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Customer Relationship Management in Banking Sector

Research · June 2022

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 International Journal of Research in IT and Management (IJRIM)
Available online at: http://euroasiapub.org
Vol. 12 Issue 6, June- 2022
ISSN(o): 2231-4334 | ISSN(p): 2349-6517 | Impact Factor: 8.106

Customer Relationship Management in Banking Sector

Ashima Bansal, MBA, M.Phil, M.Com.,UGC-NET, Assistant Professor, Seth Jai Prakash
Mukand Lal Institute of Engineering & Technology, Radaur

Anjali, Student of Master of Business Administration, Seth Jai Parkash Mukand Lal Institute of
Engineering And Technology, Radaur

Abstract:-
Customer relationship management is an overall business strategy that enables the organization
to maintain good relationship with customers. Customer is considered as the king of the market.
There is a unique relationship between customers and banks. Some banks are still following
traditional marketing because of many reasons such as lack of training, risk of failures etc. and
on another hand; some are adapting CRM to maintain profitable relationship with customers. In
this competitive era customers have a lot of choices they are generally not loyal to any
organization, so with the implementation of CRM in banking sector customers can be retained
for long period. CRM is concerned with creation, establishment and enhancement of customer
relationship to maximizing the value of customers. The implementation of CRM has changed the
bank culture to result oriented from task oriented. But still organizations are facing some
problems in implementing of CRM such as evaluation of customer perception is not an easy task.
This paper highlights the challenges facing by banking sector. The purpose of this research is to
examine the relevance of CRM and impact of CRM in Indian banking sector.

Keywords: -Banking sector, Customers, Customer relationship management, Information

technology, customer satisfaction, loyalty

Introduction: -The concept of customer relationship management started in 1970s. Customer

relationship management enables the banks to identify and fulfils the customer needs and desires.
Let us first examine Who is a customer? Customer can be an individual, groups of individuals or
organizations, government, agents etc. We can say that a customer is a legal entity who has some
financial relationship with the banks. Customer relationship management is a marketing strategy
that helps in acquiring new customers, increasing revenues, reducing the cost of sales, win back
the lost customers and creating values to customers. The aim of CRM is collection of
information about customer behavior through channels of communication to provide right

28
International Journal of Research in IT and Management (IJRIM)
Email:- editorijrim@gmail.com, http://www.euroasiapub.org
(An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.)
 International Journal of Research in IT and Management (IJRIM)
Available online at: http://euroasiapub.org
Vol. 12 Issue 6, June- 2022
ISSN(o): 2231-4334 | ISSN(p): 2349-6517 | Impact Factor: 8.106

product or service at right place and time. Identifying customer behavior is a typical task as it
changes very frequently, so monitoring over the changing behavior is a challenge for banks.
Building and maintaining deep -rooted relationship with customers is a comprehensive process.
In all economy banks play an important role by creating saving habits among customers and also
providing financial assistance to traders, industrialists, service providers.

Banking sector is a consumer oriented as consumer is main focus of banks. Banks segregate the
customers into a different group according to some criteria like their different needs and behavior
in order to serve them properly. In today’s era information technology make this task easy in
collecting data from individual customers to study and look over the pattern of individual
behavior in order to win the trust, satisfaction and customer loyalty. Nowadays banking sector
starts realizing about the importance of CRM for establishing, maintaining and retaining of
customers to maximizing the profits. Every banking sector should consider consciously
investment in CRM in order to achieved wishful results.

Customer Relationship Management (CRM): -Customer relationship management is

the core business strategy that integrates internal and external functions to create and furnish
value to customers. CRM is a strategy to get the information about the customer’s behavior and
requirements in order to establish long term profitable relationship with customers. Banking
sector by adopting CRM analyze each and every customer separately and uniquely so that trust
of customers, customers satisfaction and long-term loyalty of customers can be achieved.
Customer relationship management is a commitment of banks to place the customers in the heart
of the organization. CRM is a customer centric approach, its ultimately objective is handling of
different customers through identification and understanding of differentiated needs, behaviors
and preferences of customers.

Customer relationship management is a customer centric approach; its ultimate objective is

handling of different customers through identification and understanding of differentiated needs,
behavior and preferences of customers.

Banks that wants to grow the scale of business and improve its profitability should consider the
following challenges are:

1. Acquiring of new customers and retention of existing customers more cost effectively.
2. Win back the trust of lost customers.
3. Increasing profits from existing customers.
4. Reducing the cost of sales.

29
International Journal of Research in IT and Management (IJRIM)
Email:- editorijrim@gmail.com, http://www.euroasiapub.org
(An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.)
 International Journal of Research in IT and Management (IJRIM)
Available online at: http://euroasiapub.org
Vol. 12 Issue 6, June- 2022
ISSN(o): 2231-4334 | ISSN(p): 2349-6517 | Impact Factor: 8.106

Sources:https://www.quora.com/What-are-the-characteristics-of-CRM

Review of Literature: -
Customer Relationship Management (CRM) has become one of the most dynamic technology
topics of the millennium.

Peppers and Rogers (1999) argued that other organizations view CRM as a tool, which has
been particularly designed for one-to-one customer communications, which is the function of
sales, call centers or the marketing departments.

Puccinelli (1999) looks the financial services industry as entering a new era where personal
attention is decreasing because the institutions are using technology to replace human contact in
many application areas. Over the last few decades, technical evolution has highly affected the
banking industry

Bose (2002) noted that CRM was invented because the customers differ in their preferences and
purchasing habits. If all customers were alike, there will be little need for CRM. As a result,
understanding customer drivers and customer profitability, firms can better tailor their offerings
to maximize the overall value of their customer portfolio (Chen and Popovich).

Chen and Popovich (2003), CRM is not a concept that is really new but rather due to current
development and advances in information and enterprise software technology, it has assumed

30
International Journal of Research in IT and Management (IJRIM)
Email:- editorijrim@gmail.com, http://www.euroasiapub.org
(An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.)
 International Journal of Research in IT and Management (IJRIM)
Available online at: http://euroasiapub.org
Vol. 12 Issue 6, June- 2022
ISSN(o): 2231-4334 | ISSN(p): 2349-6517 | Impact Factor: 8.106

practical importance. The root of CRM is relationship marketing, which has the objective of
improving the long-term profitability of customers by moving away from product-centric
marketing.

Greenberg (2004), CRM generally is an enterprise-focused endeavor encompassing all

departments in a business. He further explains that, in addition to customer service, CRM would
also include, manufacturing, product testing, assembling as well as purchasing, and billing, and
human resource, marketing, sales and engineering.

Frow and Payne (2004) added that CRM stresses two-way communication from the customer to
the supplier to build the customer over time. The two-way communication has been enhanced
greatly by advances in technology particularly the Internet.

Objective of study: -
 To study the relevance of customer relationship management in banking sector.
 To examine the benefits of implementation of customer relationship management in
banking sector.
 To investigate the impact of technology on performance of commercial banks.
 To know the challenges faced by banking sector in providing better facilities and
maintaining good relations with their customers.

Research Methodology: -
This is a descriptive research paper based on secondary data from various sources such as
reports, journals, websites, magazines, books and newspaper etc.

Objective of customer relationship management: -

1. To attracting the new customers.
2. To retention of existing customers.
3. To build the trust of customers towards banking sector.
4. To maintain personal relationship with customers, personal relationship in the sense that
banks deals with each customer in different and unique manner.
5. To interact with customers through various communication channels to create value for
customers.
6. To deal the customers with respect, attention and polite manner.

31
International Journal of Research in IT and Management (IJRIM)
Email:- editorijrim@gmail.com, http://www.euroasiapub.org
(An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.)
 International Journal of Research in IT and Management (IJRIM)
Available online at: http://euroasiapub.org
Vol. 12 Issue 6, June- 2022
ISSN(o): 2231-4334 | ISSN(p): 2349-6517 | Impact Factor: 8.106

Customer life cycle: -Customer life cycle compromises of customer acquisition,

customer development, customer satisfaction and customer retention.

Reach

Loyalty Acquisition

Retention Conversion

Sources:https://www.zendesk.com/blog/crm-process/

i. Customer Acquisition: -

In this competitive era, acquisition of customers is a complex process. We should use some
strategies to attract the new customers like customer relationship management is a good business
strategy to grab the opportunities available in market.

ii. Customer Development: -

Customer development involves availability of products to customer according to their own

choices and wants. Customer development can be achieved by providing right product at right
place and right time.

iii. Customer Satisfaction and Loyalty: -

As traditional marketing was based on earning more and more profits only by selling the
products but now in modern marketing along with selling the product to customer for profits,

32
International Journal of Research in IT and Management (IJRIM)
Email:- editorijrim@gmail.com, http://www.euroasiapub.org
(An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.)
 International Journal of Research in IT and Management (IJRIM)
Available online at: http://euroasiapub.org
Vol. 12 Issue 6, June- 2022
ISSN(o): 2231-4334 | ISSN(p): 2349-6517 | Impact Factor: 8.106

customer satisfaction is equivalent important. CRM in banking sector proves beneficial in

boosting the loyalty of customers and customer’s satisfaction.

iv. Customer Retention: -

The cost of acquiring new customer is far higher than the cost of retaining existing ones. Every
organization should make efforts to build and retain customers for longer period.

Types of Customer Relationship Management: -

Types of CRM

Operational Analytics Collaborative

CRM CRM CRM
I. Operational CRM: -Operational CRM gives you a complete picture of each customer
journey. Operation CRM can automate lead scoring and win profitability, so that you
know which leads to nurturing with automations. Operational CRM provides automation
features like sales automation, marketing automation and service automation.
Benefits of Operational CRM are:
 Boosting market processes
 Enhancing internal communication
 Increasing customer satisfaction and revenue
II. Analytics CRM: -Analytics CRM analyzes the each and every customer data,
maintains it and provides it for reports. Now Information technology make it easier to
gather large quantities of customer data. By analyzing this gathered information, we can
understand which factors are responsible for customer retention and what problems
customers are facing and what factors are beneficial in boosts up the sales.
Benefits of Analytics CRM are:
 Understanding the customer behavior better
 Boosts customer loyalty
 Accurate financial forecasting and planning

33
International Journal of Research in IT and Management (IJRIM)
Email:- editorijrim@gmail.com, http://www.euroasiapub.org
(An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.)
 International Journal of Research in IT and Management (IJRIM)
Available online at: http://euroasiapub.org
Vol. 12 Issue 6, June- 2022
ISSN(o): 2231-4334 | ISSN(p): 2349-6517 | Impact Factor: 8.106

III. Collaborative CRM: -Collaborative CRM are also known as strategic CRM that
focuses on customer satisfaction, customer service and customer retention than customer
acquisition. To deal with the customers and managing business activities, banking sector
should invest in collaborative CRM. To increase the profits, customer satisfaction and
royalty various departments in the organization like sales department, marketing
department, finance department shares information with each other.
For example, Feedback from a customer collected by technical support team will
help marketing team to suggest more suitable products or services to the customer.
Benefits of Collaborative CRM are:
 Improves customer service
 Retaining of existing customers
 Customer data available for multi-channel interactions

Customer relationship management process: -

1.Generate
brand
awareness

5.Invest in 2.Acquire
loyalty and
leads
upgrading

4.Provide
quality 3.Convert
customer leads into
service customers

Sources:https://www.zendesk.com/blog/crm-process/

34
International Journal of Research in IT and Management (IJRIM)
Email:- editorijrim@gmail.com, http://www.euroasiapub.org
(An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.)
 International Journal of Research in IT and Management (IJRIM)
Available online at: http://euroasiapub.org
Vol. 12 Issue 6, June- 2022
ISSN(o): 2231-4334 | ISSN(p): 2349-6517 | Impact Factor: 8.106

There are five steps of CRM process are:

1. Generate brand awareness: -The first step of CRM is how to introduce prospective
clients to your business is by building brand awareness. There is a lot of competitors in
the market so marketer should create brand awareness among customers in the market
that this particular brand is also exists in the market. Generally, it is the introduction of
your business to customers.
2. Acquire leads: -CRM process is just begun from introducing your brand to potential
customer. While introducing the brand marketer should encourage the customers to learn
more about your business to attracts towards your brand. Marketing campaign are also
helpful to influence the customers.
3. Convert leads into customers: -The next step of CRM process is conversion of leads
into customer. This is the step where you actually see the profits of an effective CRM
strategy. When customers are interested about your brand then now it’s time to turn those
leads into actual customers.
4. Provide quality customer service: -To maintains the customer relevancy providing
quality customer service is imperative step. It is of extreme importance to understand
what changes are required to improve customer experience.
5. Invest in loyalty and upgrading: -The final step in CRM process is to provide
support to customers to boost up the loyalty of customers. In addition to retaining the
customers for increasing profits another way is to focus on upgrading their purchasing
order by switching their shopping habits to more luxury products or services.

Components of Customer Relationship Management: -

1. Human Resource Management: -Human resource management is an important
component of CRM as employees of the organization are considered as crucial assets.
Human resource management helps in analyzing the skills of employees in different
situations across the organization. So HRM assists in successful implementation of CRM.
2. Customer Service: -Customer service section gathers information and data about the
customers purchase behavior, their needs and wants as well as shares this relevant
information with concerned departments. This helps in building good relations with
customers.

35
International Journal of Research in IT and Management (IJRIM)
Email:- editorijrim@gmail.com, http://www.euroasiapub.org
(An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.)
 International Journal of Research in IT and Management (IJRIM)
Available online at: http://euroasiapub.org
Vol. 12 Issue 6, June- 2022
ISSN(o): 2231-4334 | ISSN(p): 2349-6517 | Impact Factor: 8.106

3. Sales Force Automation: - Sales force automation is the essential component of CRM
which forecasts the sales and recording sales processing. With the help of sales force
automation, it is very easy to determine revenue generation opportunities.
4. Marketing: - Customer relationship management assists the marketing by effectively
implementation of promotion strategies. Marketer actively track the data about every
customer to improve customer understanding and enhancing the customer loyalty.

Positive effects of CRM in banking sector: -

Customer relationship management has a very vital role in the banking sector in establishing,
maintaining and retaining of customers as well. Positive effects are as follows:

i. Information obtained through CRM is speedy and exact.

ii. Understanding customer behavior and their needs and desires, so that product or service
can be customized according to customer.
iii. CRM is helpful in selling multiple products of banks such as deposits, credits and
investments etc.
iv. CRM also helps in boosting the strong customer loyalty and good relationship with
customers.
v. Customer relationship management helps in selection of profitable customers.
vi. Customer relationship management assists in improving efficiency and effectiveness of
sales.
vii. By using CRM, banks providing new technologies to customers such as mobile banking,
ATM, E-cards etc.
viii. CRM provides information about customers that helps in segmentation of market.

Problems of CRM in banking sector: -

Despite of many benefits of CRM, there are some problems that banking sector are facing such
as:

i. Evaluation of customer perception accurately is a very challenging task facing by

banking sector.
ii. In developing and retaining of customers loyalty requires huge cost.
iii. The most common challenge is shifting of customer from one bank to another to take the
benefit of interest rate if another bank offers higher interest rate.
iv. CRM is also affected by frequent transfer of operational staff.

36
International Journal of Research in IT and Management (IJRIM)
Email:- editorijrim@gmail.com, http://www.euroasiapub.org
(An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.)
 International Journal of Research in IT and Management (IJRIM)
Available online at: http://euroasiapub.org
Vol. 12 Issue 6, June- 2022
ISSN(o): 2231-4334 | ISSN(p): 2349-6517 | Impact Factor: 8.106

v. The other problem is that all customers are not ready to build a relationship with any
organization, they have a perception that organization has collected that much personal
information about them.

Conclusion: -The aim of this research was to study the impact of CRM in banking sector.
CRM has been a focus point of modern marketing in recent years. The study of CRM play a
crucial role in Indian banking sector in attracting the new customers and retaining of existing
customers. The advancement of technology has changed the customer behavior and their
perception also. Nowadays customers are demanding more satisfactory products and services.
With the help of CRM, banks can easily fulfill the demand of customers at low cost. Banks
should provide training to employees in order to develop positive attitude towards customers.
The implementation of customers relationship management changes the bank culture from task
oriented to result oriented. Banks should start treating their customers or clients as son-in-laws,
so that their daughters (deposits and loans) will be happy and in turn bankers will also be happy
and prosperous.

References: -
1. Chary T. Satya Narayana & Ramesh, R. (2012). Customer Relationship Management in
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37
International Journal of Research in IT and Management (IJRIM)
Email:- editorijrim@gmail.com, http://www.euroasiapub.org
(An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.)
 International Journal of Research in IT and Management (IJRIM)
Available online at: http://euroasiapub.org
Vol. 12 Issue 6, June- 2022
ISSN(o): 2231-4334 | ISSN(p): 2349-6517 | Impact Factor: 8.106

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Websites:-

1. https://www.bankingfinance.in/customer-relationship-management-banking-sector.html
2. https://techonestop.com/types-of-crm-operational-analytical-collaborative
3. https://www.zendesk.com/blog/crm-process/#:~:text=the%20CRM%20process%3F-
,The%20CRM%20process%20is%20a%20strategy%20for%20keeping%20every%20cust
omer,ultimately%20turn%20leads%20into%20customers.
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5. https://www.researchgate.net/publication/342301280_CUSTOMER_RELATIONSHIP_
MANAGEMENT_IN_BANKING_SECTOR_PROBLEMS_AND_CHALLENGES

38
International Journal of Research in IT and Management (IJRIM)
Email:- editorijrim@gmail.com, http://www.euroasiapub.org
(An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.)

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