Proposal of the report

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Proposal of the report

  1. 1. RESEARCH REPORT CUSTOMER RELATIONSHIP MANAGEMENT IN BANKING SECTOR GROUP MEMBERS NAME: SAAD HASAN NIAZI RIAZ AHMED KAMRAN HAIDER
  2. 2. BACK GROUND: “During the past decade dramatic changes are taking place in marketing environment” (Phillip Kotler, 2008). The information technology has inducted many new innovations within the fields of business and marketing. Information Technology has emphasized management to re arrange their plans and new plans for marketing, using websites and internet have taken place. Before 90s, organizations and banks were focusing the number of transactions made by the customers and this was the way they were following to for their sales promotion. But after the stated era, companies have shifted the attention towards the long lasting and strong relationship with the customer. Strategy to adopt e-CRM not only provides a cost effective relationship management but it is the most effective solution for the retention of the customer. Further in the thesis we would discuss the role of e- CRM within the banking industry. “Relationship management has become a very important factor for marketing with in the financial services industry”. (Zineldin; 1995) In this part of the paper, we start with some basic definitions of CRM, its background knowledge and work done by several researchers in this area especially in the banking sector. Major Banks in Pakistan and some success stories of CRM in context with the banking industry are also presented in this section.
  3. 3. INTRODUCTION Today, many businesses such as banks, insurance companies, and other service providers realize the importance of Customer Relationship Management (CRM) and its potential to help them acquire new customers retain existing ones and maximize their lifetime value. At this point, close relationship with customers will require a strong coordination between IT and marketing departments to provide a long-term retention of selected customers. This paper deals with the role of Customer Relationship Management in banking sector and the need for Customer Relationship Management to increase customer value by using some analytical methods in CRM applications. CRM is a sound business strategy to identify the bank’s most profitable customers and prospects, and devotes time and attention to expanding account relationships with those customers through individualized marketing, reprising, discretionary decision making, and customized service-all delivered through the various sales channels that the bank uses. Under this case study, a campaign management in a bank is conducted using data mining tasks such as dependency analysis, cluster profile analysis, concept description, deviation detection, and data visualization. Crucial business decisions with this campaign are made by extracting valid, previously unknown and ultimately comprehensible and actionable knowledge from large databases. The model developed here answers what the different customer segments are, who more likely to respond to a given offer is, which customers are the bank likely to lose, who most likely to default on credit cards is, what the risk associated with this loan applicant is. Finally, a cluster profile analysis is used for revealing the distinct characteristics of each cluster, and for modeling product propensity, which should be implemented in order to increase the sales. In looking for ways to drive growth, banks need to evaluate their customer management strategy.  Do they currently have a CRM solution that is capable of delivering?  Consistent and cost-effective customer service?  Customer-aligned products and services?  Enhanced customer loyalty and long-term value?
  4. 4. Banking institutions face many challenges including global competition for deposits, loans, underwriting fees, increasing customer demands, shrinking profit margins, and the need to keep up with the new technologies (SAP AG, 2002). “Banks and other service providers realize the importance of Customer Relationship Management (CRM) and its potential to help them acquiring new customers, retain existing ones, and maximize their lifetime value” Onut et al., (2006). Customer Relationship Management (CRM) came into the power when banking institutions were getting more and more competitive. The focus of CRM helped banks to understand the customer’s current needs, what they have done in the past, and what they plan to do in the future to meet their own goals (Xu, et al., 2002). “The intelligent use of information about customer needs will create long-term two way relationship with the customers” Crosby (2002). This will bring many advantages to the banking sector since long term customers are less costly to serve and smooth running relationships are less resource demanding. In general, CRM for any organization consists of two tasks i.e., customer acquisition and increased sales to existing customers. It is often justified by the phrase, “Make the right offer at the right time to the right customer”. In a web article by Bhaduri (2005) in which the author discuss about the use of CRM for banking sector in developing countries; the author describe that CRM is variously misunderstood as a fancy sales strategy, an expensive software product, or even a new method of data collection. It is none of these. CRM is a simple philosophy that places the customer at the heart of a business organization’s processes, activities, and culture to improve his/her satisfaction of service and, in turn, it will maximize the profits for the organization. Bhaduri (2005) further argues that CRM made bankers realize that the purpose of their business is to “create and keep a customer” and to “view the entire business process as consisting of a tightly integrated effort to discover, create, and satisfy customer needs”. Pakistan is considered
  5. 5. amongst one of the developing country and in this internet age when the customers are having access to a variety of products and services worldwide, it is becoming very difficult for the local banks in Pakistan to provide the services according to the needs of customers. In such case, instead of acquiring new customers, it is becoming more difficult for these banks to keep their existing customers. Even though most of the banks in Pakistan have realized the importance of CRM and implemented its applications, but the initial investigations during the current research have shown that quite a number of CRM goals does not produces required results and, even worse, in some cases users say that CRM has damaged customer relationships. Currently, in the banking sector of Pakistan, CRM vision is merely an I.T system that only records customer detail (necessary or unnecessary), including their previous transaction histories, purchasing preferences, and even birthdays. Banks then uses this data to personalize every contact with that customer, sometimes sending unsolicited mails. In short, it looks like that the current CRM system in the banking industry of Pakistan is not producing the required results. Therefore, this paper highlights some of the major problems and Creating Global Economies through Innovation and Knowledge Management: Theory & Practice 313 challenges in the banking sector of Pakistan using the customer relationship management (CRM). Customer Relationship Marketing is a practice that encompasses all marketing activities directed toward establishing, developing, and maintaining successful customer relationships. The focus of relationship marketing is on developing long-term relationships and improving corporate performance through customer loyalty and customer retention. Customer Relationship Management (CRM) as the name suggests, the primary focal point is placed on the customer. The key objective is to increase customer value over time by increasing customer loyalty. If a company develops better customer relationships, it also improves business processes as well as its profits. In general, CRM is a more efficient automated method used to connect and improve all areas of business to focus on creating strong customer relationships. All forces are coupled together to save, improve, and acquire greater business to customer relationships. The most common areas of business that are positively affected include marketing, sales, and customer service strategies. CRM helps create time efficiency and savings on both sides of the business spectrum. Through correct implementation and use of CRM solutions, companies gain a better understanding of their strongest and weakest areas and how they can improve upon these.
  6. 6. Therefore, customers gain better products and services from their businesses of choice. In order to achieve better insight on CRM, it is essential to consider all of its components. IMPORTANCE OF CRM Customer relationship management is a broad approach for creating, maintaining and expanding customer relationships. CRM is the business strategy that aims to understand, anticipate, manage and personalize the needs of an organization's current and potential customers. At the heart of a perfect strategy is the creation of mutual value for all parties involved in the business process. It is about creating a sustainable competitive advantage by being the best at understanding, communicating, and delivering and developing existing customer relationships in addition to creating and keeping new customers. So the concept of product life cycle is giving way to the concept of customer life cycle focusing on the development of products and services that anticipate the future need of the existing customers and creating additional services that extend existing customer relationships beyond transactions. PURPOSE OF THE REPORT: Purpose of our research is to study implementation of analytical CRM in the banking sector, through technologies used for CRM by the bank and the satisfaction level of customers by using these technologies. RESEARCH QUESTIONS:  What are the technologies used by banking sector to get the customer attentions?  What strategies are used by the banks for CRM?  What are the responses of customers by using these technologies?  What are the Draw backs in baking sector which effects Customer Satisfaction level?
  7. 7. OBJECTIVES OF THE STUDY : The main objective of the study is to examine the importance of CRM in banking sector, and its impact on the ‘Customer Satisfaction’.The other specific objectives of the study are: 1. To review the literature on the concept and use of CRM in banking sector. 2. To analyse the perception of customer on CRM as a tool of banking sector in retention of customers in general and SBI and other nationalised banks in particular. 3. To offer pertinent suggestions based on the findings of the study. METHODLOGY: Our study is comparative and analytical one through the perceptions of the customers of the selected banks. Will be collected through a well structured qualitative questionnaire from the selected banks. A Questionnaire will be formed from different literature with modifications to suit the setting in the banking sector. Perceptions on CRM practices are measured by using 3 point Likert scale as follows: 1= Disagree; 2= Neutral; 3= Agree. Questions that will be asked from the customers will be used from the following broad category. • Products and services used by customers, • Call centres, • Response time of query, • Speed of processing transactions, • Security issues with internet banking, online shopping etc., • Convenience, • Trust.
  8. 8. POPULATION: All the premium customer of commercial banks. SAMPLE: Sample size depends on number of customer visited in bank per day. PROBLEM STATEMENT: Modern Marketing philosophy advocates the concept of CRM that creates customer delight. This applies to all sectors of Sales and Marketing includes the banking. In the banking field a unique ‘Relationship’ exists between the customers and the bank. But because of various reasons and apprehensions like financial burdens, risk of failure, marketing inertia etc., many banks are still following the traditional ways of marketing and only few banks are making attempts to adapt CRM. It is with this background, the researcher has made a modest attempt towards the idea that CRM can be adapted uniformly in the banking industry for betterment of Banking Services.

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