Today's world globalized customers



Today the world is globalized and customers are well educated and well informed. This has increased the competition among the firms and organisations. The competition elevates the customer bargaining power and switching power to choose the best product and service. Therefore customer relationship has become a focus of importance to all the companies in order to retain the customer as well as maximize revenues. Today marketing is no more developing, delivering and selling of goods and services, it is moving towards developing and maintaining long term relationship with customers. Therefore relationship marketing has making its important in all the business sectors so as in financial services. Customers Relationship Management creates the opportunity through which the banks can benefit by developing good relationships with their customers.

The aim of the project is to gain a better understanding how the CRM has benefited both the bank as well as its customers. This research also aims to identify how critically CRM has been practiced in Lloyds Banking Group, analysis the data mining process of Lloyds Banking Group, to find out the customer segmentation procedure of the bank to analysis the customer retaining strategy of the bank, to find out how does the bank measure customer life time value and to verify the relationship between the customers and the Lloyds Banking Group. To validate the purpose of the project has addressed to set of questionnaires, one is for Lloyds Banking Group's employees and other is for customers of the bank. The literature review has also help to understand the answer for the research questions. Both the quantitative as well as qualitative data collection techniques have been adopted namely, survey questionnaire and semi-structure interviews. Some data has also collected through interview of Lloyd's employee and a group of their customers.

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Lloyds use CRM as an effective business strategy to classify the most profitable customers for bank. And accordingly bank gives priorities those customers through individualized marketing, reprising, flexible conclusion building and modify service-all delivered through a variety of sales channels that the bank use. Researcher has found that Lloyds is conducting a campaign management by using data mining task. This campaign helps to make crucial business decisions by exacting suitable, beforehand strange and ultimately logical and actionable awareness from huge databases.

Researcher also has suggested suitable recommendations to the bank to improve the CRM practice in Lloyds Banking Group.


This chapter rovides the brief introduction of research. Furthermore, it also discusses the aims, objectives of the research questions and scope of the study.


Customer Relationship Management of Lloyds Banking Group PLC; A Critical Evaluation


Peter Drucker said, “The purpose of a business is to create customers”. Customer Relationship Management can be the single strongest weapon we have as manage to ensure that customers become and remain loyal. Customer Relationship Management (CRM), is an vital division of modern business organization. CRM concern the relation between the organisations along with its consumers. Consumers are the means of support of any business in a universal business with thousands of workforce and a multi-billion earnings, or a single broker with a handful of standard consumers. CRM is the same in principle for both examples.

Globalization and technology improvements have pushed companies into hard competition. In this new era organisations are targeting on managing customer relationships, mainly customer satisfaction, in order to maximize revenues (Constantinos 2003). Today, marketing is not just developing, delivering and selling; it is shifting towards developing and maintaining equally long term relationships with customers (Buttle, 1996). This new business values is called relationship marketing (RM), which has involved significant interest both from marketing academics and practitioners (Gronroos, 1994).

The Greek philosopher, Epictetus said that “what concern me is not the way things are, but rather the way people think things are” (Szwarch, 2005, p.3). The concepts of consumer satisfaction were depending on the thinking of consumer. Research suggests that customer satisfaction, basic concept of relationship marketing, is important in achieving and retaining competitive advantage. Research studies have discovered that retaining current customers is much less expensive than attracting new customers (Desatnick, 1988; Stone et al., 1996; Bitran and Mondschein, 1997; Chattopadhyay, 2001; Massey et al., 2001). The best way to retain customers is to keep them satisfied, a number of studies have shown that customer satisfaction can guide to brand loyalty, repurchases intention and repeat sales (Day, 1984; Swan and Oliver, 1989; Oliver, 1999). Customer retention, in turn, seems to be related to profitability (Oliver, 1999).

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Relationship marketing is becoming significant in financial services (Zineldin, 1995). If a bank develops and sustains a solid relationship with its customers, its competitors cannot easily replace them and so this relationship provides for a continued competitive advantage (Gilbert, 2003). Moriarty et al. (1983) has suggested relationship concept in the banking sector which states that banks can increase their profits by maximising the profitability of the total customer relationship over time, instead of looking for to get more profit from any single transaction. Perrien et al. (1992) observed severe competitive pressures that forces financial institution to restructure their marketing strategies by developing into long-term relationship with customers. And banking industry purely related to financial services, which needs to create the trust among the people.

This research is exploratory in nature and design. The data which is collected is going to be mostly primary data collected from the relevant persons within the bank. The data has gathered from the face to face interviews with the help of structured and semi-structured questionnaire with those persons. The above describe interviews has last 40 (fourty) to 45 (fourty five) minutes (approx). On the other hand the researcher has decided to collect primary data from random interviews of Lloyds Banking Group's customers. Sample size is around 200 customers and of structured questionnaire.

But of course this research paper has relied on reviewing the various secondary data available from various researches such as books, magazines, website, previous research and publication etc. The collected data has been analysed by graphs, table and pi chart drawn from Microsoft excel.


The aim of the research is to study why CRM is important in bank, how the CRM works in banks and also the effectiveness of Lloyds Banking Group in obtaining long term customer relationship, customer loyalty, and customer satisfaction by the use of CRM. And also suggest feasible recommendations to Lloyds Banking Group to increase the customer satisfaction and market share by the effective use of CRM.


The followings are the objectives of this research;

  • To study how critically practised in Lloyds Banking Group
  • Analysis the data mining process of Lloyds Banking Group
  • To find out how the bank segments their customers
  • To analysis how the bank retaining their customers
  • To find out how does the bank measure customer Life Time Value
  • To verify the relationship between the customers and the Lloyds Banking Group


The scope of the study and research work has limited to Lloyds Banking Group only. This chosen level of aspects has stayed at large in the study so that it can be studied well and analyzed thoroughly to get a deeper understanding. Trying to cover too much ground may lead to a very superficial and confused analysis and may involve long time duration to complete the project work or report. Therefore a specified and narrow down approach with Lloyds Banking Group and an evaluation of its success has comprised with the researcher's scope of the study to avoid confused analysis and a weaker report.



This chapter provides the brief introduction of the research. Furthermore, it also discusses the aims, objectives of the research questions and scope of the learning.


This chapter determines the theoretical issues relating to CRM which is relevant to the research.


This episode discusses about primary and secondary methods of research used by the researcher.


Chapter 4 deals with the information about Lloyds Banking Group.


This chapter deals with the result of primary data.


Analysis part deals with findings in the context of literature review in chapter 2.


This chapter includes the overall conclusion of the research. This chapter produce the conclusion compared and contrasted with the finding of the research and the literature review. It summarises the aims and key findings and acknowledges the limitation of the works.


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This chapter is the last chapter of the research. This chapter provide the recommendation for the managerial implication in the Lloyds Banking Group. At the end, chapter provide recommendation for the future research.


This chapter includes a systematic list of books, web site and other works such as journal, magazine etc which have been used as secondary data or as reference in this research.


This chapter contain all questionnaires and some graphs, chart and tables which have been made on the basis of customer survey.


This chapter contains a review of literature relevant to the research. This literature review deals with, about CRM, the history and goals of an integrated banking CRM, the technological factor of CRM, the process cycle in banks, data warehouse technology, data mining process, how to analysis the data, customer segmentation process, communication strategies of bank to the customers etc.


Existing research states that ‘relationships are the base to the successful development and edition of new business viewpoint, though business have taken care of relationships with their customers for many centuries' (Gronroos, 1994). Sheth and Parvathiyar, (1995) said that relationships demand much more than mere transactions. Rather, they symbolize strategic and tactical issues based on a new philosophical move that geared in the direction of long-term organisation survival.

According to Storbacka, (1994) relationship marketing got popular in 1990s but it has a long history under different names. In its starting, one-to-one marketing appeared in the mid 1990s, which transformed into Customer Relationship Management.

Parvatiyar and Sheth gave a static definition of CRM. “Customer Relationship Management is widespread tactic and process of acquire, retaining and partnering with careful consumers to create better-quality value for the business and the consumer” (Parvatiyar and Sheth 2000, p.6)


According to Puccinelli (1999) the financial services industry as entering a new era where personal attention is decreasing because the institutions are using technology to replace human contact in many application areas.

Sherif, 2002 advocated that, now global changes brought new trends, directions and new ways of doing business, which also brought new challenges and opportunities to financial institutions. In order to complete with newly increasing competitive pressures, financial institutions must recognize the need of balancing their performance by achieving their strategic goals and meeting continues volatile customer needs requirements. Different ways must be analyzed to meet customer needs.

Foss said that banks are highly focusing on CRM for the last five years that is expected to continue.

According to Peter (1998) and Chablo (1999) the main goals of an effective integrated CRM solution in the banking sector are to enable financial institutes to;

  • Widen customer relationship through acquiring new customers, identifying and targeting new segments and expanding in new markets.
  • Lengthen the existing relationship developing longer term relationships, increasing perceived value of products and introducing new products and
  • Deepen the relationship with customers initiating the cross selling and up selling opportunities, understanding the propensity of different customer segments to purchase and increase sales.

The implementation if CRM system in a bank helps the business organisation to obtain a complete picture of their existing customers, design both customer-oriented and market-driven financial products and services, as well as implement extensive and reliable financial marketing research and efficient campaigns, to achieve and enhance customer loyalty and profitability.

The above goals can be achieved through the seamless integration of information technology solutions and business objectives at every process of the bank business that affects the customer.


The main phases of CRM are as follows;

1. Customer selection or Segmentation

According to Dave Chaffey (2009), customer selection defining the types of customers that a company will market to. It means identifying different groups of customers for which to develop offerings and to target during acquisition, retention and extension. Different ways of segmenting customers by value and by their detailed lifecycle with the customer are reviewed.

Many companies are now only proactively marketing to favoured customers. Seth Godin (1999), says “Focus on share of customer, not market share fire 70 per cent customers and watch your profits go up!”

According to Efraim Turban (2008), the most sophisticated segmentation and targeting schemes for extension of customers are often used by banks, which have full customer information and acquire history data as they search for to boost Customer Lifetime Value (CLV) through encouraging increased use of products overtime. The segmentation approach used by banks is based on five main basics which in result are covered on top of each other. The amount of options used, and therefore the complexity of approach, will depend on resources obtainable, opportunities, capabilities and technology afforded by catalog.

i. Identify customer lifecycle groups

When guests use online services then they basically pass those seven or more stages. The organisations have clear these segments and establish the CRM infrastructure to categories customers in this manner; then they deliver focused messages, whichever by modified web messaging or by e-mails that are triggered routinely because of various rules. First-time guests recognized by a cookie placed on their PC. When guests registered, they are tracked through the residual stages. The customers who have purchased one or more products are one particular important group. The key challenge is for a company to encourage a customer to shift from the first product to the second and then go on. Explicit offers can be try to push customer for further products. In the same way, when customers turn into an inactive then the customer required follow-up.

ii. Identify customer profit characteristics

This is a conventional segmentation which is based on the nature of customer. For Business 2 Business Companies it includes sex, age and geography. It includes volume of the organisation and the type of sector or application, the organisation operates in.

iii. Identify behaviour in response and purchase

As shown in figure 2.2 through analysis of data base when customer progress through the lifecycle, company is capable to build up a detail reaction and buy history which judges the details of frequency, recency, group of product buy and monetary value. This approach is known as 'RFM (Recency, Frequency, Monetary value) analysis.

iv. Identify multi-channel behaviour

In spite of of the eagerness of the company for online channels, various customers are chosen for using online channels and others customers are chosen conventional channels. This is an degree, be indicated by RFM and rejoinder examination since customers with a preference for an online channel is more reactive and make more use online. Customer who likes online channels is focused mostly by online communications such as e-mail, but when customer like conventional channels is focused by conventional communications such as direct mail or phone. This is known as ‘right-channelling'.

v. Tone and style preference

In a same way to channel liking, customers are respond in their own way to various types of message. Some customers like rational application, in that time a detailed e-mail may work best. On the other hand some customers are preferred an emotional appeal. Companies are test for this in customers or conclude it using profit description and response performance and then expand various inventive treatments consequently.

2. Customer acquisition

Processes used to add new customer. According to Turban (2008), customer acquisition refers to marketing activities intended to form relationship with new customers while reducing acquisition cost and targeting high-value customers. Service value and selecting the right path for various customers are essential at this stage and during the lifecycle.

The conventional manner to customer acquisition include a marketing manager developing a blend of mass marketing (billboards, magazine advertisements etc.) and direct marketing (mail, telephone, etc.) campaigns based on their knowledge of the particular customer base that was being focussed. Marketing campaign trying to pressure new customers to buy a particular type of diapers, the mass marketing ads might be determined in parenting magazines. The advertisements could also be positioned in more conventional publications whose readership demographics were alike to those of new parents.

Customer acquisition is comparatively similar to mass marketing. A marketing manager selects the demographics that they are involved in and after that works with a data vendor to obtain lists of buyers who meet those features. The data vendors have large database holding millions of eventual customers that can be segment based on explicit demographic criteria.

The idea of “similar demographics” has conventionally been an art rather than a science. Usually there are not hard-and-fast systems about whether two groups of buyers share the similar features. Most of the segmentation that took place in conventional direct marketing involves hunches on the division of the marketing professional.

3. Customer retention

Dafe Chaffey 2009 said that customer retention refers to the marketing actions taken by a company to keep its current customers. Identifying applicable offerings based on their personal needs and complete position in the customer lifecycle (e.g. purchase value or number) is key.

Customer retention strategy aims to keep a high percentage of valuable customers and a customer development strategy aims to boost the value of those retained customer to the organisation. Customer retention is based on customer loyalty. And customer loyalty is the point to which a customer will continue with a specific brand or vendor.

Customer acquisition to retain and extend create long-term customer relationship. We need to calculate customer satisfaction, as satisfaction drives loyalty and loyalty drives profitability. This relationship is exposed below;

The marketers aim is to push customers up the curve towards the affection zone. But the majority are not in that zone. Marketers must understand to achieve retention,why customers defers or are indifferent.

4. Customer extension

This technique is encouraging customers to increase their involvement with a company. According to Turban 2008, customer extension is increasing the range of products that a customer buys from an organisation. Sometime it is referred ‘customer development'.

Increasing the lifetime value (CLV) of a customer is the main objective of customer extension by encouraging cross-sell. For example a customer of Egg credit card may be offered the loan or a deposit account.

There are many of customer extension technique for CRM as follows;

  1. Re-sell: same type of products to existing customers-particular vital in some Business
  2. Business background as re-buys or modified re-buys.
  3. Cross-sell: sell extra products which may be closely related to the original buy.
  4. Up-sell: this is mean, selling more expensive products.
  5. Reactivation: Customers who have purchased for some time or have lapsed can be encouraged to buy again.
  6. Referrals: generating sells from recommendation from existing customers.


Customer Lifetime Value (CLV) is also an important theory and practise of CRM. But the calculation of CLV is not straightforward. There are so many company, they do not calculate it. According to Dave Chaffey (2009) “Lifetime value is the total net benefits that a customer or group of customers will provide a company over their total relationship with the company”. CLV is based on estimating the income and costs related with each customer over a phase of time and then calculating the net present value in present monetary terms using a discount rate value applied over the stage.

Efraim Turban (2006) said there is various scale of complexity in calculating LTC. Those are exposed in figure 2.6. Option 1 is a realistic way or estimated proxy for future LTV, but the true LTV is the future value of the customer at individual level. CLV modelling at a segment level 4 is crucial within marketing since it answers the question;

How much can I afford to invest in acquiring a new customer?

  1. Lifetime value analysis helps marketers to:
  2. Create the true value of a company's customer base
  3. Recognize and compare crucial target segment
  4. Calculate the effectiveness of another customer retention strategy
  5. Plan and calculate investment in customer acquisition programmes

Make decisions about product and offers

Figure 2.7 gives an example of how LTV can be used to develop a CRM strategy for different customer groups. There are 4 (four) main types of customers are indicated by their present and future value as bronze, silver, gold and platinum. Separate customers' groupings (circles) are recognized according to their current value (as indicated by current profitability) and future value as indicated by CLV calculation.

Every group will have a customer segmentation based on their demographics. Therefore this is used for customer selection. Within the four main value groupings, there are various strategies are developed for various customer groups. Few bronze customers such as group A and B practically do not have development potential and are usually unprofitable, therefore the objective is to reduce costs in communications and if they do not stay as customers this is acceptable. Some bronze customers like group C may have potential for growth; therefore for group C the strategy is to extend their purchases. Silver customers are focused with customer extension offer and gold customers are extended. Platinum customers are the best customers; therefore the communication is very important with these customers.


According to Davenport and Short, (1990); Porter, (1987) ‘information technology is an enabler to thoroughly redesign business process to achieve improvements in organisational performance'. ‘Information Technology help helps a business process by facilitating changes to job practices and establishing new techniques to link a customer with organisations, suppliers and stakeholders' (Hammer and Champy, 1993).

Eckerson and Watson (2000) advocated that ‘CRM take full advantage of technology to collect and analyze data on customer patters, expand predictive models, interpret customer behaviour, proper respond with communications, and deliver product and service to individual customers. By using technology a business can generate a 360 degree view of consumers to find out from past interactions to optimize future ones.'

Peppard (2000) said that ‘the leading factors in CRM development are improvement in set of connections communications, client/server compute, and business cleverness application. CRM collect, store, maintain and distribute customer knowledge all over the organisation. The effectual management of information has a vital role to play in CRM. In the case of scheming customer duration importance, consolidated view, product tailoring and facility improvement, the information is essential.' Along with data warehouses, enterprise resource planning (ERP) organization and the internet are the vital infrastructures to CRM application.

Fickel (1999) said ‘CRM application links front office (e.g. marketing, sales and customer service) and back office (e.g. financial, logistics, operations and human resources) functions with the businesses' customer contact point'.

A company's touch point is “all of the communication, human and physical interactions your customers experience during their relationship lifecycle with your organisation. Whether an ad, Web site, sales person, store or office, touch points are important because customers from perceptions of your organisation and brand based on their cumulative experiences”

(Source; at 16/10/2009 on 15:25)

According to Eckerson and Watson (2000), ‘CRM integrated touch points is something like a common view of the customer. A separate information systems controlled these touch points. Figure 2.8 demonstrates the correlation between customer touch point with back and front office operations'

Peppers and Rogres, (1999) said ‘In many companies, CRM is just a technology solution that extends divide databases and sales force automation tools to link sales and marketing functions in order to develop targeting efforts. On the other hand some organisations consider CRM as a tool that is exclusively designed for one-to-one relationship.' According to Goldenberg (2000) ‘CRM is not just a tools application for sales, marketing and service, but when CRM completely and successfully implemented, customer-driven, a cross-functional, technology-integrated commerce process management scheme that improves relationships and encompasses the whole organisation‘.


According to Watson (2000) ‘data warehouse is a tools of information technology management that helps business decision makers to instant access of information of customer data throughout the organisation by combining all database and operational systems like sales and transaction, human resource, inventory, purchasing, financial and marketing system. Data warehouse pull out, clean, convert and manage large volumes of data from various systems and creating a historical record of all customer'.

Data warehousing technology is the most crucial part of CRM because it makes CRM possible. Shepard et al. (1998) said ‘a better understanding of customer behaviour is possible because data warehousing technology consolidates correlates and convert customer data into customer intelligence. Thoughts of customers and their buying pattern can improve information relating to customer service interactions, bill and account status, back orders, product returns, product delivery, and internal operating cost. The capacity of a data storehouse to store hundreds and thousands of gigabytes of data compose an analysis feasible as well as immediate.

Organisational benefits with a data warehouse are as follows;

  • exact and faster access of information
  • bad and duplicate data eliminate by quality data and filtering
  • customer profiling and retention modelling
  • it compute total present importance and approximate future value of every customer
  • it gives detail report


Peppers and Rogres, (1999) said that ‘the first analytical step of data mining is to describe the data. Data mining summarize its statistical attributes like standard deviations and means, visually review it by use of charts and graphs and distributes the value of the field in our data. But alone data description can not provide an action plan. We have to build a analytical model based on pattern determined from known output and after that we have to test the model on result outside the original sample. An ideal model must never be puzzled with reality, but it is useful guide to understanding our businesses'.

According to Eckerson and Watson (2000) ‘we can use data mining for both classification and regression problems. In first problem we can predict what type something will fall into. In second problems we are predicting a number like prospect that a person will react to an recommend. In CRM process, data mining is often used to allocate a score to a particular customer. Data mining is also often using to recognize a set of characteristics, which is called profile. Data mining segments customers in to groups with similar behaviour like purchasing a particular product.'


Pound (2000) said that exploration and alteration process should be done by the banks on basis of customer information captured; this shows the full value of CRM initiatives. Banks set up a closed CRM cycle with the help of an integrated CRM solution, which composed of a set of continuous iterative process. It manages the whole customer related process for bank, analysing customer profile, customer data and life time value, which is helping to making marketing decision and optimizing the execution of marketing campaigns, customer service strategies and sales strategies across various channels during the bank.

According to Professor Constantin Zopounidis (2002) CRM process cycle is based on a generic business view. It presents a continuous improvement of value between customers and banks across touch points. The main stages are as follows;

Customer data collection

Customer data analysis

Marketing strategy and action programs

Pound 2000 said that ‘recent banking data sources are extremely heterogeneous. Geographic information is dispersed due to continual acquisitions, mergers and reorganizations. For example a bank might use web site, ATMs, e-mail, sales, call centres and marketing automation applications that must be integrated in a unified environment of CRM banking. An effective multi-channels customer interface will not be possible without a centrally integrated warehouse driving the entire CRM process cycle. This should be update real time. The historical data should be recorded by it, which is used to create propensity models and customer life time value models to recognize past behaviour and action in order to take future marketing strategy'.


Kristin Anderson & Carol Kerr (2002), said that in banking transaction system data such as (e.g. Checking, Credit, Savings) are frequently organised around accounts, channels, products and other alike transactional concepts. This limits the bank ability on identifying the total relationship and unique customers. An Integrated CRM is a major goal it consolidates these “information islands” and separate solution, which forms an open cross-bank system from all executives, business area department officers and branch employees, shares the identical customer information. Integrated banking CRM structure can be obtained from this necessary basis of data supply.

Operation (contact) sources: Chou, Chou 2000, said the customer communication touch-point (ATM, Branch, Call-Centre, Internet-Banking, Mobile banking, personal contact, etc.)

Internal sources: Professor Constantion Zopounidis (2000) said internal sources that are the available information island, data bases and product oriented systems from other banks such as (Cards, Deposits, Investments, and loans etc.), Marketing campaign response, meta-data analysis and reliable data mining results.

External Sources: Professor Constanin Zopounidis 2002, said marketing researches that of external sources, infomediaries etc. Providing geo-demographic, psycho-graphic data and lifestyle, these can help to improve customer images.

Marketing Communication


Heygate (1998), said Simple and sophisticated data analysis techniques are required for deriving the valuable customer insight from the data collected in a central customer warehouse. More advance data analytics includes OLAP (Online Analytical Processing) mining techniques and tools, these extracts applicable patterns or trends in the data.

According to Lawer (2000), key incorporated customer management insights provided by customer data analysis are customer segmentation/differentiation, concentration and distribution of customer's value; share of purchases/profits, analysis of strategies that widen/lengthen/deepen customer relationship.

Hawkes 2000, advocated customer data analysis enables the recognition of customer's profit and customers preferences for definite bank product and services, indicates the most suitable channels to reach the customers, and assesses the profitability and life time value of every personality.

Additionally, Delto 1998 said that the future manners of the consumers can be predicted by analysing their past behaviour. Customer statistics, profit and segmentation are the main amount produced of the analysis stage feeding the marketing strategy planning and completing process. Having easily accessible information to marketing makes the difference between a winning campaign and a failure.


Kristin Anderson and Carol Kerr 2002 advocated captured results and data of customer analysis support marketers to route marketing messages, processes and strategies. True values of data of Lloyd TSB are discovered by tools and process for marketing decision making, marketing decision making and CRM initiatives and campaign are deployed from converted information to customer knowledge.

Goal of marketing automation within CRM are which personalise and optimizes each customer contact from planning, execution, monitoring marketing strategies and action programmes.

Bryan Foss 2003 said it is critical for bank CRM not only to extract their data source to uncover patterns and insight but also to operationalise the system through the bank performance to turn the customer knowledge into importance creating achievement.

Merlin Stone 2003 advocated the grades from advertising and CRM activities and strategies continue the process knowledge acquisition enhancing the on-going assessment of marketing data intelligence, closing the feed-back loop. Hence, the final element of CRM process cycle is the valuation of the results of campaign driven by marketing data intelligence. It is crucial to measure performance and feed result back into the centre customer data warehouse, in order to convey greater customer aptitude in the future.

The extensive use of customer relationship management (CRM) application has provided companies with increasingly thorough insight into the productivity of their individual-level customer relationship. In history, this information has principally been used to make out the most productive customers and to define ways for serving them in a most favourable behaviour. These days however companies like Lloyds TSB have become more aware of unbeneficial clients and the fact that these associations can account for a significant share of their entirety customer base. Therefore Lloyds TSB practises a six step move towards for dealing with such unprofitable customers, a frame work that Lloyd TSB refers to as the ABCs of Unprofitable customer's management: Avoid their acquisition in the first place, Bear in mind potential release operation, Catch the potential of abandonment, Draw up a cost-benefit analysis, Ensure awareness with our atmosphere, and Facilitate biting the bullet.


Newell (2000) advocated that, “the actual value to an organisation lies in the value created by them for their consumers, and in the value the consumers return back to organisation. It is also significant to spot that the value does not lie in additional information and in much superior technology. In the consumer knowledge, the value is lies and in this way the organisation uses that knowledge to control their relationship with consumers. CRM's sole is knowledge”.

Newell (2000) also said that “unluckily there are few organisations, which are transforming the information to knowledge of consumer and so those organisations miss the chance to give value to their consumers. But if CRM applied in a correct way, Customer Relationship Management is the equipment, which contributes to profit. An organisation can use customer knowledge to build relationship, if organisations are transforming the consumer data into knowledge. And it creates loyalty which is followed by profit by the relationship, which is build by knowledge”.

In short the benefits of CRM are as follows;

1) Lower cost of recruiting customers:

The recruitment cost of customer will reduce. And in other cost like marketing, contact, mailing, follow up and etc will be reduce.

2) To preserve a steady volume of business there are no need to recruit many customers:

It will eventually minimise the need for new recruitment of consumer by increasing long term relationship with customer. (Newell, 2000)

3) Reduced costs of sales:

Long term consumers are more reactive than the new consumers, which will minimise the cost of selling. In addition to cost of marketing campaign will also minimise due to awareness with the distribution channels. (Newell, 2000)

4) Higher consumer profitability:

Higher consumer wallet share, up selling, cross selling and follow up sales will increase consumer profitability. Furthermore satisfied consumers refer more consumers. (Newell, 2000)

5) Increased customer retention and loyalty:

Long term customer or retained customer purchases high quantities frequently. Bonding of relationship increased by customer's initiatives, and as result - loyalty. (Newell, 2000)

6) Customer profitability evaluation:

Profitable customers are evaluated by the organisation. It is about which customer going to be profitable in future and which customers never profitable in future. The main success in business is to find economically valuable customers. And after that acquire them and never let them go. (Newell, 2000)

Budhwani (2002) advocate, that “all customers are not valuable. The customer who are taking organisation's time, energy and resources with out generating sufficient business, they are dangerous customers”.


The aim of this chapter is to outline the methods used to collect primary and secondary data for the research. The primary data has been collected by using questionnaire, which is type of quantitative techniques. The secondary data has been collected from various relevant journals, database, textbooks and internet website.


It is important to consider the appropriate model and measures to the aims and objective of the research. The main target of this research is to analyse how effectively Lloyds Banking Group practice CRM, how they maintain long term relationship between customers and bank, how Lloyds manage life time value of customers. This research has utilized primary data that has been collected from Lloyds Banking Groups' employees and customers.


According to Burns and Bush (1998) “Data and information collected from secondary research is previously collected by some other researcher for some other purpose”. Chisnall (2005) said “It involves collection of data that already exist”. Under secondary research, researcher has collected the information from relevant textbooks, journals, library database and internet websites.

Data can be two types, primary and secondary. Secondary data is accessible from in-house databases, publications, research agencies etc. secondary data can be further classified into external and internal data. External data is available syndicated and library resources while internal data is available within the organisation. The main advantage of secondary data is, it is inexpensive and its help researcher to save time. The main disadvantages of this data are inaccuracy, insufficiency and relevancy.

Everything has some advantages and disadvantages. Secondary data also has some advantages and disadvantages, which discusses as follows;

Advantages        Disadvantages

Usually cheap.        Secondary data was not collected exclusively to address the researcher's problem.
Obtain quickly.         Disparity of units-sometimes data collected in quantity units that do not match the required unit.
Boosting the existing primary research.        While collection, analysis and presentation there are some chances of may be high error.
Usually available.        The data collected may be out of date for the researcher to research.

Table 3.1: Advantages and Disadvantages of secondary research

Source: Adapted from Burns and Bush, 1998, pg.144

The objective of this research is to “Customer Relationship Management of Lloyds Banking Group; A Critical Evaluation” after getting in-depth knowledge of the CRM activities towards financial institution, the research relates the theory to the data mining, customer segmentation, customer lifetime value and overall practice of CRM in Lloyds Banking Group.

This research papers has rely on reviewing the various secondary data available from various resources like magazines, website, text books and publication etc.


According to Chisnall (2005) “The primary research involves observation, experimentation or questionnaire in order to collect new information about the market. Primary research includes qualitative and quantitative research.”

Qualitative research

According to Malhotra and Peterson (2006, pg. 150), “Qualitative research is an exploratory research methodology based on small sample that provide insights and thoughtful of the problem setting. Also its findings are not supported by statistical evidence, but it offers an insight and guidance to researcher”.

This research has conducted some Depth Interviews with Lloyds Banking Groups' employee.

Quantitative research

Quantitative research involves measurable data.

Quantitative research includes;


Questioning respondents is the basic of a survey. According to Malhotra and Peterson (2006, pg.181) “It is used when the research involves a huge number of people and asking them a sequence of questions. It can be conducted in person by telephone, through a mailed questionnaire or electrically through computer”.

In this research, questionnaire type of survey has been used by researcher. There are three type of question, which is as follows;

  • Open-ended questions
  • Closed-close ended questions
  • Scaled response questions

Open ended questions have not used this research. Only close ended questions and scaled response questions have been used in this research. Therefore closed-close ended question and scaled response question have been discussed below.

  • Closed-close ended questions

“Closed questions can be simple alternatives questions and multiple-choice questions. Under this question respondents are offered a choice of alternatives replies from which the respondents expected to select answer. In the simple alternative questions respondents have two choices, ‘Yes' or ‘No'. In the multi-choice questions respondents have range of choices” (Chisnall, 2005)

In this research researcher used simple alternative questions as well as multiple-choice questions when constructing the close ended questions to get a deeper understanding.

  • Scaled response questions

Burns and Bush (1998, pg 287) said, in this type of questions, a scale is urbanized by the associate to compute the attributes of some construct under study and the response of the respondent is determined by rating the item on the scale”.

In this research five point ‘linkert scale' has been used, in which the respondents can rate up to point five in the scale.

  • Observations

According to Parasuraman (1991) in case of observation the respondent plays a little or no role in terms of interacting with the researcher.

This technique has not used in this research. Because survey technique is the best suited technique for the current research.

  • Questionnaire

It is a common method to gather primary data. According to Malhotra and Peterson (2006, pg. 288) “A questionnaire is a formalised set of questions for obtaining information from respondents”.

Three factors are there, which helps the researcher to confirm a true response from a questionnaire. These three factors are as follows;

  • The question of questionnaire must be able to understand by the respondents.
  • The requested information must be able to provide by respondents.
  • Respondents must be willing to provide the information (Chisnal, 2005)

While prepare the questionnaire the researcher always keeps these three factors in his mind to get error free response.


Most important part of research is question design. According to Denscombe (1998) “While designing the questionnaire, a researcher must fanatical in mind that questionnaire should be crisp and concise by asking only those questions which are vital to the research”. As Malhotra and Peterson (2006) suggested the funnel approach in the questionnaire, the researcher has been approached in this research.

There are two parts of the questionnaire. One is for Lloyds Banking Group's employees to do research with the help of bank's employees and other one is Lloyds Banking Group's customer to do customer survey. As the researcher feel during the research, for the security reasons bank staffs were not willing to answer entire questions. Therefore the researcher asked three general questions. On which the researcher tried his level best to collect the required information.

The second part of the questionnaire is for customer survey. The researcher asked questionnaire to the respondent in an arranged manner with four sections, A, B, C and D. the questions are made in easy language. Therefore it is easy to understand. Firstly researcher asked general questions from customers like how long they have been with Lloyds and average annual income then the questionnaire has narrow down to analysis the performance on individual relation ship, customer value and customer loyalty and bank's communication with customers. And the questionnaire which has designed offers confidentiality of information to all customers.

The data has been used in this research from authentic secondary source. Primary data has pull out from interviews with customers of this bank and the relevant persons within the company. And the conclusion and recommendations for the bank have based on a findings and analysis. No particular ethical issues regarding the research can be foreseen.

Section A

This section consists of general question. It is includes two questions. This includes the general questions like duration of relationship with Lloyds and average income of the customers. Under section A close-ended questions had asked and customers were asked to (√) in one of the boxes that was appropriate for them.

Section B

This section includes two numbers of questions. These questions consist of scaled response questions and one closed ended question. Questionnaires were a scaled questionnaire of 5 points. The researcher was done an evaluation of Linkert scale of 5 point. The scale had 5 points, described a below.

Section C

Section C consists of 3 questions, where all question were closed ended type. The customers of Lloyds were asked to (√) in one of box, which they considered to be suitable. Those questions were used to analyse the customer value and customer loyalty of Lloyds Banking Group.

Section D

Section D consists of 2 questions. The researcher was done an evaluation of Linkert scale of 5 point. The scale had 5 points, described a below.

Pilot testing of the questionnaire

According to chisnall (1997) ‘this is very crucial for every researcher to pilot-tested his or her questionnaire during all of the stages of development. This may involve redesigning of questionnaire several times, so that questionnaire would become specific, clearly understandable and capable of being respond by the customers and free from bias'.

Before the main survey the pilot survey was done by researcher. In this current survey the sample size was 200. The 10% of the main survey were used for pilot test. And that was 20 customers. After redesigning the shortcoming of the questionnaire, the researcher conducted survey of 6 customers for the accurate ness of question.

Questionnaire management methods

In the current research data has been collected from the relevant persons within the bank. According to my topic the researcher have chosen most appropriate 3(three) relevant banking officers from Lloyds Banking Group. They faced an interview with the researcher on face-to-face manner. They are Mr. Imran Mumtaz (Senior Banking Manager), Mr Darren Dowlut (Senior Marketing Manager) and Mrs. Ruth Leigh (Costomer Service Officer). The above describe interviews were last 40 (fourty) to 45 (fourty five) minutes (approx).

On the other hand the researcher decided to conduct other research out side the Lloyds Banking Group, to get maximum number of respondent in a short time. The researcher went to different branches of Lloyds Banking Group in London. The branches were East Ham, Ilford, Stratford and High Holborn. The survey was carried out between 25th of November 2009 to 23rd of December 2009. The researcher used the timing of the customers' survey between the opening hours to meet the bank customers.


According to Saunders et al, (2003) “Sampling techniques are the range of methods that enables the researcher to reduce the amount of data by considering data from a sub-group rather that all possible elements”.

  • Population

Saunders et al (2003) advocated that “Population is a set of cases from which a sample is used for the specific survey”. Sample population of the current research was the total number of the customers of Lloyds Banking Group.

  • Sampling frame

“Sampling frame is a list, map, index or record of a population from which a sample can be extract” Chisnall (2005). Sample frame of the current research were the total number of Lloyds Banking Group's customers.


Malhotra and Peterson (2006, pg.323) asid “sample is a subgroup of elements of the population selected for participation in the study”.

The target of this research was how effectively Lloyds Banking Group practice Customer Relationship Management. Research focused on customer lifetime value, customer segmentation, data mining and data warehouse technology, relationship between bank and customers and so on. Therefore the researcher focused on B2C (Business to Customers) retail banking sector. The sample size has taken 200 retail banking customers of Lloyds Banking Group.

Anderson, Black, Hair and Tatham (1998) mentioned that “for structural equation modelling sample size of 100 to 200 are sufficient”. So sample size of 200 customers has taken by the researcher. But the researcher surveyed more 12 customers to get complete response from 200 Lloyd's customers. Because the questionnaires were spread to 200 customers, but 12 customers were in the bank to open the new account, out of 200 customers.


According to Chisnall (1997) “The data collected from the research has to be processed by analysis, interpretation and tabulation”. Therefore the researcher analysed the data collected from questionnaire in chapter 6 (Discussion and Analysis) and displayed by graphs, pi chart and table which is enclosed in appendices, which is chapter 10.


This chapter deals with the information about the host company that is Lloyds banking Group and this chapter based on primary secondary data.


Lloyds Banking Group is providing a large range of banking and financial services to personal and corporate customers. It is a leading United Kingdom based financial services. It established in 1995 by the merger of Lloyds Bank, recognized in 1765 and conventionally considered one of the Big Four banks, with the TSB group which traces its birth to 1810”. (Source:

After the acquisition of HBOS in 2008, Lloyds TSB Group plc was renamed Lloyds Banking Group plc on 19 January 2009. But the banks operate as Lloyds TSB Scotland Plc within Scotland. This makes it the largest retail bank in United Kingdom. Lloyds Banking Group has a wide network of branches and cash machines, which is across England and Wales. Lloyds Banking Group offer 24 hours phone and online banking services. Now a day Lloyds Banking Group has 16 million customers. UK Retail Banking, Insurance and Investment and Wholesale and International Banking these are the three activities that Lloyds Banking Group organised.


“Lloyds Banking Group is quoted on the London Stock Exchange and it is one of the largest financial companies within FTSE 100. Lloyds Banking Group's capitalisation is £26.7 billion on 31st December 2007. The total group's assets were £ 353 billion at the end of 2007. Lloyds Banking Group has around 70,000 employees. And the total income for the 12 months to 31st December 2007 was £18 billion with profit before tax totalling £4 billion”.


History of Banking Group

Lloyds Banking Group can draw its base back to 1765 in Birmingham with the establishment of Taylors and Lloyds. In 1865, this private bank was transformed into Joint Stock Company. And in 1889, it became Lloyds Bank Limited. It acquired the demutualised Cheltenham and Gloucester Building Society in 1995. The Revd. Henry Duncan of Ruthwell, Dumfriesesshire had been founded the primary Trustee Saving Bank (TSB) in 1810. In 1985 the TSB Group was incorporated under the Companies Act. In 1995 the establishment of the up to date bank was declared. And in 1998, following the legislative process of incorporation had been finished Lloyds TSB commenced trading.

Three Scottish branches of Lloyds were absorbed into TSB Scotland. That had remain detach to TSB Bank within England and Wales. In 1991 TSB Northern Ireland was disposed to Irish Banks prior to merger. The bank do not have a existence in the region consequently. In 1992 TSB Channels Islands was integrated in to TSB Bank. In 1996 Lloyds Bank International merged into Lloyds Bank. While there was no longer any advantage in functioning individually.

In 2000 this group acquired the Scottish Widows Fund and Life assurance Society.

Lloyds Offshore Limited, a entirely owned secondary of Lloyds Banking Group, operates brances in Jersey, Guernsey and the Isle of Man, although Lloyds Banking Group (Gibraltar) Limited operates in Gibraltar, both deal as Lloyds TSB international.


Present situation of the company

The Financial Services Authority has given authorisation and regulation to Lloyds banking Group. Lloyds Banking Group is a member of the Financial Ombudsman Services, the Association for Payment Clearing Services, the Financial Services Compensation scheme and the British Bankers Association. It subscribes to the banking Code and Business Banking Code.

Lloyds Banking Group provides mortgages in England and Wales are administrated by Cheltenham & Gloucester Plc. Lloyds TSB Scotland and Cheltenham & Gloucester are constituent of the Council of Mortgage Lenders. On the other hand C&G are truly savings asset in Lloyds Banking Group. In 2009, it was announced that Lloyds TSB Scotland counting extra branches of Lloyds TSB England and Wales are to be divest by Lloyds Banking Group beneath the TSB brand, jointly with branches (though not the name) of C&G. the process could take up to 4 years to complete.

(Source: Adopted from

Lloyds Banking Group is a dynamic banking group. On the one hand, retail and commercial banking are operates by this group. Lloyds Banking Group offering account management for business and private individuals, asset management, debit and credit cards and even mortgage loans with the help of C&G. on the other hand, Lloyds Banking Group has been established outstanding efficiency in insurance sector through Scottish Widows. In the field of insurance Lloyds Banking Group offering life insurance, pensions, investment funds, general insurance (like car, house, and travel). Lloyds Banking Group has 2200 branches in Great Britain. And it also has locations in Asia and Europe.

(Source: Adopted from

As Zineldin (1995) said 2Relationship marketing is becoming important in financial services in 1990s”. And Customer Relationship Management is a very new idea in financial sector. But Lloyds Banking Group has already developed an enhanced model of Customer Relationship Management. It including the real time delivery of detailed customer information to bank's front line staff. In a wide pilot this CRM model delivered an improvement in customer satisfaction as well as increased 12% in sale. Lloyds Banking Group has increased their sales and service staff by 1500 during 2001 (approximately) just because of high quality of CRM technology and programme.

(Source: adopted from

Lloyds Banking Group's Strategy

Through developing the long term customer relationship, Lloyds Banking Group's strategy is remains to grow the business. Bank's businesses are focused on extending the depth and reach of bank's customer relationship, enhancing product to build competitive advantage. This enable bank to get its vision of being the best financial organisation in the UK.

Bank's key for driving more income and more business growth, it has to focus on improving personal, commercial and corporate customers' relation although developing and creating new products that meet the needs of existing customers and attract new customers as well.

(Source: adopted from


This chapter will present the result of the primary research, which is about the data collected from the employees and customers of Lloyds Banking Group using questionnaires, a type qualitative and quantitative method technique.


According to Sharp J. A., Peters J. and Howard K. (2004, pg.113) “Data analysis is the ordering and structuring of data to produce knowledge”. Again they said “Statistical method enjoys a special position in research because they grew up through attempts by mathematicians to provide solutions to problems of defining and building of knowledge noted by philosophers”. They said this in same book at page 114.


Q.1: How can the definition and benefits of CRM in Lloyds Banking Group is described?

Lloyds Banking Group looks at Customer Relationship Management as integrating the activities of sales, marketing and service to accomplish a common goal. Lloyds Banking Group applies Customer Relationship Management from consumer to consumer base by offering the right product or service to right consumer at the right time. Lloyds Banking Group always looks right products or services that fit the consumers' needs and right time when consumers actually need that products or services. According to Lloyds this is not only depends on its internal environment that includes its management goals although it is closely looks its external environment, multi channels environment (new technologies), competitors and level of consumers' satisfaction.

Lloyds Banking Group looks forward to its goals by achieving long term relationships and satisfied customers I the globally changing competitiveness, which is supported by Sherif (2002). He said “Focus on supervision customer relations and in particular pleasure, in order to capably maximize revenues”.

Source: Adopted from face-to-face interviews.

Q.2: How can the Customer Relationship Management processes in Lloyds Banking Group is described?

While dealing with customers Lloyds Banking Group has 2 major activities. Firstly enhance customer relationship and satisfaction level of customer by collecting data, analysing and forming new and modifying old strategies at the central level. Secondly Lloyds gets knowledge about customers at the branch level.

Customer Segmentation

The purpose of Lloyds Banking Group's CRM is to rate consumers by their attractiveness and for that they are using Profitability Segmentation Model. Customers have been segmented according to their financial need and profitability. Based on the customer's transaction history the company has recognized 200 sub-segments within the 6 segments of targeted market. Every month customers are evaluated and then scored on basis of two areas: ‘their lik