How to manage customer relationships

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An Understanding Of How To Manage Customer Relationships Effectively In Banking Environment


The banking scene has witnessed a paradigm shift in India during the nineties. The first of these shifts occurred during the 1994-2004 phase in which the emphasis shifted from growth of profits and balance sheet size to a clean, transparent and healthy balance sheet, from a regulated and administered regime to a relatively deregulated one. During the next phase (2004- 2005) the financial markets started giving interest rate signals, links, between forex and money markets became stronger, as a result deregulation of interest rates led to the intensification of competition in the Indian Banking System.

The process of economic liberalization and financial sector reforms brought the issue of "customer focus" to the forefront it has been commented by Andrew Derrer, chief executive of Misys Retail Banking, in a report about branch banks, "For the past 300 years, banks have gotten used to being product-centric, and they were proud of the unique products that they provide, But, it has now become so easy for competitors to copy what each is doing that it is hard for banks to differentiate themselves on the basis of products. Now it is all about the service that you provide and the way that you package the products. This is a major cultural shift".

Towards getting closer to the customers in the identified market segments with well-defined characteristics, banks are establishing strategic business units such as Corporate Accounts Groups, National Banking Group, International Banking Group, etc. Attempts are being made both by public as well as by private sector banks to re-shape their structure and functioning keeping customer in view. Any bank that wishes to either grow in the size of its business operations or improve its profitability must consider the challenges affecting its customer relationships.

The customer choice and awareness have been increasing tremendously during this decade due to more open economy, the advent of information technology and media revolution, besides hectic competition for resources by banks and non-banks. Banks are now attempting by creating exclusive delivery channels for specific customer segments. As markets become increasingly competitive, customer can now immediately go elsewhere if they do not get what they want, this has increased contestability issue among banks at different levels. Banks are now required to discommodes their services and differentiate themselves through customer service excellence and intimacy, improved customer experience, new products and services targeted specifically at customers or customer segments, to gain competitive edge, to increase their market share and higher profits which can only be achieved when business can find new ways of maintaining the loyalty of existing customers. "Customer focus" is the ability to provide predictability positive experiences that consistently meet or match the customer's expectations at least. Customer focus Should be managed by "moments of truth".

A "moment of truth" refers to "any episode/incident when a customer is exposed to any aspect of the service offered and based on the contact, forms an opinion about the quality of the service and the quality of product offered.

Chapter 1: Introduction

Several studies have indicated retaining customers is less expensive and perhaps a more sustainable competitive advantage than acquiring new ones. With the help of CRM mechanism, each bank should strive to make a positive endeavor to ensure enhancement in its profits by selling a few more products to the existing customers.

A satisfied customer brings in a stream of new customers and he himself becomes a repeat-customer. Thus, business volume steadily increases through a continuous process of "cross-selling" and "up-selling".

The foundation of an excellent Customer Relationship Management (CRM) program is finding the balance between bank's (customer) revenue, (customer) profitability and customer satisfaction to deliver business results.

Effective CRM comes from committing to a "virtuous circle" process of customer management. This involves identifying. differentiating, discerning, targeting and interacting with customers in a continuous fashion. Such interactions enable the accumulation of customer information capital during customer marketing or analysis stages of a sale campaign to lie continuously enriched and updated. This updated information capital used in turn to guide more meaningful interactions therefore deeper and better relationship with the customers.

Mechanism For Virtuous Circle Of CRM

The CRM strategy to achieve this "virtuous circle" of CRM must be coupled with the right technology solution to enable a customer management system built on a solid foundation of accurate, accessible and actionable data. Technology solutions are now available that support activities in all phases of the "virtuous circle" of CRM.

While a solid foundation of accurate, accessible and actionable data is critical to success, the reality is that in many companies, customer's data is to be kept in non-integrated systems. Such disorganized and fragmented data caused numerous problems within the banking organization. These problems include less effective marketing and sales campaigns, increased customers attrition, excessive customer servicing costs and the inefficient use of customer contact channels.

The trick to smarter banking is to stay ahead of customer needs and meet them better than the competitor. Essentially this requires three things:

  • Developing deeper, more up-to-date and predictive customer insight ,
  • Managing the customer experience more cost-effectively and to higher standards,
  • Using, multiple channels for optimal advantages.

The solution lies in bringing customer data together into a "single instance of truth" from which all sales and servicing functions can draw. Accuracy and accessibility increases because the data resides in a single integrated place. Actionable data is the data that allows the marketer to meet specific business goals such as increased revenues, increased profits, decreased attrition and decreased costs. To achieve these goals, it is crucial for the enterprise to fully understand customer level, profitability and use this intelligence to form customer segments. The marketer can Formulate a strategy that grows and retain profitable customers to reduce cost and to divest unprofitable customers. Given that Financial Services Industries such as banking industries do not have an 80-20 rule (i.e., 80% of profits coming from 20% of their customers) therefore , identifying, differentiating, targeting and interacting with the right customers at the right time with the right message is absolutely critical to improved business results.

The Indian Banking Industry which was operating in a bureaucratic style prior to 2001 had to undergo large scale transformation with the opening up of the economy. The Sector has been facing unprecedented challenges with the wave of liberalization, privatization and globalization of Indian Economy. Banks in India are under intense pressure in today’s volatile market place. Steep competition, globalization, growing customer demand and exposure to higher credit risks are forcing the banks to find new ways of improving profitability (Andreassen,2001). On the other hand, cost-cutting measures have forced banks to manage operations with few Customers Relationship Managers and Product Specialists. Industry consolidation also poses fresh challenges to this sector. (Popli & Rao, 2009)

CRM For Banks: The Modular Principle

  • Defining the marketing and distribution segments for specific target groups in the context of marketing management
  • Planning and executing your marketing and distribution
    scenarios flexibly in the context of campaign management
  • Entering and updating your contact and customer master data, together with roles and relationships, in the context of business partner management
  • Providing information on products and cross-selling in the context of product management
  • Creating and editing contracts and contract overviews in the context of contract management
  • Supporting your employees with role-based processes in the context of interaction management
  • Setting up a customer-oriented IT landscape in the context of data management

With the advent of new generation of private and foreign banks, monopoly enjoyed by the nationalized banks is to be given a go by. The availability of many players in the market has empowered the customers with myriad choice and option for selecting the best(Sun and Li, 2006). Thus, the expertise to prescribe the perfect solution becomes the hallmark for a banker of first order. This can only be possible if a well-wrought CRM system is in place.

A sale does not end in a single transaction, nor is it desired to be so; rather it must be extended through a series of transactions, which will pave the way for a long-term relationship. In ultimate analysis that banker is not a seller of product and services but a solution provider. When a customer faces a problem in connection with financial matter, he comes to his banker. Now, it is the duty of the banker to provide him with the best solution. The solution of the problem of the customer squarely depends on the innovativeness and creativity coupled with a strong based of CRM. This will ensure customer loyalty and a strong bonding between the service provider and service user.

CRM has assumed a special significance in the wake of globalization because of great increase in competitive pressures in the banking industry. Financial reforms has given a great degree of freedom to banks in determining their interest rate structure of deposit and advances as well as their product range. Bank customers have now started enjoying a new freedom of choice, not available earlier as products were standardized and interest rates were regimented(Sun and Li, 2006).

Aim Of The Research

To investigate the factors and circumstances which influence the increase in importance of Customer Relationship Management in Banking Industry.

Research Objective

The purpose of my dissertation is to find out as to how Business-to-Business CRM in banks can be described (This is my main research question). I shall review the understanding of the following:

  • Definitions and benefits of CRM.
  • Various CRM Processes.
  • CRM technology utilized in one of the Indian Bank.
  • CRM Structure

The structure of  the study goes like this:

Chapter 2: This chapter deals with the literature review which gives an overview of financial industry and meeting customer needs. In this section, I have also covered the concept of call centre with the focus on IDBI Bank Ltd.

Chapter 3: This chapter includes the research, methodology and the theory related to this. This section would explain that what kind of methodology I have opted for my study and how that can benefit me in my research.

Chapter 4: This chapter includes the analysis done on the basis of data collected with respect to IDBI Bank Ltd, New Delhi.

Chapter 5: This chapter provides the limitations of my research and the recommendations.

Chapter 6: This chapter is the crux of my study i.e. conclusion

Chapter 2: Literature Review


Customer Relationship Management is the term which often changes with the time. As its relevance and importance changes or in other words grow with the time. More advancement in technologies leads to enhancement in CRM and its related issues. Customer Relationship Management not only deals or is related to managing customer relations, but also with customer retention and their satisfaction towards product of particular industry. My research spin around the customer relationship management in service industry and role of call centres in managing it effectively. (Uppal, 2008 ,p.19)

The Banking scenario in India is at cross roads and is continuously evolving, but the progress has been remarkable over the decade. With the level of competition increasing in the banking industry, banks are competing with each other to woo customers with more and more personalized service. From taking care of customer service account, needs to helping him in investing his money, banks are offering all these and much, much more. (Uppal, 2008 ,p.19)

In this fast pace and verging modernization all the sectors are facing tough competition. So is with the Banking sectors which are the vital part of service industry. Banks are making an attempt to survive in this stiff competition in this unsure market. Banks have realized that customer retention is much as important as generating new customers. Customer retention can be managed effectively through proper customer relationship management. This is done to increase the market share and increase the profitability. Customer relationship management (CRM) is an approach towards building of good and healthy association for a long-lasting relation. This is one of the aspects for success in an industry.

Mostly, the reason for people to change the bank is bad services provided by them. As the customer has become more aware of happenings, they want focused services and proper attention towards them. The way to provide better services can be formulated through good marketing strategy by the banks. These strategies should be prepared while keeping all the considerations of every kind of customers in lieu so as to avoid chaos. Only relying on the committed relationships is not enough for banks nowadays. They need to offer more to retain those customers, from there only the urge for customer relationship management comes, which enhances the requirement for proper channel to control this.)

Customer Expectation

Companies often have different perspectives on customer service. These include:

  • Every activity is designed with accurate process of providing and delivering good services to customers.
  • Precision and uniformity of delivering products and services to customers as per their wish.
  • Appropriate control of customer’s needs and changing behavior, to be taken care of.
  • Services should provide on time and in proper way. There should be no long follow ups and waiting (Crosby et al, 2003).

The expectations mentioned above can vary from one company to another, but still the basic would be these requirements. As these are the expectations, which any customer of any company would like get from their services (Wilson, 2007).

The more practical view of customer service is larger than what its definition gives because it depends not only on the bond of customers but also the advantage that customer is getting (Crosby et al, 2003). Customer service is like an activity which not only relates with the transaction which customer does with the bank, but also the services provide to him pre-transaction and post-transaction. (Zohar et al., 2002)

Customer Service

In the service sector, customer service is of primary importance because this sector is based on the assumption that it provided services to the customers and that to be according to their level (Zohar et al., 2002). But before providing services to customer, it also becomes important to understand that what the real expectation of the customer is. Hence, customer service is based on understanding the requirement of customer, his needs with the changing scenario and thus, formulating the customer service policies in view of that. It is a kind of motivation for the industry to serve its customer better and provide them the services which should fulfill the needs and not just the formality (Mathew et al., 2005).

Although the need to satisfy the customer is not only for the service industry, but it implies for other industries as well (Wilson, 2007). Because all the industries are customer oriented. The difference between the service industry and other industry is that the former has its existence due to this (Zohar et al., 2002). There are various assumptions regarding the customer services, but the main could be framing the customer relationship policies as per the need of the customer and not of the industry. As the industry works because of customer. (Robert  and Graham , 2008)

Customer Relationship Management (CRM)

Customer relationship management (CRM) is a term given to the management of customer relationships in high-volume consumer services, with the objective of mounting a more profitable business and trying to form some closer understanding of the needs of individual customers(Srivastava et. al, 2008). The essential difference between CRM and other approaches to customer retention is that the classification and augmentation of customer relationships is facilitated by technology. CRM attempts to integrate through many communication channels between an organization’s units and its customers, for example recording information about customer preferences and then using the information to develop and strengthen the relationship and the profitability of the customer (Uppal, 2008 ,p.19).

The aim of CRM is to collect data from all parts of the organisation to enable tracking an analysis of a single customer relationship, as well as the identification of hidden preferences of a customer. To illustrate the above point: it is possible that a customer of a financial services company would have a number of the product accounts like a mortgage, savings accounts and insurance. Each of these product accounts would be handled by separate parts of the business, with no knowledge of the others. As a result, customers rarely feel that they have a relationship with ‘the company’ (Dick et al, 2004).

To redress this, many financial service organizations are turning to data warehousing. A data warehouse is an integrated source of data that collects, cleans and stores information about customers. Adolf et al. (2007) have termed this as ‘information-based continuous relationship marketing’. Data warehousing allows the organisation to view relationships and profitability across the organisation (Jasola and Kapoor, 2008).

Companies are new moving to integrated CRM solutions with the advent of e-commerce. Internet –enabled activity allows companies to give information to their customers and collect data from them in a much more structured manner than previously (Dick et al, 2004). A smaller version of the data warehouse is the data mart. This serves a division or department of the organisation and should ideally be integrated with the enterprise’s data warehouse. Such integration avoids repletion of the original problem of invisibility of customer relationships across the company (Clark et al. 2008).

CRM is therefore aimed at both customer retention and relationship growth approaches (Srivastava et. al, 2008).

CRM is defined as ‘the management process that uses individual customer data to enable a tailored and mutually trusting and valuable proposition. In all but the smallest of organizations, CRM is characterized the IT enabled integration of customer data from multiple sources (Clark et al. 2008).

Emergence Of CRM

As observed by Sheth and Parvatiyar (2007), developing customer relationships has historical antecedents going back into the pre-industrial era.

Much of it was due to direct interface between producers of agricultural products and their consumers. Similarly, artisans often developed customized products for each customer. Such direct dealings led to relational bonding between the producer and the consumer (Dick et al, 2004). It was only after the advent of mass production in the industrial era and the advent of middlemen that interaction between producers and consumers became less recurrent leading to transaction-oriented marketing(Dyche,2007). In other words, the production and consumption functions became separated leading to the marketing functions being performed by middlemen, and middlemen, in general, are oriented towards economic aspects of buying since the largest cost is often the cost of the goods sold (Bitner, 2005).

In recent years however, several factors have contributed to the rapid development and evolution of CRM. These include the growing disintermediation process in many industries due to the advent of complicated computer and telecommunication technologies that allow producers to directly interact with end-customers (Rajola, 2003). For example, in many industries such as the airline, banking, insurance, computer software, or household appliances industries and even consumables, the de-intermediation process is fast changing the nature of marketing and accordingly making relationship marketing more popular. Databases and direct marketing tools give these industries the means to individualize their marketing efforts. As a result, producers do not need the functions formerly performed by middlemen (Dick et al, 2004).

Even consumers are enthusiastic to undertake some of the responsibilities of direct ordering, personal merchandising, and product use related services with little help from the producers (Cannie, Caplin,2001). The recent success of on-line banking, Charles Schwab and Merryll Lynch’s on-line investment programs, direct selling of books, automobiles, insurance, etc., on the Internet all attest to the growing consumer attention in maintaining a direct relationship with marketers.

The de-intermediation process and consequent dominance of CRM is also due to the growth of the service economy. Since services are typically produced and delivered at the same institution, it minimizes the role of middlemen (Jasola and Kapoor, 2008). Between the service provider and the service user a moving bond also develops creating the need for maintaining and enhancing the relationship. It is therefore not difficult to see that CRM is important for scholars and practitioners of services marketing (Berry & Parsuraman, 2004; Bitner, 2005; Crosby, Evans, & Cowles, 2003; Alderson, W, 2005).

Another force driving the adoption of CRM has been the total quality movement. When companies embraced the Total Quality Management (TQM) philosophy to improve quality and reduce costs, it became essential to involve suppliers and customers in implementing the program at all levels of the value chain. This created the need for closer working relationships with customers, suppliers, and other members of the marketing infrastructure. Thus, several companies, such as Motorola, IBM, General Motors, Xerox, Ford, and Toyota, formed partnering relationships with suppliers and customers to practice TQM. Other programs such as "just-in-time" (JIT) supply and "materials-resource planning" (MRP) have also made use of interdependent relationships between suppliers and customers (Oliver et al, 2006).

With the advent of digital technology and complex products, the systems selling approach has become common (Naidu et al, 2008). This approach has emphasized the integration of parts, supplies, and the sale of services along with the individual capital equipment. Customers have liked the idea of systems incorporation and sellers have been able to sell amplified products and services to customers (Wilson, 2007). Then, the popularity of system integration began to extend to consumer packaged goods as well as to services (Shapiro & Posner, 2004). At the same time some companies started to insist upon new purchasing approaches, such as national contracts and master purchasing agreements, forcing major vendors to develop key account management programs (Shapiro & Moriarty, 2006). These measures created intimacy and cooperation in the buyer-seller relationship. Instead of purchasing a product or service, customers were more interested in buying a relationship with a vendor. The key (or national) account management program designates account managers and account teams that assess the customer’s needs and then companion the selling company’s resources for the customer’s benefit (Popli and Rao, 2009).

Many programs have led to the establishment of strategic partnering within the overall domain of customer relationship management (Anderson & Narus, 2001; Shapiro 2006). Similarly, in the current era of super-competition, marketers are forced to be more concerned with customer retention and loyalty (Dick & Basu, 2004; Reichheld, 2006). As numerous studies have indicated, retaining customers perhaps offers a more sustainable competitive advantage than acquiring new ones. What marketers are understanding is that it costs less to retain customers than to compete for new ones (Rosenberg & Czepiel, 2004).

On the supply side it pays more to develop closer bondings with a few suppliers than to work with more vendors (Hayes, Wheelwright, & Clarke, 2008). In addition, several marketers are concerned with keeping customers for life rather than with only making a one-time sale (Cannie & Caplin, 2001). There is greater opportunity for cross-selling and up-selling to a customer who is loyal and committed to the firm and its product offerings. In a recent study, Naidu, Parvatiyar, Sheth, and Westgate (2008) found that relational intensity increased in hospitals facing a higher degree of competitive greatness.

Also, customer prospect have been changing rapidly over the last two decades. Fueled by new technology and the growing availability of advanced product features and services, customer expectations are changing almost on a daily basis. Consumers are less willing to make compromises or trade-offs in product and service quality. In a world of ever changing customer expectations, building cooperative and collaborative relationships with customers seems to be the most practical way to keep track of their changing expectations and properly influencing those (Sheth & Sisodia, 2005).

Finally, many large multinational companies are today trying to become global by integrating their worldwide operations. To achieve this they are seeking cooperative and collaborative solutions for global operations from their vendors instead of merely engaging in transactional activities with them. Such customers' needs make it imperative for marketers interested in the business of companies that are global to adopt CRM programs, predominantly global account management programs (Yip & Madsen 2006). Global account management is conceptually similar to national account management programs except that they have to be global in scope and thus more complex. Managing customer relationships around the world calls for external and internal partnering activities, including partnering across a firm’s worldwide organization.( Parvatiyar & Sheth, 2001]

Importance Of CRM

Over the past two decades it has been argued, through various literatures, that there is a need to change the approach towards marketing in all the business. This kind of changed approach can be carried out through relationships, networks, and interactions (e.g., Day 2000; Grönroos 2000a; Gummesson 2009; Hunt 2000; Peck et al. 2009; Webster 2000).

In the current scenario of globalization , marketing has undergone a metamorphic change to cope with increased competitive, changing needs of customers, continuous product up progression due to change in technology, changing market trends and many more (Rosenberg & Czepiel, 2004). Because of these continues changes, the marketing efforts have also slowly shifted from mass marketing to interactive marketing and finally to today’s relationship marketing.

Customer relationship management is the important task for most of the entrepreneurs for their business purpose towards customers. Now this entrepreneur’s activity has come from product centric to customers centric (Srivastava, Shervani, & Fahey,2008). The satisfaction of the customer not only by the quality of the product but also by the quality of the services rendered to the customers has retained the value of companies among them.

If the companies try to retain the values of customers such process will lead them as a customer centric one. Also creating a belief, image, loyalty, honesty and the trust among the customers are the important task of an organization.

Hence, for all the above reasons, the CRM is brought to lime light by the company. Not just as a segment to be followed to the customer’s but to obtain the long term values among them. (Burkat, 2001)

Financial Industry In India: An Overview

The financial industry in India is not new concept, but its history can be traced for more than 200 years. This industry began around 1786 with the country’s first bank ‘Bank of Bengal’. Since then the industry has changed tremendously. Especially after 1969 the nationalization of banks took place. With the nationalization of banks, public sector experienced various positive changes and growth. After that an era came when the banks raised their standard from mere an institution for borrowing and lending to liberalized institutions (Rosenberg & Czepiel, 2004). This gave the Indian Banking scenario a major facelift. However, even today, despite the foray of foreign banks in the country, nationalized banks continue to be biggest lenders in the country. This is primarily due to the size of the banks and the penetration of the networks.


There are three parts of the Indian banking system, which can be classified as:

1. Nationalized banks

2. Private banks, and

3. Specialized banking institutions.

The Reserve Bank of India (RBI) is the supreme head of all these banks. The financial industry in India comprises of 30 banking units contributing to almost 50% of deposits and 60% of advances. All the banks report to Reserve Bank of India, which is the centralized body for managing the banking industry in India.

There are total 274 commercial banks in India, out of which 223 banks are in the public sector and 51 are in the private sector. The private sector banks also include the foreign banks and their number is 24. Regarding the specialized banks, they include cooperatives, rural banks, etc. form a part of the nationalized banks category.


In today’s scenario, the banking industry is considered to be among the best for providing jobs (Popli and Rao, 2009). This sector has the major grip of the job market. The private banks are providing good packages with the good positions, which leads to good growth of the employees and also encourage them to join n the banking sector. The Banking sector is considered the most lucrative option in today’s job market. In the industry, a position in Treasury or Forex is considered right on top and this is followed by careers in Private Banking, Investment Banking and Retail Banking. One could work in a variety of areas in banking industry including Recurring Deposit account, banking officer, probationary officer, loan officer, assessor, personal loan officer, home loan officer, home loan agent, loan manager, mortgage loan underwriter, loan processing officer, accountant, product marketing and sales executive, and customer service executive among others.

In the Financial Services, some of the important jobs include that of a stockbroker who is essentially a person who buys and sells securities on behalf of individuals and institutions for some commission. While some brokers like to practice with individual clients others work for institutions. Brokers who work for institutional investors are often called securities traders. Many prefer to work as dealers, advisors and securities analysts. Security analysts are those who advise companies on floatation’s of shares as they are expected to have sound knowledge of capital markets.

Investment analysts are the backbone of the financial services sector. They study the financial reports of companies, assess various statistical information, profitability projections, compare financial results, survey the industry as a whole and on the basis of the available information, and finally conclude to a decision. Equity Analysts do jobs similar to investment analysts and research the equity markets and make predictions.

CRM In Banking Industry

Although ‘banking’ is an old activity and has its roots in economics, finance, and commerce, the concept of ‘banking technology’ is of recent origin. To many people ‘banking technology’ means the use of computers and related hardware to streamline and automate banking operations. This research attempts to demsfying ‘banking technology’ and offer a much boarder meaning and more realistic and operationally sufficient perspective on ‘banking technology’.( Ravi, 2008).

The term ‘banking technology’ refers to use of sophisticated information and communication technologies together with computer science to enable banks to offer better services to its customers in a secure , reliable , and affordable manner, and sustain competitive advantage over other banks.( Ravi, 2008)

Universally conducting efficient banking operations and associated business in evolves managing:

1. The information and communication technology that drives the banks’ core business.

2. Customer relationships

3. Risks associated with conducting business with customers and other banks and financial institutions.

Successful banks all over the world have invested considerably in information and communication technologies, which in turn would increase banks’ profits considerably on one hand and improve the convenience and comfort levels of their customers in doing business with them on the other (Zohar et al., 2002). Banks continuously embrace, with great passion, the latest of developments in information and communication technologies and customer relationship management in order to service customers better and reap more profits. ( Ravi, 2008)

In today’s deregulated world, members of financial services industry are continuously forced to seek new ways to gain on their competitors and to outdo one another in terms of effectively realization to retail customers’ demands for increasing sophisticated financial products and services (Brown, 2000). As they have moved away from traditional broad based marketing to retail relationship service provision to attract and hold customers, to cross-sell products and most importantly to turn customers to avail multi products and services, customer relationship management is of utmost importance to financial services industry for survival and growth( Ravi, 2008). To keep customers in today’s competitive environment, financial institutions are increasing the depth of relationship through implementation of customer relationship management programs. (Berry and Persuraman ,2003)

Well-known studies performed at international level have pointed out that 65% of the profits are supplied by a mere 20% of the company’s customers , another 25% of the profits being owed to another 20% of the customers , whereas the remaining 60% of the customer together account for only the remaining 10% (Brown, 2000)( Rajola , 2003)

CRM relies heavily upon the integration of many technologies for success. And yet CRM is not wholly and solely reliant upon these technologies—financial services institutions (FSIs) quickly have realized that properly trained employees and precisely aligned business processes play an equally important role in CRM. To gain the full value of any investment in a CRM-related technology, FSIs must place proper emphasis upon training the people who will be interacting with customers and upon the reevaluation of existing business processes to assure conformance with CRM (Foss, 2002)..

Banks are highly focusing on CRM for the last five years that is expected to continue (Foss, 2002). According to Foss (2002) most of the financial services industries are trying too use CRM techniques to achieve varieties of outcomes. These areas are:

  • Creating consumer-centric culture and organization.
  • Securing customer relationships.
  • Maximizing customer profitability.
  • Aligning effort and resource behind most valuable customer groups.

To implement strategies these aspects must be considered:

  • Communications and supplier-customer interactions through channels;
  • Identifying sales prospects and opportunities;
  • Support  cross and up-selling initiatives;
  • Managing customer value by developing propositions aimed at different customer segments;
  • Supporting channel management, pricing and migration.

The bank would need a complete view of its customers across the various systems that contain their data (Mathew et al., 2005). If the bank could track customer behaviors, executives can have a better understating a predicting future behaviors and customer preferences. The data and applications can help the bank manage its customer relationship continue to grow and evolve (Dyche, 2007).

Six Business Imperatives For A Successful CRM Strategy

Any financial institution seeking to adopt a customer relationship model should consider six key business requirements.

  • Create a Customer-Focused Organization and Infrastructure
  • Gain an Accurate Picture of Your Customer Categories
  • Accurately Assess the Lifetime Value of Your Customers
  • Maximize the Profitability of Each Customer Relationship
  • Understand How to Attract and Keep Your Best Customers
  • Maximize Rate of Return on Marketing Campaigns.

Benefits Of CRM

CRM permits businesses to leverage information from their databases to achieve customer retention and to cross-sell new products and services to existing customers. Companies that implement CRM make better relationships with their customers, achieve loyal customers and a substantial payback, increased revenue and reduced cost. CRM when successfully deployed can have a dramatic effect on bottom-line performance. For example, Lowe ’ s Home Improvement Warehouse, in a span of 18 months, achieved a 265 per cent return on Investment (ROI) on its $ 11m CRM investment. 13 According to a study conducted in the sector of banking, convenience of location, price, recommendations from others and advertising are not important selection criteria for banks. From customers’ point of view, important criteria are: account and transaction accuracy and carefulness, efficiency in correcting mistakes and friendliness and helpfulness of personnel.

Thus, CRM, high-quality attributes of the product / service and differentiation proved to be the most important factors for customers.

Need For CRM In Banking Industry

A relationship- based marketing approach has the following benefits:-

  • Over time, bank customers tend to increase their holding of other products from across the range of financial products/services available.
  • Long-term customers are more likely to become a referral source.
  • The longer a relationship continues, the better a bank can understand the customer.
  • Customers in long-term relationships are more comfortable with the service , the organization , methods and procedures (Vardarajan P.R ,2006)

IDBI Bank: An Overview

The Industrial Development Bank of India Limited commonly known by its acronym IDBI is one of India's leading public sector banks and 4th largest Bank in overall ratings. RBI categorised IDBI as "other public sector bank" (Vardarajan, 2006).It was established in 1964 by an Act of Parliament to provide credit and other facilities for the development of the fledgling Indian industry. It is currently the tenth largest development bank in the world in terms of reach with 975 ATMs, 568 branches and 352 canters. Some of the institutions built by IDBI are The National Stock Exchange of India (NSE), The National Securities Depository Services Ltd. (NSDL) and the Stock Holding Corporation of India (SHCIL) IDBI BANK, as a private bank after government policy for new generation private banks (Robert  and Graham , 2008).

To meet emerging challenges and to keep up with reforms in financial sector, IDBI has taken steps to reshape its role from a development finance institution to a commercial institution. With the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, IDBI attained the status of a limited company viz. "Industrial Development Bank of India Limited" (IDBIL). Subsequently, the Central Government notified October 1, 2004 as the 'Appointed Date' and RBI issued the requisite notification on September 30, 2004 incorporating IDBI Ltd (Vardarajan, 2006). As a 'scheduled bank' under the RBI Act, 1934. Consequently, IDBI, the erstwhile Development Financial Institution of the country, formally entered the portals of banking business as IDBIL from October 1, 2004, over and above the business currently being transacted (Vardarajan, 2006).

The Private banking arm, IDBI bank was merged into IDBI. The IDBI BANK was one of the fastest growing companies in India. The Banking arm was technologically driven, customer focused entity. IDBI got the platform of its private banking arm to reform itself into a competitive entity (Andrew, 2006 ).


With an ever-changing financial service marketplace in an environment of continued turbulence, disruptive competitors, dynamic markets and demanding customers, reaching out to the customers effectively is becoming a tremendous challenge. With over million transactions in a day, alongside comes the challenge of understanding the credit worthiness of customers, and therefore to proactively mitigate, measure and monitor credit risk.

With technology deployment seen as the key solution to fuel growth, IDBI Bank, one of India's fastest growing private sector banks, needed a solution that could help the Bank meet the new regulatory framework and also ascertain the credit portfolio of its customers. IDBI Bank needed a solution that would assist in understanding the credit worthiness of its customers, generating superior Portfolio Analysis and enhancing its risk management initiative in retail banking in line with the Bank's plans on being Basel II compliant by 2006.

Keeping these underlying objectives in mind, IDBI Bank has led an aggressive effort to manage the quality of its interactions with customers. In pursuing a customer relationship management (CRM) business strategy, the stated objective of the bank is “to capture the full potential of our customer base through the use of customer information to deliver the right solutions in a consistent, professional manner at every point of contact.” This research will investigate the steps IDBI Bank has taken to build and fortify its CRM capabilities within the realm of customer knowledge ( This research will also investigate the analytics and customer decision capabilities that provide the backbone of the bank’s CRM activities (

IDBI Bank has embraced CRM as a critical business strategy and has been actively pursuing this mission for approximately, While the bank has pursued technologies that enable CRM through both customer interaction and customer knowledge, it has made particular strides in the areas of customer knowledge, decision, and the use of advanced analytics. At IDBI Bank, gathering and mining customer data to better understand and serve customers is a critical imperative that is yielding success. (Uppal, 2008, p. 230-231).

IDBI Bank’s success with CRM can be traced to a number of factors. First, the bank was one of the early adopter of a client information file (CIF) . Second, the bank has aggressively used its customer data to better understand its customers and create meaningful and actionable segments and customer strategies. Third, the bank’s CEO and executive team vocally and visibly support the bank’s CRM efforts. Finally, IDBI Bank is willing to experiment with CRM and learn from its mistakes.

It should be noted that IDBI Bank is cautiously optimistic regarding its CRM efforts. The bank is very clear about the lengths that it still needs to traverse before it can declare victory. While the bank has been an early proponent of technology and advanced analytics to assist in building strong relationships with customers, there is still progress to be made on the people and business issues (Robert and Graham, 2008).

As noted earlier, although IDBI Bank has embraced CRM as a business strategy only recently, the bank’s commitment is anything but lukewarm (Robert  and Graham , 2008). If a driving factor in pursuing a CRM business strategy was the need for consistent communications with customers across its consumer lines of business, the key enabling factor for the bank has been the wealth of historical customer data available in IDBI Bank’s data warehouse. As the bank sought to address the issue of consistency of approaches, it quickly realized that the challenge would be to parse customer data into its most meaningful aspects and to distribute that data to the consumer touch points (Soteriou and Stavrinides, 2000, Bhat, 2005; Bexley, 2005).

As the bank has experimented and worked to deploy CRM strategies within its banking network, the concept of CRM divided into two areas (Mukherjee et al., 2003). CRM was viewed as integral to the marketing of products and services within the bank, but it was also seen as a discipline for managing customer interactions. The quality of customer interactions was believed to be integral to the customers’ expectations and loyalty with the bank. CRM was soon viewed as a discipline that not only could help IDBI Bank offer the most appropriate products and services to customers but also could ensure that the customers’ interactions are customized based on the individual’s current and potential value as a client (Sarah D., 2004).

IDBI Bank has been a long-term proponent of proactively selling its products and services to customers. What makes IDBI Bank different from other organizations is that it takes these very straightforward disciplines of a sales culture and wraps around them an imperative always to match the appropriate product and service to the customer (Robert and Graham, 2008). Selling for the sake of selling is not tolerated. Rather, the bank strives to ensure that sales discussions are solidly based upon an understanding of the customer’s financial needs and goals. In addition to this, IDBI Bank’s service orientation is to provide critical customer information to the points of customer contact. In essence, the bank is attempting to use technology as a distributed platform for institutional memory. (Zeithamal and Berry, 2008)

IDBI Bank looks confidently into the future to face and thrive in the intense competitive environment that is emerging (Andreassen, 2001, Schneider and Bowen, 2007). The bank has now gained experience and has in place the strategies required for gaining a leadership position. With cutting edge relevant technology, aggressive marketing, innovation, tight control over costs and with its motivated workforce, the bank is all set to emerge as a model global corporate citizen in the days ahead.


Quality in servicing customers is an important marketing construct for banks, but idiosyncrasies in the definition of service quality and customer satisfaction, as well as in adapting current instruments to measure them in the international banking industry, constitute major constraints to research and practice (Johnston 2001). This research conceptualizes the quality of banking services based on the perception of 50 customers of IDBI Bank.  Five drivers of banking service quality are developed and argued to be a proxy for customer satisfaction: (1) business and financial transactions (2) customer relationships (3) information technology (4) branch, and (5) image. The resultant framework is expected to serve bank executives when making strategic decisions on how to address their clientele. (Gerhard , Ajami, Goddard, Gargeya, 2006)

Most studies on service quality make use of the SERVQUAL framework (Parasuraman et al., 2004), which measures a customer’s perception of quality from comparing his or her expectations of an excellent service with the perception he or she has about the actual performance of the same service. Then, if the same perceived service matches or exceeds the expected service, that customer would be motivated to contact the service organization again (Kotler & Armstrong, 2001).


Indian Banks have recorded a phenomenal growth in the past decade with the initiation of Economic Reforms. The banks, both Public and Private, have transformed themselves into profit-oriented business organizations besides playing a developmental role in the economy (Kotler & Armstrong, 2001). In an attempt to be more profitable, the banks have become competitive and more customer-oriented. This new orientation has compelled them to take a more pragmatic approach for conducting the business. In the backdrop of this scenario, the study reviewed implementation of Customer Relationship Management (CRM) and the impact of CRM on service quality and customer retention in ten public and private sector banks of India (Zikmund, G.W., 2004).

It was found that the Private Sector Banks have been able to implement the CRM practices more effectively as compared to their Public Sector counterparts. This fact has further been corroborated by the findings of the service quality level being provided by these banks (Zikmund, G.W. ,2004). Further, it was observed both the public and private sector banks scored the least on responsiveness and empathy factors. Public Sector Banks have fared better in terms of reliability and assurance whereas the Private Sector Banks have fared better in terms of tangibility, reliability and assurance. (Alderson, 2005)

Chapter 3: Research Methodology

This chapter will cover the discussion about the methodological issues related with this product. It will further deal with the chosen research approach, results from the literature review.

Methods And Approach

The method is the tool, which is being used by an empirical study to reach a specific goal in a scientific way. There should be a matching between, on one hand, method and on the other hand the problem, purpose and the available resources. The chosen method should also be based on the analysis, which has to be conducted.

Research Approach

When determining what research approach should be adopted, there are so many options for a researcher to take under consideration. The research approach consists of the inductive or deductive way of drawing conclusions, and qualitative and/or quantitative method of investigating information. Two different approaches for drawing research conclusions exist, that is, induction or deduction. A deductive approach is according to Doorm & Ekroth (2004) based upon the theories and area investigation. This should be followed by an attempt to describe and explain if the reality truly is what the theories earlier stated. In contrast Doorm (2001) claims that the inductive approach is not based on any theory at all, rather than approach of collecting data from which a general conclusion can be drawn. They finally argue that this could lead to a future development of a new theory.

According to Johansson & Svedner (2003) the qualitative approach allows the researcher to describe the individual case more thoroughly, since the objective is not to generalize. Furthermore, the method is flexible and therefore it enables the researcher to correct possible weakness and incorrect formulations and also to add lacking questions. Johansson & Svedner (2003) further stress that if the researcher instead collects a great amount of facts, and analyses them with the purpose to find patterns that are presumed to answer for a large group of individuals, a quantitative approach is recommended.

I have adopted the inductive approach, and my study is based on my research findings, on the basis of which I have developed my own model. Since the purpose of this investigation required the methodology that would enable me to a deeper understanding of the problem at hand, I have adopted a qualitative approach, which allowed me to investigate my problem area in more depth and detail. The method I have chosen for my research has enable to get the deep understanding of the topic I have chosen.

Induction Or Deduction

According to Pervez Ghauri (2006), there are two ways of establishing what is true or false and of drawing conclusions: induction and deduction. Induction is based on empirical evidence while deduction is based on logic. Through induction we draw general conclusions from our empirical observations and this process goes from assumption to conclusion. By deduction we mean that we draw conclusions through logical reasoning. In this case, it need not be true in reality, but it is logical.

Quantitative Research

It is a research mainly catering to the quantitative aspects and the relationship of variables and a scientific investigation. (Bhattacharya.2002) It is based on a hypothesis that can be used to create models mathematically and also measurement of quantitative variables forms a part of this type of research. Like in empirical research there is a use of data and in explanatory research there is a study of cause & effect relationship, there is also an application of correlation theory is being used in this research. Also, this theory states that there exists a variation between variables and there are possibilities that two connected variables also have a variance developed.

Types Of Data Collection

1. Secondary Data- A data analysis which consists of gathering data that was collected and compiled by other researchers, and thus, utilising their data to attain an understanding of your own concept is called secondary data. An optimum amount of data is available on various secondary data sources which have to be explored supporting the issue or a topic. Secondary data is used in many studies because it can be obtained at a fraction of the cost and time involved in primary data collection (Wilson, 2006).

The data is explored mainly through various external sources of secondary data including articles, journals, newsletters, books, published research reports, internet and search engines to develop an understanding about brand and branding strategies and analyse the factors which makes a brand a high-end luxurious brand, the data was also compiled to investigate the purchase decision elements of the consumers and the attributes which plays a major role in influencing consumers to purchase. Secondary data also helps in analysing the previous studies and evaluating its significance to the present scenario hence forming up a base and arousing a key area where the research should be inclined. The data gathered through secondary sources will help in effectively evaluating the primary data with more insight. 

2. Primary Data- With respect to collecting primary data, researchers collect the data themselves by using methods such as questionnaires and interviews. Primary data can be collected by three different methods - Observation, Qualitative research and Quantitative research. Observation research is a data collection approach where information is collected on the behaviour of people, objects and organisations without any questions being asked of the participants. While, Quantitative research uses a structured approach with a sample of the population to produce quantifiable insight into behaviour, motivations and attitudes and at last, Qualitative research uses an unstructured research approach with a small number of carefully selected individuals to produce non-quantifiable insights into behavior, motivations and attitudes. In this research study, qualitative research is taken into consideration for collecting primary data.

Data Collection Method

For the research of my study, I shall do the analysis on the basis of questionnaire surveys and some secondary research as well. As the key purpose of the study is to find out as to how to manage CRM in banking sector with the focus on customer satisfaction.

The source of secondary research used in my study is as follows:-

1) Internet search, using online resources to gather data for research purposes. This method is not usually very reliable and requires appropriate citation and critical analysis for findings.

2) Library search and indexing, this technique requires to go through written texts that have already done similar work and utilizing their researches for your dissertations.

3) Data collection organizations.

4) News Papers and Magazines, journals and other similar periodicals.

Data Validity And Reliability

Yin claims that research design is the logical sequence that connects the empirical data to its conclusions. Hence, for a research measure to be valid, it must also be reliable, and vice versa.


Validity refers to how well a specific research method measures what is supposed to be measure. Generally, it is more difficult to resolve validity than reliability (ibid). High validity can be achieved when the research brings the outcome which is supposed to be and this is also referred as internal validity.


According to Chisnall (2001), reliability refers to the stability and consistency of the results derived from the research, to the probability that the same results could be obtained if the measures used in the research were replicated. Lekvall & Wahlbin (2007) states, a research holds high reliability if it can be repeated several times and the outcome is same.

For the reliability of my research, I have tried my best to choose the right source of information to get the proper information required for the research.

Data Analysis And Discussion

All the essential information collected from the given sources was understood and interpreted in analyzing the answers for the objectives of research. . The data collected through secondary resources has been arranged in such a manner that it can answer the questions being asked in research process and finally satisfies aims and objectives of the dissertation process. The feasibility analysis for the research topic was evaluated on parameters discussed in research questions.

The reason for choosing the secondary method for my research is that it helped me to enlighten the better and clear picture of my research along with the practical experiences. As my topic deals with customer satisfaction, hence it becomes necessary and relevant to collect the data from the customer directly. I would be collecting the data from 100 respondents and would be conducting the analysis on it.


This chapter has explained the methodology for this dissertation. The aim of the research was:

  • Identify the definitions and benefits of CRM.
  • To understand the various CRM Processes.
  • To determine CRM technology utilized in one of the Indian Bank (IDBI Bank Ltd.).
  • To categorize the CRM Structure

Chapter 4: Analysis

The research done by me has the variance in the methodology. I have tried to imply the different methods to collect the data, hence forth taking out the implications and the conclusions based on the same. I had used the online questionnaire format for this research. The questionnaire was designed using likert scale and other applicable options. I sent the questionnaire to almost 100 respondents, out of which 88 respondents were returned, out of which 10 respondents have not completed the questionnaire properly and accurately. Hence, I left with 78 questionnaires which are actually useful. I had used the range of questions which include the matters like customer care, commitment, satisfaction, customer perception, staff and customer relationship towards IDBI Bank Ltd.  The questionnaire was sent online through the help of M/S Viva Info media in Mumbai, which is a data collection and mass mailer company.

Table 1: Survey Response Rate













In this study, the internal method of the survey has been used. Data is collected from the customers of IDBI Bank Ltd. The data collected through these questionnaires have been analyzed under various headings which will lead to better conclusion towards the research question of this study.

The questions have been divided into different sections for the purpose of research, so that the analysis with respect to different factors mentioned earlier, can be done. The factors are:

Factor 1 (Service): The questions in this category are related to service quality provided related to common banking have been put under this category.  (Table 1).


Response Rate as per Category





quality of the banks products and services





Relationship with the bank





Usage of Customer care number





Bank’s website





Comfort of using banking options





Factor 2 (Basic Services Provided by Customer Care)- This factors includes the criteria to judge the service quality provided by the bank and its staff.


Response Rate as per Category

Never/ Very long

Rarely/ Long

Occasionally/ Appropriate

Sometimes/ Low

Always/Very Low