relationship Banking is not about having a "buddy-buddy"
relationship with your customers. Customers do not want that. Relationship
Banking uses the event-driven tactics of customer retention banking, but
treats banking as a process over time rather than single unconnected
events. By molding the banking message and tactics to the LifeCycle of
the customer, the Relationship Banking approach achieves very high
customer satisfaction and is highly profitable.
The relationship banking process is usually defined as a series
of stages, and there are many different names given to these stages,
depending on the marketing perspective and the type of business. For
example, working from the relationship beginning to the end:
Customer loyalty describes the tendency of a customer to
choose one business or product over another for a particular need. In the
packaged goods industry, customers may be described as being "brand
loyal" because they tend to choose a certain brand of soap more often than
others. Note the use of the word "choose" though; customer loyalty
becomes evident when choices are made and actions taken by customers.
Customers may express high satisfaction levels with a company in a survey,
but satisfaction does not equal loyalty. Loyalty is demonstrated by the
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actions of the customer; customers can be very satisfied and still not be
Customer Loyalty has become a catch-all term for the end
result of many marketing approaches where customer data is used. You can
say Relationship Banking or Database Banking and what you are really
talking about is trying to increase customer loyalty - getting customers to
choose to buy or visit more. Increased customer loyalty is the end result, the
desired benefit of these programs. All of the above approaches have two
elements in common - they increase both customer retention and the
Lifetime value of customers.
Customer loyalty is the result of well-managed customer
retention programs; customers who are targeted by a retention program
demonstrate higher loyalty to a business. All customer retention programs
rely on communicating with customers, giving them encouragement to
remain active and choosing to do business with a company.
Banks want customers to do something, take action.. And once
they do it for the first time, banks want them to continue doing business with
them, especially when the bank is probably paid big money to get them to do
business with them for the first time. Banks don’t want to pay big money
the second time. You want to create a "loyal" customer who engages in
Customer data and models based on this data can tell you which
customers are most likely to respond and become loyal, no matter what kind
of front-end marketing program you are running or how you "wrap it up"
and present it to the customer. The data will tell you who to promote to,
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and how to save precious marketing dollars in the process of creating
customers who are loyal to you longer.
Types of relationships
Relationship marketing has received a good deal of audiology
press in recent times. Readers are referred to those articles for tactical
information on implementing relationship marketing. Relationship
marketing is an important part of the IMC process for a number of reasons.
• Lost customers typically voice their dissatisfaction to at least nine
other people, causing brand erosion and lost revenues.
• Selling to repeat customer’s costs less than acquiring new customers.
• Because of the Life Time Customer Value (LTCV), small increases in
customer retention produce large revenue increases.
• Customers benefit from brand relationships by reducing their risk of
purchase, having to make fewer decisions, avoiding switching costs,
receiving more latitude and special treatment from the practice, and
gaining a personal association with the brand.
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The final step in identifying relationships in need of nurturing
and growth is to recognize that not all patients and customers are profitable
to your practice. Every audiology practice has patients who consume more
time and complain more than the rest of the practice’s patients. In fact, you
might say that 20% of your patients create 80% of your practice’s problems,
which certainly affects your bottom line. The Pareto Rule may work both
ways in this case. It is unnecessary, not to mention unethical, to rid your
practice of these people. At the same time, it is in your practice’s and other
patients’ best interest to devise messages that deter and deflect the constant
trouble makers. That, too, is part of the IMC approach
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Retention of credit card customers
Once you have a credit card customer, there is one sure way to
keep her. Sell her a second product. Sell her a checking account, a savings
account, a mutual fund, an auto or personal loan, or a home equity loan.
Banks who have built a customer database have discovered that loyalty is a
function of the number of products owned.
The problem is that banks are not organized to take advantage
of this situation. There is a VP for Credit Cards, a VP for Retail, a VP for
Home Mortgages, etc. The VP for Credit Cards does not get a bonus if his
customers sign up for a checking account. Often these VPs don’t even share
the names. But the fact is, the number one best way to keep a credit card
customer is to sign the customer up for a checking account. She will begin to
identify with the bank’s branch and its personnel. She will be embarrassed to
have them know that she has dropped the bank’s credit card. So she won’t.
Attraction for customers
The key encounter is when the customer opens an account. People still
tend to open their accounts in a branch, and that might be the only time they
are going into a branch, but if they have a positive experience they might go
back, like my mom does. For account opening you want to make sure you
have the appropriate person and appropriate systems to expedite it. There’s
nothing like sending people off with a bag of coffee beans like Umpqua
does. Then the customers are reminded of Umpqua every time they grind
coffee beans. That’s just smart.
- 20 -
Banks can also help you with ATM Management, including
new advanced-function products that gain customer loyalty, drive foot
traffic, and boost your ATM profits. For example, let us introduce you to a
revolutionary banking solution for your customers who have not established
bank accounts and/or don’t use debit or credit cards. In essence, we create
"virtual" bank accounts so that customers can access financial products and
services via ATMs. For example, customers can wire funds domestically or
internationally, access payroll checks, or recharge prepaid phone plans – all
without accessing a traditional bank account.
Our ATM program includes:
Choice of ATM equipment
Real-time online ATM activity reports– simply go to a dedicated
web site to view up-to-the-minute reports for your machine – no
need to wait for monthly reports. This feature also helps you
better manage your ATM cash levels.
Shipping, installation, and training
Unparalleled customer and technical service support
Monthly residuals deposited directly to your bank account
- 21 -
Machine maintenance program (optional)
Online monitoring – our customer support personnel contact
Electronic Bill Payment
Another payment service that will provide an additional hook to
win and retain important business clients is in the rapidly growing field of
EBPP. Like consumer bill pay, EBPP solutions automate paper-based
Accounts Receivable and Payable processes for your business clients. EBPP
reduces costs, improves efficiency, and enables better cash flow
Competitions faced by the banks
• Besides increased
competition or lowering of cost
These issues have always been there and all banks have to cope
with these. In today's world of narrowing margins, a serious look at costs
definitely is an imperative. One obviously has to ensure product superiority
and operational excellence. However, to my mind, the biggest challenge
today is to establish a customer intimacy without which the other two are
meaningless. In the financial world, product superiority does not last for
long, as it is relatively easy to copy products. So, the real strength comes
from operational excellence and understanding the customer and developing
rapport with him.
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At low cost, customer
Notwithstanding what banks may feel about their products, customers
utilize these products only for a few minutes. The key lies in making those
few minutes convenient, efficient and effective. There are multiple ways to
achieve these objectives. For instance, we introduced welcome kits wherein;
a customer who comes in to open an account with our bank walks out with a
fully enabled account, debit card, chequebook, Net Banking account, and
phone banking account—in a matter of minutes.
Another key area that I can immediately think of is integration
of services. Why should a customer receive multiple mailers from the bank
when he can instead receive integrated financial statements? Why should a
customer have multiple login IDs for different electronic channels?
These measures not only lead to customer convenience, they
also help the banks save on cost. Identifying customer needs and tailoring
products to match these needs is another area where a lot can be done. For
example, we recently launched a 110 percent Housing Loan to address other
needs of a customer when he goes for a housing loan.
• Tipping point
The opening up of the Indian banking sector to private players
acted as 'the tipping point' for this transformation. The deregulatory efforts
prompted many financial institutions (like HDFC and ICICI) and non-
financial institutions enter the banking arena.
With the entry of private players into retail banking and with
multi-nationals focusing on the individual consumer in a big way, the
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banking system underwent a phenomenal change. Multi-channel banking
gained prominence. For the first time consumers got the choice of
conducting transactions either the traditional way (through the bank branch),
through ATMs, the telephone or through the Net. Technology played a key
role in providing this multi-service platform.
The entry of private players combined with new RBI
guidelines forced nationalized banks to redefine their core technology and
strategy was central to this change.
• Pressing issues
Today banks have to look much beyond just providing a multi-
channel service platform for its customers. There are other pressing issues
that banks need to address in order to chalk-out a roadmap for the future.
Here are the top three concerns in the mind of every bank's CEO.
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"The aim for any business is to win customers....
And keep them."
Customer retention is one of the main priorities for banks today. With
the entry of new players and multiple channels, customers have become
more discerning and less 'loyal' to banks. Given the various options, it is
now possible to open a new account within minutes. Or for that matter shift
accounts within a couple of hours. This makes it imperative that banks
provide best levels of service to ensure customer satisfaction. Customer
Retention marketing is a tactically driven approach based on customer
behavior. It's the core activity going on behind the scenes in Relationship
Banking. It’s a sad fact that many banks are continually looking for new
customers and not recognizing the “Goldmine” that lies within their current
The Operating Lease “Customer Retention Program” has been
designed to mine your entire current client base, systematically providing
advanced notice of up-grade opportunities. These notices contain detailed
finance proposals to allow your sales team to easily upgrade your customer’s
current equipment to your latest technology.
- 25 -
Customer Retention is one of the most challenging and
rewarding aspects of Business Equipment sales. The long-term investment in
customer retention improves your business and allows your company to plan
for growth into the future. Customer Retention program is based on
managing the Entire Customer Lifecycle. Finance provides an ideal tool for
being able to lock in your customer base over the long term.
• Measures to be taken, in order to retain the customer
1. Past and Current customer behavior is the best predictor of
Future customer behavior.
Think about it. In general, it is more often true than not true,
and when it comes to action-oriented activities like making purchases and
visiting web sites, the concept really shines through.
We are talking about actual behavior here, not implied
behavior. Being a 35-year-old woman is not a behavior; it’s a demographic
characteristic. Take these two groups of potential buyers who surf the ‘Net:
• People who are a perfect demographic match for your site, but
have never made a purchase online anywhere
• People who are outside the core demographics for your site, but
have purchased repeatedly online at many different web sites
If you sent a 20% off promotion to each group, asking them to
visit and make a first purchase, response would be higher from the buyers
(second bullet above) than the demographically targeted group (first bullet
above). This effect has been demonstrated for years with many types of
Direct Marketing. It works because actual behavior is better at predicting
- 26 -
future behavior than demographic characteristics are. You can tell whether a
customer is about to defect or not by watching their behavior; once you can
predict defection, you have a shot at retaining the customer by taking action.
2. Active customers are happy (retained) customers; and they like to
They like to feel they are in control and smart about choices
they make, and they like to feel good about their behavior. Marketers take
advantage of this by offering promotions of various kinds to get consumers
to engage in a behavior and feel good about doing it.
These promotions range from discounts and sweepstakes to
loyalty programs and higher concept approaches such as thank-you notes
and birthday cards. Promotions encourage behavior. If you want your
customers to do something, you have to do something for them, and if it’s
something that makes them feel good (like they are winning the consumer
game) then they’re more likely to do it.
Retaining customers means keeping them active with you. If
you don't, they will slip away and eventually no longer be customers.
Promotions encourage this interaction of customers with your company,
even if you are just sending out a newsletter or birthday card.
The truth is, almost all customers will leave you eventually.
The trick is to keep them active and happy as long as possible, and to make
money doing it.
3. Retention Banking is all about:Action – Reaction – Feedback –
- 27 -
Banking is a financial conversation. Banking with customer
data is a highly evolved and valuable conversation, but it has to be back and
forth between the marketer and the customer, and you have to LISTEN to
what the customer is saying to you.
For example, let's say bank looks at some average customer
behavior. Bank looks at every customer who has made at least 2 purchases,
and bank calculates the number of days between the first and second
purchases. This number is called "latency" - the number of days between
two customer events. Perhaps you find it to be 30 days.
Now, look at your One-Time buyers. If a customer has not
made a second purchase by 30 days after the first purchase, the customer is
not acting like an "average" multi-purchase customer. The customer data is
telling you something is wrong, and you should react to it with a promotion.
This is an example of the data speaking for the customer; you have to learn
how to listen.
4. Retention banking requires allocating banking resources. You have
to realize some marketing activities and customers will generate higher
profits than others. You can keep your budget flat or shrink it while
increasing sales and profits if you continuously allocate more of the budget
to highly profitable activities and away from lower profit activities. This
doesn't mean you should "get rid" of some customers or treat them poorly.
It means when you have a choice, as you frequently do in
marketing, instead of spending the same amount of money on every
customer, you spend more on some and less on others. It takes money to
- 28 -
make money. Unless you get a huge increase in your budget, where will the
money come from?
If you always migrate and reallocate marketing towards higher
ROI efforts, profits will grow even as the marketing budget stays flat.
You have to develop a way to allocate resources to the most
profitable promotions, deliver them to the right customer at the right time,
and not waste time and money on unprofitable promotions and customers.
This is accomplished by using the data customers create through their
interactions with you to build simple models or rules to follow. These
models are your listening system , like the "30 day latency" model above .
They allow the data to speak to you about the customer.
How you manage your customer relationships—and the
information that powers them—is paramount to your success. You have to
truly understand, serve and satisfy your customers if you want them to be
loyal to your company.
With marketing and information management solutions, you
know your customers like never before—enabling you to foster enduring
and profitable customer relationships. In short, we enable you to:
• Recognise and retain profitable customers
• Determine customer lifetime value
• Strengthen customer relationships
• Increase share of wallet
• Increase number of customer touch points
- 29 -
• Recognise customers at risk of attrition or churn
The solutions maximize marketing and customer relationship
efforts. The Banking industry has leading Customer Information
Management solutions that include Customer Data Integration (CDI) and
customer recognition. This gives you the power of immediate information
that also helps bank to develop a more complete picture of each customer
using their comprehensive Customer Information solutions so the bank can
offer the products and services that their customers want.
Bank Customer Information Consulting solutions also provide
consulting, analytics and privacy expertise. Banks helps them to honors their
customers’ privacy preferences - vital to building trust-based relationships.
Additionally, banks consulting and analytics services help banks to provide
them with a true understanding of their products.
Most banks and finance companies can provide equipment
finance. But not all financiers want to be involved in helping you win sales.
Not all financiers keep the Retention of your Customers as their end goal.
When was the last time your bank or finance company called
you to tell you about a possible sales lead?
The Customer Retention Program provides your sales team
details of up-grade customers each month. Potentially with this tool, they
could have 50% of their monthly sales budget locked in. This makes
reaching their targets easier and enables them to spend more time
concentrating on new prospects.
- 30 -
Our upgrade program can utilise your current customer base to
extract this information immediately. Alternatively, we can develop this tool
over the long term once our finance program has been implemented.
Banks should do a meeting annually to keep their customers
updated abouth the changing needs and even allowing for existing contracts
to be varied to add or remove equipment, as the customers requirements
An important aspect of the Customer Retention Program is that
Banks systems have been designed and modified based on years of
experience. But it has also been designed to be adaptable so that Customer
Retention Program can be tailored to banks current business systems.
• Cost pressure
Cost pressures come into play when banks are not able to afford
the cost of a certain service or initiative although they want to or need to
have it in place. This is primarily because the cost structure at the backend is
not efficient enough to offer that kind of service to the marketplace.
Increased competition: The entry of new players into the
banking space is leading to increased competition. A recent example would
be of Kotak Mahindra Finance Limited (KMFL)—a financial services
company focused on investment consulting, auto finance, insurance, etc—
morphing into Kotak Bank. Many other such players are waiting on the
Technology makes it easier for any company with the right
channel infrastructure and money reserves to get into banking. This has been
- 31 -
one of the major reasons behind this kind of competition from players who
do not have a banking background. Kotak Bank overcame the initial costs of
setting up its own ATM network by getting into a sharing agreement with
New entrants with strategies such as these make the banking
With this banks have redefined their business priorities. They
are now focused on
• Cost reduction
• Product differentiation
• Customer-centric services
Although the ways in which banks implement these vary, the underlying
objectives remain the same.
• Cost reduction
Reduced costs basically translate to higher profit margins. If
banks can reduce costs, it can go a long way in increasing profits.
The focus is on increasing the profit margins by cutting costs
where it matters—on the operations side. Banks have woken up to the fact
that they need to get into shape fast in order to handle competition.
"Banks have been increasingly facing sliding margins and fierce
competition. It is imperative for them to increase the volumes and reduce the
cost of operations," says K.P. Padmakumar, Chairman, Federal Bank.
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The customer is interested in how he/she can benefit from the
bank and its products. That's why it becomes necessary for a bank to
differentiate its products from the others. Some of the ways in which
differentiation can be introduced are through specialization, new products,
and increasing the
Specialization basically means that the bank gets involved only
in selected areas. For example, the bank might be getting involved only in
housing finance. Or, it could be limiting its services just for corporate
banking clients. Another way to specialize could be by handling just specific
sets of portfolios.
Banks can differentiate themselves by adding new products to
their range of services. This will provide the bank with better yields per
contact. Increasing the added value of products is another way of
differentiation for banks. Operational excellence is also a key factor in
effective differentiation from the competition.
• Customer centric model
Indian banks have realized that it no longer pays to have a
'transaction-based' operating model. This has led to the development of a
relationship oriented model of operations focusing on customer-centric
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While banks have to ensure product superiority and operational
excellence, the biggest challenge today is to establish customer intimacy
without which the other two are meaningless.
"In the financial world, product superiority does not last long as
it is relatively easy to copy products. So, the real strength comes from
operational excellence and understanding the customer and developing
rapport with him," says Gunit Chadha.
In this context, it is very important that banks identify and
understand customer needs. This will help banks in tailoring their products
according to customer needs. It also helps in new business opportunities like
cross-selling and 'upselling,' which takes cues from customer aspirations and
Customer relationships have to be managed in the best possible
manner. This will ensure that the customer comes back to the bank. In
addition to good customer retention rates, it will also provide better income
generation capability. This is because a major chunk of income of most
banks comes from existing customers, rather than from new customers.
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Online banking presents a real mix of opportunities and
obstacles for financial service providers. Customers in this market are
intelligent and tech savvy and are 50 percent more likely to stay with their
bank than customers using traditional services.
Unfortunately, many financial institutions do not have adequate
technological infrastructures to reap the rewards of this channel. Banks are
known for legacy systems and information silos--segregated databases from
autonomous divisions with separate record keeping, customer information
and agendas to protect. Online channels are said to be the most un-integrated
of all channels and can easily pose more problems than they resolve.
Over the last few years, most banks took a laissez-faire
approach to online banking initiatives. Now they acknowledge the need to
invest heavily, and they know that CRM--a key factor in an industry built on
trust and relationships--is key to fully integrating this channel and to
maximizing return on investment.
Richard Bell, director of e-Banking at TowerGroup, a
Massachusetts-based banking technology consulting service, says banking
institutions are beginning to realize that offering their existing services on
the Internet probably doesn't have a strong business case behind it. "But," he
says, "there are things they can do once those services are online that do
have strong business cases."
According to Bell, if a bank can find out enough about its
customers' financial environments and it can make more appropriate offers
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that strengthen its ties with consumers, then that has value. "This is where
there is a strong tie between Internet banking and CRM because people, who
do Internet banking, by their actions, provide a real gold mine of data about
what their financial needs and activities actually are."
• Web banking bonanza
This emerging financial services tenet comes at a moment when
online banking is in transition. Until recently there was not a lot of value in
banking via the Internet: It actually took longer to pay a bill online than it
did to write, stamp and mail a check. One third of early online banking
adopters retreated to offline channels with more services.
According to Bell, the percentage of households banking online
has increased from approximately 15 percent to 19 percent over the last two
years. (These numbers vary widely depending upon institution, region and
specific geographic location.)
Experts disagree on the actual number of current and future
customers banking online. Estimated 6 million in 1999 and predicts 23
million by 2004. Gartner's similar figures range between 27.5 and 55
million, respectively. Different definitions of what actually constitutes an
online customer contribute to the blame--the industry is that green. These
numbers, which may seem low, could represent as much as 40 percent of the
total possible market. Yet, obstacles remain. In the United states, between
one third to one half of banking customers are currently unwilling to use an
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Scenario of retain banking
Accenture believes that the key to effective CRM is to cultivate
meaningful insights about customers--insights that reveal not only what
makes the customer satisfied, but also what brings profitability to the
organization. Although most companies understand that developing insights
about individual customers can increase satisfaction and drive sales, few
truly understand which insights are critical, how to use them to deliver
value, or how to develop them in the first place.
Through more than a decade of work in this area, Accenture has
identified six key insights that enable companies to obtain a more accurate
reading of their most valued customers:
• Current value—-
How Valuable Is This Customer To The Organization Right Now?
How Much Of The Customer’s Financial Services Activity Is With This
• Future value
How Valuable Is The Customer Likely To Become In The Future, As Life
Stage And Wealth Change?
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• Best next product
Which Is The Next Best Product Or Service For This Customer, The One
That Will Increase Value For The Customer And The Organization?
• Attrition risk
How likely is the customer to leave?
We believe the answer lies in the new wave of technology
innovation that promises to help transform CRM yet again. “Reality
Online”—Accenture’s vision of the future of technology and business—will
be instrumental in enabling companies to further enhance their ability to
build and maintain lasting, profitable customer relationships. Bringing
together the virtual and the physical worlds, the next generation of CRM
embraces technology as the critical enabler. These solutions will create a
world where objects will sense, reason, communicate and act; where every
physical entity or event has a corresponding “virtual double” and where the
time between stimulus and response approaches zero. In this world, insight
will be bought and sold in a market that rewards those who build trust and
harness the real-time economy.
CRM in next generation
So how do financial institutions convert the nemesis of data
overload to the nirvana of customer insight? Without doubt, there is both an
opportunity to be realized and value to be unlocked. If you can tap into the
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immediate value of the six customer insight building blocks, your
organization is well positioned for the longer-term opportunities such as
increasing customer retention, fighting the brand wars, protecting your
customers’ privacy, gaining greater value from your customer base and
creating a new set of offerings in the future. If you understand the potential
value of your customers, you can make decisions about where not to invest
as well as how to draw even greater reward from the high potential value
Thinking creatively about this vision while maintaining a laser
focus on the customer and on value, you will position your organization to
compete effectively now and in the new world of financial services.
Traditional one-to-one customer interaction is unsustainable as customer
numbers grow. The goal for the financial services sector therefore is to use
customer insight to understand how to create an effective multi-channel
customer experience that is personalized and relevant, differentiated by
value and respectful of privacy concerns.
As technological advances continue, many more applications
will emerge. One thing is clear for now: The “Reality Online” vision has
tremendous potential to make the next-generation CRM initiatives more
effective and more profitable than those of the past. New capabilities will be
required for capturing, storing and analyzing greater amounts of data. But by
making this a part of the future of CRM strategies, financial services
companies will be much better positioned to keep pace with the demands of
their customers and competitors and, above all, to grow profitably in the
years to come.
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Acknowledging the value of gold customers
• Treatment for gold
Every company has gold customers – they are the life blood of
their revenue stream. Gold customers represent 20% or less of the customer
base, and about 80% of the revenue. Some companies have not yet identified
these valuable people. That is a mistake, since the health of any business
depends onthem.Gold customers have a higher retention rate. They are more
loyal, less price sensitive, and buy more products, more often.
Once you know who they are, how should your marketing strategy address
them? One school says, “Market to them like mad. Get them to buy more.”
That might work, but, in most cases, is probably a mistake. The proper
course is to work to retain them.
Five percent of their customers provided 80% of their profits. Getting these
five percent to put more money in their bank would have been a fruitless
Whatever banks can do, they should make gold customers aware that they
are very important to us , and show it by really valuable services. Banks
should create a services budget just for the gold customers.
So where should you put your marketing dollars? With that segment just
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below gold. Here is where you can make the maximum impact per dollar
spent. Let these folks know how close they are to gold status. Encourage
them to spend a little more to get the services that go with gold. You could
use points, or monthly statements to make them aware of what they need to
do. Many customers and companies will respond to these incentives.
We soon learn that each customer segment needs to be treated
differently based on their contribution to overall profits. If we segment the
customer base into five quintiles, based on lifetime value, for example, we
get a picture that looks like this:
The top quintile, our Gold customers, are where the bulk of our
revenue and profits are generated. We must treat these customers with
respect. Don’t, necessarily, market to them. Provide them with super
services – service so good that you could not possibly afford to provide it to
every one of your customers. The marketing dollars should be aimed at the
second, third, and fourth quintiles. To the second quintile, you tell them how
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close they are to qualifying for Gold. You tell them how wonderful it is to be
Gold, and how easy it would be for them to move up.
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There is only one way: Set aside a control group of gold
customers who do not get these benefits. Monitor the performance of those
who get the benefits with those who do not. You will soon be able to see the
difference in retention and sales. Control groups for gold customers are
difficult to manage. The word gets around, and some in the control group
ask to be included in the benefits. How do you respond? “There was a
computer error. Of course, you are included in the gold program.” Only a
small percentage will complain and can easily be handled. Nieman Marcus
solved this problem with their gold customers. They called the ones that they
switched to the gold program the “out of control group”.
If you have not yet developed a special program for your gold customers,
begin at once. It may be the If you have not yet developed a special program
for your gold customers, begin at most important single customer
relationship program in your company.
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• Integrated Marketing Communication (IMC)
Integrated Marketing Communications (IMC) focuses on
building brand by creating databases that continuously monitor and respond
to market needs as relationships are fostered between practices and
customers (e.g., patients, referral sources). The first two articles in this four-
part series focused on two aspects of IMC: Customer Relationship
Management (CRM) strategies for database mining and building brand
awareness through strategic messaging to target markets.
The purpose of IMC is the same as traditional marketing, which is to
maximize profitability of a business. IMC is an ongoing, circular process
that requires continual communication between an audiology practice and its
target markets. This communication dynamic is what distinguishes
traditional marketing from IMC: the former works to increase profitable
transactions , whereas IMC works to increase profitable relationships. This
is not a semantic quibble. The concept of a profitable relationship requires
that both parties benefit and “profit,” as described by Schultz. IMC is based
on continual exchange between marketer and customer. The former seeks
and stores information on each individual customer in a database. The latter,
through transactions, surveys, and other methods is encouraged to
communicate back. Thus the fields of experience of both become greater and
more useful to both parties.
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• Growth & retention through personal sales
Personal sales are the most important part of relationship-
building in an audiologist practice. In IMC parlance, we are engaged in
“solution selling” – working in collaboration with every customer,
developing customer-specific dialogues to extract the most from our brand
features to solve as many of the customers’ problems as possible and retain
the customer within the practice. One of the great strengths of personal
selling is that it allows flexibility to each provider as a means to integrate
customer needs/wants/demands with the practice’s offerings
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Q1 Retain Banking is also known as relationship banking. So what
Measures have you implemented to retain your customer?
The needs of a customer are met with quality service like free ATM
cards , Drafts etc.
Q2 Do you prefer to retain your customers or make new ones?
Both are important at the same time because as it is said that “Old Is
Gold” and new customers to achieve targets.
Q3 Do you have some special or attractive offers in order to attract
Or retain your customers?
Yes we have a scheme called CASA (Current And Savings Account)
with Rs 50,000/- of free accidental insurance.
Q4 Do you have a CRM department or relationship management
department in your bank?
Q5 Do you provide any extra benefit or special service for loyal
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Q6 What type of people do you cater to?
All types of people but mostly we are having clients who are
Q7 Does your bank have a motto or a saying or a favourite line to
which it stands by and performs?
Yes. The Favourite line is “Where Every Individual Is Committed”
Q8 At what level of management does the decision of retain
banking or the retain department are taken?
Top level management.
Q9 Does the RBI have any influence or say in the matter of retain
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The most important aspect of a bank is to retain customers than
attracting new ones. Customer Retention is one of the most challenging and
rewarding aspects of business equipment sales. The customer of a bank
should feel proud while receiving the services from his bank. The bank
should retain its customer base by whatever means may be possible. The
succession of a bank is to develop a good relationship with the customers to
retain them in the bank.
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