ISSN : 2230-9519 (Online) | ISSN : 2231-2463 (Print) IJMBS Vol.

7, Issue 1, Jan - March 2017

Customer Relationship Management in Banks: A Case

Study of Krishna District, Andhra Pradesh
1
Shaik Sharifuddin, 2Dr. Talluri Sreekrishna
1
Dept. of Commerce and Business Administration, Acharya Nagarjuna University, Nagarjuna Nagar,
Guntur, Andhra Pradesh, India
2
Dept. of Management Sciences, R.V.R & J.C. College of Engineering, Chowdavaram, Guntur,
Andhra Pradesh, India

Abstract about the customer. The analysis of such data helps a firmassess
Customers are the focal point in the development of successful a customer’s current and potential profitability satisfaction and
marketing strategy.Customer retention assumes significance in loyalty. Theability of banks to respond towards the customers’ needs
revenue analysis of various organizations. Thesuccess of CRM make thecustomers feel like avaluable individualrather than just part
process depends on the active involvement of all managers of a large number of customers. CRM is a soundbusiness strategy
and employeesinthe banking field a unique ‘Relationship’ to identify the bank’s most profitable customersand prospects,
exists between the customers and thebank. Butbecause of anddevotes time and attention to expanding account relationships
various reasons and apprehensions like financial burdens, risk with those customersthrough individualized marketing, reprising,
of failure,marketinginertia etc., many banks are still following discretionary decisionmaking, andcustomized service-all delivered
the traditional ways of marketing and onlyfew banksare making through the various sales channels thatthe bank uses. Inorder to
attempts to adapt CRM.Providing service to customers has been succeed with strategic organizational change banks should also
identified as theprime responsibility of the Banks andtherefore, communicate thechange to customers in a way leading them to
Banks considered that CRM is the besttool to perform the alter their behavior and attitudes accordingly.
job of renderinggood services.The lack of understanding
onCustomerRelationship Management (CRM) is always a concern II. Research Problem
among the service providersespeciallybanks. Banks have their Banking sector has always been the focus of society due to its
own way of managing their relationships with the customers. essential role in thefinance world and the wellbeing of world’s
However,the perception of customers on CRM practices among economy. In the banking field a unique‘Relationship’ exists between
banks should also be takenintoconsideration. CRM activity attend the customers and the bank. But because of variousreasons and
the needs of customers without delay in time, thebanks can create apprehensions like financial burdens, risk of failure, marketing
more awareness to customers and can create a customer data base inertia etc.,many banks are still following the traditional ways
verysignificantly. of marketing and only few banks aremaking attempts to adapt
CRM. It is with this background, the researcher has made amodest
Keywords attempt towards the idea that CRM can be adapted uniformly in the
CRM, Bank, Customer bankingindustry for betterment of Banking Services. Particularly
in banking sector, the role ofCRM is very vital in leading the banks
I. Introduction towards highlevel and volume of profits. Sothere is a need to study
Customer relationship management is one of the strategies to the role of CRM in development and promotion of bankingsector
manage customer as itfocuses onunderstanding customers as through the sidelines of the practices, problems and impact of the
individuals instead of as part of a group. CRM managesthe CRM onbanking sector all the time.
relationships between a firm and its customers. CRM and
knowledge managementaredirected towards improving and III. Objectives of the Study
continuously delivering good services to customers.Tounderstand The main objective of the study is to examine the importance
more in customer relationship management, we first need to of CRM in banking sector, and itsimpact on the ‘Customer
understandthreecomponents which are customer, relationship Satisfaction’. The other specific objectives of the study are:
and their management.Managingcustomerrelationships is 1. To review the literature on the concept and use of CRM in
important and valuable to the business.Today, many businesses banking sector
such asbanks, insurance companies, and other serviceproviders 2. To analyze the perception of customer on CRM as a tool of
realize the importance ofCustomer Relationship Management banking sector inretention of customers in general
and its potential to help them acquire new customersretain 3. To offer pertinent suggestions based on the findings of the
existing ones and maximizetheir lifetime value.Banking sector study.
is a customer-orientedservicewhere the customer is the KEY
focus. Research is needed in such sector tounderstandcustomers’ IV. Customer Relationship Management
need and attitude so as to build a long relationship with them. In literature, many definitions were given to describe CRM.
CustomerRelationshipManagement includes all the marketing During the lastdecades there has been strong orientation on
activities, which are designed to establish,develop,maintain, and customers’ satisfaction by fulfilling their needsand wants as means
sustain a successful relationship with the target customers. for the achievement of organization’s objectives. This underlying
motivation on customer focus is clear mission to create value
The effective relationshipbetween customers and banks depends for customers, stay profitable andgain desired performance. By
on the understandingof the different needs of customersat different creating value for customers organizations would gaincustomers’
stages. The objective is to effectivelyanalyze all the available data loyalty, which in turn would result in business’ growth and profits.

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The maindifferenceamong these definitions is technological and view of its customers across the various systems that contain their
relationship aspects of CRM. data. If the bank could track customer behaviour, executives can
have a better understanding, apredicative future behaviour and
Someauthors from marketing background emphasize technological customer preferences. Most sectors of the bankingindustry are
side of CRM whiletheothers considers IT perspective of CRM. trying to use CRM techniques to achieve a variety of outcomes.
From marketing aspect, CRM is defined as’’a combination In the areaof strategy, they are trying to:
of business process and technology that seeksto understand a • Create a customer-focused organization and infrastructure.
company’scustomers from the perspective of who they are, what • Secure customer relationships
they do, and what they are like’’ • Maximize customer profitability;
• Identify sales prospects and opportunities;
Technological definition of CRM was given asmarket place of • Support cross and up-selling initiatives;
the future is undergoing atechnology-driven metamorphosis”. • Manage customer value by developing propositions aimed
Consequently, IT and marketing departments mustworkclosely at differentcustomer segments;
to implement CRM efficiently. They focused on the evaluation • Support channel management, pricing and migration.
of thecritical satisfaction dimensions and the determination of • Gaining accurate picture of customer categories.
customergroups with distinctivepreferences and expectations in • Assess the lifetime value of customers.
the private bank sector. • Understand how to attract and keep the best customers.

The methodological approach is based on the principles of VI. CRM Objectives in Banking Sector
multi-criteria modelingandpreference disaggregation modeling The idea of CRM is that it helps businesses use technology and
used for data analysis and interpretation. Havefocused on the human resourcesGaininsight into the behavior of customers and
management of the exchange relationshipsand the implications the value of those customers. If it worksashoped, a business can:
of suchmanagement for the performance and development provide better customer service, make call centersmoreefficient,
oftechnology-based firms and theircustomers. Specifically the cross sell products more effectively, help sales staff close deals
customer relationships ofnew technology-based firms hasbeen faster,simplify marketing and sales processes, discover new
studied. The managing relationships with theircustomers customers, and increasecustomer.
(especially withemployees, channel partners and strategic
alliancepartners) was critical to the firm’slong-term success. It For CRM to be truly effective an organization must first decide
was also emphasized that customer relationship management what kind ofCustomerInformation it is looking for and it must
basedon social exchange and equity significantlyassists the firm decide what it intends to do withthatInformation. Companyanalysts
in developing collaborative,cooperative and profitable long- can combine through the data to obtain a holistic viewof each
termrelationships. They have also hierarchicallysegmented customerand pinpoint areas where better services are needed.
data sources into clusters, automaticallyable the features of the
clusters,discovered the characteristics of normal, defectedand VII. Review of Literature
possibly defected clusters ofcustomers, and provided clues for The following literature review section provides a discussion
gaining customer retention. and argument for theservice quality and CRM practices. The
phraseCRM appeared in the literature after theevolution in
V. CRM in Banking Sector the relationship marketing philosophy.Berry (1983) defined
CRM is a sound business strategy to identify the bank’s most relationshipmarketing as attracting, maintaining and enhancing
profitable customersand prospects, and devotes time and attention thecustomers’ relationships in multiserviceorganization. After a
to expanding account relationships withthose customers through few decades, the evolution inrelationship marketingphilosophy
individualized marketing, repricing, discretionary decisionmaking, changed the word relationship marketing to CRM. Accordingto
and customized service-all delivered through the various sales Brown(2000) CRM is a process of acquiring new customers,
channels that thebank uses. The model developed here answers retaining the existencecustomers,and at the same time understands,
what the different customer segmentsare, who more likely to anticipates and manages the needs of anorganization’scurrent and
respond to a given offer is, which customers are the bank likelyto potential customers. Furthermore, Mylonakis (2009) described
lose, who most likely to default on credit cards is, what the risk CRMas aninnovative process to create a long term relationship and
associated with thisloan applicant is. A greater focus on CRM is gaining trust. Further, aclearvision of CRM along with appropriate
the only way the banking industry canprotect its market share and strategies if applies in banking sectors found outthatbeneficial in
boost growth. With intensifying competition, decliningmarket maintaining the customer service quality, customer satisfaction
share, deregulations, smarter and more demanding customers, andcustomerretention which ultimately leads to the growth of the
there iscompetition between the banks to attain a competitive organization andprofitability (Bansal andSharma, 2008).
advantage over one another or forsustaining the survival in
competition. Girdhar (2009) observed that by satisfying the internal customers
and buildinggoodrelationship with them, the relationship with
Over the last few decades, technical evolution has highly the external customers can also beretainedand satisfied by the
affected the bankingindustry. ATM displaced cashier tellers, banks. Kumar & Rajesh (2009) reveals that any bank thatwishes
telephone represented by call centers replacedthe bank branch, to eithergrow in size of its banking operation or improve its
internet replaced the mail, credit cards and electronic cash profitability mustconsider the challengesaffecting its customer
replacedtraditional cash transactions. In recent years, banks relationship.The challenge before thebanks is not only to
have moved towards marketingorientation and the adoption of obtain updatedinformation for each customer, but also to use
relationship banking principles. The bank would need acomplete theinformation to determine the best time to offerthe most relevant

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products (Lau et al.,2003). It is also important to understand that benefits to a bank,namely a distinctive andconsistent customer
if customersbring in profits for the bank, itbecomes imperative for experience, clear identification of theorganization, technological
the bank to provide excellent services tothose customers,otherwise andprocess-related capabilities.
they switch to other banks (Ray, 2007). Service quality in
bankingimpliesconsistently anticipating and satisfying the needs The banking industry is much further along than other industries in
and expectations of customers. recognizingthe value of CRM and implementing decision support
systems to support CRM.Thoughmost of the banks have already
Parasuraman et al. (1985) also hold the view that high quality focused on tactical point solutions, they’re ready foratransition
service gives credibility to thefield sales force and advertising, toward strategic, enterprise-wide CRM initiatives that cross major
stimulates favourable word-of-mouthcommunications, enhances businesslines. Aneffective decision support system for CRM
customers’ perception of value, and boosts the morale andloyalty enables to collect data aboutcustomer from everytouch consolidate
of employees andcustomers alike. Puccinelli (1999) looks the this information into a single view of thecustomer, and use this
financial servicesindustry as entering a new erawhere personal informationfor customer profiling, segmentation, cross-selling,up
attention is decreasing because theinstitutions are using selling and retention efforts. As bankscontinue to seek a unified
technology to replacehuman contact in many application areas. understanding ofcustomer relationships across diverse channels,
Over the last few decades, technical evolution hashighly affected theimportance and penetration of CRMis expected to grow like
the banking industry(Sherif, 2002). In today’s competitive anything.
banking industry,customers have to make a choiceamong various
service providers by making a trade-off betweenrelationships From the analysis it is found that Customer Retention is not
andeconomies, trust and products, or service and efficiency a big challenge to Banks asper the opinions of customers of
(Sachdev et al., 2004).RogerHallowell (1996) conducted a research selected Banks. It is found that though CRM activities havenot
on customer satisfaction, loyalty, andprofitabilityand found that as helped to increase the confidence of the customers in meeting
compared to public sector, private sector bank customers’ the changing needs, it helpedto increase the confidence of the
level of satisfactionis comparatively higher. customers while rendering services in mean time efficiently.
CRM activities of the selected Banks are not up to the mark in
CRM is a key to create a superior customer experience. It manages retaining the keycustomers.During the e-banking era and services
thecustomerrelationship by creating a clear understanding (Know), based on advising rather than cash services,where the interaction
by developing servicesandproducts based on the added value for between customer and bank employees is of major importance,
target groups (Target), then enabling theactual sale anddelivery banksface the challenge of winning customer’s loyalty through
of services and products through the selected channels (Sell),and product features and serviceexcellence. This is however, related
developing long termprofitable relationships with customers after to winning customers’ confidence of internet bankingusage.CRM
sales services(Service) (Hussain, et.al., 2009).Many researchers undertaken by employee approach to customers is found very
have been done in various industriesespecially in the banking poor. It is furtherobserved that the CRM activities are initiated
sector thatfocussing on customer oriented services (Ndubisi and implemented by the Banks in a seriousmanner, so that the
etal., 2007; Rootman et al., 2008; and Duttaand Dutta, 2009). customers in particular and the society in general benefited a lot.
The literature on CRMsuggests that banks should consider the Providingservice to customers has been identified as the prime
customer relationship life cycle(Dwyer et al.,1987). In general, responsibility of the Banks and therefore,Banks considered
there are three core phases: customer acquisition,customerenhan that CRM is the best tool to perform the job of rendering good
cement, and customer recovery. The acquisition phase describes services
theinitiation of acustomer-bank relationship.
IX. Data Warehouse and Data Mining
VIII. CRM Analysis and Findings Data mining has to be more intelligent and offer information
CRM has emerged as a popular business strategy in today’s on the customer inreal time.It is the database that holds the
competitiveenvironment. Itis a discipline that enables the customer information and serves as the centralcollective memory
companies to identify and target their mostprofitable customers. of the organization. Company effectively utilizes the data mining
Itinvolves new and advance marketing strategies that not onlyretain tosupport their sales and service staff in particular. They have also
the existing customers butalso acquire new customers. It has been supported their salesand staff with advanced technology which has
found as aunique technique which can bring remarkablechanges helped them uses the data for thepurpose of developing a customized
in total output of companies. offer. The CRMgroup analyzes results obtainedand designs action
plans, such as campaigns,promotions, special marketinginitiatives,
Through the literature survey and data analysis it can beinferred etc. Plans developed are then implementedby means of the several
that CRM tries to findout the relationship between perception channelsused by the bank to reach customers. Evaluation orresults
and satisfaction,commitment and loyalty thatunderlines the completes the cycle. Theresults become an integral part of the
significance in Indian Banking Sector. Customerslargely select description ofthe bank-customer relationship inthe warehouse.
theirbanks based on how convenient the location of bank was The learning cycle is thus completeand results obtained can be
to their homes oroffices. With the advent of new technologies reused infuture analyses and in future marketing plans. Itis easy to
in the business of banking, such as internet bankingandATM’S, understand that the DataWarehouse cannot actually be built ‘once
now customers can freely choose any bank for their transactions. for all’ but is a kind of living structurecontinuously enriched and
Private Bankshavetraditionally viewed themselves as exceedingly updated as the RelationalMarketing activity develops. OLAP (On
Customer Centricity offering whatthey believe tobe highly Line Application Programming) analysesare developed by means
personalized services to the High Net Worth Customers. It isalso ofBusiness Object in its web version. CRM analysts use thistool
found that thestructured approach of CRM can provide various to issue complex SQLqueries on the Data Warehouse or on the

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AnalyticalDatamart and carry out monoand bivariate statistics would not be confused with new system. In addition when pursuing
on the whole customers’population or on selected groups.The itsorganizational strategies the bank should always consider the
Analytical Datamart is derived from the Data Warehouse through cost for educating the personneland customers especially in the
thefollowingsteps: cases of going to complete banking activity. Customers whocannot
1. Raw data processing: data selection, data extraction, and data manage ATMs, e-cards, internet banking would be put aside of
verification and rectification the change which couldresult in less satisfaction of the services
2. Data modeling and variable preprocessing: variable offered by the bank. Therefore, it is essential to meetcustomers’
selection newVariable creation, variable statistics, variable expectations by studying customers’ demands and needs and try
discretization. to match or tochange customers’ behavior and attitudes with help
of well-definedreorganizational strategies.
The aboveprocessing, based on traditional data analysis, is
strictlydependent on the investigatedprocess; new variable creation, However, the concept of customers’ loyalty which is seen as relation
for instance, isintended to aggregate informationcontained in the between therelative attitude that customer has to the services he/
raw data into more expressivevariables. A simple example is she receives and the trust directedbehavior he/she shows. Such
thenumber of credit transaction on current accountthat contains conclusion could be probably drawn by the personal bankadvisors
much of theinformation contained in the individual transactions, who interact in a specific personal way with beneficiary customers.
butis easier to analyze andrepresent. Variable discretization, based Relying on thecustomers’ satisfaction of personal advisors one
on the distributionof the original variables, is intended to generate can say that these beneficiary customers areloyal.
categorical variables that betterexpress the physical reality ofthe
problem under investigation. The AnalyticalDatamart is customer XI. Conclusion
centric andcontains the following data: The general discussion can be said that the bank is yet to develop
1. Demographic (age, sex, cultural level, marital status, etc.) an integrativeapproach which focuses on the customer needs and to
2. Ownership of bank’s product/services deliver to it. As shown by the study, thebank is far from developing
3. Product/services usage (balance, transactions, etc.) a customer centric approach both for the customer as well as
4. Globalvariables: profit, cost, risk, assets, liabilities forthe employees. Thus, for customer relationship management to
5. Relationship with the bank: segment, portfolio, etc. deliver to its expectations, itshould play an integrative role within
the bank and ensure that all processes are integrated inthe bank
X. Customers’ Loyalty & Satisfaction global strategy, which is far from reality in the study above. In view
When faced with organizational change customers usually of this, toimplement a CRM integration strategy, the following
require explanatoryinformation as to why the change is recommendations can be adopted:
conducted. It has been argued that the quality ofinformation is 1. In a competitive environment, the Banks should adopt suitable
the key for organizations to succeed with change. In this case marketing skills ratherthan depending on the trading skills.
managers shouldtreat information about change as product for Hence, new services should be constantlyintroduced to ensure
customers where customers’ needs are clearlyrecognized. In the growth of the Banks and to be competitive in the market
relation to the organizational changes, the bank should inform and tokeep up the enthusiasm of the employees and customers
its beneficiarycustomers via personal letter where all the necessary etc.
information is provided as to where,when, and how they could do 2. Implement a Customer Centric Process in Banks.
their errands related to services. In my personal opinion, thebank 3. Employee Relationship Management first before Customer
should also use all possible ways for informing its customers, Relationship Management.
especially in places wherecustomers are interacting with the bank 4. Increase customer experience through the web site.
in most. It can be at the desk when receiving service,via personal 5. Develop channel integration for effective Customer
bank advisor, via e-mail and letter. Relationship Management.
6. Proper training should be given to the bank personnel
The information about the organizational change should be made regarding the behavioral patternsby the Banks before they
in a form of shortverbal notice when interacting with customers in come and work in the field.
other banking matters. This way of informingcustomersis regarded 7. More importance should be given to handling online
to be the most efficient due to having possibility for making transaction and using m -commerce and mobile banking
furtherexplanations when customers require such. However, of services.
more significant value for customersis guidance in new system that 8. It should be realized that customer relation cannot be
requires information and education which is positively relatedto built overnight. CRM should beconsidered as Continuous
customer loyalty. Moreover, the information process, life cycle Relationship Management.
of information along withcontrol should be well managed by the 9. Data gathered from the customers should be given proper
bank. Furthermore, the bank should constantly work onensuring value and it should beproperly utilized. Decision making
security and privacy of internet banking and e-card usages since authority should be extended to field force andsome resources
these issues are closely related to the trust and thus customers’ should be given for faster implementation.
loyalty.The focus should be not only onproviding right services for 10. The Banking sector is developing and getting higher day by
the right customers but also ensure the safety and confidentiality day in urban and semi
ofthe operations customers engage into with the bank. 11. urban areas; there is large number of customers using the
services in the urban and semi urban areas. So a wide scope
The information about the organizational changes is of the most in rural areas is expected in the days to come.
important value for thecustomers. Therefore, the information
should be given in time, in a consistent and clear way socustomers

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Particularly in marketing approach, considering customer retention Services Research, 2 (2), pp. 157-171, 2003.
as a big challenge,provisioning the facilities attending the needs
without delay in time, meeting the changingneeds creating the
database, employee approach to customers, customer awareness
impact ofCRM relationship with customer impact over bank
objectives, CRM and public image, CRMand updating the data,
CRM and customer satisfaction, other nationalized is found
quitegood. On the other hand, in terms of retention of existing
key customers, enhancing customerloyalty, provisionising
technological infrastructure, location of CRM, existence of
CRM,approaches of CRM, coverage of CRM by e-Marketing,
relationship with the customer,CRM’s objectives and making
the customer delight, retention of customers benefits of CRMto
the organization, loyalty, customer confidence, are found quite
satisfactory and in goodcondition with specific bank. It is very
clear from the foregoing analysis that the approach ofCRM by
banks is to some extent same and one but the reach is quiet
distinguishable. It is dueto the profile, their capability and the
strategy of CRM in making it and reaching down tocustomers. On
the contrary, it can also be asserted that the background of both
banks alsofound as a big cause for reaching the top CRM. Hence,
CRM is an inevitable tool ofmarketing that can be considered as
Critical Responsibility of Market with regard to Banks inpresent
context. The results in this study show the respondents either agree
or strongly agreeon majority of the statements in the dimensions
used. This study is significant to banks asthey get information on
what are items that are important to customers so as to maintain
therelationship.

The targeted campaigns through Internet and the call center for
customers activelyusing one or both of these innovative channels for
their banking operations. The sameapproach is now being extended
to small and medium businesses and to commercialcustomers.

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