S.K.

SOMAIYA COLLEGE OF ARTS, SCIENCE & COMMERCE

STD: S.Y. BANKING AND INSURANCE

SUBJECT: CUSTOMER RELATIONSHIP MANAGEMENT. TOPIC: RELATIONSHIP MARKETING AND CUSTOMER PERCEIVED SERVICE QUALITY IN NATIONAL BANK AND MILLENNIUM BANK.

INDRODUCTION:Relationship Marketing is all about attracting, maintaining, & enhancing customer relationships. The concept of relationship marketing develop from the facts that acquiring new customers is more costly than retaining the existing ones& long time customer tend to be less price sensitive & also provide free word of mouth publicity for the company. The focus of deregulation, globalization & advancing technology have greatly increased the competitive pressure in the banking industry. The freedom of choice which bank customers did not have earlier because of standardized products & regimented interest rates has now been given to the customers. Therefore, in order to prosper in highly competitive markets it will be imperative for banks to shift their focus from transaction marketing to developing long term relationship marketing & retain the customers.

METHODOLOGY:For studying the relationship marketing strategies being followed by the banks, individual in-depth interviews were conducted with the managers of two public and two private sectors banks. The open structure ensured that unexpected facts or attitudes as well as underlying motivations could be pursued. The key features of relationship marketing that were explored were the management of demand & supply, customer complaint management, monitoring of customer retention, products & services, relationship pricing, & customizing the relationship.

THE NATIONAL BANK:The National Bank is one of the largest banks in India in terms of profits, assets, deposits, branches and employees. MANAGEMENT OF DEMAND AND SUPPLYThe National bank does not have specific policies to smoothen the random fluctuations in demand so as to shift demand from peak periods and increase demand in slack periods. The bank leaves it to its customers to learn when the facilities are crowded and when they are not. Since demand cannot be perfectly controlled, it is necessary that National Bank considers the efficient management of its resources by altering capacity by increasing it to meet high demand and contracting it in slack periods. Branch manager, sometimes, requests employees with comparatively lesser work on a particular day to help any overburdened employee dealing directly with the customer. However this is difficult, since there is usually one set of ledgers having all the entries or a single PC. MANAGING CUSTOMER COMPLAINTSIn National Bank, complaints are usually not solicited by any means. Customers, when they have a problem, usually complain to the branch manager and the branch manager is supposed to resolve the problem then and there. In case the problem is taking some time in getting resolved, the branch manager is supposed to let the customer know the status of the complaint. However there is no monitoring of whether the branch manager actually does so. CUSTOMER RETENTIONAccording to the bank management, "the employees have no time to ask customers as to why they are closing their accounts", in case of account closures.

PRODUCTS AND SERVICESThe National bank does not have any segmentation strategy. Only recently has it started opening personal banking branches to cater to the needs of high profile retail customers. Targeted mainly at high net-worth individuals, these one-stop shops are aimed at offering a wide range of consumer finance schemes. RELATIONSHIP PRICINGThe National Bank has no relationship pricing strategies. CUSTOMIZING THE RELATIONSHIPThe bank does not have any database on customers where the lifestyle information and specific preference and characteristic about individual customers are kept so that services can be personalized.

POSITIVE ASPECTS: There is an employee overburdened who is directly dealing with the customer then, the Branch Manager requests another employee who has comparatively less work on that particular day to help out that employee. If any of the customers are facing some problems and if they complaints to the Branch Manager, then he has to solve the problem immediately. In case, if the problem cannot be solved then and there, it is the duty of the Branch Manager to make aware to the customer about the status of the problem. The bank had started segmentation strategy personal banking branches to fulfill the needs of high-status retail customers.

NEGATIVE ASPECTS: The National bank does not have any particular policy or strategy to make smooth their demands which are of unsystematic variations so as to shift demand from peak periods in slack periods. There is only one set of ledger or single PC having all entries then the problems are created. There is no scrutinizing whether the branch manager looks after the complaints or not. The employees dont have time to ask the customer what is the reason behind closing the account? The national bank has no relationship pricing strategies.

THE MILLENNIUM BANK:The millennium bank is a private bank set up by the millennium group. MANAGING DEMAND AND SUPPLYThe millennium bank provides efficient services, which can help to shift customers away from the branch so as to avoid crowding. The millennium bank provides free ATM services to its customers. The ATMs of the bank are networked across the country and gives customers the power to access their accounts 24 hours a day from anywhere in India. The bank also has phone banking services 24 hours a day as well as internet banking services. It has agents for opening accounts at customers premises. The retail branches of the millennium bank do provide for diversions to the customers by way of reading materials like newspaper and magazines. This serves to reduce the perception of waiting time. MANAGING CUSTOMER COMPLAINTSUsually customers go to the branch manager to complain and there is a suggestion box in the branch managers room. If a customer complaints and the complaint cannot be resolved quickly, the status of the complaint is made known to the customer. When the problem is solved, in the case of serious problem, the regional officer sends an apology to the customer and asks him if the problem has been solved to his satisfaction. There is also a monthly branch meeting which all employees attend and where the latest guidelines, circulars, changes in procedures, as well as the problems that customers are facing are discussed. Sometimes, when the regional managers come to the

branches for inspection, he talks to the frontlines about customer needs and problems. On every branch anniversary, customers are invited to the branch and their suggestions are solicited. On this occasion, the regional managers of the bank visit their branches and interact with the customers and employees and in these sessions, customer service issues are discussed. CUSTOMER RETENTIONThe bank keeps track of all account and closures and withdrawals in the fixed deposit accounts on a continuous basis. In case of closures and/or heavy withdrawals the customers are questioned, so as to learn the reasons for their withdrawal and so as to try to retrieve the situation. PRODUCTS AND SERVICESThe bank has segmented its customers into two broad segments- regular and HNW (High Net Worth). HNW customers are required to maintain at least Rs. 1 lakh in their savings account. They are assigned to relationship managers and the latter are supposed to attend to all his needs. The HNW customers are also given other free financial services. In the case of credit cards too, the millennium bank has segmented its customers on a price quality platform. RELATIONSHIP PRICINGThe bank has several relationship pricing programs. For instance, for its high net worth customers do not have to processing fees for car loans and housing loans. Again, for both the HNW and powerpay customers, demand drafts, fund transfers and pay orders are all free.

CUSTOMIZING THE RELATIONSHIPThe bank has come up with a scheme where it is asking customers to give certain information during the opening of their accounts so as to glean the customers lifestyle information. The bank plans to use the database to send personalised messages, for instance , say birthday cards as well as to design financial products and cross-sell other financial products. In the case of its HNW customers, the bank does send greeting cards on certain occasions.

POSITIVE ASPECTS: For the convenience of the customer the millennium bank offers well-organized services. Bank provides an ATM service, phone banking and internet banking so that the customer can access their account 24hrs from anywhere in India. The customers should not get bored in a long queue so banks give magazines and newspaper. After solving the problem of customer the branch manager should ask them whether they are satisfied or not. They always ask to the customer and get a suggestion from customer about their issues. The bank keeps all the records in the fixed deposit account. The bank has several relationship pricing programs. The bank always takes information of customer so that they can send greeting cards to their customer on certain occasions. So that they can build a good relationship with the customer.

THE PERFORMANCE OF THE BANKS WITH REGARD TO SERVICE QUALITY With the factor analysis, the 15 service quality items could be reconfigured into four dimensions, namely- customerorientedness, competence, tangibles, and convenience. The factor customer-orientedness comprised variables like extent of prompt service, consistent courtesy, and knowledge to answer customers questions, convenient operating hours, personal attention and understanding of specific customer needs. Variables like extent of interest in problem solving, right service, error-free records, service-time guarantee and safety of transactions combined to define competence. The tangibles factor consisted of variables like extent of visual appeal of physical facilities and information conveyed by published materials. Variables like guidance signs and timeliness combined to define convenience. For each bank, factor scores for the 4 different factors were averaged. The ranks obtained by the banks on each factor are shown in above table. RANKINGS OF TWO BANKS ON THE FOUR FACTORS.
FACTORS BANKS Customer oriented Competence Tangibles Convenience

Millennium National

2 4

1 4

1 3

4 3

THE EFECT OF RELATIONSHIP MARKETING ON CUSTOMER PERCEIVED SERVICE QUALITY:

Service Quality Factor competenceMillennium and Prudential bank takes care to ensure a certain degree of service efficiency. Both these banks are more responsive to complaint management than are the public sector banks National and Century. The reasons as to why the public sector banks especially the National Bank fared poorly when it came to competence are manifold. In the case of both these banks, if the problem is taking some time in getting resolved, the branch manager is supposed to let the cur know the status of the compliant.

Service Quality Factor tangiblesIn case of Millennium banks, the branches are also quite spacious with ample seating arrangements and reading materials for the customers. Millennium banks provide certain services, which can help to shift customers away from the branch so as to avoid branch crowding. These services are: 1. The banks provide free ATM services to its customers. The ATMs of the bank are networked all across the country and gives customers the power to access their accounts 24hrs a day from anywhere in India. 2. The banks have phone banking and Internet banking services, where in the customer can carry out a host of financial transactions. 3. the branches of both the banks send books of cheque deposit slips to customers and also have cheque deposit boxes where the customers can drop the cheques that need

to be deposited, thus obviating the need for customers to spend a longer time than is necessary in the branch premises, thus reducing branch traffic. 4. The bank also contracts sales agents who come over to the customers house and helps him in completing the entire formalities o opening an account. The retail branches of Millennium Bank also provide for diversions to the customers by way of reading materials like newspapers and magazines. The National Bank on the other hand does not have specific policies to smoothen the random fluctuations in demand so as to shift demand from peak periods and increase demand in slack periods.

Service quality factor-customer-orientednessIn case of the service quality factor customer orientedness it can be seen that Millennium Banks have done well compared to the national banks. These banks practice several relationship marketing strategies which are served to enhance the service quality of the banks. The banks have taken steps to monitor the satisfaction of their customers ,segment their customers and come with customized services as far as customer retention is concerned, in case of heavy withdrawals the employees are suppose to ask the customers so as to learn the reasons for the withdrawals and also to try to retrieve the situation. Again, the Millennium Banks have segmented their customers into two broad divisions: regular and high net worth. Relationship pricing strategies encourage customers to have multiple accounts and services with the banks. The Millennium Banks have several relationship pricing programs. The capability to organize, analyze and segment is essential to make relationship marketing work.

The Millennium Bank has come up with a scheme where it is asking customers to give certain information during the opening of their accounts so as to glean the customers lifestyle information. The bank plans to use the database to personalize its services and to design financial products. The National Banks on the other hand have hardly taken steps to monitor the satisfaction of their customers, segment their customers or come up with personalized services. The National Banks for instance hardly does any customer satisfaction surveys in its own initiative unless directed by the RBI or the IBA. As far as monitoring their customer retention rate, the bank management says that, the employees have no time to ask customers as to why they are closing their accounts, in case of account closures. In view of the increasingly competitive market. The bank has now decided to do quarterly customer satisfaction surveys and in the last few months started a newsletter for its employees where the importance of customer satisfaction and retention is being discussed.

Service quality factor-convenienceThe most important item in this factor is the presence of guidance signs in the bank. The National Bank and the Millennium Bank have fared poorly. The National Banks have few guidance signs, without any details. For instance, these banks have guidance signs at counters depicting the types of accounts and the account numbers that those counters handle. Millennium bank on the other hand has no guidance signs at all.

Comparison of National and Millennium Banks

1) In national Bank all work is done manually which means that more paper work and work not done in proper way and on time. In Millennium bank all the work is done with computers which mean that they use high technology and less paper work with work done on time. Resulting in faster and efficient performance. In Millennium banks they take care of their customers and their complaints with a systematic program and treat them as a family.

2) In national bank they do not have any systematic programs to take care of customers and their complaints but customers are treated as outsiders. 3) In national bank employees doesnt care much when customers ask for accounts closure or heavy withdrawals possible resulting loss in business.

In millennium bank, for the cases of closure of accounts or heavy withdrawals, the customers are questioned so as to learn the reasons for their withdrawals and try to retrieve the situation.

4) In national bank they do not In millennium banks they practice have any segmentation the segmentation strategies and strategies. offer a range of services and products to meet each ones requirements. 5) In national banks since they do not worry or bother about customer services and no personalized details of customers are maintained. In Millennium banks as a part of their programmers they keep a database of personalized information of their customers to be in touch with them on various occasions like their birthdays and anniversaries.

OUR RECOMMENDATIONS: The bank should understand the needs of customer. It should identify the types of customer. It should understand the lifecycle of the customer. It should be alert of the communication channel utilized by the customers. They should maintain customers feedback and improve their services. It should be able to handle customer properly. It should use communication channel likewise, direct contact, online, call-center and media. There must be awareness in the bank that the Branch Manager is scrutinizing the problems and complaints of the customer and the bank should let the customer know about the status. The bank should provide equal services to both the customer i.e. regular and high net worth customer.

CONCLUSION:Retail banking caters the need of individual customer. For this purpose qualified and trained staff is to be maintained. For training those employees, banks spend a huge amount of money. Sometimes these trained personnel leave the job halfway which increases the expenditure of the bank. Apart from this banks also have to maintain various cell regarding customer grievance, employee grievance, etc. which again increases the expenditure of the bank. In conclusion it can be said that effective customer Relationship is not just the function of infrastructures and facilities, technology and information, comfort and people and warmth. It is a process, the process of planning, organizing, staffing, coordinating, controlling and budgeting. And this process needs to be managed most efficiently for the best result in terms of customer satisfaction. Building relationships with customers is a fundamental business of every enterprise, and it requires a holistic strategy and process to make it successful.