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Customer relationship management in the Indian banking sector

In today’s changing and competitive environment, organizations recognise that customers are essential for the business and the success of the organization depends upon successfully managing relationships with them (Boulding et al. 2010). It becomes more significant for service providing organizations like bank to keep customers happy because it is the clients that keep business going (Bikker and Bos, 2009). Intensification of economic globalization creates competition among organizations and enforces a climate of constant change. In the ever changing and fiercely competitive environment, only those organizations can survive which compete successfully to win new customers and keep the existing ones (Johnson, 2009). Gaining and retaining clients has never been more significant especially for banks whose main area of business is dealing with customers and selling financial packages to them (Chen and Popvich, 2007). Over the past few years, there has been phenomenal growth of consumer banking in India (Jha, 2008). This unprecedented development has been due to growth in Indian economy and government’s decision to privatise many banks. Banks realize that customer relationship is a crucial aspect for the success as it is needed to sell the services to generate profits (Raab, 2008). Keeping customer satisfied requires an effective strategy that can assist in maintaining valuable customer relationship and offer customers life time value like Customer Relationship Management (CRM) (Wang, 2008).

Indian banking industry has operated relatively stable in last couple of decades. However, in recent times, the banking sector has been facing fierce competition (Laharwal, 2010). Surviving and growing in this environment for profitability is important to banks (Hussain et al. 2010). CRM is a growing trend in Indian banks today and they are investing a lot on it. CRM is on top of banking priorities. The idea behind this is that it would help the bank to effectively utilize technology and other resources to gain insight into the clients’ behaviour and customers’ values. If adapted and implemented successfully, CRM can help banks provide better customer service, make banking operations more efficient and simplify selling and marketing processes (Hussain et al. 2010). CRM is a broad approach to create, maintain, and expand relationship with customers. It is a strategic plan that aims in understanding, anticipating, managing and personalizing the organizational needs of current as well as potential customers (Raab, 2008). Banks understand that CRM is the creation of mutual values for all stakeholders in the business process. It is about creating a sustainable competitive advantage by being the best to understand, communicate, and deliver and develop existing customer relationships in addition to creating and keeping new customers (Zineldin, 2005). CRM is a major focus for Indian banking industry. Changing nature of the environment has forced the banks in India to apply CRM in their banking operations (Foss, 2009). The initiatives and strategies of the banks are dependent on the impact of CRM on their performance. A fundamental share of the bank’s strategy is to exploit the CRM potential for improvement in performance of the businesses and raise standards of achievement. The Indian banks intend to achieve these targets by adapting latest CRM strategies and systems (Laharwal, 2010). However, the problem with the Indian banks is that they are slow to adapt to latest changes in information technologies. Indian banks always lag behind in adapting better customer relationship systems. The banks often apply poor and obsolete CRM strategies which are successful theoretically but that cannot be applied in the current market environment and organizational culture of the Indian banks. The Indian banks often ignore individual bank needs and the needs of the employees and customers and they apply inadequate methods in implementing important CRM strategies (laharwal, 2010). In CRM literature, the perspectives of CRM have been underestimated. More specifically the number of relevant studies is insufficient. The existing body of CRM research actually makes up a fragmentary address of the issue (Foster, 2010). Despite the importance of the CRM in current business environment, majority of the researches are theoretical in nature. Data on Indian bank’s approach and strategies on CRM is literally unavailable (Foster, 2010). The information that is provided on internet is deemed unreliable and invalid. Indian banks have paid almost no intension in formulating their own research regarding CRM concerning customer satisfaction and bank performance due to it (Laharwal, 2010). Many previous researchers on CRM are mainly about the implementation issues and concepts. A lot of the work explains why companies implement CRM and its benefits; however, these are not grounded in rigorous empirical work.

By incorporating CRM effectively, banks can improve their performance as well as the performance of their employees (Stone, 2007). Company profitability will be increased so the customer satisfaction. The use of CRM strategy brings many other benefits to the banks which are all be discussed in this research. The main purpose of this dissertation is to examine the significance of CRM for Indian Banks and its impact on customer satisfaction. In particular, the research has focused upon the effects and influences of CRM systems on banks business functions and operations (Foster, 2010). To understand this, need for CRM adaption and its implementation process has been looked into. Employees’ involvement and their training, problems faced by the Indian banks, evaluation, success and failure factors and other related issues have been critically analysed (Jha, 2008). Other studies of literature review e.g. how does CRM arise, how does it develop and how it will be maintained are also examined. Critically analysis has been presented along with debate on CRM related topics. The researcher also included arguments and counter arguments of different scholars on relevant subject.

2.2. Customer Relationship Management

Different authors define customer relationship management (CRM) in many different ways. Since the introduction of the concept, many scholars studied and defined in their own knowledge and experience (Armstrong, 2010). The major difference among their definitions is between technological and relation aspect of the CRM (Armstrong, 2010). Few scholars lay emphasise on CRM’s technological side while some authors of marketing background consider customer relationship more important. Stone (2007) defines CRM from the technological perspective as integration of technology with business processes in order to seek the understanding of organization’s customers. According to Bose (2002), a marketing researcher, CRM involves use of customer knowledge to improve the services. Kale (2008) further describes CRM as an essential function to gather and accumulate customer information to provide effective services. Mithas and Claes (2010) carry these views forward and states that CRM is about to attract, develop, maintain, and retain customers. Ryals (2010) believes that CRM is a strategic approach of that concerns increasing value for stakeholders via appropriate relationship development between customers and organization. Academics and practitioners from many other backgrounds also take keen interest in professional adoptability of CRM. For some researcher such as Sheth (2005), CRM is a term applied to implemented processes to handle relationships with customers. The organizations use CRM software to support the processes. For these scholars, the term CRM is generally used to refer to a software-based approach to handling customer relationships. For a bank, CRM stands for coping with customer concerns and issues (Stringfellow and Bowen, 2008). It involves collecting data to facilitate customer service transactions by making the information needed to resolve the issue or concern readily available to those dealing with the customers which results in customer satisfaction, profitable business and a great help to the management in deciding on the bank’s future course (Srinivasan and Moorman, 2010).

There are many types of CRM discussed by scholars. The types vary depending on the nature and function of CRM. For banking organizations, Stone (2009), Sharp (2009) and Foss (2009) separately define two common types of CRM: Operational CRM and Analytical CRM. Operational CRM takes the customer needs into consideration and prioritize those needs. This type of CRM helps bank to organize information in such a way that the bank can better serve the needs of its client (Stone, 2009). Analytical CRM on the other hand evaluates the necessary customer data for a wide variety of reasons and purposes like designing target markets, identifying customer behaviour and managing information system (Foss, 2009). Collaborative CRM can be the third important type of CRM for banks (Sharp, 2009). It takes data and information gathered by all teams and departments and combines that knowledge into a workable format that allows all departmental operations work effectively. CRM applications with a collaborative CRM component enable the banks to make quick and easy adjustments in targets. If implemented successfully CRM can help the banks to acquire, maintain, retain and expand customer base (Nelson, 2007).

2.3. The need for CRM in a banking environment

Thomas and Sullivan (2010) believe that CRM came into existence because of the changes, advancement and developments in marketing environment and technology. In contrast to this, Roh and Han (2008) think that it has already been present but developed later. Authors like Wilson (Wilson et al. 2002) raise question that why does a company need CRM? They and some other contemporary scholars try to answer it in many ways. The idea of CRM is that it assists organizations gain insight into the customer behaviour (Armstrong, 2010). Nelson (2007) suggests that every bank has clients and they need to maintain data and information about the customer, therefore they must have basic CRM technology to track and serve the customers. Leverin (2006) argues that CRM is needed by a bank to increase profitability by reducing operational costs in serving the customers. By increasing customer value through smarter marketing using customer data, CRM software, applications, system or technology is a must have for every bank (Aihie and Bennani, 2007). The growing demand of CRM in India finds its basis in perpetual shift of the market circumstance (Hussain et al. 2010). The fundamental reason that led to the surge of CRM adaption in modern business scenario is the change in Indian banks from profit orientation to customer centric. The banks need CRM to survive as it is impossible nowadays not to focus upon the customer expectations. In contrast to Leverin’s (2006) and Hussain et al. (2010) views, Foster (2010) debates that CRM is needed because of ever changing technology and highly competitive banking sector in India. There are enough reasons for banks to adapt CRM. According to Pablo and Juan (2008) theory, banks needs to apply CRM to create a base upon which relationship could be effectively managed with customers that could then be turned to value proposition. With the changing nature of banking environment in India, banks require a distinct approach towards the customers (Ranjan, (2009). Undeniably a smarter pursuit would be the introduction of a comprehensive CRM suit in the bank (Foster, 2010)

2.4. The importance of CRM for Indian banking sector

The Indian banking sector has changed considerably since 1990s (Ranjan, 2009). The influence of CRM has a great impact on bank operations and functions. The banking industry has managed to gain and maintain a vital position in economic environment (Bhatnagar, 2009). For years it has been playing a significant role of creating opportunities for employment and making important contributions to the economy (Raab, 2008). The Indian banks have been facing traditional problems of lack of modern delivery and marketing techniques in current fast emerging digital economy. Banks are constantly looking for ways to improve their service and to increase customer base (Bhatnagar, 2009). CRM provide the opportunity for them to do so (Jha, 2008). As already been analysed, CRM is important for the banks to bring together relationship of IT and marketing strategies to create profitable and long term relationships with bank clients. The importance of CRM can be assessed by evaluating CRM that provides enhanced opportunities to use data and information to both understand customers and create value (Ranjan, 2009). For Indian banks, the latest concept of CRM serves the purpose of creating value for all stakeholders. In Indian banking sector, the idea of CRM application or software or a system is based upon gaining insight into customer behaviour and the customer value as mentioned by Hussain (Hussain et al. 2010), Ranjan (2009) and Bhatnagar (2009). Many scholars discussed the importance of CRM for banks in number of ways. Johnson and Selnes (2010) state that, CRM is important for banks in order to respond effectively to the needs of the customers. Several commentators recommend the CRM for efficient operational functionality. For some researchers like Payne and Pennie (2010), the importance of CRM can be studied by identifying the bank’s most profitable customers and prospects. CRM is a comprehensive approach to cater, maintain and expand customer relationships. It is important for banks to use CRM strategy that aims to understand, anticipate, manage and personalize the needs of banks’ current and potential customers. IDC (2010) study shows that huge growth of customer relationship management is predicted in the Indian banking sector over the next few years. Banks compete to improve profitability with customer retention and in order to do so banks have to act upon deeper customer knowledge, ensure that the customers get what they wish and understand when they are not satisfied and act accordingly (Bove, 2008). The present day CRM includes developing customer base which persuades banks adequately attend to increase customer base by all means (Xu and Yen, 2008). The recommendations by existing clients to others develop client base. If the base increases, the profitability also increases. Hence the bank has to implement lot of innovative CRM to capture and retain the customers (Buttle, 2008). There are many other reasons why CRM is important. Different scholars put forward their theories regarding this. CRM has been important to the banking industry at the start of the new millennia as it has been to any other industry. Many banks have used CRM tools to acquire more customers and to improve relationships with them (Lindgreen, 2005). Competition and increased regulation made it more difficult for banks to stand out from the crowd. However, the development of CRM gave proactive banks access to technology that helped them improve customer retention by using customer feedback to offer conveniences (Ryals, 2010). Call centres of bank use CRM solutions for various purposes like tracking call transactions and troubleshooting techniques. Sales have taken on more importance in banks with the evolution of CRM (Meyer and Kolbe, 2005). Plakoyiannaki and Tzokas (2010) argue that for many customers, a strong banking relationship is as vital as any other business relationship they maintain. This gives CRM-driven banks an advantage in that customers want the benefits of a solid relationship (Massey et al. 2004). Customer relationships are becoming even more important for banks as market conditions get harder. Competition is increasing, margins are eroding, customers are becoming more demanding and the life-cycles of products and services are shortening dramatically (Payne, 2010). All these forces make it necessary for banks to intensify the relationship with their customers and offer them the services they need via the channels they prefer (Foss, 2009). Law and Wong (2006) argue on importance of CRM for banks that it is crucial to recognize that CRM in Indian banking industry is entirely different from other sectors, because banking industry purely related to financial services (Mithas, 2010). The banks have to create trust, establish customer care support and create regarding its important services which are required to keep regular relationship with customers.

2.5. The impact/effects of CRM on bank performance

A healthy business environment is important for the banks to take advantage from the CRM (Bennani, 2007). Indian banks are now operational in very competitive environment which is changing the business environment and as a result latest information and ideas are required (Babu and Hedge, 2006). Changes produced by CRM at economic and social level are intense. According to Cillán and Jesús (2005), banks carry out banking operations in an information society and it is easy to understand CRM impacts if the ways in which bank deals with CRM are understood. The impact of CRM on banks has been debated constantly by various scholars. A number of them mention the positive effects on performance of the bank (Kamath, 2010). There is hardly any author who commented any negative consequence. Although writers and authors agree on many aspects of CRM, they argue on indirect results that CRM has on banking processes. Scholars like Hinton and Conner, 2007) mention that if adapted and managed properly, CRM can help the bank provide better and improved customer service, make business process especially sales and marketing more efficient and assist in selling services more effectively. Stevens (2008) proposes that banks can apply CRM tools analyse information with minimum discrimination. CRM can help the banks to access ideas and experiences from variety of sources. CRM applications deliver many benefits across organizational processes and functions (Injazz and Popovich, 2008). CRM improves information and increases knowledge management. It helps to reduce costs of transaction and increase speed and reliability of transactions. CRM tools can be used for effective external communications and service quality (Laharwal, 2010). The banks in India recognize positive impact that CRM systems and tools have on banks. They realize that it can increase information and lead to efficient processes and better performance (Rahman and Bhattacharyya, 2008). The bank staff when trained on CRM can deal with customers perfectly and solves problems and client issues more professionally (Laharwal, 2010). Nagai (2005) takes a detailed approach on benefits of CRM. He says that CRM systems collect data flows between operational systems (like sales and inventory systems) and analytical systems that can help sort through these records for patterns (Pires, 2006). Banks can then obtain all-inclusive view of each customer and pinpoint areas where better services are needed. Kolbe and Brenner (2008) also propose many benefits of CRM such as its help in responding to campaigns, fulfilling contracts on time, gathering sales and service data, collecting account information and keeping service and support records. In contrast to Kolbe (2008), Bove (2008) takes a more direct approach. He advises that CRM system and technology can be used to plan and target the strategies for better customer services. According to him, CRM includes many aspects which relate directly to one another including front office operations; direct interaction with customers. Lindgreen (2006) assess that CRM help gather customer data to be used in facilitating customer service which results in satisfied customers and profitable business. Furthermore, according to him, CRM is a great assistance to the management in deciding on the future course of the bank. Aihie and Bennani (2007) evaluate on the CRM benefits as well. They state that CRM is invaluable for bank’s advertising and marketing planning which is released more in tune with target market. This leads more responses to advertisement and a more effective marketing campaign. According to Newby (2007), there is a correlation between CRM and bank performance. He stresses that bank performance and profitability improves directly with the implementation of latest CRM technology. However, Walton (2009) and Storbacka (2009) disagree with Newby (2007) and put their views forward that although the performance improves but it negatively affects the bank profits as the expenditure on customer relationship management increases more. In contrast to many theories, these scholars believe that CRM systems fail in Indian banking sector. The two authors claim that the actual performance regarding customer management is not improving. Indian banks also find it difficult and experience real problems in implementing CRM (Dutta, 2010). One research carried out by IDC (2010) about the effectiveness of CRM systems. The purpose of this study is to provide an assessment of the causal effect of CRM on bank performance. Their study included the discussion of the strengths and challenges of using this approach and its applicability. The finding concludes that banks using CRM systems have greater levels of performance. Wang (2008), writing on the effects of CRM comments that it helps in expanding the business as CRM system is capable of handling enormous amount of important data. It ensures business is successful and customers a lot more satisfied than before. Coltman (2007) and Armstrong (2010) agree with the notion that CRM has a positive impact on bank performance. They think that CRM enables banks to effectively manage leads and opportunities and track the leads through deal closure. It helps managers to assign and track the activities of various members. Thus improved transparency leads to improved efficiency. They also suggest that CRM can help in strategy formulation to eliminate current operational inefficiencies. Sunarto (2007) also suggests some benefits of CRM for banks. He states that banks may use CRM to help create incentives for customers to produce more business from existing customers. Efficient management of customer relationships promotes cheap growth as believed by Heinrich (2006) and Raich, 2008). It wastes fewer resources and creates a climate of trust among customers. Banks use CRM to drive profitability, cut costs and reduce risks (Bikker and Bos, 2008). In summary by introducing and adapting the latest CRM methods, techniques, applications and systems, banks can provide better customer service, increase customer revenues, discover new customers, sell products more effectively, help sales staff close deals faster, make call centres more efficient, simplify marketing and sales processes (Durkin, 2006).

2.6. Limitations to CRM

CRM brings benefits and advantages if implemented effectively (Johnson, 2009). Successful integration or adaption of CRM system in the banks may not be as easy as it looks like. Kurtz and Snow (2010) express their concerns and thinks that efficient operation of CRM is not simple as it seems. Every concept has limitations so does the CRM in banks. This is especially the case in Indian banks. Sharp (2009) is in the view that problems of CRM are sometimes in excess to its benefits and it’s not worth implementing a CRM strategy. According to Buttle (2008) most banks fail to prepare for CRM. CRM adaption often requires change in organizational structure and even organizational culture and environment. Indian banks are now operational in very competitive environment which is changing the business environment and as a result latest information and ideas are required (Yadav, 2009). Changes produced by CRM at economic and social level are intense. According to Baran and Strunk (2008), banks carry out banking operations in an information society and it is easy to understand CRM impacts if the ways in which bank deals with CRM are understood. One of the major drawbacks of CRM is the large investment to build and maintain a CRM system that requires customer database, hardware, database software; communication links analytical programs and skilled personnel. Furthermore, there is the problem of CRM evaluation. Research conducted by Dyché (2006) suggests that many banks are unable to even estimate or appraise the results from CRM. Ratametha (2009) recognizes the benefits of CRM for banks but is concerned of CRM implementation in Indian banks. CRM requires adequate resources and appropriate human and financial capital. Like Ratametha (2009) many scholars accept that banks face challenges such as skills deficiency and lack of knowledge. Goldenberg’s (2008) study shows that there is a dawdling response from Indian banks regarding CRM for bank performance. He blames that on cultural drawbacks and organizational structure. It is also found by Stone’s (2009) research that CRM adaption have some major internal and external barriers apart from briefed above. The internal barriers consist of the characteristics of the management and costs and return, and external factor comprise of influential environmental factors like social, legal, cultural and political (Tsai and Cheng, 2007). Like all other things, CRM systems also have few shortcomings that need to be overcome. The technology is still new I Indian and has lots of areas of improvement. It's not completely fair to say that CRM doesn't benefit banks in meeting their important goals but for some the benefits of CRM don't seem significantly greater than the investment of time and effort required to use the system (Yadav, 2009).

2.7. CRM models

There are a number of comprehensive CRM models which have been developed by marketing consultancy firms, and research scholars vigorously emphasised on these models (Sousa, 2009). Although various models can be discussed and analysed but for banking sector only few can be practical. Contemporary marketing researchers highlight the impact of CRM on companies, although this assertion is easy, it’s difficult to quantify to produce an explanatory and predictive theoretical understanding for scholars to be applied (Foss, 2009). Few firms have produced a good practical CRM model; many others are empirically extending these models. There is a wide range of CRM assessment models available, but each has limitations (Sousa, 2009). Most models are either limited in scope or lack a detailed description of how to use it in practice. Practical models which are mostly used by large organizations are QCI model, Payne’s 5 process model, Gartner competency model and CRM value chain model (Payne, 2009). All basic CRM Process model have same kind of stages and actions. Following models are examples. These models have three key phases of customer acquisition, retention and extension (Foss, 2009).

http://a3.twimg.com/profile_images/501053975/CRM_bigger.gif http://t1.gstatic.com/images?q=tbn:Bd_RFvGC7ufKrM:http://www.211answers.com/images/crm_model.jpg&t=1

Source: Google images

CRM Model

IDIC model is a good example which can be applied in the banking scenario. The IDIC model has been developed by a consultancy firm Peppers and Rodgers (cited in Buttle, 2008). This model suggests that should take four actions in order to build closer customer relationship: identifying customers, differentiating customers by value, interacting with customers and understanding their expectations, and customizing the offer and communications to ensure that the expectations are met (Tsiakali, 2009).

Another good model for banking industry is the framework of Ganapathy (cited in Kotler, 2010).

http://www.infovis.net/imagenes/T1_N164_A905_CicloCRM_en.gif

This model is also made up of three main stages of customer attraction, customer acquisition, and analysis. The difference of this model with the basic models is its detailed analysis of customer behaviour and choice of developing a service specific to that analysis (Reynoso, 2009).

No matter what approach or process a bank applies, there are several influential factors that need to be considered when adapting and using CRM within the organization such as social, cultural, economic and political. It also need to consider its strength, apply them well to reduce weaknesses, exploit opportunities and eliminate threats (Armstrong, 2010).

2.8. CRM Software for banks

There are several CRM software available worldwide. Top of them include NetSuite, Microsoft, Maximizer, Salesnet, Soffront, Pivotal, Aplicor, Entellium, and RightNow. Oracle and SAP CRM software are the top two software that are widely used by organizations. Indian banks also tend to apply one of these two software (Foss, 2009). The leader in CRM field is considered to be Oracle (Buttle, 2010). With more than 50 CRM applications on offer, it provides service requirement for almost all kinds of industries (Cravens, 2008). Oracle applications are thought to aid the companies through improved business processes. It offers accurate information, better operational functionality and excellent support for all departments within the organization. Oracle applications related to marketing and services can help the staff to improve the way they identify prospects, manage and serve customers better and build relationships with customers. Scholars like Dyche (2008) who researched the CRM and its applications for banks, consider oracle the most reliable as it empowers bank staff to more effectively plan, develop, launch, track, and analyse campaigns. Foster (2010) added another benefit of it and states that the software is helpful in providing a single platform for managing service across multiple delivery channels. SAP CRM software has a very close competition with Oracle. It provides the same benefits. Both of them are the most used software in the world (Buttle, 2010). Unlike other software, these applications help the banks to address short term imperatives to reduce costs and increase decision making ability. These also help to achieve differentiated capabilities in order to compete effectively (Hussain et al. 2010).

2.9. Role of a CRM manager/Managing CRM in banking sector

Almost all marketing researchers agree on the importance of the role of a manager in managing CRM. According to Hussain et al. (2010), Indian banks realize that they have to devote resources to manage CRM. CRM manager is a key factor who can effectively manage the issues related to CRM. Stone (2009) argues that it is vital for banks that their CRM applications and systems is supported and controlled by qualified and experienced manager. Taking his views forward, Sharp (2009) comment on the responsibilities of the managers and add points that apart from managing CRM software or program, the manager has the responsibility of training bank staff for CRM support (Armstrong, 2010). Bringing together trained and professional staff, encouraging communication and coordination among them, promoting team working and instructing ways in quality service, are some of the duties managers have to perform in order for CRM to work efficiently and harvest benefits (Buttle, 2009). In addition to these, managers have the obligation of CRM strategy planning and implementation. The role of the manager is to bridge the relationship gap between bank and customers. Other concerns include problem solving, evaluating performance and ensuring CRM is successful. Their commitment is crucial for the success of the CRM in banking operations (Lindgreen et al. 2006).

2.10. Evaluation and Performance Appraisal

Banks start CRM with great enthusiasm but get engaged in routine activities. Consistency in practice is the critical aspect for the success of the CRM (Armstrong, 2010). There is a need to build a mechanism to check whether CRM is effectively in good use (Buttle, 2009). To verify how successful the CRM adaption is in a bank, regular feedback system needs to be devised from the perspective of the management, employee participation perspective and customer experience perspective. Banks need to know how successful is the CRM system working for them, how does it impact the performance of the departments and its operations (Lindgreen, 2009). They need to evaluate and assess the value, worth or merit of CRM strategies. Evaluating the impact of CRM is a challenge for bank management. The ultimate purpose of the CRM is to improve performance but it’s difficult to isolate improvement attributed to CRM (Armstrong, 2010). The basic purpose of evaluating is to assess how well the bank needs are met by CRM adaption and implementation. It can also be implied to improve the initiative, to better meet bank requirements (Buttle, 2009). The other reasons to evaluate CRM as described by Nelson (2009) are to assess outcomes or impacts of CRM, to understand why it does or does not work, to find out how it is operating, to assess whether its objectives were met, to assess its efficiency or cost-effectiveness. Impact assessment as defined by Stevens (2008) is a part of evaluation in which banks analyse the whether CRM has produced effects as intended. There are many evaluation methods available for the banks. Choosing method or mixture of methods depends upon the bank requirements and influencing factors. According to Walton (2009), a performance appraisal is a technique to evaluate the performance of the employee or the project in terms of cost, benefits, quality and quantity. The main aim of the performance appraisal is to provide feedback in order to improve in future, reduce errors, correct mistakes and apply up to date policies and procedures along with latest techniques for improvements. It helps the banks to learn from their mistakes (Stevens, 2009). The information collected can be used for organizational planning and management. In general, Scholars recommend and insists on evaluation as it not only measures how well a bank is doing, but also assists in being more effective and efficient (Armstrong, 2010).

2.11. CRM and Customer Satisfaction

Competition in the Indian financial services industry has intensified in recent years, owing to events such as technology changes and financial industry deregulation Ratametha (2009). These factors have also reduced barriers to entry for new customers. Today, customers have more power in deciding their bank of choice Payne (2010). Consequently, keeping existing customers, as well as attracting new ones, is a critical concern for banks. Indian banks understand that customer satisfaction is an important variable in evaluation and control in a bank marketing management (Ranjan, 2009). Poor customer satisfaction leads to a decline in customer loyalty, and given the extended offerings from the competitors, customers easily switch banks. Banks need to leverage effectively on their customer relationships and make better use of customer information across the institution Payne (2010).

Contemporary management scholars generally agree that quality of service and customer satisfaction is a strategic goal all organizations want to achieve in order to gain maximum profits (Payne, 2010). Many among these scholars agree that CRM is a strategy that improves the quality of service for the customers increase customer satisfaction (Payne, 2010). To achieve satisfaction, a set of tools, technologies and procedures promote the relationship with the customer. Dutta (2010) believes that recently updated CRM approach in Indian banks is expected to help the banks improve abilities to plan sale operations as well as marketing campaigns and provide services through the different ways of interaction with customers. Even Srinivasan (2010) agrees with him and states that advancing CRM applications and modern CRM systems will definitely help the banks in India to increase their power to better interact with clients that in results may improve customer satisfaction. According to Yadav’s (2009) study, CRM service solution adapted by Indian banks assist them in effectively addressing the increasing complexity of its support related operations. Kamath (2010) observed in her research the importance for CRM application for customer satisfaction and comments that CRM does cater to all customer interactions across multiple touch points including the internet, bank branch, call centre and other distribution channels. One of the banks' greatest assets is their knowledge of their customers. Indian banks realize this and use this asset to into key competitive advantage by retaining those customers who represent the highest lifetime value and profitability (Mithas, 2010). As client satisfaction emerges as a key competitive differentiator, CRM role is quickly evolving (Foster (2010). With CRM service applications, banks equip staff with tools that are needed to rapidly respond to customer needs (Johnson, 2009). Customer service is such an important issue in today’s competitive environment that banking sector considers it as an integral part of its strategic business plan. CRM integrated approach makes all the difference to satisfying customers, retaining their loyalty, providing added value and generating growth. In fact, CRM might be the difference between banks that flourish and those that fail to survive.

2.12. Conclusion

The following conclusion summarise the main ideas of the literature. It restates the literature's major points and tells the reader what to think or understand about the ideas presented in the literature. The various studies and researches by a number of academic scholars discussed in the above sections prove that customer relationship management (CRM) is as important for a financial institution like banks as it is crucial for any other organization. In the constantly changing and intense competitive environment, only those banks can survive and grow which compete successfully to win new customers and keep the existing ones and to do this CRM can assist them in building lasting relationship with its clients alongside improving their performance by increasing revenue and productivity. By incorporating CRM effectively, banks can improve the performance of their employees and increase the customer satisfaction. The fundamental reason that led to the surge of CRM adaption in modern business scenario is the change in Indian banks from profit orientation to customer centric. The banks need CRM to survive as it is impossible nowadays not to focus upon the customer expectations. CRM is needed because of ever changing technology and highly competitive banking sector in India. The importance of CRM can be assessed by evaluating CRM that provides enhanced opportunities to use data and information to both understand customers and create value. The impact of CRM on banks has been debated constantly by various scholars. A number of them mention the positive effects on performance of the bank. Although writers and authors agree on many aspects of CRM, they argue on indirect results that CRM has on banking processes. CRM brings benefits and advantages if implemented effectively. Successful integration or adaption of CRM system in the banks may not be as easy as it looks like. Scholars express their concerns and think that efficient operation of CRM is not simple as it seems. Every concept has limitations so does the CRM in banks. This is especially the case in Indian banks. Banks can overcome many of the limitation analysed in the literature by efficiency managing CRM and adapting some comprehensive CRM model along with effective CRM software. Almost all marketing researchers agree on the importance of the role of a manager in managing CRM. CRM manager is a key factor who can effectively manage the issues related to CRM. It is vital for banks that their CRM applications and systems is supported and controlled by qualified and experienced manager. Other important aspect the bank has to consider is a need to build a mechanism to check whether CRM is effectively in good use. To verify how successful the CRM adaption is in a bank, regular feedback system needs to be devised from the perspective of the management, employee participation perspective and customer experience perspective. Banks need to know how successful is the CRM system working for them, how does it impact the performance of the departments and its operations. They need to evaluate and assess the value, worth or merit of CRM strategies. Evaluating the impact of CRM is a challenge for bank management. The ultimate purpose of the CRM is to improve performance and to assess how well the bank needs are met by CRM adaption and implementation.

All the information gathered through secondary research is analysed and discussed critically in this literature review. Arguments are well presented in the debate and the researcher managed to provide a detail theoretical knowledge of CRM and its related features for bank, which is then used to align with it the practical information, collected and analysed through primary research.

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