Customer relationship management as a model for growth in banks.
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Date
2004
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Abstract
The banking industry has been characterised by changes and a turbulent
operating environment. Increased competition, the entry of non traditional
players in the market, and a more aware and demanding client base has
made it imperative for banks to understand their customers. The need to
attract and retain good customers is critical to the top and bottom line, as is
the need to effectively sell and cross-sell to the customer. The recognition that
it is more costly to gain new customers makes it imperative that maximum
value is extracted from the existing customer base. The important trends that defined business in the nineties, such as globalisation, deregulation, and extraordinary technological advancement, made customer facing initiatives both a way for corporations to show that they cared for their customers, as well as a strategic and operating imperative. Customer relationship management (CRM) was viewed as a critical strategic process in order for banks to protect their customer base and to improve stakeholder value. CRM is as much about improving profitability by effectively tapping into the client base, as it is about managing information in a way that ensures that the customer enjoys a consistent experience with the organisation regardless of which channel he/she transacts through. The process is designed to make customers feel that their bank understands and appreciates them. The CRM process must be supported by a well thought out strategy and must contain clear goals. Technology is an essential component underpinning CRM and the supporting processes and procedures. Whilst this is an inescapable fact, CRM is not about plugging in some expensive technology that will solve the organisations problems. On the contrary, it is an initiative that requires commitment and a mindset in order for it to succeed, and an over-arching strategic customer relationship management ethos. This paper will critically examine the CRM strategy as a means of effectively servicing bank customers and leveraging the database to prevent the loss of customers to competitors and increase the value of stakeholders through effective delivery of products and services, and ensuring a consistently good customer experience at all points of contact. Whilst the focus will be on the generic principles of the CRM process as it relates to one major bank, the essentials are true for any other bank or financial institution for that matter. Issues such as the different channels that clients could use to interact with their bank, and how the bank can optimise these interactions will be aired. In addition the rationale for distinguishing between the various categories or segments of customers and how this influences CRM will be discussed. For years organisations and banks in particular have plodded on; treating each customer either the same or indifferently. Interactions were haphazard and often unplanned. The banks relationship with its customer lurched from interaction to inter-action, often without any continuity. Different areas of the bank viewed the customer differently; there was no coherent all encompassing view of the customer. This often led to frustrations for the customer and equally as often, loss of business. The need for a seamless and profitable series of interaction with the customer becomes more and more obvious as the industry becomes more competitive.
The process leading up to the implementation of CRM is just as critical as the
implementation of the technology itself. For Standard Bank this process
started in 1999 after the failed take over bid by Nedcor. The organisation set
out to reinvent itself and embarked on a strategy of growth and enhancing
stakeholder (shareholders, customers and its people) value. The growth came
from entry into new markets such as Africa and Europe, as well as
concentrated growth in the domestic market. The company focussed on its
existing customer base and sought to increase its penetration by improved
cross-sell. The strategy involved an assessment of the internal and external operating environment, and its resources and capabilities. New technology was
acquired and new skills were developed to ensure success of the strategy. In
this paper, we shall analyse this process and the appropriateness of the
strategic customer relationship management as a model for growth.
Description
Thesis (MBA)-University of KwaZulu-Natal, 2004.
Keywords
Customer relations--Banks., Bank services--South Africa., Theses--Business administration.