Customer relationship management in banking services in haryana [www.writekraft.com]

Writekraft Research & Publications LLP
(All Rights Reserved)
CUSTOMER
RELATIONSHIP
MANAGEMENT IN
BANKING SERVICES IN
HARYANA
(Regd. No. AAI-1261)
Corporate Office: 67, UGF, Ganges Nagar (SRGP), 365 Hairis Ganj, Tatmill Chauraha, Kanpur,
208004
Phone: 0512-2328181
Mobile: 7753818181, 9838033084
Email: info@writekraft.com
Web: www.writekraft.com

208004
Phone: 0512-2328181
Mobile: 7753818181, 9838033084

INTRODUCTION
In the present scenario of globalization and liberalization, marketing has
undergone a metamorphic change to cope with increased competitiveness, changing
needs of customers, continuous product up-gradation due to change in technology,
changing marketing trends and many more. It is a business process, which seeks to match
the organizations human, financial and physical resources with the wants and needs of its
customers within the context of its overall competitive strategy.
A customer is the “king” of the market. A customer is the most important
person in the market. A customer is not dependent on us — we are
dependent on him.
(Mahatama Gandhi)1
Customers rarely want simply to be sold to; they want to be valued. They
want their circumstances to be acknowledged and their needs to be satisfied. A customer
is a person who brings us his wants. It is our job to handle them profitably. This demand
for a matching of the suppliers offers to the customer needs is something greater than the
resultant transactions; it is responsible for some kind of higher order business
relationship.
This move beyond the traditional realm of transaction. Marketing today has
led to a new emphasis in marketing, with a focus on relationship and the developments of
the notion of relationship marketing and marketing is recast as a matter of relationship
management. It does not abandon the fundamental principles of marketing, but builds
them into something more powerful and more relevant for today’s competitive market
place.
Relationship Marketing
Relationship marketing is a strategy used to learn more about customer
needs and behaviour in order to develop stronger relationship with them. ■y
Relationship
marketing has emerged as one of the major marketing issues in the 1980’s and 1990’s.
208004
Phone: 0512-2328181
Mobile: 7753818181, 9838033084

1
Many marketers have considered relationship marketing as a necessary and effective way
of achieving competitive advantage - through the creation of relationships, networks and
interactions that are long-term.
Despite the fact that the term ‘Relationship Marketing’ was introduced by
Berry (1983) more than twenty years ago, there is still a lot of debate about what is meant
by relationship marketing. Berry has defined Relationship marketing as “attracting,
maintaining and enhancing customer relationships so that indifferent customers are
transformed into loyal ones .3
In the relationship marketing perspectives, servicing and selling to the
existing customer, are viewed to be as important to long-term marketing success as
acquiring new customers. Good service is necessary to maintain the relationship, while
good selling is necessary to enhance it.
Besides above in the 1990’s relationship marketing has become a topic of
central importance in companies. Gronoors in 1990 formulated a relationship-focussed
definition of marketing, emphasizing the need to establish, maintain, enhance and
commercialize customer relationship, through the mutual exchange and fulfillment of
promises. In the service sector it has received the greatest attention. Relationship
marketing is increasingly important source of competitive advantage in companies by
which they serve their customers. More and more companies are moving towards using
service and relationship building and service as a powerful means of achieving
competitive differentiation.
There is another major trend in relationship marketing i.e. the emergence
of one-to-one marketing (Mceahem 1998). While the earlier perspective aimed at
meeting the needs of segments of consumers, the new perspective treats every customer
as unique. The quality of relationship with individual customer is emerging as a proper
measure of success. Now it is possible to maintain data on individual customers and
address their needs on one-to-one basis. There is more attention given to customers and
relationship marketing in terms of improved service quality, personalized care, reduction
of customer stress etc. also benefits them. A high degree of customer contact,
commitment and service are maintained.4
208004
Phone: 0512-2328181
Mobile: 7753818181, 9838033084

2
The relationship marketing approach has gradually taken the shape of
customer relationship management. Relationship marketing has a narrow focus on the
customers and only focuses on the marketing functions of the organization concerned. On
the other hand, customer relationship management focuses more widely on customers and
on the entire functions connected with value creation and delivery chain of the
organization concerned. Organization have preferred the usage of the term Customer
Relationship Management (CRM) rather than relationship marketing because they face
the harsh reality that brings an old adage to life -
“You can please some of the people most of the time and most of the
people some of the time, but you can ’t please all of the people all of the time”.
Today, Customer Relationship Management (CRM) is the key that fulfills
the promise of helping sellers -please all of the people (customers) most of the times.5
To step over the threshold of the new millennium - the age of “never
satisfied” customer, leading enterprises are identifying the need to change from a product
- centric business to a customer - centric one. Organizations are slowly waking up to the
benefits as well as the challenge of changing processes that are necessary in this age of
never satisfied customer.
There are some interesting facts bearing customer retention
• Acquiring new customers cost five times more than the cost involved in satisfying and
retaining current customers. It requires a great deal of effort to induce satisfied
customers to switch away from their current suppliers.
• The average company loses 10 percent of its customers each year.
• A 5 percent reduction in the customer defection rate can increase profits by 25-80
percent.
• The customers profit rate tends to increase over the life of the retained customers.6
Now, if the companies would like to retain their customers, the golden
path (and the only path) is to make your customers loyal to your products/services. This is
where CRM comes into picture. Building loyalty into customers involves understanding
the various ways that they are different and using that knowledge to tailor appropriate
208004
Phone: 0512-2328181
Mobile: 7753818181, 9838033084

behaviors towards those customers. To do so, the company must know the details of who
the customers are, not just as groups or segments of customers but each
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208004
Phone: 0512-2328181
Mobile: 7753818181, 9838033084

and every individual customer. Details of whether the customer is profitable, or whether
the customer does business with the competitors etc., should be known. This
understanding will lead to a successful implementation of CRM.
Thus from the above discussion we can conclude that the customer
relationship management is new and viable term in the marketing in spite of Relationship
Marketing.
There are some selected views of marketing theorists, practitioners and
researchers on relationship marketing are summarized below to define the concept of
relationship marketing.
1. “Relationship marketing attracts, maintains and enhances customer
relationship” as viewed by Leonard I. Berry (1983). He proposes the
following sequence of activities for performing relationship marketing viz.
developing core services to build customer relationship, customization of
relationship, augmenting core services with extra benefits, enhancing
customer loyalty and fine tuning interval marketing to promote external
marketing success.
2. Christopheretal (1990) consider relationship marketing as “A tool to turn
current and new customer into regularly purchasing clients and then
progressively move them through being strong supporters of the company and
its products to finally being active and vocal advocates for the company”.
3. James J. Lynch (1996) viewed, as “Relationship marketing is an essence
selling by using psychological rather than economic inducements to attract
and retain customers. It seeks to personalize and appeals to the hearts, minds
and purses of the mass consumers”.
4 Ian H. Gordon (1998) viewed as relationship marketing is an ongoing process
of identifying and creating new values with individual customers and then
sharing the benefits from this, over a lifetime of association. It involves the
understanding, focusing and management of ongoing collaboration between
suppliers and selected customers for mutual value creation and sharing
through interdependence and organizational alignment.7

5. Christopher, Payne and Ballantyne (1991) developed a broad theory of
relationship management. The key elements of their theory involve:
• Emphasizing a relationship, rather than a transaction approach to
marketing, understanding the economics of customer retention and
thus ensuring the right amount of money and other resources are
appropriately allocated between two tasks (retaining and attracting
customers).
• Highlighting the critical role of interval marketing in achieving
external marketing success.
• Show how the principle of RM (Relationship Management) can be
applied to a range of diverse market domains, not just customer
markets.
• Recognizing that quality, customer service and marketing need to be
integrated in a much closer manner.
• The traditional marketing mix concept of the four P’s (product, price,
promotion and place) does not adequately capture all the key elements
which must be addressed in building and sustaining relationships with
markets.
• Ensuring that market is considered in a cross functional context.
This broad concept of RM is illustrated in diagram:
Emphasis on all six market Relationship marketing
domains (especially
customer retention)
Emphasis on customer Transaction marketing x
market domains (especially
customer acquisition)
Functionally based Cross functionally
Marketing based marketing
The transition to RM
(Calfornia management review (2001))

The diagram illustrates the transaction from transaction marketing to
Relationship marketing. The move to cross-functional marketing reflects the difficulties
encountered by traditional hierarchically oriented organization that adopt a departmental
or functional approach to marketing. RM highlights the organization of marketing
activities around cross-functional process as opposed to organizational functions. This
cross-functional approach to customer management has become a major theme in RM.8
Definitions of Relationship Marketing
The relationship-marketing paradigm is there for around 22 years. Yet
there does not appear to be an emerging consensus as to what it is even though most of
the definitions have common denominators (Gronroos, 1996). Considering the following
definitions, most of the definitions are based on the first definition given by Berry.
“Attracting, maintaining and - in multi-service organizations - enhancing
customer relationship ” (Berry, 1983).
“Relationship marketing is marketing to win, build and maintain strong
lasting relationships with industrial customers ” (Jakson, Barbara Bund, 1985b).
“The process of identifying and establishing, maintaining, enhancing,
and when necessary terminating relationships with customers and other stakeholders, at
a profit, so that the objectives of all parties involved are met, where this is done by
mutual giving andfulfillment ofpromises” (Gronroos, 1997).
“Marketing seen as relationship, networks and interactions” (Gummesson,
1999).
“The ongoing process of engaging in cooperative and collaborative
activities and programmers with immediate and end-user customer to create or enhance
mutual economic value at reduced cost” (Sheth and Paratiyar, 2000).
"A customer-centered approaches whereby a firm seeks long-term business
relationships with prospective and existing customers” (Evans and Laskin, 1994).9

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CUSTOMER RELATIONSHIP MANAGEMENT
CRM stands for customer relationship management. It is not a new
concept but an age-old practice, which is on the rise because of the benefits it offers,
especially in the present marketing scenario. So, CRM today is a process of methodology
used to learn more about customers’ needs and behaviors in order to develop stronger
relationship with them. After all, a good customer relationship is the heart of business
success. 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 brings together lots of pieces of information about customers,
sales, marketing effectiveness, responsiveness and market trends.10
CRM helps businesses use technology and human resources to gain insight
into the behavior of customers and the value of those customers. Finding and keeping
customer is the heart of every business. In recent years, the concept of CRM has been
developed as a way for business to approach customer relations systematically and
efficiently. Of course, businesses have always had relationship with customers. There is
new thing about CRM is that it focus on actively managing customer relations in an
organized and strategic manner. In practice, that means developing the company’s
internal operations, software and Internet capabilities so the customer relationships are
more profitable. For example - CRM could be used to track key customer information
such as accounts, buying histories and preferences so that the producer can match
customer needs with product plans and offering.11
CRM has many potential benefits. It can help companies to identify their
best customers, enrich and individualize customer contact, manage market campaigns,
and reduce customer response times etc. All in all, it can help to build long-term
profitable customers relations. CRM is important because, fundamentally, it’s cheaper
and more efficient to retain the existing customers than to find new ones. If it work as
hoped, a business can provide better customer service, make call centers more efficient,
cross sell products more effectively, help sales staff close deals faster, simplify marketing
and sales process, discover new customers and increase customer revenues.
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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For example - many financial institutions keep track of customers’ life stages in order to
market appropriate banking products like loans, investment to them at the right time to fit
their needs.
Next, the organization must look into all the different types of information
about which customers come into a business, where and how this data is stored and how
it is currently to be used. One company, for instance, may interact with customers in a
very large number of different ways including mail campaigns, web sites, call-center,
mobile sales force staff and marketing and advertising efforts. A solid CRM system links
-up each of these points. This collected data flows between operational systems (like
sales and inventory system) and analytical system that can then comb through the data to
obtain a holistic view of each customer and pinpoint areas where better services are
needed. For example - If some one has a mortgage, a business loan or a large commercial
checking account with one bank, it is necessary for the bank to treat this person well each
time it has any contact with him or her. When the focus is on the valuable customer, it is
necessary to ensure that their value be based on the total value of their relationship with
organization, the potential value of their relationship, the profitability of their
relationship, the insights they can provide to the organization, and the influence that they
have to manage over their customers. By thinking more insightfully about what the
customers are really worth, one can focus the resources on attracting and keeping the
right type of customers. This focus, in turn, will improve the productivity of CRM efforts
and will position him better for innovation and growth. The guru of quality, W.
Edwards Deming probably said it best;
“.... It will not to be enough to have customers they are merely satisfied.
Satisfied customers switch, for no good reason, just to try something else why not? Profit
and growth come from customers that can boast about your product or service - the loyal
customers. He requires no advertising or other persuasion, and he brings a friend along
with him ”. 19
Finally, organizations have to understand that CRM applications won’t
determine the nature of customer relationships - customers will do that.

8
Definitions of CRM
CRM guru.com and various contributors define the CRM:
Official CRM guru.com definition
“Customer relationship management is a business strategy to select and
manage customers to optimize long-term value. CRM requires a customer centric
business philosophy and culture to support effective marketing, sales and services
processes. CRM applications can enable effective customer relationship management
provided that an enterprise has the right leadership strategy and culture ”.
According to contributor Dick Lee
“Customer relationship management is the implementation of customer
centric business strategies; which drives redesigning of functional activities; which
demands re-engineering of work processes; which is supported, not driven, by CRM
technology. CRM is a “chain reaction ” triggered by new strategic initiatives rather than
something you can initiate at the work process, or worse yet, technology level”.
According to Mei Lin Furg
“Customer relationship management is the superset of business models,
process methodologies and interactive technologies for achieving and sustaining high
levels of retention and referrals within identified categories of valuable and grows able
customers ”,
Martin Brending defines
“CRM is about developing and implementing business strategies and
supporting technologies that close the gaps between an organization’s current and
potential performance in customer acquisition, growth, and retention. It improves return
on Assets. The asset in this case is the existing and potential customer base ”.

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Ryan Crawcour the contributor of CRM Guru defines the CRM as
“Customer relationship management should be exactly that: the process
of actively depending the knowledge (not data) you have of your customers over time,
and then using that knowledge gained to customize your business and strategies to meet
that customer’s individual need”. In their definition he stresses this point simply because
a large percentage of the market’s perception is that CRM is simply a technology solution
that does sales force automation or call center. CRM is about an entire change of mindset
to become customer orientated; it is not simply a piece of technology that will solve all
your needs.
Jennifer Pratt defines
“CRM is a management approach or model that puts the customer at the
core of a company’s processes and practices. CRM leverages cutting-edge technology,
integrated strategic planning, up close and personal marketing techniques and
organizational development tools to build internal and external relationship that increase
profits margins and productivity within a company ”.
Michel defines CRM as
“Customer Relationship Management is to identify, establish, maintain,
enhance and when necessary also to terminate relationships with customers and
stakeholder, at a profit, so that the objective of both parties are met, and this is done by
mutual exchange andfulfillment ofpromises
Subbarathnam Swami Nathan defines the CRM
“Customer relationship management refers to the management of all
interactions with the customer that an enterprise indulges in. Its focus is on managing
and optimizing the entire life cycle ”. 1 T
The reason for the above definition is: The stated objective and benefit of
good CRM is to increase the customer base by acquiring new customers and effectively
serving the needs of the existing customers.

Evolution of CRM
CRM had its origins in two unrelated places. One was in the U.S. where it
was driven by technology and the second place CRM developed was in B2B (Business to
Business) marketing in Scandinavia and Northern Europe.
CRM has evolved since its earliest formation, originally driven by an
inside-out focus, through three phases of evolution - technology, integration and process.
Now forward to a fourth phase - Customer - driven CRM - an outside - in approach.
• Technology: In its earliest stage, CRM meant applying automation to existing
sales, marketing, support and channel processes as organizations attempted to
improve communications, planning, opportunity and campaign management,
forecasting, problem solving, and to share best practices. To some degree, it
worked but automating poorly performing activities or processes rarely improves
the quality of outcome.
• Integration: By developing cross-functional integration, supported by data
warehousing and shared roles and responsibilities, organizations began to create a
customized view of the customer. Web hits, support issues, sales calls and
marketing enquiries started building a deeper understanding of each customer and
allowed aggressive organization to adopt their tactics to fit individual needs. This
step focused around two primary components:
(a) Make it easier to do business with the seller.
(b) Predictive modeling.
• Process: By rethinking the quality and effectiveness of customer-related processes,
many organizations began to eliminate unnecessary activities, improved outdated
processes, and redesign activities that had failed to deliver the desired outcomes.
Recreating the process through an understanding of the capabilities of the
technology, the outcomes were more predictable and the promises for a
meaningful Return on Investment (ROI) more substantial and realistic. The
metrics for success became the improved effectiveness in serving the customer.
All three of these assumptions have failed or at least become outdated
because of some reason, i.e.

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Historical purchases or inquiries are not a clear indication of future needs
as buyers are rapidly redefining requirements to satisfy their current business or market.
Sellers are working aggressively to re-establish structural bonds and driven by sensitive
financial markets, buyers move to whichever supplier can provide the best aligned, most
cost effective solutions that promise to improve and stabilize their business performance.
These factors are driving CRM into a fourth phase.
Customer Driven CRM - The Fourth Phase
Today, revenue performance has become the central theme of
organizations. Organizations are now challenging everything from how they create value,
to how they serve their markets, to how they meet customers’ expectations. It is the
answers to these questions that create the framework for phase four i.e. - “Customer
Driven CRM”.
Without a deep understanding of what’s going on in the customer’s head -
especially what will influence buying behavior - it is different to establish customer
strategies that mutually serve the needs and expectations of the buyer and seller
communities.
The difference:
(Past and Future of CRM)
From Past.......................... To. ........................ Future
a. Life cycle and value based segmentation a. Relationship based segmentation
b. Client mgt. (standardized and reactive) b. Client mgt. (segmented and proactive)
c. Media based planning c. Hi-Tech analytics
d. Brand mgt. d. Multi-channel campaign planning
e. Minimal It-skills e. Significant It-skills
(Haris Randy (2004) crm.com)
In the past, CRM has followed a basic balanced technique involving four categories:
Customer, Financial, Operations and People.
Organization first analyzed the needs and capabilities of operations and
their people to determine what could be delivery to the customer. From that, they draw
conclusions and predictions to determine the impact on the financial category.14

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But now the priorities have changed. The focus is first on the customers: -
what will they buy, when, why and for how much? What creates value for them? What
services can we do for them etc?
So we can conclude that a CRM strategy isn’t an easy task.
Comprehensive technologies, complex organizational design and ever changing customer
demands are just the beginning and the promises of customer driven CRM are worth the
journey.
Factors responsible for evolution of the concept of CRM
Factors responsible for evolution of the concept of CRM are, viz.:
• Shorter product life cycle: Brands generally have a shorter life span than the
product category to which they belong. Advent of new technology may lead to
new product and consequently to the emergence of new brands. Thus as there are
many brands for the same product in the market, need arise to satisfy the customer
to the highest extent and thus need arise to manage a very good relationship with
customers.
• Rapid new product offering: Firms nowadays introduce products using the latest
technology. Some products offered are new to the market, new to the world or
new to the firm. As new products are being introduced, CRM will help firms
manufacture new products according to the need and expectations of the
customer.
• Growth of demanding: The overall demand is increasing in today’s world. But
also the customers are demanding many benefits from a particular product, e.g.,
for a face cream customer look for a good quality, good fragrance, good
packaging, fairness, economical and not harmful for skin and money back
guarantee - Amway.
• Well-informed and educated customers: Due to the media and print ads, the
awareness level of customers is increasing. Now the customers are aware of
different type of products and brands available in the market. Thus if a company
wants to have more customers it should develop a good relationship with its
present and future customers. Thus CRM would help a lot.

13
• Competitive market pressures: There is a stiff competition in the market. Take
any product for, e.g., soap there will be more than 70 brands of soaps in the
market. In this crowded market if competitors makes a good relationship with the
customer and you don’t, then you may loose the game. Thus a good relationship
is to be developed by firms with their customers with the help of CRM.
Decline in customers’ brand loyalty and company loyalty: In the present
scenario, brand loyalty, especially in the FMCG category, is on the decline stage.
Newer and superior products are hitting the retail shelves all the time. Thus the
firms have to upgrade their products, improve service and create bonds of trust
through proper care of customer needs and regular communication.15
CRM Objectives
The following are the specific objectives of CRM:
• Enable the company to quickly identify, contrast, attract and acquire new
customers: This allows the company to focus its limited marketing resources on
the most promising target markets with the highest potential value. This is
typically done using the information generated by CRM applications which
automatically generate customer and market profiles, identify, target markets with
high revenues and profitability potential, generate leads, track marketing
campaigns across a variety of media, select appropriate contact media, plan
promotions and incentives and manage the proposal process through negotiation
to close.
• Obtain a better understanding of the customers - their wants and needs:
CRM applications, often used in combination with data warehousing, e-commerce
applications and call centers, 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 in terms of the products and or
services provided by the company. This information is used in the planning and
execution of marketing campaigns. It also enables customers to seek products and
reveal their preferences in an interactive manner.

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• Define the appropriate product and service offering and match it to the
customers unique needs: CRM provides customization and personalization
capabilities that give customers the power to view the enterprise in a way that they
can relate to, there by making it easier for them to do business with it. This
includes configuration, pricing, quotation, catalog and personal generation
capabilities that harness the power of Internet while ensuring the flexibility to
respond quickly to changing technical and business conditions.
• Mange and optimize a company’s sales cycle: The productivity of the sales
process is increased by accurating the contracting process and improving revenue
velocity. This is accomplished through capabilities such as, online order entry,
credit card processing, tax calculations, auctions, billing, order status and payment
processing. CRM solutions also include tools, which provide the ability to
communicate important information from supply chain modules to the customer
interface in real-time. These tools can help in determining feasibility, profitability
and delivery dates, while understanding the constraints of the entire supply,
production and logistics chain across multiple channels and enterprises.
• Identify cross selling and up-selling opportunities: CRM help in identifying
opportunities for cross selling and up selling of higher value added services to
existing customers based on their past purchasing behavior.
• Increase retention of existing customers through improved after sales, service
and support: CRM applications document all post-close service and support
related interactions with customers, track customer requests and feedback from a
variety of communication channels and use this information to anticipate the
demand for service and technical assistance, and maximize customer satisfaction
and retention while minimizing customer service staff. The goal is to install
greater customer loyalty CRM provides capabilities for providing online support
information, online product registration to an electronic help desk, self-service
support logging and tracking, and integration with call centers.16

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Need for CRM
Several companies are turning to customer relationship management
systems and strategies to gain a better understanding of their customer’s wants and needs
used in association with data warehousing, data mining, call centers and other
intelligence based applications, CRM “allow companies to gather and access information
about customers buying histories, preferences, complaints, and other data so they can
better anticipate what customer will want. The goal is to install greater customer loyalty”.
Other specific needs include:
• Companies have to increasingly pursue a customer centric competitive
strategy rather than a product-centric one: Two trends have brought CRM to
the forefront. First, with increased global competition and easy access to the latest
technology, products have become harder to differentiate; hence companies are
increasingly pursuing a customer-centric competitive strategy rather than a
product centric one. Second, now it is possible to put customer information from
all over the enterprise into a single system rather than a no different systems and
access it from anywhere in the world through the Internet.
• E-Customers demand constant access, immediate response, and a
personalized touch: Customers in the e-business age expect constant access to a
company, through e-mails; call centers, faxes and websites. They demand
immediate response and a personalized touch meeting their needs, placing new
demands on the enterprise, which CRM alone can satisfy.
• Focus is shifting from supply chain to demand chain effectiveness: With the
product quality at all time highs, manufacturers find it increasingly difficult to
gain competitive advantage based solely on product attributes. Therefore the focus
now is on channel operations and customer relationships, when there is great
potential for adding value and differentiating the offerings. Increasingly
companies are applying sophisticated information technology to identify, acquire
and retain the most profitable customers by continuously improving the highest
levels of customer experience, and creating and sustaining the highest levels of

customer satisfaction. Thus, in the era of e-business, the key source of competitive
advantage is shifting. Thinking firms are revising their strategy to
16

focus on demand chain effectiveness that is, a continuously improving their
ability to identify, acquire and retain profitable customers.
• Better understanding and intelligent management of customer relationships is
essential for survival: The effect of increased commoditization of products and
production processes is that customers now have more and more choices. Hence
giving them better, more personalized product offerings and services is the only
real way to make a difference winning the battle for share of mind and share of
wallet in this new economy depends on understanding and intelligently managing
relationships with customers. It is no longer the privileged domain of
particularly successful companies; it has become the make-or-break challenge for
every company.17
Types of Customer Relationship Management
CRM allows a company or Bank to address all of the types of customers it
serve at different points in their lifecycle and to choose the marketing program that best
fits a customer's attitude towards the company and willingness to purchase its products
and services.
There are four types of CRM programs
a. Win Back or Save
b. Prospecting
c. Loyalty
d. Cross-sell/up-sell.
a. Win Back of Save: - This is the process of convincing a customer to stay with
the organization at the point they are discontinuing service or convincing them
to rejoin once they how left of the four categories of campaigns, win back is
the most time-sensitive. Different studies shows that a win-back campaign is
four times more likely to succeed if contact is made with in the first week
following a defection than if it is made in the fourth or fifth week.
Selectively is the other essential characteristic of a successful win-back
campaign. Leading organization often filter their prospect for contact to
exclude customers who have frequently switched, who have bad credit or
whose usage or consumption of services/products is low.

17
In past, the organization would ignore customers who had a significant
decline in consumption or who had discontinued some services as long as
they remained customers. The organization assumed that such consumers
were merely switching to another product without good data and the ability to
analyze; there was no way to disprove this assumption.
Recent study in this area has shown that many of these consumers are
either reducing overall usage or in grating to a competitor's product.
b. Prospecting: - Prospecting is the effort to win new, first-time customers.
There are three most critical elements of a prospecting campaign are
segmentation, selectively and sources. It is essential to develop an effective
needs bases segmentation model that allows the organization to effectively
target the offer. Without focused on this approach, the organization either fails
to achieve an adequate acceptance or rate on the offer or spends too much on
promotions, advertising etc. Because needs based segmentation defines what
the customer wants from the organization and profit-based segmentation,
defines how valuable the customers in and helps the organization to decide
how much it is willing to spend to get that customer.
c. Loyalty: - It is less expensive to keep on existing customer than to acquire a
new one. Loyalty is the category in which it is most difficult to gain accurate
measures. As the life of a customer with the company increases, the value he
delivers to the company increases. According to Harvard Business review
authors Thomas Jones and Earl Saser, "Increased customer loyalty is the
single most important driver of long-term performanceFor a loyal customer,
there are no new costs of sales and marketing, because a good relationship
exists between the customers and the company. Customer loyalty presents in
itself a compounding effect. For Ex.: Let's consider two banking companies:
One loses customers at the average rate of 30% per year; the other company
optimizes its marketing programs to reduce the attrition to 20% per year. If
both companies acquire new customers at the rate of 30% per year, then after
seven years the first company would be the same size as it was seven year
before. The second company, which had reduced the customer chum to

18
20%, would double in size in the same period. The compounding effect of
customer loyalty on customer profitability increases because the sales costs are
lower and revenue generally has increased.
The best tool to retain the customers is prepared. Preparation means
taking care of customers better than competitors,
d. Cross sell/up sell: - Cross selling is the process by which we offer to the
existing customers’ new products and services. "Up-selling" is a form of cross
purchase of the customer. The data-mining technique in CRM can be used to
organize the cross-selling campaigns. The data used is the purchasing behavior
of the existing customers. Each of the cross- sell offers in then evaluated so that
the offer yields benefits to both the company and the customer. These cross-sell
model in applied to new customer data in order to make predictions about these
customer-based on which cross-sells offers can be made. For Ex.: A bank-
private or public in India may have a number of services like Personal Finance
services (Home Finance, automobile Finance), capital services (bonds and
deposits). Life insurance services, ATM card, credit cards etc. Based on the
customer data, it can organize its cross-sells plans. Customer understanding
targets the propensity to buy; relationship marketing increases the propensity to
buy. CRM increases the propensity to buy over the customer life cycle thus
affecting the profitability directly.18
Different perspectives on CRM
There are five major perspectives on CRM. They contribute in unique ways to
understanding the phenomenon of CRM, each will be discussed in this section: -
• CRM as a process: - A process refers to a collection of tasks or activities that
together result in a desired business outcome. Stated differently, a business
process refers to a group of activities those successful convert organizational
inputs (human resources) into desired outputs i.e. new products.
When viewed as a process, CRM has been defined at two different levels
of aggregations more specifically, some have defined it as a higher level process
that includes all activities that firms undertake in their quest to build durable,
profitably, mutually beneficial customer relationship (e.g. show 2003; Srivastava
19

et al; 1999(Yet other have constructed it more normally and define it as a process
that is concerned with managing customer interactions for the purpose of
promoting the establishment and maintenance of long-term, profitable
relationship. (E.g.Galbreath & Rogers/1999;Kohli al.2001). The former
perspective defines CRM as a macro level process, whiles the latter focuses
exclusively on interaction management and subsumed under the micro level
perspective.
The usefulness of this view is limited by the fact that CRM has been defined
at different two levels, and thus, it is unclear which tasks would be to include
under a rule of such process.
• CRM as a strategy: - Strategy is defined as a "concerns to directions in which
human and physical resources will be deployed and applied to maximize the
chances of achieving a selected objective in the face of difficulties." (Koontz and
O'Donnell)
The strategic view of CRM emphasizes the fact that resources are to use
for relationship building and maintenance efforts should be allocated based on
customers' lifetime value to the firm i.e. estimated net profits over the course of
the relationship (www. CRM Guru, 2003 ;)
This view suggests that all customers are not equally profitable and
valuable, therefore the maximum profitability can only be achieved when
available resources are invested in customer relationship that provide a desired
level of return.
• CRM as a Philosophy: - When defined as a philosophy, CRM is a perspective
that effectively builds a bridge between the marketing concept and relationship
marketing paradigm and focuses on the importance of creating customer value
and loyalty. CRM refers to that idea which is the most effective way to achieve
such loyalty is by proactively seeking to build and maintain long-term
relationships with customers.
The philosophical view of CRM, stresses that a loyal customer base can
only be achieved if interactions are viewed with in the context of an ongoing

20
relationship and the firms must organize around and be responsive to their
customers and their changing needs.
This view suggests that to build long-term, profitable relationships, it is
not an easy task for an understanding of customers evolving needs drives firms’
day-to-day activities.
• CRM as a Capability: - Capability refers to the "capacity for a team of resources
to perform some task or activity." While resources are the source of firms
capabilities. The capability perspective on CRM highlights the fact that firms
must invest in developing and acquiring a mix of resources that enables them to
modify their behavior towards individual customers or groups of customers on a
continual basis. (IT tool box. Com 2003).
The capability view of CRM has not received widespread support in the
literature. It does serve to emphasize that a certain mix of resources are needed to
effectively manage customer relationship.
• CRM as a technology: - In this perspective CRM is a simply a technological tool
that enables firms to build customer relationship. This is one of the important
areas needed at the right place as an enables. It is important to emphasize that
technology does play a substantial role in CRM efforts by, among other things,
seamlessly linking front (i.e. sales) and back office (e.g. logistics) functions to
provide for the efficient and effective management of interactions across different
customer touch-points e.g. internet, direct mail, sales call etc; (ehen& popovich,
2003). In addition CRM tools enable firms to defend the power of database, data
mining and interactive e.g. Internet technologies to collect and store huge amounts
of customer data, build knowledge from that data. Such knowledge is
deemed crucial to effective relationship management.
Thus it is clear that technology plays a vital role in firms' relationship
management efforts.19

21
CRM in Marketing Literature
Literature Review
Customer relationship management has always existed in marketing and
management literature, but in marketing literature the terms customer relationship
management and relationship marketing as used interchangeably. As Nevin (1995) points
out, these terms have been used to reflect a variety of themes and perspectives. Some of
these themes offer a narrow functional marketing perspective while others offers a
perspective that is broad and paradigmatic in approach and orientation. A narrow
perspective of customer relationship management is database marketing emphasizing the
promotional aspects of marketing linked to database efforts (Bickert 1992).
Another narrow, yet relevant, viewpoint is to consider CRM only as a
customer retention in which a variety of after marketing tactics is used for customer
bonding or staying in touch after the sale is made (Vavra 1992). 0(
A more popular approach with recent application of information
technology is to focus on individual or one-to-one relationship with customers that
integrate database knowledge with a long-term customer retention and growth strategy
(Peppers and Roggers 1993). Thus 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 the mutual benefit of both
sides, through interactive, individualized and value-added contacts over a long period of
time”. 21 Brent Frei, President and CEO, Onyx Software (1999) defines “CRM is a
comprehensive set of processes and technologies for managing the relationship with
potential and current customers and business partners across marketing, sales, and
services regardless of the communication channel. The goal of CRM is to optimize
customer and partner satisfaction, revenue, and business efficiency by building the
strongest possible relationships at an organizational level”.22
Mckenna (1991) gives a more strategic view by putting the customer first
and shifting the role of marketing from manipulating the customer to genuine customer
involvement. Berry (1995), in some broader terms, also has a strategic viewpoint about

CRM. He stresses that attracting new customer should be viewed only as intermediate
steps in the marketing process. Developing closer relationship with these customers and
22

turning them into loyal customer are equally important aspects of marketing. Thus, he
proposed relationship marketing as “Attracting, maintaining and in multi-service
organization - enhancing customer relationship.”23 Liz Shahnam, CRM analyst says CRM
is “A buzzword that’s really not so new. It is a philosophy that puts the customer at the
design point, its getting intimate with the customer” (CRM Guru-com). Frontline
solutions President Bob Thompson even maintains, “None of the elements of successful
CRM necessarily has to include technology. CRM is simply a process with the goal of
making relationship profitable. To reach this goal, marketing, sales and services must
work more as team and share information. Computerized CRM applications make this
possible”. (CRM Guru.com). The marketing experts Dick Lee, principal of Minneapolis
based High yield marketing and author of the customer relationship management planning
guide describes CRM as “A customer-centric business strategy, which drives changes in
functional roles in the company, which demand re-engineering of work processes, which
is supported, not driven, by CRM technology”. In their approach he says that first you
change your business approach, then you re-engineer the roles in your company to
support that new approach, then and only then you start talking to vendors.24
Gronroos and Gummesson take a broader perspective and advocate that
customer relationship ought to be the focus and dominant perspective of marketing.
Gronoor (1990) states: “Marketing is to establish, maintain, and enhance relationship
with customers and other partners, at a profit, so that the objectives of the parties involved
are met. This is achieved by a mutual exchange and fulfillment of promises.” Similarly,
Morgan and Hunt (1994), draw upon the distinction made between transactional
exchanges and relational exchanges by Dwyer, Schurr, and OTI (1987), to suggest that
relationship marketing “Refers to all marketing activities directed toward establishing,
developing, and maintaining successful relationships”.
25
The core theme of all CRM and relationship marketing perspectives is its
focus on, co-operative and collaborative relationship between the firm and its customers,
and/or other marketing actors.
Another important fact of CRM is “customer selectively”. As several
research studies have shown not all customers are equally profitable for an individual
company. The company therefore must be selective in tailors its program and marketing

23
efforts by segmenting and selecting appropriate customers for individual marketing
programs. Hence, we define CRM as:
“Customer Relationship Management is a business strategy to select and
manage customers to optimize long-term value. CRM requires a customer-centric
business philosophy and culture to support effective marketing, sales and service
process for the company and the customer”.
Customer Relationship Management in Banking
It is said that marketing of banking services is concerned with product,
price, place, distribution and promotion decisions in the changing socio-economic and
business environment. The users of banking services play a very significant role in the
formulation of overall marketing strategies. The bank marketing activities are concerned
with the designing of product strategies - here the emphasis is on generation of new
products, keeping in view the needs and requirements of prospective. It is also related
with the place decisions, which draws our attention on the location of a bank at suitable
points. The marketing principles, again, assign weight-age to the distribution of services
which draws our attention on the behavioral aspects of the bankers; pricing decisions
which are linked with charging of commission and rate of interest; promotional strategies
which cover advertisement, publicity and many other steps for motivating the actual and
prospective users of the services.
The new marketing concept revolves around customer satisfaction. Every
business wants to grow day by day. So it must continue to try to attract customers at all
times during its life time without a single day’s pause. This is and must be the only
policy of business concern if it wants to consistently grow26.
Hence, we come to the conclusion that customer satisfaction is the basis of
all business actions with a view to earning more profits.
If the new marketing concept is applied to a bank, it would mean that:
The bank should continue to create new services for the use of customers and
deliver the existing services to customers most efficiently.

24
Bank marketing must be customer oriented. It is critical that customer’s need and
wants to be fulfilled by product or the services that the bank offers.
CRM primarily caters to all interactions with the customers or potential
customers, across multiple touch points including the Internet, bank branches, call center,
field organization and other distribution channels.
CRM help banks in following ways:
• Campaign Management: Banks needs to identify customers, tailor products and
services to meet their (customer) needs and sell these products to them. CRM
achieves this through campaign management by analyzing data from banks
internal 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, banks can
identify the most profitable customers and customer segments, and executed the
targeted, personalized multi-channel marketing campaign to reach these customers
and maximize the lifetime value of those relationships.
• Customer information consolidation: Instead of customer information being
stored in product centric soils, (for e.g. separate databases of saving accounts and
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 company: This means whoever the bank speaks to
irrespective of whether the communication is from sales, finance or support, the
bank is aware of the interaction. Removal of inconsistencies of data makes the
client interaction processes smooth and efficient thus leading to enhanced
customer satisfaction.
• Personalized sales home page: CRM can provide as single view where sales
managers and agents can get all the most up-to-date information in one place,
including opportunity, account, and news and expense report information. This
would make sales decision fast and consistent.
• Contact center: It enable customer service agent to provide uniform services
across multiple channels such as phone, Internet, e-mail, fax.

• Operational inefficiency removal: CRM can help in strategy formulation to
eliminate current operational inefficiencies. An effective CRM solution supports
all channels of customer interaction including telephone, fax, e-mail, the online
portals, wireless devices, and face-to-face contacts with bank personnel. It also
links these customer touch points to an operations center and connects the
operations center with the relevant internal business partners.
• Enhanced productivity: CRM helps in enhanced productivity of customers,
partners and employees.
• Activity management: It helps managers to assign and pack the activities of
various members. Thus improved transparency leads to improved efficiency.
• Lead and opportunity management: These enable organizations to effectively
manage leads and opportunities and track the leads through deal closure, the
required follow up and interactions with the prospects.
• CRM with business intelligence: Banks need to analyze the performance of
customer relationship, uncover trends in customer behavior, and understand the
true business value of their customers. CRM with business intelligence allows
banks to assess customer segments, which help them calculate the net present
value (NPV) of a customer segment over a given period to derive customer
lifetime value. Customers can be evaluated within a scoring framework.
Combining the behavior key figure and frequency of monetary acquisition
analysis with a marketing revenue quota can optimize acquisition costs and cut
the number of inefficient activities. With such knowledge, banks can efficiently
allocate resources to the most profitable customers and re-engineer the
unprofitable ones. These data warehousing solutions have been implemented in
City bank, RBI, SBI, IDBI, and ICICI.27
In the present scenarios of banking, though the banking services are
technology driven, and major role is played by technology in all decisions on customer
services, the tested methods like, customer surveys, continue to help the managements in
identifying the customer needs. Identifying the customer needs is important before
providing the services, so that the actual requirement of the particular segment of
customer is met with. This will help managements to have an insight into customer needs

26
and attitudes. In order to identify the customer needs, banks have to develop a proactive
approach. Such approach, will not only enhance the image of the bank in the customers
view point, but also provides a satisfaction to the bank for having served the customer for
his actual needs. Customer’s surveys will help to know good feeling among customers
about the bankers providing service. Bankers enhance customer satisfaction by giving
continuous attention to customer service. Mapping the customer needs is therefore an
important aspect in servicing the customer.
Customer service and satisfaction model
“By entering into your premises, customer is giving an opportunity to serve
him, but you are not doing any favor by serving him”.
(Mahatma Gandhi)29
Ever since, the liberalization and globalization of Indian economy has
taken place almost a decade ago, the focus point in any service organization is “Customer
Service” more so in the banking industry.
The phrases such as “Customer is the King in our business”, “Service to
customer is service to God” and no more a myth but turned out to be a reality. Customer
service is the base for business expansion because of the stiff competition prevalent in the
banking industry. With the advent of new private banks in 1995 “the concent of customer
services” has become an important issue in banks, either it is in the public sector or
private sector. The survival of banking business is dependent on customer services. It is
required to upgrade the customer service to satisfy the customer expectations. To render
efficient customer service, the bankers have to first understand, what really the customer
wants.
Customers, who contact any bank, wants two things:
1) They need a solution to a problem relating to investment/credit.
2) They want to feel in some way “special”.
Looking at number one, when the bank is providing appropriate solution
for the problem say:
Offering a loan for purchase of house, car or motorcycle etc.
Keeping the amount in savings / term deposits suiting to the needs of the
customer.
27

Issuing a demand draft the customer’s needs are satisfied.
Very often the only time that customers contact the bank is when they
have a problem with some services that they have availed/they want to avail say.
Delay in getting a loan
Delay in getting a term deposit
Delay in getting a demand draft
The second element of any customer service satisfaction model is that
each and every single customer has to feel some way “special”.
The following can be considered as some important elements in making
a customer feel “special”.
• Speed and Time: Speed and time measures are very important factors to many
customers. The speed with which the banks offer their services will actually gain
a competitive advantage and allow them to offer higher satisfaction. On account
of technological revolution at present products and offered to take care of the
element of “speed and time” like
Anytime, anywhere
banking Internet and
mobile banking ATM etc.
• Personal interaction with a customer: How well and how able a bank does this,
varies from the small to the large. Small matters like, remembering a customer’s
name, a tone of voice and remembering details about the customer including his
birthday, anniversaries etc. There are certain banks like ICICI, HDFC who
identify every opportunity that they possibly can make the customer feel unique
and an individual. The front line staff should be trained to answer the telephone
calls and deals with the customers face-to-face, to treat every single customer as,
not their only customer, but their most important customer.
• Courtesy and competence: Common courtesies and manners are very important,
probably more important than the banks may consider competence means that
whoever serves the customers or whoever supports people that serve customers
has to do things and do them well. It means getting things done rightly at the first

28
time. It means knowing what should be done and how best it can be done. It is a
license to keep customers for lifetime.
• Expectations: A successful banker will be judged by his ability to manage the
expectations of his customer well and they systematically and consistently exceed
them. A delighted customer will come back to the bank, will convey his friends
about his/her experienced and will become an ambassador for the bank’s business
- an unpaid salesperson.
A satisfied customer is one whose expectations are equal to the
experiences. Where the experience of a customer is less than the expectations is
becomes important and irritates and moves as a dissatisfied customer.
So the successful banker trains all his/her employees as customer focused
individuals.
• Information and keeping the customer informed: One of the simplest ways to
customers feeling special and make them feel important is to keep them informed.
They should be informed of things they are waiting for and let them know how
things are going on.
• Attitude and customer liaison: One of the most important aspects of attitude is
when the customer is dissatisfied and one of the most important and outward
expressions of attitude is the verbal and non-verbal behavior that people use at
critical times. The attitude that will work - the banker should instill it is that every
single customer is his most important customer. Instead of seeing a customer for
the transactions value that they spend at that time or for the nature of their enquiry,
the banker should try to see him as a million dollar customer, somebody who has
access to large revenue, either through their direct spending or indirectly through
referrals and repeat business.
• Long term relationships: A customer will feel special if the banker will actually
reward, recognize and encourage his/her loyalty and in the long run either
personal or business, given the right elements and environments he would prefer
to be consistent.
When put together, each one of the above seven elements will make
customer satisfaction beyond even their widest dreams. The customers will

become increasingly more loyal and profitable if the banker begins to implement
ideas based around the seven elements and make them a constant focus of
attention.30
CRM Strategies for Banks
The strategic outline for an effective implementation of CRM would be as follows:
• Improving Customer Knowledge
• Targeted Customer Contact
• Meaningful Marketing
• Strengthening Customer Base
• Impact Analysis
Improving Customer Knowledge: Improving customer knowledge
requires capturing more and more relevant information about the customer and
integrating it with the existing data. Most of the banks today do not have information on
the income levels, spending preferences, investment patterns, family size, age and other
useful data about their customers. The next step that follows data capture and integration
is creation of useful and meaningful customer profiles. Based on the customer profiles so
created need to create customer segments: potential-wise, product-wise, location-wise
and profitability-wise.
Targeted Customer Contact: Improved customer knowledge will enable
the banks to target their initiatives precisely. They can have customer care or relationship
problems to suit specific groups of customers product-wise, location-wise or even social
stratum-wise. Products and services can be fine tuned to fully serve the interests of target
customers. Marketing can be targeted with much more precision with increasingly higher
rates of success. Multiple channels can be developed and customized to suit the interests
of the specific target groups. Sales forces and efforts can be optimized and fully exploited
by tapping only the right prospects and potential segments. Banks would be able to
understand the contribution from each customer group/segment and give them due
recognition and attention to add value to the relationship.
Meaningful Marketing: The more precisely on target customer initiatives
in marketing the more meaningful and productive would be. The customers would be
able to relate and respond to the initiatives readily and willingly. The customized and

30
need-based marketing approach would also attract the appreciation of the customers and
improve brand loyalty and equity.
Strengthening Customer Base: Banks functioning with the help of fine-
tuned CRM systems would be able to add a large number of customers to the existing
customer base. They would be able to add more and more customers to the captive
customer because of the perceived or real value of doing business with the bank. Working
further on the different target group’s banks may be able to shift more customers from the
captive group to the loyal group. Banks can improve customer loyalty with loyalty
programs, incentives and attractive pricing of products and services and flexible channels
of delivery.
Impact Analysis: The sharper focus provided by Customer relationship
management would help the bank management in making key decisions and impact
analysis on various groups of customers and their contribution to the bank. CRM would
even be helpful in identifying unprofitable customer groups and services and ways of
either dropping them or upgrading them through appropriate persuasive techniques or
pricing policies and programs.
It may appear that CRM is buzzword with not much relevance of practical
implementation. With more and more advancements in technology taking place and an
equality higher level of implementation of technology would be totally irrelevant and
unproductive unless they were made after a well thought-out business strategy, supported
by exhaustive business intelligence and customer information systems and solutions.
Meaningful CRM is just a matter of time and not a matter of choice. In fact, CRM is the
goldmine and hope for a better tomorrow for banks.31
Relationship Banking
A new approach to the marketing of, a bank service that is receiving
growing attention in banks is viewing “Relationship Banking”. The emphasis is here on
viewing the customer as long-term business relationship, rather than confining attention to
the particular transaction. Banks make strategic plans to meet the total banking
requirements of the customers and expect repeat business from them. Banks take on the
role of all weather friends and establish a firm relationship where in the customers confine
all their banking transactions to them. For building up profitable customer

relationship, it is inevitable on the part of the bankers; first of all, to know more about the
customer and their banking needs and towards this end, banks need to prepare customer
profiles. Building a long-terms profitable relationship with the customer calls for
systematic efforts. In order to ensure customer satisfaction, bank staff should guide the
customer in making the right choice from among the available range of services and
facilities.32
Process of Relationship Banking
The process of relationship banking follows five major steps:
• Knowing thyself: This is an important prerequisite for relationship banking. The
banker should have a thorough knowledge about their products and services. This
helps the customer to develop confidence in his banker.
While knowing about one’s products, it is desirable to know about the
products of one’s competitors as well. This would enable the banker to plan their
sales strategy more effectively.
• Presenting thyself: Presenting thyself is as important as knowing thyself.
Banking is a service industry and service is identified with the person who meets
it out. It is here; the customer first comes into contact. Not only his appearance,
but also his attitude should be appealing to the customer. Proper dress code,
immaculate surroundings, attractive interior decorations, ambience and courteous
staff at the workstations are ways of presenting oneself to attract customers.
“A thing of beauty is joy for ever” (Keats); so is a smiling face. The
approach with a smile is the starting point of relationship. If the man behind the
counter is able to create, cultivate, satisfy and continue a relationship with the
customer, the latter becomes loyal to the service-providing bank and will continue
to patronize the bank.
• Understanding the customer: This is the most important part of relationship
banking. Customer is the pivotal point around which the entire gamut of banking
revolves. They always deserve a patient listening. No matter how he reacts, the
banker should remain calm, composed and pleasant. Every customer deserves to
be treated with respect. The best way to show respect is to stand up and greet a
customer.

32
“One man’s meat is, another man’s poison”, the adage goes. Each
customer is different from another. Each has his own likes and dislikes. So there
cannot be a universal approach that suits all individuals and all occasions.
Customers, personal as well as commercial, seek to be treated not as targets but as
individuals so that perception of the ‘the treatment I receive’ is as important as
‘the goods I buy’. Services are relationship and successful services are successful
relationship. The building of relationship is the only way to increase business by
retaining the existing and attracting new ones in this era of mounting competition.
• Understanding and meeting the needs: Understanding the needs of the customer
is an integral part of relationship building. The need of the customer gets revealed
through conversation. Identification of common area of interest may help the
banker to indulge the customer in conversation. This conversation would help the
banker to understand the needs of the customer.
Once relationship is cultivated and the needs of the customer are
ascertained, the banker can slowly start making suggestions regarding their
products / services that can meet the needs of the customer. The banker should be
very honest and sincere in his approach. Then only he can win the trust of the
customer.
• Follow up: Lastly, any amount of effort, in canvassing a customer, would be set at
not if proper follow-up were not done. Perhaps, this can be considered to be the
single major reason for the banks, losing customers. Correct name, full address,
telephone number and other details viz. date of birth, names and details of family
members etc. may be kept in the dossier for further follow up. Sending greeting
cards on birthdays, festive occasions, calling on customers at frequent intervals,
wishing them success or congratulating them etc. are techniques in cementing the
relationship.33
Thus, the relationship banking is manifold in the emerging banking
scenario. In the mounting competition, it works as a highly effective tool to widen
the business opportunities through existing and potential clientele.

33
Marketing of Banking and Financial Services
Marketing of Services
Marketing of services means marketing of intangible something one
cannot sea, hear or smell. The American marketing association defines “Services as
activities, benefits or satisfaction, which are offered for sale or are provided in
connection with the sale of goods.34
According to Kotler, “A service is any act or performance that are partly
can offer to another that is essentially intangible and does not result in ownership of
anything
35
In the service market a customer basically buys the time, knowledge and
skill of provider or supplier of services. The buyer gets satisfactions or benefits from the
decision of the providers. An institution or an individual may act as a provider who is
expected to specialize in the very field. The buyers who pay for it utilize the excellence
or expertise of skill or activities of provider. Thus, marketing of services is an attempt to
offer the activities, benefits or satisfactions to the buyers at a profitable price. In order to
clarify the meaning of services, some special characteristics of services, which
distineuish these from products, are as follows: -
• Intangibility: - Intangibility is an important consideration that complicates the
functional responsibility of marketing manager, especially while influencing and
motivating the prospects / customer. The services of tangible nature cannot be
touched, tasted, felt and smelled when they are bought. In a true sense, it is not a
physical object. It has mental connections.
• Perishability: - Another point complicating the task of a professional is the
natures of perishability that is finding in the services. The goods if not sold today
can be stored, preserved for further selling. Thus the risk element is here in a
different form. But in the context of services, if we fail to sell the services, it is
lost only not for today but even for the future. The services can’t be stored or
preserved. Unutilized or underutilized of services are found to be a waste.

• Inseparability: - This is also a feature that complicates the task of professionals
while marketing the services. The inseparability focuses on the fact that the
34

services are not of separable nature. They are produced and consumed at the same
time and can’t be separated from the provider being it man or machine. Donald
Cowell says, “Goods are produced, sold and then consumed whereas the
services are sold and then produced and consumed
• Heterogeneity / Variability: - Another feature is heterogeneity, which makes it
difficult to establish standard. The quality of the services can’t be standardized.
The prices charged may be too high or too low. Of course, it is due to the
difference in the perception of individuals, the levels of providers and users.
The aforesaid features of services make it clear that it is difficult to specify
performance standards for services industry. The quality of services varies not
only among firms in the same industry but also from one transaction to the next.
The reason being service industries are human being.
Hence, these peculiar characteristics of services require that there should
be special marketing program for services. All over, like the manufacturing sector
and service sector has also established a good reputation, services are being
marketed at a large scale and this sector is providing a lot of job potentialities by
marketing numerous types of services to the customers, e.g. food (hotel and
restaurants), personal care (laundries, garment repairing), insurance, transport and
so on.
In marketing of services, the provider satisfies the buyer by offering or
delivering or creating the services at a profit. Thus, in the sale of services to the
customers, the provider has to see that the customers are satisfied, their needs are
fulfilled and profit is earned, marketing of banking and financial services.36
Marketing of Banking Services
In the late 1950’s, new concept in marketing of services with respect to
banking profession arose in the west. Marketing of banking services consist of identifying
the most profitable markets, assessing the present and future needs of customers, setting
business development goals, making plan to meet them and managing the various services
and promoting them to achieve the plans - all in the context of changing environment in
the market.

35
Identify the customer’s financial
needs and wants
Forecasting and research Develop appropriate banking
Features financial market needs products and services to meet
customer’s needs
Distribution: Setup suitable Pricing: Determine the prices for
distribution channels and bank products/services developed
branches
Advertise and promote the
Products to existing and potential
Customers of financial services
The Marketing Approach to Banking Services.
(Dr. Renu Sobti, Banking and Financial Services in India, p. 107)
In other words, banking is a service industry; which provides financial
services to the customers. Banks accept deposit for the purpose of lending and investment
with a view to earn profit. As a part of business, they also provide auxiliary services, like
remittances, collection, custody of valuables etc. They work as intermediaries between
depositors and borrowers. Their goodwill and trust have made the banking industiy a
pillar of strength in the society.
Banks deal with money, the classical undifferentiated product, and the
only way which those dealing in the commodity can secure any competitive advantage is
through range and quality of services they offer so that customer can be satisfied.

36
Because of the increase in competition and de-regulation all over the
world, the realization has dawned on the bank that it is a buyer’s market and that the
banks have to plan, actively seek and develop services to satisfy the customer’s needs.
The marketing approaches enable the banks to devise the customer satisfying services,
innovate and venture in to areas where their expertise would help the customers. But in
applying marketing technique to banking services, some special characteristics of bank
services are to be taken into account, which are as follows:
Greater Responsibility: Bankers who persuade their customers to entrust
personal or corporate funds on their care or to accept advice on investment on some
management matters incur a heavier responsibility than the seller of some product
(tangible) or other service. It does not mean that producers of products are without
responsibility. But the responsibility in these cases is limited to fitness of purpose, quality
and value for the money of the product or service concerned. But a banker’s failure to
discharge his responsibility for safeguarding customer’s funds or to provide responsible
advice on financial matters can bankrupt a company or ruin an individual’s life. Thus, the
bank manager, dealing with transactions that may fundamentally affect his customer’s
future, must be more receptive and aware of the possible consequences of successful
‘sale’.
More Regulation Banking industry in general, has to face more regulations
from the government as banks play a major role in the socio-economic development of the
economics. Thus, in order that resources are channelized properly into productive areas,
government places much regulations and controls on banks. More particularly in
developing country like India, the government and the Reserve Bank of India are
emphasizing the role of banks in the socio-economic development of the country. This
diversion of commercial objectives in the interest of national economic consideration is an
important factor in the banking. More emphasis is given to priority sector lending. This
does not mean that the word ‘profit’ should be dropped from the bank marketer’s
vocabulary; it remains a condition of healthy growth and even survival as an independent
organization. But it does require a more flexible approach to the process of planning,
targeting and monitoring marketing activities.

Attracting Deposits: Marketing of banking services are differs from
marketing in other industry. Involvement of marketing not only in the provision of
services to the customers (lending) but in the procurement of raw materials on which
most of these services are based, i.e. in banking industry marketing is used both in buying
and selling. The banking industry can ‘buy’ a proportion of its raw material (money)
from the money market; but an important proportion of raw material has to be gained by
persuading individuals or corporate organizations to deposit their funds with it; and
persuasion is a marketing function. This makes marketing of services more complex in
banks in comparison to other goods and services.
Delivery Mechanism: Delivery mechanism through branch staff is not that of
an ordinary sales person in a shop. In banking dealing of staff with the customers is an
integral part of the product itself.
Lack of Special Identity: To the public one bank’s services is very much like
another. The reason of using a particular bank or branch is often convenience. Each bank
must find a way of establishing its identity and implanting this in the mind of public. As
the competing products are similar, the emphasis is on the ‘package’ rather than the
product. The package consist of branch location, staff service, reputation a new services.
All over the world, development of external to banking industry like
growing disintermediation, greater deregulation and rise of competition from non banks
or near banks are pointing out that the task of deposit mobilization by banking system has
become all the more difficult and complex. To cope up with the changing situation,
banks undoubtedly need marketing orientation in their thinking, skills and methods.
There is a need to develop right attitude amongst bankers at all levels to render excellent
customer services. Thus the future growth of the banking industry and its profitability
depends on the customer’s satisfaction. It implies that banks have to sustain and grow on
the quality of services rendered by them.
Secrets of superior services
Giving good service in tough times makes good business sense. But how
we can actually achieve it? Here are some proven principles we can use it and they called
“The Secrets of Superior Service”.

38
• Understand how the customer’s expectations are rising and changing over
time: This principle clarify that what was good enough for the last year may not
be good enough now. For this use customer surveys, interviews and focus groups
to really understand what the customer actually want, what they value, and think
about what they are getting or not getting from the business.
• Use quality service to differentiate the own business from competitors: This
principle defines that the product must be reliable and up to date and the delivery
systems must be fast and user-friendly. Make a real difference by providing
personalized, responsive and “extra-mile service” that stands out in a unique way
that customer will appreciate, and remember.
• Set and achieve high service standards: Determine the “norm” for service in the
industry or bank and than find a way to go beyond it with the basic and expected
levels of service to provide the customers with desired and even surprising
interactions. Give them more choice than “usual”, be more “flexible” than
normal, be “faster” than the averages and extend a “better” warranty than all the
others.
• Learn to manage customer’s expectations: This principle define that no
company give customers everything their hearts desire. Sometimes we have
needed to bring their expectations, into line with what you know you can deliver.
The best way to do this is by first building a reputation for making and keeping
clear promise. Once we have established a base of trust and good reputation, we
only need to ask our customers for their patience in the rare circumstances when
we can’t meet their first requests. Nine times out of 10 they will extend the
understanding.
The second way to manage customer’s expectations is with the tactic
called “under promise than over deliver”. It works like this that customer wants
something done fast. We know it take one hour to complete. Don’t tell the
customer! Let them know we will rush the project... but then promise 90 minutes.
Then when we have done it just an hour, the customer will be delighted that we
actually finished the job “so quickly”.

• Appreciate the complaining customers: Customers with complaints can be the
best allies in building and improving the business. They point out where the
system is faulty; procedures are weak or problematic. They show that where the
products are below expectations or service does not measure up. They points out
areas where the competitors are getting ahead, or where the company’s staff is
falling behind. These are same points or insights and conclusions that people pay
consultants to provide. But a “complainer” gives them to free. The complainer
gives a chance to reply and set things rights.
• Take personal responsibility: In many organizations, people are quick to blame
others for problems or difficulties at work: managers blame staff, staff blame
managers, engineering blames sales, sales blames marketing and everyone blames
finance. This does not help infact it tends to make things worse.
So the most reliable way to bring about constructive change in the
organization is to take personal responsibility and helps make good things happen.
Make recommendations, propose new idea, give valuable suggestions, and
volunteer to help out with problem solving teams and projects.
Finally, remember that service is the currency that keeps our economy
moving. If I serve in one business, you serve me in another. When either of us
improves, the economy gets a little better. When both of us improve, people are
sure to take notice. When everyone improves, the whole world grows stronger
and closer together.38
Distribution of Banking Services
In marketing, distribution means through which a seller makes his product
available to the buyer through the use of various middlemen known as channels of
distribution. But in marketing of banking services, a different type of distribution has to
be adopted. Bank can employ a number of distribution modes like Bank branches, credit
cards, banking by mail, ATM services, any branch banking and the like banks increase
the profitability of their branches by extending the range of products and services they
offered.
The role of banks in the shaping of a nation through its services to the
various sections is laudable. Thus banks help to improve industries both large and small,

40
individuals rich and poor in advancing their development. Apart from this wide coverage,
banks play an active role in the growth of a man right from his childhood to his end.
Banks serve in the smooth delivery of a child by financing the hospital
expenses. As the infant grows as a boy/girl the banks care for his/her education by
lending them educational loans on marginal interest and easy repayment schedules. Banks
support them on the eve of his marriage through marriage loans. Later, the banks come in
handy to reliase the dream of owning a house through house loan programmed. Banks
also provide loans for the purchase of consumer durable adding happiness and fulfillment
to domestic bliss. Thus from computer to car anything can be obtained through personal
loans from banks on nominal rates of interest.
Desire for travel and acquirement of knowledge through it is inherent in
every human being. Visiting foreign lands and meeting people on the other side of the
globe are very much longed for by most of the individuals. Banks fulfill these dreams by
offering Subha-Yatra loan. Old- age characterized by physical weakness and sickness
requires more concern and financial commitments. Banks come in handy to these people
to meet their medical expenses through medical and other related loans.
Even on death, banks come into the rescue by providing loans to meet the
funeral expenses. Thus in all phases of human life, banks offer a helping hand. It is
obvious that the financial assistance from banks activate the individual to move towards
his prosperity, growth and joy.39
Services provided by Banks
There are major changes in Indian Baking scenario since the
implementation of banking sectors reforms from 1992. These reforms tried to enhance the
viability and efficiency of the banking sector. To tackle the internal deficiencies of the
sector, new norms relating to account practices, prudential standards and capital adequacy
requirements were suggested, on the other hand for improving the external environment,
the reforms aimed to transform the highly regulated environment into a market one.
The up-coming of new private sector banks in Indian and financial
reforms have electrified the banking environment and added new dimensions to
automation in Indian banking. Growing customer demands for better services and higher
41

satisfaction levels have been the prime driver for Indian banks to embrace information
technology.
In the last two or three years technological changes coupled with
increased customer expectation have also forced public sector banks to offer services
like, Anywhere, Anytime, Anyhow banking. New generation of customer of these banks
demand quick and efficient services. New private sector banks are providing special
types of services as per individual customer requirements. Such types of services are
known as tailor made services. Services offered by these NPSBs (Nationalized Public
sector Banks) are broadly classified into two categories.
1. Corporate Banking Services/Wholesale Banking Services: Corporate banking
services are provided to the big corporate house, multinationals, public sector
organizations and to the government, corporate banking contains huge volume of
transactions with less number of total transactions initially, almost all new private sector
banks are concentrating mainly on wholesale banking. Special types of services are
developed and provided by observing the requirements of corporate world. These
requirements are just like providing loans at the end of each month for disbursement of
staff salary, seasonal credit for purchase of business enterprises etc.
2. Retail Banking: When banking services are offered to individual as per their
personal requirements, it is called retail banking. In retail banking, evolutionary changes
are much slower than in corporate market, simply because the market is so large and the
number of environmental factors relatively few.
The Indian banks are providing both type of services, i.e., wholesale banking and retail
banking services. Innovating and customer friendly services are developed and offered to
individual as well as to corporate customers. Some of the important services, which are
provided by banks, particularly, in retail banking, are mentioned in the following: -
• Saving Bank Account: Saving bank account can be opened with multiple options in
banks. Saving banks provides more than just the usual banking services to customers.
This account can be opened even with zero balance on the condition that
requirements of just Rs. 5,000 to 10,000 quarterly averages balance. This amount
varies from bank to bank. If a person, is not having enough time to visit to

42
bank for opening his account, the banks representative can approach to him at his
home or office to help for completing the formalities of opening saving bank
. 40
account.
• Corporate salary account: Banks provide corporate salary account service to
those employees whose regular salary accounts are opened in their bank or their
branches. Private Banks offer a vast range of services customized to suit both
business houses and employees. Some of the services provided by these banks are
really fantastic. The salary of employee is automatically credited to his account.
The facility of free ATM, personalized chequebooks, phone banking, inter-branch
banking, bill pay, special overdraft facility, personal loans on reduced interest
rates, debit cards and cheque pick-ups etc. are provided.41
• Demat services: This facility is provided to customers who are bugging and
selling shares frequently from share market. There are many problems while
dealing and keeping share certificates physically in offices or at house. These are
chances of losses in transit, signature differences, delay in transferring shares, fix
and theft etc.
Demat means dematerialization of share physical certificate.
Dematerialization is a process where in share certificate are converted into
electronic form and credit to customer’s demand account, which a customer can
open with a depositing participants like ICICI. After opening an account a
customer can submit his shares for dematerialization at the branch. Customer can
buy or sell shares through his demat account by following simple banking
procedures.42
• Bill pay: The monthly payment of bill is a very cumbersome and time-consuming
activity for an individual. Banks provide the services of monthly payments of
customer’s bill in selected cities for selected services bill like electricity,
telephone or cellular phones, school fees bill etc. So a customer needs not to waste
time in long queues or writing cheques 43
• Tele banking: This service has started attracting the fancy of urban customers for
convenience of facility, (which takes care of transport bottlenecks, traffic jams,
non-availability of time to visit bank branches etc.) who want to make necessary

43
queries about their accounts position. Telebanking is an automated banking
solution for handling such queries speedily; any branch of a Commercial Bank,
which has computerized operations, can offer this facility with the help of suitable
software for this purpose.
Under this system, a telephone line is connected to the telebanking
computer, when a customer makes a call; the system picks up the call and attends
the same. Thus the customers can get information about the balance in their
accounts, a few last transactions, and status of any particular debit or credit
transfer of funds. Banks are also offering services such as account opening,
ordering for demand drafts.44 Customers request the Bank for statement of account
or for account opening form also, to be sent through Fax. Customers on phone
itself without visiting the bank branch may obtain the details of the accounts.
• On-Line Banking: On-line Banking or Internet Banking with popularity of PC’s
easy access to Internet and World Wide Web (www), Internet is increasingly used
by banks as a channel for receiving instructions and delivering their products and
services to their customers. This form of banking is generally referred to as
Internet Banking. Online-Banking enables a customer to conduct banking
transactions, at the website of the bank, on the Internet. This is also called Virtual
Banking or Net Banking or Anywhere Banking. It is more or less like bringing the
Bank to your computer.
On-line Banking allows customer to use the Internet for basic function in
corporate and retail Banking and credit cards. These include making inquiries
about account balance and getting statements and real time funds transfer,
securities with other financial institutions. Also this helps in servicing the
customer better and tailoring products better suited for the customers. Net
Banking helps bank spread its reach to the entire world at fraction of the cost.
Internet banking has led to emergence of new banks, which operate only
through the Internet and do not exist physically. Such Banks are called
‘VIRTUAL BANKS’ or ‘INTERNET-ONLY BANKS’.45

44
Some distinctive features of Internet-Banking
• It removes the traditional geographical barriers as it could reach out to
customers of different countries/legal jurisdiction.
• It has added new dimension to different kinds of risks traditionally
associated with banking, and throwing new risks of control challenges.
• It poses a strategic risk of loss of banking business to those who do not
respond on time, to this new technology, being the efficient and cost
effective delivery mechanism of banking services.
• A new form of competition has emerged both from the existing players and
new players of the market who are not strictly banks.
• Security of banking transactions validity of electronic contract, customer’s
privacy etc which have all along been concerns of both members and
supervisors have assumed different dimensions given that internet is a public
domain, not subject to control by any single authority or group of
users.
How to get connected to Internet Banking
A user can get connected to Internet by having similar setup as in case of
e-mail. The user first visits the bank website (say www.icicibank.coml on the Internet.
Then you enter the Internet banking section, ‘Infinity’ on-line, in this case. The personal
password supplied by the bank enables one to access the bank account and do any
required operation or transaction.
Some of the banks even have tutorials in the form of guided tours on the
web site, to familiarize a first-time user with Internet banking.
Following types of transactions can be UNDERTAKEN on the internet
Accounts information
Fund transfer
On-line real-time payment for shopping done on
internet Requests and intimations.
Contacting/communicating with the accounts or relationship manager

Electronic bill payment towards utility services.
45

• Mobile Banking: The way the banks provide services to their customers, has
evolved over time, now the mobile banking is the next value added services.
In 2001, mobile data service was provided as next big thing. In 2007
nearly one million users are expected to be heavy users of this service. Mobile
offers lowest cost and a much more direct relationship with customers. The
banking world is indeed staring to wake up to the potential of Mobile.
The following is the list of mobile banking services:-
- Account balance enquiry
- Account statement enquiry
Cheque status enquiry
- Cheque book request
Credit/Debit Alerts
- Minimum Balance alerts
Bills payment alerts
- Recent transaction history request
Information request i.e. Interest rates/ exchange
Banks conduct these transactions through mobile phone with the help of
technologies like WAP, SMS etc.Banks combine internet and telephone to offer this
service for the convenience of the customer. This facility functions by sending a PIN no.
to Mobile, one transaction is enabled- this is very handy when customer runs out of cash
or his wallet is stolen or when he forgets his ATM Card at home.
How Mobile Banking works
SMS stands for short messaging service. In SMS technology, one has to key in
certain predetermined ‘keywords’, as instructed by the banker, to access the services, as
the key word is entered, the cellular service provider connects the customer to the bank,
which in turn, will flash the required information on the cellular phone screen. Unlike
SMS mobile banking, in WAP-enabled mobile banking, one actually logs on to the
website of the bank, as in Internet Banking.
In Internet banking, one requires a PIN from one’s Bank. When the
customer requests for mobile-banking services from the bank, the banker will ask for the

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