BM COLLEGE OF MANAGEMENT & RESEARCH, INDORE

SYNOPSIS
(SUBMITTED TOWARDS THE PARTIAL FULFILLMENT OF MASTER OF BUSINESS ADMINISTRATION AWARDED BY DEVI AHILYA VISHVAVIDHYALAYA, INDORE)

ON A STUDY OF THE CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN BANKING SECTOR (A CASE STUDY OF STATE BANK OF INDIA)

BMCMR

MBA III SEM

2009-2011

Project Guide
Dr.Vijaylaxmi Iyengar
Director, BMCMR.

Submitted By
Mahesh Kumar Gunji

A STUDY OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN BANKING SECTOR

(i)

PREFACE
The research provides an opportunity to a student to demonstrate knowledge, skill and competencies required during the project. The training project helps to know the customer relationship management in banking sector in detail. Although researcher have tried my level best to prepare this report an error free report every effort has been made to offer the most authenticate position with accuracy. The report is divided into seven chapters. The first part will consist of introduction to the topic, second will contain the. The middle part will be giving a brief overview about the customer relationship management and the methodology to be used in the project. Fourth chapter is the most important part as it will contain the objectives of the project and. Last part will be dealing with the analysis of data , limitation, findings and suggestions. The Chapter1- deals with the introduction and conceptual frame work related to the customer relationhip management and scenario of the present market. The Chapter2 deals with the review of literature on customer relationship, which will be covering the early researches on the topic done by researcher and the conclusion drawn by them will be used for further references. The Chapter 3 deals with the Rationale of the study which will be covering all the aspects like why research is being done on customer relationship management. The Chapter 4 deals with the objective of the study which will be covering the main motive of the study and the main reasons for the conduct of the study. The Chapter 5 deals with research methodology used by researcher and explain factors like Research design, The Research Process, to find satisfactory answers to the questions: what, how and why? It may be diligent enquiry in a scientific manner for improvement of an existing system or for development of a new one or for improving a process consists of data analysis and result through use of various tools and techniques of statistics. TheChapter6 deals with the expected outcome of the study on above topic which will be drawn after the conduct of the whole research. The Chapter 7 consists limitations of the study like number of companies selected for research, area of the research, number of respondents ,availability of primary and secondary data. The limitation of any study is that any research is time consuming and involves the basic knowledge of the interpretation which may not be up to the mark all the time. Hence, the project undertaken focuses on these issues linked with the evolution on equity market.

INDEX

CHAPTERS PREFACE

CONTENTS

PAGE NO.
(I)

Chapter 1

INTRODUCTION Conceptual framework

1-4

Chapter 2 Chapter 3 Chapter 4 Chapter 5

REVIEW OF LITERATURE RATIONALE OF STUDY OBJECTIVE OF THE STUDY RESEARCH METHODOLOGY The study. Hyphotesis test. Tool for data collection. Tool for data analysis.

5 6 7

8-10

Chapter 6 Chapter 7

EXPECTED OUTCOME OF THE STUDY LIMITATION OF THE STUDY

11 12

BIBLIOGRAPHY WEBLIOGRAPHY REFERENCES

A STUDY OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN BANKING SECTOR CHAPTER 1 INTRODUCTION

Competition and globalization of banking services are forcing banks to be productive and profitable. To retain High Net Worth individuals, banks should focus strongly on relationship management with customers. Innovative Customer Relationship Management (CRM) strategies and cutting edge software can help, to a great extent, in achieving the desired results. To provide customized services, banks are opening Personalized Boutiques which provide all the required financial needs of a customer. The entire service industry is now metamorphosed to become customer- specific. In this context, the management of customer relationship in financial services industry demands special focus. Gone are the days when customers at a bank did not mind the long serpentine queues and waited patiently for their turn with a token in their hand. In todays Internet era, no one has the leisure to wait. in this context, online banking is assuming a great significance. Today, banking is more customer-centric, unlike the yester when it was transactioncentric. Banks are increasingly focusing on the premise that customers choose on the service provider who differentiates through quick and efficient service. However, there is more to Customer Relationship Management (CRM) than just managing customers and analyzing their behaviours. Banks are well aware that their success is predominantly dependent on the CRM strategies adopted by them. Service providers have recognized that good CRM bonds customers with the organization for a longer term, resulting in increased revenues. With customers expectations becoming even more competitive, banks are coming up with a wide array of novel products and services every day. The challenge is for the banks to work towards ensuring that customers prefer their products and services over that of competing brands.

Customer Relationship Management

In literature, many definitions were given to describe CRM. The main difference among these definitions is technological and relationship aspects of CRM. Some authors from marketing background emphasize technological side of CRM while the others considers IT perspective of CRM. From marketing aspect, CRM is defined by [Couldwell 1998] as .. a combination of business process and technology that seeks to understand a companys customers from the perspective of who they are, what they do, and what they are like. Technological definition of CRM was given as .. the market place of the future is undergoing a technology-driven metamorphosis [Peppers and Rogers 1995]. Consequently, IT and marketing departments must work closely to implement CRM efficiently.

Meanwhile, implementation of CRM banking sector was considered by [Mihelis et al. 2001]. They focused on the evaluation of the critical satisfaction dimensions and the determination of customer groups with distinctive preferences and expectations in the private bank sector. The methodological approach is based on the principles of multi-criteria modeling and
preference disaggregation modeling used for data analysis and interpretation. [Yli- Renko et al. 2001] have focused on the management of the exchange relationships and the implications of such management for the performance and development of technologybased firms and their customers. Spesifically the customer relationships of new technology-based firms has been studied. [Cook and Hababou, 2001] was interested in total sales activities, both volume-related and non-volume related.

Customer Service and Retention

More competition and increased regulation made it more difficult for banks to stand out from the crowd. However, the development of CRM gave proactive banks access to technology that helped them improve customer retention by using customer feedback to offer conveniences like ATMs and online banking. Banks can also use CRM tools to improve customer loyalty by using data collected through customer sign-ups, transactions and feedback processes.

Call Centers
Bank call centers use CRM solutions for various purposes. Cost-driven call centers use CRM to track call transactions and troubleshooting techniques to fine-tune the service resolution process. Metrics like average handle time and customer feedback ratings help bank call centers improve their customer support for retention. Profit-driven call centers also leverage CRM customer account records for add-on selling opportunities.

Sales
Sales has taken on more importance in banks with the evolution of CRM. Bundling products and premier customer accounts are examples of techniques used by banks to build single product customer accounts into full product suites including a range of financial services. With CRM software, bankers can easily see what products you currently use, what products you are eligible for and what the benefits are should you add the additional product or service.

Data Warehouse and Data Mining

The Data warehouse is the core of any decision support system and hence of the CRM. In implementing its Data Warehouse Garanti Bank has selected an incremental approach, where the development of information systems is integrated with the business strategy. Instead of developing a complete design of a corporate Data Warehouse before implementing it, the bank has decided to develop a portion of the Data Warehouse to be used for customer

relationship management and for the production of accurate and consistent management reports. Here we are not concerned with the latter goal, but are concentrating on the former.

The Data Warehouse has been designed according to the IBM BDW (Banking Data Warehouse) model that has been developed as a consequence of the collaboration between IBM and many banking customers. The model is currently being used by 400 banks worldwide. The Garanti Bank Data Warehouse is regularly populated both from operational systems and from intermediate sources obtained by partial preprocessing of the same raw data.

SBI(STATE BANK OF INDIA)

Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. SBI is a leading public sector bank in INDIA with large customer base and excellent infrastructure facility. It caters the prospective customers with wide range of products and banking facility. It is the only bank in with various departments and functions and large work force. It has recently under taken the re-engineering process to provide better facilities for the customers and it has adopted various technologies to satisfy the customers to the fullest. It has its prominence from past two decades. The idea of CRM is that it helps businesses use technology and human resources gain insight into the behavior of customers and the value of those customers. If it works as hoped, a business can: provide better customer service, make call centers more efficient, cross sell products more effectively, help sales staff close deals faster, simplify marketing and sales processes, discover new customers, and increase customer revenues. the organization must look into all of the different ways information about customers comes into a business, where and how this data is stored and how it is currently used.

A STUDY OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN BANKING SECTOR CHAPTER 2 REVIEW OF LITERATURE
During the course of literature review about the an analysis of customer relationship management. It was evident that there is hardly any significant research done applying the concept of different technique.

According(Nevin, 1995; Parvatiyar and Sheth, 2001; Sin et al., 2005)

crm has been a part of marketing literature since more than a decade. Interestingly, there is still much debate over what exactly constitutes crm.

According to Parvatiyar and Sheth (2001)

some of the themes represent a narrow functional marketing perspective while others offer a perspective that is broad and paradigmatic in approach and orientation. One example of a narrow perspective is to view CRM as database marketing (Peppers and Rogers, 1995) emphasizing promotional aspects of marketing by leveraging customer databases. Other examples of a narrow approach include electronic marketing (Blattberg and Deighton, 1991) and aftermarketing (Vavra, 1992). Electronic marketing encompasses all marketing efforts supported by information technology while aftermarketing efforts focus on customer bonding after the sale is made. In order to develop a comprehensive list of CRM practices, it is essential to identify the key constructs of CRM. In this direction, Sin et al. (2005) have proposed that CRM comprises the following four constructs: Key customer focus, CRM organization, Knowledge management Technology-based CRM. Each of these is discussed as follows.

A STUDY OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN BANKING SECTOR CHAPTER 3 RATIONALE OF THE STUDY

Technology plays the role of enabler in CRM deployment (Das, 2004) and allows firms to achieve greater customization and better service at lower cost (Sin et al., 2005). A review of academic and practitioners literature was done to develop a comprehensive list of CRM practices. Please refer appendix I for the practices and their respective chief sources. Going over to customer loyalty, Oliver (1999) defined it as a deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situation influence and marketing efforts having the potential to cause switching behaviour. Thus, loyalty has both an attitudinal and behavioural dimension (Day, 1969; Dick and Basu, 1994). Behavioural loyalty will include examples like repeat purchase, word of mouth, etc while attitudinal loyalty will comprise examples like trust or emotional attachment.

A STUDY OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN BANKING SECTOR CHAPTER 4 RESEARCH OBJECTIVE
This survey attempts to measure the extent of deployment of CRM best practices across the banking segments. In CRM projects, following data should be collected to run process engine: 1) Responses to campaigns, 2) Shipping and fulfillment dates, 3)Sales and purchase data, 4) Account information, 5) Web registration data, 6) Service and support records, 7)Demographic data, 8) Web sales data. The current study has two parts as mentioned below: CRM best practices survey Case study research

Following are the research questions associated with the current study: 1. What are the best practices with regard to CRM deployment? 2. What is the association between deployment of CRM best practices and loyalty of profitable retail customers in the Indian retail banking sector?

A STUDY OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN BANKING SECTOR

CHAPTER 5 RESEARCH METHODOLOGY

Research methodology is a method of studying problems whose solutions are to be desired partly or wholly from fact these fact may be statement of opinions, historical fact those contained in record and report the result of test answers to questionnaires, experimental data of any sort, and so forth. - By M.S. MONROE Redman & Mory-Systematized effort to gain new knowledge. Research is an art of scientific investigation. It refers to the systematic method consisting of enunciating the problem, formulating a hypothesis, collecting the facts or data, analyzing the facts and reaching certain conclusions either in the form of solutions towards the concerned problem or in certain generalizations for some theoretical formulation.

The study:
The research is completely analytical in nature as it will be dealing with order to develop a questionnaire comprising the CRM best practices, extensive review of literature was done. Based on the review of literature mentioned earlier, 140 statements were developed each representing a CRM practice.

Tools for data Collection .

The primary data will be collected through the use of structured questionnaire regarding information and general observation made by the researcher. The secondary data will be collected through the use of brochures collected from STATE BANK OF INDIA, ICICI BANK, Journals, Magazines, Websites and the research done by other researchers.

Tools for Data Analysis:

The researcher will use the following statistical tool for analyzing data. According to Sin et al. (2005), the CRM efforts are targeted at the profitable customers. Further, these efforts are intended to lead to increased customer loyalty (Das, 2004; Lindgreen, 2004; Parvatiyar and Sheth, 2001; Sin et al., 2005). Therefore, the current study explores the association between the deployment of CRM best practices and loyalty with respect to profitable retail customers. Further, as discussed earlier, the profitable retail customers are classified as High and Medium RV customers making high and medium contribution to the banks profitability respectively. Thus, the study will try to explore the veracity of the following two hypotheses using pattern matching technique consisting of literal and theoretical replication.

Hypothesis 1 (H1): There is a strong association between deployment of CRM Best

Practices in scheduled commercial banks and loyalty levels of High Relationship Value retail customers.

Null Hypothesis 1 (Ho1): There is no strong association between deployment of CRM

best practices in scheduled commercial banks and loyalty levels of High Relationship Value retail customers.

Hypothesis 2 (H2): There is a strong association between deployment of CRM Best

Practices in scheduled commercial banks and loyalty levels of Medium Relationship Value retail customers.

Null Hypothesis 2 (Ho2): There is no strong association between deployment of CRM

best practices in scheduled commercial banks and loyalty levels of Medium Relationship Value retail customers.

A STUDY OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN BANKING SECTOR CHAPTER 6 EXPECTED OUTCOME OF THE STUDY

The complete research will help the researcher to understand the Results obtained by extensive usage of customer data to develop and apply Relational Marketing have convinced the Garanti Bank to proceed along the line undertaken. As lists of customers eligible for four very important banking product/services are available, as above described, the following actions are now being deployed: 1. extension of promotions to a larger customer population by having sales people in the branches contacting progressively 15,000 customers. 2. targeted campaigns through Internet and the call center for customers actively using one or both of these innovative channels for their banking operations. The same approach is now being extended to small and medium businesses and to commercial customers. Moreover the analytical and strategic CRM cycle is being completed by developing an application analyzing customers' attrition and deploying strategies to reduce it.

A STUDY OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN BANKING SECTOR

CHAPTER 7 LIMITATION OF THE STUDY

The current survey provides for data collection from a single respondent, which, however, can affect the findings. A more appropriate alternative would have been to collect data from more than one employee and that too across the three management levels, namely top, middle and lower management. The same was, however, not attempted for reasons of exorbitant cost and time. However, as mentioned earlier, all care was taken to ensure that the responses collected are representative.

REFRENCES
Berry, M.J.A. & Linoff G.S., 2000, Mastering Data Mining: The Art and Science of Customer Relationship Management, John Wiley & Sons, Inc. Cabena, P., Choi H.H., Kim I.S., Otsuka S., Reinschmidt J. & Saarenvirta G., 1999, Intelligent Miner for Data Applications Guide, IBM Redbooks, SG24-5252-00. Cook, W.D., & Hababou, M., 2001, Sales Performance Measurement in Bank Branches, Omega, 29, 299 307. Couldwell, C., 1998, A Data Day Battle, Computing, 21 May, 6466. Hosking, J.R.M., Pednault, E. P. D. & Sudan, M., 1997, A statistical perspective on data minin, Future Generation Computer Systems, 13, 17-134. Mihelis, G., Grigoroudis, E., Siskos, Y., Politis, Y., & Malandrakis, Y., 2001, Customer Satisfaction Measurement in the Private Bank Sector, European Journal of Operational Research, 347-360. Peppard, J., 2000, Customer Relationship Management (CRM) in Financial Services,European Management Journal, Vol. 18, No. 3, pp. 312327, Peppers, D., & Rogers, M., 1995, A New Marketing Paradigm, Planning Review, 23(2), 1418. Ryals, L., & Knox, S., 2001, Cross-Functional Issues in the Implementation of Relationship Marketing Through Customer Relationship Management, European Management Journal, Vol. 19, No. 5, pp. 534542. Yli-Renko, H., Sapienza, H.J., Hay, M., 2001, The Role of Contractual Governance Flexibility in Realizing the Outcomes of Key Customer Relationships, Journal of Business Venturing, 16, 529555. Yuan, S.T., & Chang, W.L., 2001, Mixed-Initiative Synthesized Learning Approach For Web-Based CRM, Expert Systems with Applications, 20, 187-200.

WEBLIOGRAPHY

www.indiainfoline.com

www.wikipedia.org www.personaluniq.edu www.mscibrarra.com www.europejornals.com

BIBLIOGRAPHY
Berry, L.L (1995), Relationship marketing of services growing interest, emerging perspectives, Journal of the Academy of Marketing Science, Vol. 23, No.4, pp.236-245. Brown, S.A., (2000), CRM: A strategic Imperative in the word of eBusiness, John Wileg & Sons Canada Ltd. Butscher, S.A. (2002), Customer Loyalty Programmes and Clubs, Gower Publishing, Ltd. Dych, J. (2002), The CRM Handbook: A Business Guide to Customer Relationship Management, Addison-Wesley Professional, Massachusetts. Fisher, C., (2004), Researching and writing a dissertation for business students, Pearson Education Edition. Girishankar, S. (2000), Companies want CRM tools to manage business relationships, Information Week, No.17, pp.65. Gummesson, E. (2004), "Return on relationships (ROR): the value of relationship marketing and CRM in business-to-business contexts", Journal of Business & Industrial Marketing, Vol.19 No. 2, pp. 136-148. Hennig-Thurau, T., Hansen, U. (2000), Relationship Marketing: Gaining Competitive Advantage Through Customer Satisfaction and Customer, Springer