CUSTOMER RELATIONSHIP MANAGEMENT IN BANKING INDUSTRY- A CASE STUDY OF SARASWAT BANK

Submitted By Group 9 Abhinav Sharma Aditya Vikram Mehra Ankit Bhasin Anuj Arora Ankita Mithun Bhaladhare Asim Kumar Verma Dolly Khatri Jammy Maisnam

INSTITUTE OF MANAGEMENT TECHNOLOGY, NAGPUR

Introduction CRM, as defined by Philip Kotler, is the process of utilizing detailed information about individual customers and carefully managing all the customer touch points with the aim of maximizing customer loyalty. CRM process is defined as any action that is instrumental in the achievement of the output of an operation system, in accordance with a specified measure of effectiveness. The final objective of the CRM process is to create a powerful new tool for customer retention. The success of CRM depends purely on the process, and can be measured in terms of future revenue, customer value, customer retention, customer acquisition and profitability. CRM has many advantages if understood and put into practice properly. CRM in Banks The use of CRM in banking is essentially directed to meet the following purposes: Identifying Customers It is necessary for banks to identify potential customers for approaching them with suitable offers. The transactional data that is generated through customer interaction and also the profile of the customers such as the life cycle stage, economic background, family commitments, etc., need to be collated into one database to ensure proper analysis. For example, customer interactions with a bank for savings accounts, ATM cards, home loan, vehicle loan, demat account, etc. The data generated through all these services needs to be integrated to enable effective targeting. After the integration is done, a profitability analysis of the customers' needs to be undertaken to get an understanding of their profit-worthiness before targeting him with new offers. Customer Segmentation Banks can use customer data to effectively segment the customers before targeting them. Typically, enormous volumes of customer data are available from the data warehouse. By applying data mining tools, clusters of similar records can be made.

From this, one can arrive at a list of customers who are more likely to respond to a new loan scheme, a new deposit scheme, etc. This will help in finding a highly targeted market. Prediction Data mining tools can build a classification system based on past data, taking a number of parameters into consideration. With this, a new customer's behavior can be predicted with reasonable accuracy. The same principle can be applied at the time of launching a new product. Before the product is launched, its sales can be predicted. This can also help in deciding the advertising and pricing strategy. Customer Loyalty Analysis To develop effective customer retention programs, it is important to analyze the reasons for customer attrition. Data mining tools can help in understanding customers in detail. One can drill down to even individual transactions, which might have resulted in the customer switching over to a competitor. Cross-Selling Based on the previous services taken from the bank, data mining tools can provide a wealth of information about the association between two services. This can be used in building a strategy for promotion or selling more services to the customers at the time of contact. Customer Lifetime Value (CLTV) Customers who are not very profitable today may have the potential of becoming profitable in future. Hence, it is absolutely essential to identify customers with high lifetime value. CRM tools are designed to provide methods to calculate CLTV in different business environments. Product Pricing

Using data warehousing and data mining tools, sophisticated pricing models can be developed, which can establish price-sales relationship for different services and the relationship between changes in prices and sales. Assisting the Sales Force for Effective Campaigns A consolidated database on all products, pricing, competitor information, sales presentations, proposal templates and marketing collateral should be accessible to all the people concerned. These would prove very helpful in sales force automation wherein, the sales person gets instantaneous access to all relevant material as and when required, especially when the sales person is in a meeting with a client. Proper Interface with Customers Communication from various departments like sales, finance, customer support, etc., should be consistent and not contradictory. Therefore, all departments should be sharing a unified view of the customer to enable a consistent approach. Removal of inconsistencies is necessary to ensure that customers are not harassed and frustrated owing to poor internal coordination. This is extremely important to ensure customer satisfaction. The contact centers that are used to interface with customers should ensure that they are consistent with each other, irrespective of the medium used for interactions such as telephone, Internet, e-mail, etc.

Advantages of Retaining Customers Relationship Marketing essentially focuses on retaining customers, which has many advantages: Customer stays loyal for a longer time

Buys more as the company introduces new services; talks favorably about the bank Pays less attention to competing brands and competitors' advertising; and is less sensitive to price Costs less to serve existing customers than acquiring new customers, due to repetitive nature of transactions (acquiring new customers can cost five times more than the cost involved in satisfying and retaining current customers). The average bank loses some of its customers each year. A 5% reduction in customer defection rate can increase profits by 25 to 85%, depending on the nature of business.

Customer Retention Strategies in Banking Financial Bonds The first level of strategy to retain the customer is through a strong financial bond, tied to the firm primarily through financial incentives, such as lower charges for greater volume of transactions for customers who have been with the firm for a long time. This involves providing volume discounts and other price incentives to retain market share and build a loyal customer base. Axis Bank offers `Business Privilege Account' where customers maintain an average quarterly balance of Rs. 10 lakhs in the current account. The bank exempts such customers from charges for a variety of services.

Social Bonds Banks bind customers with long-term relationship through social and interpersonal bonds as well. Social bonds are much more difficult for competitors to immediately replicate than price incentives. ICICI Bank prefers to send its customers birthday reminders, festival greeting cards, daily emails and monthly bank statement reports. Customization Bonds

Mass customization does not mean providing customers with endless choices of solutions that only make them work harder for what they want. Axis Bank offers `Priority Banking' which is targeted at affluent customers, particularly those maintaining an average quarterly balance of Rs. 5 lakhs across savings and fixed deposits. `Senior Privilege Account' is targeted at high net worth senior citizen customers who maintain an average quarterly balance of Rs. 25,000 or more in their savings account. Structural Bonds Structural bonds are built by providing a combination of services and going beyond the normal routine. For example, Kotak Mahindra Bank offers cash delivery, demand draft delivery, cheque and document pick up through its home banking services. As cash

withdrawal and demand draft request are the main reasons why customers visit the bank, providing doorstep banking or home banking facility offers a strong structural advantage. IndusInd Bank offers various doorstep services to its customers, like courier pick-ups, cash delivery and home banking. Cash is delivered to the office up to Rs.25,000. Les concierge is an added facility, whereby a bank's customers can avail non-banking services like payment of utility bills and document pick-up. Many banks have tied up with utility companies for payment of electricity, telephone and other bills through ECS from the customers' accounts.

SARASWAT BANK CASE STUDY CRM Initiatives of Saraswat Bank: Introduction: The Bank has a very humble but a very inspiring beginning. On 14th September 1918. The Society was initially set up to help families in distress. Its objective was to provide temporary accommodation to its members in eventualities such as weddings of dependent members of the family, repayment of debt and expenses of medical treatment etc. Thanks to these sustained and assiduous efforts over 25 years after its inception, the Bank had gained Strong foundation in terms of its membership, resources, assets and profits. By 1942, the Bank was fulfilling all the banking needs of its customers. Last two decades the Bank has witnessed a steady growth in the business. The bank has a network of 223 fully computerized branches covering six states viz. Maharashtra, Gujarat, Madhya Pradesh, Karnataka, Goa and Delhi. The Bank is providing 24- hour service through ATM at 137 locations. The Bank got a permanent license to deal in foreign exchange in 1978. Presently the Bank is having correspondent relationship in 45 countries covering 9 currencies with over 125 banks. In 2011 Bank was granted permission for All India Area of Operation by Reserve Bank Of India. Bank has an ambitious business expansion plan in place to

have a presence in all major cities of the country, reach a business level of Rs 50000 Crores by 2016 and Rs 100000 by 2018.

Some of the CRM initiatives are: Saraswat Bank offers various customer-friendly deposit schemes and personal loans to suit different needs of the people. It provides various services like locker facility and utility bill payment facility among others. It also offers loans and advances to small and medium enterprises to help them grow their business. The bank provides credit facilities to retail traders in the form of swift loans, working capital and property loans. It also offers corporate loans to existing and prospective private and public limited companies to meet their financial needs. Some of the services offered by the bank are: Easy Pay Scheme: Saraswat Cooperative Bank has introduced "Easy Pay" scheme for customers to make recurring utility bill payments such as telephone bills, electricity bills, cellular phone bills, insurance premium, etc.

Debit Card: RBI has allowed Saraswat Bank to offer debit cards to its customers. The debit card with VISA accreditation was launched to limited customers in March

2008. After successful testing, it is now being made available to all the customers, which would enable them to draw cash from any of the VISA accredited ATMs not only in India but also across the world, and to also use it for making payment at any point of sale as well as for internet transactions of all types. Mobile Banking: Saraswat Bank has introduced mobile banking to enable customers to obtain information about their accounts. Mobile banking provides messages of both types: Push and Pull. In push messages, the bank sends SMS alerts of cash transactions above Rs. 5,000 and also for demat transactions. In pull messages, customers can check balances in the account and find out details of last five transactions by sending SMS to a given number. Insurance: Saraswat Bank has tied up with HDFC Standard Life insurance company for marketing various life insurance schemes. For non-life insurance, the bank has a tie-up with Bajaj Allianz General Insurance Company. Anywhere Banking: Saraswat Bank offers its customers the facility of anywhere banking with the clearing and quick collection of outstation cheques. Customers can withdraw cash from their accounts in any of the bank's branches with the support of core banking solutions. Internet Banking: Saraswat Bank offers internet banking facility to its customers by which customers can access information about linked account, statements of account, balance enquiry, cheque status, loan account, profile information, mini statements, etc. Apart from above mentioned services Saraswat bank also deals with Foreign Exchange, mutual fund and has a wide network of ATMs. Customer Satisfaction through CRM: In the competitive market scenario, a customer during the normal course of his business transaction with the bank expects high level of satisfaction. The level of customer satisfaction depends upon several factors and these have been considered while collecting feedback from the customers. An attempt is made with the help of a questionnaire to measure the level of satisfaction among customers of urban cooperative banks with respect to

savings/fixed deposit accounts, loans and advances. Various parameters are considered pertaining to the banking services considered, and responses are obtained on a five-point scale - excellent, very good, good, satisfactory and not satisfactory.

It is observed that, with respect to loans and advances, 79% of the customers are quite satisfied, considering the categories of excellent, very good and good. This clearly suggests that urban co-operative banks are able to attain high level of satisfaction in areas of loans and advances, through their CRM initiatives.

Analytical Tools being used by Saraswat bank Customer Profitability Analysis: This involves measuring the profitability of each customer's business, and predicting the lifetime value. This enables the bank to move towards more profitable marketing, sales and service initiatives. Predictive Churn Model Techniques: These are techniques which predict the threshold levels when a customer would switch the bank. Techniques such as logistic regression, decision trees and `neural networks' forecast likely product purchases, and also identify customers most likely to stay and customers most likely to leave the bank. Conduct What-if Analysis: This determines how certain marketing, sales and service initiatives will impact customer profitability; what schemes and offers can attract customers and when to use them.

Conclusion In today's environment of growing competition, dynamic market situation, entry of foreign banks and increasing use of online channels of communication and transactions, it has become extremely difficult for the urban cooperative banks to stay ahead of their competitors. Many banks which have understood the importance of retaining customers and corresponding lifetime value of customers are turning towards implementing CRM in their organizations. CRM has found relatively higher and more successful implementation in the financial services industry. Customer intimacy or relationship with customers is observed as one of the competitive differentiators in this industry. With increased income levels, customers are now looking for better banking facilities. Banks that understand the needs of customers and transform themselves accordingly are definitely benefiting from the long-term loyalty of their customers. The importance of adapting oneself to the changing needs of customers is compelling the banks to adapt to more customer- friendly operational systems. Urban cooperative banks should today acknowledge that appropriate understanding and implementation of CRM strategy is the key to success.