Declaration

I am Vinita Naidu, from Thakur College of Science and Commerce, student of T.Y.B.Com (Banking and Insurance), semester VI, and examination seat no:-_________. Here by submit my project report on customer retention in banking sector. I also declare that this project which is the partial fulfillment of the requirement for the degree of T.Y.B.Com (banking and insurance) of the Mumbai University is the result of my own efforts with the help of experts. Date:

Acknowledgement
I have taken efforts in this project. However, it would not have been possible without the kind support and help of many individuals and organizations. I would like to extend my sincere thanks to all of them.

I am highly indebted to Prof. Priti for her guidance and constant supervision as well as for providing necessary information regarding the project & also for her support in completing the project.

I would like to express my gratitude towards my parents & project cocoordinator Prof. Rekha for her kind co-operation and encouragement which helped me the in completion of this project. I would like to express my special gratitude and thanks to our principal for giving us such attention and time. My thanks and appreciations also go to my colleague in developing the project and people who have willingly helped me out with their ability

CONTENTS
SR NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 PARTICULARS EXECUTIVE SUMMARY INTRODUCTION OBJECTIVES IMPORTANCE AND NEED OF CUSTOMER RETENTION BEHAVIOUR OF ORGANISATION WHICH LEADS TO CUSTOMER RETENTION OR LOSS OF CUSTOMERS CUSTOMER RETENTION AND BUSINESS COMPETITIVENES DIFFERENT METHODS OF CUSTOMER RETENTION CUSTOMER SATISFACTION IMPORTANCE OF TRUST IN CUSTOMER RELATIONSHIP MARKETING STRATEGIES BRIGHTEN THE FUTURE CUCTOMER FRIENDLY BANKING SERVICES DIFFERENT CASE STUDY ANALYSIS AND INTERPRETATION OF THE STUDY IDENTIFYING YOUR CHALLENGES CONCLUSION BIBLIOGRAPHY

 EXECUTIVE SUMMARY
It is defined as the activity that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship. A companys ability to attract and retain new customers, is not only related to its product or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace. Customer retention has a direct impact on profitability. This project discusses the need to fully understand the causes of desertion to develop an effective customer retention strategy. The project provides a framework to improve client retention and proposes an integrated system to monitor the causes of desertion. The findings and framework of this project are the result of research on customer satisfaction in different books and internet. Careful analysis of each of these factors reveals major dissatisfaction with product features. Quality of customer service is a complementary source of dissatisfaction, but to a lesser extent, since the emotional connection the customer possesses with the bank mitigates most weaknesses in customer service. The purpose of this project is to provide insights into issues related to customer satisfaction, loyalty and retention which will prove useful to managers in financial services. Building a Successful Contact Center Customer Retention Program. The contact center is the focal point of customer interactions representing the enterprise to its customers. The contact center must have the support of all departments within the company for a customer retention program to live up to its potential.. Generally service quality relates to what customers think they should get, while customer satisfaction is concerned with individuals ideas of what they will receive

In this project I have tried to bring out the importance and need of customer
retention. Essential steps for customer retention. Different case study, and analysis.

Customer retention in Indian banking system

INTRODUCTION

Customer here means the customers who have already bought and received our product OR the ones who has been our client or are in midst of being our client. Customer acquisition cost is an investment and customer satisfaction and retention (CSR) enhances shareholder value and makes your business more predictable. Customer retention is absolutely necessary in banking sector due to the growing competition. Customer retention statistics are typically expressed as a percentage of long term clients, and they are important to a business since satisfied retained customers tend to spend more, cost less . On the other hand, to retain customers, you have to employ methods that were found to be an effective way to do just that for your business. One way of doing that as a tip is to use promotional items or corporate gifts and distribute them to all your clients on a level per level basis like from a regular customer to a a prospect customer. Now the only focus of all business is customer and Customer Satisfaction. This Customer Satisfaction cannot be achieved without proper involvement of internal customer employees. Companies start their business philosophy from their main goals or objectives and make clear statements showing their mission and values. All lateral developments are performed on the basis of these predetermined values. Modern businesses focus only on customer satisfaction. Customer retention is based mainly on customer satisfaction. Customers will satisfy if company is sure about the persons, method and tactics of achieving customer satisfaction. Whole management and its team are responsible for achieving business results so is the customer satisfaction. Modern management has no doubt in it that customer satisfaction can only be achieved if all employees regardless their departments work hard to satisfy customer. Customer retention reflects the soul of the company. In order to serve the customer, an organization must think like the customer and the employee. Customer retention reflects the state of mind that customers have about a company and its products or services when their expectations have been met or exceeded. This state reflects the lifetime of the operation of the bank and its profitability.

MEANING

Customer retention refers to the percentage of customer relationships that, once established, a small business is able to maintain on a long-term basis. Customer retention is an important element of business strategy in todays increasingly competitive environment. In global business environment, customer retention is playing important role for development of the business. The days are gone where main emphasis was given on profit making only. In present scenario, business organizations are giving main stress on its customers and their retention. Modern business environment is famous for various new trends. An environment where the businesses used to hire employees for the sake of monetary benefits only is now changed in multi dimensional and multi pronged environment. Now business are not run for the sake of money and short term financial benefits only but for a long time sustainable growth and development. retention level increases to a much higher level as compared to a normal retention process. Silent attrition causes the real damage to the organizations because they do not even know when the customer defected. They find no time to implement the corrective measures to try retaining that particular customer or even determine if the customer can be retained or not. Customer retention does not make sure that the customer is loyal. For example, a brokerage firm has both traditional trading platform and online trading platform. A customer has his trading account in traditional platform but after some time he feels to switch to online trading platform. Now in this situation, the customer is not considered to be loyal to the given services, but the customer is said to be retained by the same organization. Customer retention is a strategic process to keep or retain the existing customers and not letting them to diverge or defect to other suppliers or organization for business and this is only possible when there is a quality relationship between customer and supplier. Usually a customer is tended towards sticking to a particular brand or product as far as his basic needs are continued to be properly fulfilled. He does not opt for taking a risk in going for a new product. More is the possibility to retain customers the more is the probability of net growth of business. Customer retention is the activity a company undertakes to prevent customers from defecting to alternative companies. Successful customer retention starts with the first contact and continues throughout the entire lifetime of the relationship.

Effective customer retention strategies must focus on measuring and achieving the following:
Delivering service thats consistent with your value proposition and brand Cross-selling, up-selling and asking for referrals from existing customers Developing programs to increase customer loyalty and decrease turnover knowing the lifetime value for different segments Using that data to improve marketing Prioritizing retention as a major focus in your annual marketing plan Take customer feedback across the channels as a blessing in disguise to improve any lacuna in service / product. Structured / Unstructured feedback using various forums should be encouraged as customers may not tend to give direct feedback but may use various social media networks, mails, discussion forums etc to highlight issues. . Make customer service priority number one. Linking business objectives to customer retention helps offset the cost of obtaining new business. This new business is what helps the company to grow, so having more money to devote to winning it is important. Keep current customers happy and the money they spend will increase the marketing budget. Make customer service priority number one. Linking business objectives to customer retention helps offset the cost of obtaining new business. This new business is what helps the company to grow, so having more money to devote to winning it is important. Keep current customers happy and the money they spend will increase the marketing budget. Encourage customers to communicate by including requests for feedback in newsletters and emails. Give customers an easy way to submit comments via the company website and encourage product reviews on the company Facebook page.

Objectives:
Maximize customer satisfaction for current customers. Identify dissatisfied customers before they leave through a customer retention program.

. Customer retention helps in the survival of banking business for a long time.

Objectives of banks in customer retention

1. To understand the role of Customer retention in Banking. 2. To evaluate the strategies of Customer retention in Banking. 3. To find importance of customer retention in Banking. 4. To take a study of customer retention initiatives undertaken by ICICI Bank.

Importance and need for customer retention in banking

That every individual sees their bank as a most important service provider is
not difficult to understand. Considering the relationship involves the management of their hard-earned money, it is understandable people will be especially critical when deciding upon a bank or deciding to remain with one. Accordingly, banking customer retention is more of a challenge than it would be in different industries. In addition, the current economic downturn is heightening concerns and further threatening customer loyalty. Customers naturally gain a sense of security placing their money in an institution they believe shares their interests, and the nature of their precious finances means they need to know those interests are being catered to. Understanding that their business is valued plays a role in this, as many consumers view bank products and services primarily as commodities. Promising to safeguard and grow peoples finances is only a portion of what a bank must offer to promote bank customer retention

Overall Customer Satisfaction depends on: Service Quality Good Value Competitive Pricing Billing Timeliness Accuracy of Billing Knowledgeable Employees Courteous Employees billing Clarity, Quick Service, Helpful

Why is it important to retain customers? Customer retention has recently become one of the hottest topics for discussion in business circles. Suddenly the buzz words are customer loyalty, customer focus delighting the customer and relationship marketing. The reason for this new obsession is simple-improving customer retention pays big dividends. Studies have shown that increasing customer retention by just 5% can have a bottom line profit increase of up to 75%.and the lifetime value of a single customer can be measured in many thousands of pounds, depending on the type of business. We cannot escape from the simple fact that retaining customers, satisfying them and making them enthusiastic champions of our products are vital not just to business success, but to business survival

Why focus on customer retention Service encounters failures Inconvenience Response to failed service Pricing Competition Ethical concerns Involuntary switching Other factors

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Retaining customers when things go wrong No one likes to deal with complaints. It can be hard work or upsetting to handle customers who are difficult or angry, and it is often time consuming to put the matter right. Yet if we pay full attention to the complaints we receive, we will prosper. There are two reasons for this If someone is complaining it means we havent satisfied them yet-and we need to know why We are also getting a wonderful opportunity to delight the customer in the way that we resolve the problem Today you will explore some guidelines for dealing with dissatisfied customers and turning failures into golden opportunities to delight customers and ensure that they remain loyal Focusing on customers, not products Retaining customers means spending less time looking for new customers and more time looking after the ones we already have, so that they will grow into bigger customers. His argument was that every customer should be considered both as an appreciating asset and as a powerful tool for word of mouth advertising To retain customers, it is vital to focus on what people want and need than on what we want to sell to them. For many years, organizations tended to be very inward looking. They were primarily concerned about the quality of the goods they produced or the services they provided. They worried endlessly about devising the most efficient systems and procedures they debated the benefits and problems of different production methods and they spent a lot of time considering how best to sell those goods and services to people out there in the marketplace. Customer service when it existed-was frequently an extra that was bolted on at the end of the production line. In recent times however all that has changed. Customers have become more knowledgeable and more demanding than ever before-and they have far more choice about what and where they should buy. This means that, even though an organization may be producing the best product or offering the most efficient service in the world, it will not be successful unless it bends all its efforts towards finding out what customers want and then offering this to them. to retain customers you have to base everything that you do on the needs, wants and expectations of customers

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Why have things changed? There are two main reasons why, in order to retain customers, it is now necessary to concern ourselves primarily with their needs rather than with the services or products we offer 1 The external environment has changed 2 customers themselves have changed The business environment Business organizations in the 21 century operate in a world of uncertainty, complexity and rapid change. you are probably well aware of the main factors that have brought this situation about Intensifying competition-all organizations are to a greater or lesser extent influenced and affected by the global competitive environment. But as competition intensifies, our ability to retain customers is the most important way of gaining the competitive edge Rapid technological innovation-new information systems, the internet and intranet technologies have created new business possibilities, including methods of carrying out transactions and communicating with colleagues and customers. these technological advances have revolutionized the way many of us do business, they have helped to improve general efficiency and have often resulted in substantial cost savings Constant demand for higher quality and better value-in the face of increasing competition, its no good striving for quality and then sitting back once we have achieved it. Instead, we have to work continuously to improve the quality of the service we provide for our customers succeeding in the competitive environment means never losing our awareness of changing customer needs. This involves Recognizing and managing changes before they take control of us, and developing our skills, our organizational structures and our business processes in such a way that we can easily turn the threat of change into an opportunity for growth Customers In general terms, individual customers are today better educated and better informed than their parents or grandparents. They are aware of their legal and moral rights and they take time to find out about the products that are available and to compare features and prices, Added to this, customers have personal dreams and aspirations which go far beyond the modest expectations of previous generations. They are less likely to accept unquestioningly their situation in the world they are often motivated by a need to improve their physical circumstances and to realize their desire for self-fulfillment. In addition, it has become more and more common for customers to own shares in the organizations that serve them. Those that do have an extra stake have a

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further incentive to take an interest in that organizations overall performance. Although the consequences the demands and expectations of customers can be severe for business, it would be wrong to view these new attitudes and needs as a problem. On the contrary, we can gain distinct competitive advantage if we recognize and meet the characteristics of the new consumer. Increasingly, what is important for them is not what they are buying, but how they are treated by the organization doing the selling.

What does your customer want? We have seen that all too often organizations are only concerned about their goods and services from the point of view of producing or providing them. The only route to success is to devise ways of getting close to customers, of listening to what they want and then offering t this to themThe things that customers want You keep your promises You are wiling to help You inspire confidence You treat customers as individuals You make it easy for customers to do business with you.

Measuring your success Living up to customer defined standards is not easy-it is not enough to meet them in certain parts of the company or on certain days of the year. To keep customers coming back, everyone has to meet these standards for every customer every time they come to purchase. Only if you can do this can you say that you are truly providing customer satisfaction The only way of making sure that your organization is meeting your customer defined standards is to introduce reliable measurement systems. The method you select will to depend on the types of standards that you have defined. Measurement is easier for certain characteristics than for others. In some cases, it is possible to judge the quality of products and services purely by keeping count. For example; the numbers of errors made by bank However, with many other characteristics the only way of measuring the extent to which standards are being achieved is to seek customers opinions directly. The usual ways of doing this are customers feedback forms, postal surveys and customer interviews. As it is expensive to collect measurement 13

information, you should measure only what you need to know. The questions you ask must be designed to elicit information on only the characteristics you have already identified-the standards that you know you must meet to maintain the loyalty of your customer. Customer satisfaction can be created by following ways: a) In order to satisfied customers, it is important to provide employees with career. Development opportunities and high degrees of involvement in the business. If employees are satisfied only then they can serve organization and deal with customer in better way. b) Another possible strategy for satisfying customers involves institutionalizing customer relationships. Rather than just providing contact with individual employees, a small business can provide value to customers through the entire company. For example, it could send newsletters or provide training programs in order to become a source of information and education for customers. c) Customers can also be satisfied by providing some benefits to them, for example; Distribution of membership cards or convening frequent-buyer programs is the direct incentives for customer satisfaction. d) Electronic links can be created to improve the service they provide to customers. For example, e-mail connections could be used to provide updates on the status of accounts, electronic order systems could be used to simplify reordering and reduce costs, and online services could be used to provide general information. e) Some strategies like stable prices over the customer life cycle, basing prices on the overall cost and profitability of the customer relationship, may be useful to business organization, for customer satisfaction. All of these strategies are intended to customer satisfaction and minimize the changes and problems customers experience, thus making them wants to maintain the business relationship. All these efforts may creates customer satisfaction and further customer satisfaction will lead to customer retention in the organization.

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6 simple things to retain the customer without breaking the bank rules
When customers leave, they often do so because the competition has oneupped your company. Decrease the chances of this by developing customer loyalty programs and building brand loyalty by offering the highest-quality and most useful products or services. Keep promotions and special offers flowing and diverse. Everyone loves a great deal and these offers may keep customers loyal even when the competition is fierce.

Make customer service priority number one. Linking business objectives to

customer retention helps offset the cost of obtaining new business. This new business is what helps the company to grow, so having more money to devote to winning it is important. Keep current customers happy and the money they spend will increase the marketing budget. Offer products or services of the highest quality because these increase the chances of repeat business. No matter how happy employees are, they cannot make up for low-quality products or services. Whether a business is new or has been around for years, quality should be an ongoing focus. have fun! It is possible to be professional while at the same time loving what you do. A simple smile can diffuse an otherwise tense situation and make any interaction more memorable. People can hear the smile in your voice over the telephone, see it in person, and infer it through wording used in an email. Look internally when trying to satisfy customers because happy employees lead to happy customers. Subject employees to ongoing training on customer service skills. Provide them with opportunities to present feedback and ideas, exercise leadership skills, and play an active role in operations. Implementing a corporate bonus program based on company performance gives each employee a reason to focus on retaining customers. Staying relevant to customer desires helps maintain the customer base. Customer tastes change, as do societal trends, so be aware of these shifts before they happen. Once an opportunity is recognized, develop a product or service around it. Test it on a sampling of customers and solicit their feedback regarding improvements.

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Examples of existing customer management programs include:

Product design evolution Payment automation optimization Active customer complaints management Cross-sell leads management Product activation Usage stimulation Reproved products IVR Messaging Offers Leveraging sponsorships Leveraging affinity marketing High value relationship programs Low value relationship programs Local area marketing 3rd Party and Sales consultant commissions Driving customers to highest ROI channel mix Product bundling Product Up sell Silent attrition management Collections process Move and Follow Differentiated levels of service Optimizing product mix

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Banks top 5 customer retention mistakes :

1. Waiting too long to save an account. Banks maintain a rich repository of transactional, personal, and contact channel information, so they are armed with the tools to identify at-risk customers well before actual attrition occurs. By using financial services analytics to segment the customer base and track the history of account transactions and events, banks can build statistical models that predict the likelihood of customer attrition. These predictive statistical models can then be embedded in business rules engines (BRE) that continuously monitor account transactions and events. In real-time, a BRE can identify customers with a high likelihood of attrition, so that action can be taken immediately. For example, a bank could pull at-risk customers from the IVR and send them directly to a highly trained Retention Specialist to reengage them by offering on-line bill pay, upgrades, bundled accounts or valuable rewards programs. This reengagement will create a more loyal customer with opportunities for future revenue growth. 2. Assuming an at-risk account that stays open is a good save. Just because the customer initially agrees to keep the account open does not mean he or she will continue to keep it open. To avoid re-attrition, banks must not only save the account, but also reengage the customer. Offering rewards programs, direct deposit or special promotions can help to ensure that the customer will remain loyal. Again, financial services segmentation and analysis of historical patterns can be used to determine which reengagement offer is appropriate for each customer. Banks also need to develop incentives for agents based not only on saves, but also on increased account activity once the account is retained. Often agents are paid to save accounts, but the customer never reengages, so the bank incurs the cost of saving and servicing a dormant account until the customer calls to close once again. 3. Trying to save every account. Businesses find it difficult to openly say that they do not want to keep every customer, however, just as it doesnt make economic sense to approve every loan, it also doesnt make economic sense to save every account. Customer lifetime value varies significantly, and often banks are spending more to save an account than they can ever recoup. Banks need to consider the entire banking relationship, not just individual accounts. A BRE easily and no obtrusively integrates with numerous back-office systems to offer a complete picture of customer lifetime value, so educated decisions can be made about salvaging accounts.

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4. Assuming every agent is good at retention. Often, we assume that just because an agent is good at service, he or she will be equally good at retention. Normally, this is simply not the case. Retaining a customers account requires a consultative selling approach that even sales people find challenging. Having a specially trained group handling these contacts will definitely yield better results. Some banks try to minimize the load on their Retention Specialists, and allow front-line agents to make part of the retention offer or do a reselling of the account benefits. This approach presents several real dangers: it becomes even harder for the Retention Specialist to save the account, the customer can become frustrated by talking to two people, and the account will likely attrite again if the customer never speaks with the Specialist to become reengaged. 5. Not using the customers channel preference. Some companies focus retention efforts heavily on one channel, such as the contact center. Creating a retention strategy that matches the customers channel preference can dramatically improve results. For instance, if a customer typically banks online and the predictive statistical model indicates that the customer is likely to attrite, the bank can proactively reach out and chat with the customer to make reengagement offerings. Developing the right preemptive retention strategy for each channel can really pay off when customers feel that the bank has personalized communication for them. As you evaluate your retention strategy, try to avoid these common, but costly, mistakes. Your reward will be improved customer retention in financial services and significant cost savings.

( The following analysis is given by Angela Crawfords she has spent over seventeen years in financial service contact centers and operations. She has experience in small, mid-sized and global financial services organization where she was recently a Senior Vice President responsible for contact center sales, retention and marketing. She has turned numerous contact centers into profit centers, traveled throughout the country studying customer experience best practices and redesigned numerous contact channels during her career. Currently she is a Director of Product Strategy focused on Financial Services for Converges. )

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Behavior of organization which leads customer retention or loose of customers

a) Making unsustainable promises: New customers may receive incentives to convert a discount price or an extra level of service. Sometimes this is made clear, but often it isnt. At work we were initially happy with a new supplier, but gradually the price rose and the quality of service deteriorated. It is understandable that quality of delivery varies by employee, but companies should ensure the bare minimum is of acceptable quality. b) Misleading sales services: I find this issue more prevalent when the person/department for business development is different to that for ongoing account management. The sales peoples bonuses are short-term and based on bringing customers; this incentives them to oversell and make unsustainable promises. The project team then has an impossible task to live up to. And so it proved. The above two examples highlight the problem of churn. There will always be some level of churn but a high level of departing (unsatisfied) customers completely counteracts the work that has gone into developing new business. Eventually the opportunities dry up, and the company retreats to its core. c) Alienating the core audience: Moving into new markets or new segments risks alienating the core audience, if the messages used to attract the potentials arent consistent with what attracts the core audience. d) Offering sub-standard products or services: Reaching out to new audiences may divert resources away from maintaining the quality of a core product or its associated service. Not only are the core fans being deprived of their need to support their team, but the online customer support has been completely independent.

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CUSTOMER RETENTION COMPETITIVENES

AND

BUSINES

Today in global environment, there is need of use customer retention strategies to compete cut throat competition in business. Strategy related with customers is the most important technique to achieve the predetermined goals of the business because customer retention directly linked with success of the business. In modern times of competition, business organizations do many efforts to attract customers more and more. Customer retention directly linked with more volume of sale and more profits. After liberalization and globalization competition among various kinds of businesses arises. Therefore, to survive in cut throat competition, a business organization should make various competitive strategies regarding Customer satisfaction and retention of customers. In today's challenging economy and competitive business world, retaining your customer base is critical to International Journal of Research in Finance & Marketing your success. If the business organization doesnt give its customers some good reasons to stay, the competitors will give them a reason to leave. Customer retention and satisfaction drive profits. It's far less expensive to cultivate the existing customer base and sell more services to them than it is to seek new, single-transaction customers. Most surveys across industries show that keeping one existing customer is five to seven times more profitable than attracting one Business development might make some short-term gains, but losing sight of customer retention will only hurt in the long run. An organization needs to ensure it delivers on the factors that causes its core to be loyal advocates whether uniqueness, timeliness, durability or aspiration. Its brand promise, essentially. Customer lifetime value might be factored into business development strategies. But without adequate support across the organization, it remains unfulfilled as core customers depart and new customers reject the offer. Customer retention has direct impact on business development and business competitiveness.

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Different method of customer retention in banks.

Customer retention requires attention to customer details. Customer retention strategies can be made by doing proper analysis of customers and behavior of customers. For this purpose, customer retention plan is needed. Following are the steps of customer retention strategy: a) Organization should Contact top customers or clients regularly. A list of top customers should prepared and call them each at least quarterly. These numbers of customers should provided gifts, free coupons for shopping and other benefits. b) Proper research programmer should be developed to satisfy the customer by providing various services and products according to their taste and preferences. c) Keep organizational name in front of all your customers. Advertise and create Network regularly. Send e-mail newsletters regularly. The key is doing this regularly. d) Top management should give current customers good deals. More efforts should be made to attract new customers. Management must remember that, the competitors are targeting its customers with deals. e) Management should Surprise them by doing something special and unexpected for some of the best customers. a small gift can be sent or add something extra to their order. f) A good track should be kept for achieving more customers and retaining them by getting a database, contact manager; digital address book etc. a way should be found to keep track of all the clients of past, present and future so that they can be quickly cached. g) Proper communication should be maintained with costumers.

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CUSTOMER SATISFACTION- THE EXCLUSIVE KEY FOR CUSTOMER RETENTION

For customer satisfaction to be high, promises and expectations must be met. This involves the organization's ability to understand customer expectations. According to Courtney Ramirez, The importance of customer satisfaction is apparent when you realize that, without customers, you don't have a business. A single unsatisfied customer can send more business away from your company than 10 satisfied customers. The more you focus on customer retention and customer support, the more long-term business you'll get. It's worth it to focus on customer satisfaction strategies, no matter how large or small your company is. Understanding the needs of the customer is critical. Customer satisfaction does have a positive Effect on an organizations profitability. According to Hoyer and MacInnis (2001), satisfied customers form the foundation of any successful business as customer satisfaction leads to repeat purchase, brand loyalty, and positive word of mouth. Coldwell (2001): Growth Strategies International (GSI) performed a statistical analysis of Customer Satisfaction data encompassing the findings of over 20,000 customer surveys conducted in 40 countries by Info Quest. The conclusion of the study was: A Totally Satisfied Customer contributes 2.6 times as much revenue to a company as a Somewhat Satisfied Customer. A Totally Satisfied Customer contributes 17 times as much revenue as a Somewhat Dissatisfied Customer. A Totally Dissatisfied Customer decreases revenue at a rate equal to 1.8 times what a Totally Satisfied Customer contributes to a business. Satisfied customers are most likely to share their experiences with other people to the order of perhaps five or six people. Equally well, dissatisfied customers are more likely to tell another ten people of their unfortunate experience. Furthermore, it is important to realize that many customers will not complain and this will differ from one industry sector to another. Lastly, if people believe that dealing with customer satisfaction/complaint is costly, they need to realize that it costs as much as 25 percent more to recruit new customers.

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How can banks meet customers changing needs and preferences?

Amid sweeping regulatory change, slow economic growth and tightened margins, banks today are increasingly focused on their most important stakeholders their customers. Yet, despite their best efforts to attract and retain customers, customer confidence levels in banks remain low. In response, customers are changing their behavior and demanding lower fees for higher levels of service or other improvements. If these demands are not met, they are increasingly likely to shop around at other banks for competitive rates for services and products. To build on our previous global consumer banking survey in 2011, and to help banks better understand what they must do to build and maintain customer relationships, we surveyed 28,560 banking customers across 35 countries to learn more about their needs and preferences. Our banking teams around the world analyzed the responses. We hope the data and survey findings are useful to you when planning strategies and adapting your business models to attain greater customer loyalty and satisfaction

Our survey suggests that for banks to remain competitive, they must: Give customers the opportunity to choose by making promises and service offers more transparent. Rebalance fee structures to achieve the clarity and sustainability required by regulators and investors. Help customers shape their own banking experiences by improving how they provide information and advice, recruiting online affinity groups and by developing flexible loyalty programs. Develop models around customer needs by reprioritizing spending, including increasing the use of low-cost digital models and using more innovative technology.

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MAINTAINING THE CUSTOMER STABLE Banking industry statistics state clearly that recruiting new banking customers is a greater cost to the bank than retaining existing ones. Banks on average lose 20 percent of their customer base every year, and yet by increasing retention by as little as 5 percent, it is suggested these banks could increase profitability by up to 100 percent! This statistic alone speaks volumes as to the importance of bank customer retention. What gives this perspective even more weight is the fact that banks spend a great deal of their marketing finances on what is called an acquisition cost per customer. This cost to bring a single customer into their business stable is markedly greater in comparison to the cost a non-financial services business would incur to bring in a customer. Industry experts say banks have difficulty in recovering acquisition costs as it is, and a high rate of customer defection makes that recovery nearly impossible. Again, the current economic climate makes this situation even more severe. Insiders agree prospects for organic growth in banking are starting to slim, and over 10 million financial customers are switching institutions each year. For all these reasons, it is of the utmost importance that banks adopt strategies for effective bank customer retention. The growing value of customer retention

Any bank should know the extent to which customers see them to be a service provider who is of the utmost importance. Wealth, however big or small, is hard earned and people will be especially critical when either choosing a bank or choosing to remain with one. As a result, bank customer retention is more challenging than it is in other industries. In addition, the current economic climate is heightening concerns and further threatening customer loyalty. Customers want to put their money in an institution they believe is looking out for them, and the nature of money itself means these customers are looking for even more reassurance that their best interests are being catered to. A part of this satisfaction is feeling that their business is valued, as many consumers see bank products and services as commodities. An offer to improve the dollars-and-cents bottom line is only but a part of what a bank must offer in their efforts towards bank customer retention.

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Collection for customer care and retention

Collection agents can not only help banks salvage bad debt but also preserve customer relationships that will demonstrate value once the economy recovers As banks struggle with the current environment of weak revenue growth, effective cost-control returns to the fore. This provides the Collections function with an opportunity to demonstrate its value to the organization not only by recovering defaulted debt but also by salvaging customer relationships that are worth preserving in these difficult times. Long perceived as simply persistent callers single-mindedly intent on salvaging loans gone bad, Collections in many banks has now become an essential, strategic part of the whole customer care apparatus. This reinvention was born of necessity as the credit crisis and recession shifted many once-good customers into the Collections cycle, making Collections the only conversation those customers were having with the bank. Today, there remains, and will for some time, a sizeable percentage of customers still a payment or two in arrears but also positioned to become profitable customers again. And given that its always more cost-effective to retain current customers than to try to attract new ones, banks have a vested interest in this salvage effort. It is through Collections that banks can successfully re-form their relationships with these customers and make them profitable again. Such a rebuilding effort should be guided by these four principles: Recognize the Good, the Bad, and the Good Again. It was natural, during two decades of solid economic growth, for Collections to get used to dealing mainly with bad customers customers with little prospect of being converted into attractive customers for the bank. Back then, collectors rarely talked to highpotential customers. But that changed in the last few years when job losses spiked, home values plummeted, and otherwise good customers fell into default. It is these customers that collectors have dealt with over the past three years. When these customers recover and restore their credit, some will represent future revenue potential revenue for their current lender if they have a positive collections experience but revenue for a competitor if they do not. And banks will have a lot of competition from all kinds of providers for these customers new-found cash. In other words, banks are by default entrusting their future income streams to todays collectors, so it is critical to provide collectors with what they need to manage those interactions to positive outcomes. Only sophisticated customer analytics can help them distinguish between the good, the bad, and the good again. Collectors need to be able to base their customer retention efforts on sophisticated customer data analytics.

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Keep Having Customer Conversations. What is the holy grail for Marketing? To hold that all-important conversation with the customer. What do collectors do? They talk to the customer. Every day, all day long, Collections is doing that most vital function with three goals: have an authentic conversation with the customer, arrive at an agreeable outcome and make their bank the first choice when the customer decides to make a payment or purchase an additional bank product. The Collections model of people talking to people is a costly model. Despite remarkable technology-driven advances in efficiency, Collections is still a laborintensive function and the human capital cost of agents remains its greatest expense. Making sure you get the most out of your most costly resource is nothing but good business. Everybody knows it costs more to replace a customer than it does to retain one. If Collections can collect payments while keeping good customers happy, and keep Marketing from having to replace that customer at greater expense, the return on investment (ROI) on Collections becomes about as high as any investment the bank might make. Everything you can do to make sure your agents are doing what they do best is money well spent. That means deploying technology and analytics to make sure they dont waste their time reaching wrong numbers or talking to customers who cant pay or who will pay without a call. Measure Value Not Just Volume. For Collections, the business metrics are reduced charge-offs, total dollars collected and customers retained. But for leading indicators, managers have traditionally focused on interim operational metrics such as accounts-per-collector; calls-per-account, penetration rate, agent idle time, and so on. If they performed well on those metrics, odds were good they would also perform well on the business metrics. The correlation held well enough to be part of most traditional Collections dashboards. But today, volume-related metrics have less relevance. Sophisticated analytics can tell collectors what channel is best for reaching debtors and the most opportune time, which ones have money, which ones will pay, which ones wont and which ones dont even need a call. Collectors should be able to make fewer calls and still collect more money. Therefore it is not unusual to see traditional operational metrics degrade even when business metrics are improving. Managers need to be alert to that anomaly so that they are not tempted, for example, to staff based on historical patterns if new analytics have increased the odds that collectors will reach a higher number of accounts and collect more dollars. For a 20% lift in payments, who really cares if agents had 5% more downtime? Clearly, old volume-based metrics have their place. Somebody has to plan for resources by time of day and staffing capabilities. But it is critical not to lose sight

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of what makes Collections valuable: revenue collected, charge-offs reduced and good customers retained. Walk the Regulatory Tightrope. We got a frank answer when we asked a client if his view of Collections success has changed. He said, Yes, it has. Today, every Collections phone call I dont make is one less chance for a lawsuit. Thats a powerful indication of the new risks Collections must manage. It is a shift from a general belief that more calls means more payments to its exact opposite: an aversion to making a single unnecessary call. The motivation for his drastic change of heart is clear. Last year, consumers filed about 14,000 lawsuits against collection agencies and creditors and the consumer press has recently been highlighting the plight of the heavily indebted. Lenders and collectors are acutely sensitive to seeing their companys name in the media in any way connected to harassment. The fallback position for many is extraordinary discretion. Equally worrisome to creditors and Collections executives is the prospect of regulatory action. Regulations can vary widely from state to state, change frequently, and be interpreted differently in different jurisdictions. Rules that restrict collectors ability to call cell phones have already constrained their ability to reach debtors for whom a cell phone may be the only reliable communications mechanism. The prospect of other restrictions holds collectors back from many types of outreach if they cannot be certain they are legal or if they fear their actions may draw regulatory attention. In this risk-averse climate, it is critical to have a technology platform that allows for change on short notice, even during the calling day and without IT intervention. Technology and analytics that let collectors be proactive and transparent serve to avert and mitigate reputation and regulatory risk. During the crisis, Collections earned its place at the customer care table. It would be a mistake to take a step backwards by denying Collections the tools it needs to perform in todays high-stakes, analytics-driven, customer care world. Given that advanced analytics and decision automation are still in early stages in the Collections functions at most banks, the opportunity exists for dramatic initial gains, followed by sustained high performance.

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The behaviors and preferences of banking customers worldwide are changing

Although overall satisfaction remains high, trust levels remain low globally, and customers are demanding more customized attention, products and services from their banks. Select regional findings from the survey include: Confidence levels fell in all European countries from last year, particularly the countries heavily impacted by the financial crisis. Trust levels improved in all Latin American countries, mainly due to personalized and innovative service offerings. Brazilians demonstrated only a slight increase in trust levels more than half are unhappy with the quality of their offerings and advice. Chinas confidence in banking has recovered over the last year, while the level of confidence in Canada and Japan has remained neutral.

How can banks rebuild customer confidence?

Encourage customer self service. Banks needs to improve the way they provide information and advice to interest and convince self-directed customers, including financial planning tools, ranges of product and pricing bundles. Personalized banking. Customers who report a more tailored experience are often most willing to provide their banks with more frequent updates. Better value and service. Customers are demanding more control of their relationships and will look around for the most attractive fees and rates for the level of service provided. Leverage customer advocacy. Banks should embrace the use of social media as a source of banking information, as views of online communities and affinity groups become more influential.

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Banks are competing for the attention and loyalty of increasingly demanding customers.

The proportion of customers planning to change banks has increased since 2011, with 50% of customers globally citing high fees and charges as the primary reason. But customers appear to want more than a better deal they want the flexibility to shape the relationship, contacting their bank whenever and however they choose. They may prefer online channels for simple transactions, but demand high-quality, personalized services for more complex transactions. Customers are also showing increased interest in loyalty programs, especially in emerging markets like India. Although these programs tend to be costly, they offer significant benefits in advocacy and loyalty.

How can banks offer more personalized services to customers? Make pricing and service promises transparent. Pricing is critical to customer satisfaction, but most customers have no idea how much they pay each year. Transparency over pricing and service promises is vital if banks are to deliver something customers value. Offer tiered levels of customer experience. Customers should have the option to buy into certain products and services, and the ability to earn upgrades through loyalty, whether in terms of longevity or the share of wallet handled by a particular bank. Move from multi-channel to omni-channel distribution. Banks need to look beyond multi-channel distribution towards an omni-channel approach, which uses customer data gathered from branches, website visits, social media and elsewhere.

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How can banks provide a better customer experience?

Make low-cost digital channels customers preferred choice. Banks should encourage customers to use digital channels whenever possible by using price incentives. Prioritize investment on critical customer interactions. Banks should focus operational improvements on customers most valued interactions, optimizing the resulting impact on attrition, dormancy and loyalty. Use innovative technology to deliver the retail bank of the future. The use of technology is crucial to delivering a lower cost, more reliable, more flexible but still personal customer experience.

Why do customers change banks

These are following reasons generally were customer changes banks A specific service failing High fees or charges Lack of personalized contact Poor branch experience Poor brand image reputation Poor call centre experience Poor financial advisory competent Poor internet/mobile experience Poor range of products and services Poor rates on account Proximity of branches

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IMPORTANCE OF TRUST IN CUSTOMER RETENTION IN BANKS

The simple definition of marketing, as defined by John Jantsch in his book Duct Tape Marketing, is this, Marketing is getting people who have a specific need or problem to know, like, trust and refer you to others. It represents all of your actions that make your customers love, hate or feel indifferent about your service. Why is trust so important? Without it, we really dont have a relationship with our customers. If we dont have a relationship, we probably dont have loyalty. According to the financial and marketing experts, its five times more costly to acquire a new customer than maintain an existing relationship. In a time where dollars must stretch and customers are more thoughtfully spending, its imperative you make a remarkably pleasant and indelible impression with your customers.

Six questions to be asked for a good customer retention strategy.

1. What are the expectations of our customers and what it will take to exceed them? 2. What differentiates our company in the eyes of our customers? 3. To what extent can we grow our business with our existing customers? 4. How do our interactions with our customers affect their satisfaction and buying behavior? 5. Do we have any customer segments that require different treatment? 6. How loyal is our customer base and how can we improve it?

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MARKETING STRATEGIES BRIGHTEN THE FUTURE CUSTOMER FRIENDLY BANKING SERVICES

The author of Customer Relationship Management in Banking enumerates the business imperatives for a successful CRM strategy. These include: Creating a customer-focused organization and infrastructure; assessing the lifetime value of the customers profitability; maximizing the profitability of each individual customer relationship and understanding how to attract and retain the best customers. While analyzing the implications of these imperatives the author also provides an insight into the various modules which are used to analyze and predict risk and profitability, maximize cross-sell and up-sell initiatives, among others. Marketing Strategies Brighten the Future Customer Friendly Banking Services emphasize that bankers need to embrace modern technologies and adopt a modern strategic philosophy, besides maintaining the tempo of operational management of their services. Accordingly, banks need to adopt the right marketing strategies that are more relevant, qualitative and customer-specific to ensure a competitive edge over others in the service industry

Marketing Strategies Brighten the Future Customer Friendly Banking Services outlines how banks can gain competitive advantage from CRM by becoming low cost players in the market, achieving operational efficiency and maintaining customer loyalty. Ability to predict the products that customers are likely to purchase over a period of time, increased productivity of managerial executives, sales and customer service staff, streamlining of business processes are cited as some of the benefits retail banks obtain by taking recourse to successful management of customer relationship. The success of a CRM plan is dependent on the choice of the software. Towards this end, the article identifies domain expertise, credibility in the market, cost of implementation and the relationship with the vendor as factors on which the vendor selection is based.

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Customer retention as a element in banking in todays competitive world

Customer retention is an important element of banking strategy in todays increasingly competitive environment. Bank management must identify and improve upon factors that can limit customer defection. These include employee performance and professionalism, willingness to solve problems, friendliness, level of knowledge, communication skills, and selling skills, among others. Furthermore, customer defection can also be reduced through adjustments in a banks rates, policies and branch locations. Clearly, there are compelling arguments for bank management to carefully consider the factors that might increase customer retention rates. Several studies have emphasized the significance of customer retention in the banking industry. However, there has been little effort to investigate factors that might lead to customer retention. Most of the published research has focused on the impact of individual constructs, without attempting to link them in a model to further explore or explain retention. If retention criteria are not well managed, customers might still leave their banks, no matter how hard bankers try to retain them. These constructs were rated by customers as having strong effects on loyalty to their banks. Demographic characteristics (i.e. age, gender, educational level and income) were also assessed for their contribution to intentions of staying with or finding alternative banks. Results suggest that the most important constructs were customer satisfaction, followed by corporate image and switching barriers. There was also evidence that customers age groups and level of education contributed to explaining respondents' propensity to stay with their current banks.

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CASE STUDY
Six secrets of outstanding customer retention(case study) When I was Vice President of Sales for a New York based computer services company, I walked by one of my salespersons desk when the phone began to ring and picked up the phone to answer the call. It was one call that tested my customer service skills. It was a call from a Senior Vice President for Chase Manhattan Bank, N.A. She was not happy with the service our representative was giving her and said she was considering going to another vendor for her computer services. I let her talk as she vented her anger. I reintroduced myself and let her know that I would personally appreciate her sharing her customer service concerns with me. I also let her know we valued her as a customer and wanted her business and that I would do whatever it took to make her happy with our company. She then let me know that someone better "make her happy" by the end of the day or we could forget about doing business again with Chase Manhattan Bank. I let her know I personally could see her in one hour, and she agreed to the meeting. I put together the solution and took the #4 subway line to Wall Street to meet at her office. As I waited in the lobby of her building for an elevator, five women gathered around me to also wait for the elevator. The elevator arrived and we all walked into the elevator. I took the initiative and greeted the group of women and commented on the weather. This opened up the conversation between all of us and soon, with additional exchanges, we were laughing about our day. I left the elevator, and one of the women also got off on the same floor. I asked her where the Senior Vice President's office was located, and she said she would be glad to take me to the office. We continued our engaging conversation along the way and, before I knew it, we were at the Senior Vice Presidents office door. I was about to thank the woman for escorting me, when she walked around and behind the Senior Vice President's desk and announced that she was Senior Vice President and how could she help me. Let's say I was surprised. I introduced myself, we both paused for a moment, and then we both laughed.

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To say the least, we had a very productive meeting, which led to a great customer relation with Chase Manhattan Bank and her for many years and with the bank even beyond her retirement. She was so impressed with her positive experience that day that she became my biggest advocate to other senior management within the bank, which led to new customers and millions in additional business. What, then, are the secrets to customer retention and winning back an angry customer so that the situation becomes an outstanding customer service experience?

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The following are six customer service secrets for winning back customers, increasing customer satisfaction, and increasing your bottom line: 1.Start with a Positive Attitude Look at any customer service situation as a challenge and an opportunity to learn and grow, and take care of the customer's needs. Start with a positive attitude that says, "I want to help you and, together, we will find a solution." I always say, "You never know who is watching you, so always give them your best face. Because I had a positive attitude in the above situation, I put on my best face when interacting with the women in the elevator, and this led to a positive impression of me with the senior vice president." 2.Listen with Empathy Put yourself in the customer's shoes, experience his/her pain, and communicate to the customer you understand the pain. You can communicate your understanding of their pain by saying, "Thank you for sharing your concerns with me. If I were in your shoes, I would feel the same way." 3.Take Ownership Don't make excuses for what happened with the customer. Apologize and take ownership for what happened with the customer. The sooner you take ownership of the customer service challenge, the sooner you can take ownership of the customer service solutions. 4.Communicate Your Plan of Action Let the customer know what you are willing to do to take care of his/her concerns. The customer becomes frustrated when he/she feels uninvolved or uncertain as to what you are planning for the customer service solution. Ask for the customer's commitment to the plan before proceeding with the action. My plan of action started when I told the customer that I was going to take the subway immediately to meet with her, and the complete customer service plan was communicated during our first meeting. 5.Take Action The most important customer service secret is taking action. You can go through all the other customer service secrets and if you dont take action, all your actions and credibility are lost. You increase customer retention when you make sure you deliver more than what is promised. Act quickly, act with a quality solution, and act with integrity. 6.Ask for the Business During the customer service challenge, I expressed several times that I valued and wanted her business. This lets the customer know that you dont take his/her business for granted. Its even more important that you express to the customer that you want his/her business after the customer service situation is resolved.

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You can also give an extra incentive to the customer for acting now to continue giving you the business. It can be as simple as a discount coupon or some other special offering. Apply these customer service secrets with your customers and you will increase customer satisfaction and customer retention and win back customers to increase your bottom line.

STRATEGIES OF HDFC BANK

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HDFC banks using customer retention strategies With bad economy, HDFC Bank has come out with well tailored customer retention strategies. Though not known to be as aggressive as ICICI Bank, HDFC Bank has now started to focus more on existing customers. This is done more in order to prevent existing customers from switching accounts. Last morning I got a call from a lady who told me that she has been assigned to my account based on the balance I maintain. So for my account 1) All charges has been waived off 2) Services like locker, de-mat etc would now be charged at 50%. Would let me know in case it can be waived off completely 3) The charges on my debit card have been taken off. 4) Gave her number to contact regarding any service This happened not only for my high balance account but all 4 accounts which my wife, brother and father maintain. I was particularly moved by the way they waived off all charges and converted my account to a classic account. While they have little relationship with HDFC but they were much ready to discuss the home loan stuff and wanted to help on that front too. I see this more as a welcome move at the time when finance markets has to get down to the basics i.e. look after their existing customers. I am sure others would now follow suit and ultimate beneficiary would be the customer. Everyone must recall how last year people shifter tomes of money from private banks to public ones like SBI. Though too late, these banks have started to response.

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ANALYSIS AND INTERPRETATION OF THE STUDY:-

1. Facts of CRM Initiatives: According to a research by Reichheld and Sasser in the Harvard Business Review, 5% increase in customer retention can increase profitability by 35% in banking business, 50% in insurance and brokerage, and 125% in the consumer credit card market. Therefore banks are now stressing on retaining customers and increasing market share. 2. Needs of a Bank The banks now need to find out what to sell, whom to sell, when to sell, how to sell and how to be different to increase profitability. Banks need to differentiate themselves by adding value-added service, offerings and building long-term relationships with their customers through more customized products, enhanced value offerings, personalized services and increased accessibility. Banks also need to identify customers and products that would be most profitable and target customers with products that are most appropriate to their needs and serve the customers with greater cost efficiency. Banks also need to find out the avenues for increased customer satisfaction, which leads to increased customer loyalty. This may be explained better from two initiatives bank took in the past: Earlier what drove many bankers to invest in ATMs was the promise of reduced branch cost, since customers would use them instead of a branch to transact business. But what was discovered is that the financial impact of ATMs is a marginal increase in fee income substantially offset by the cost of significant increases in the number of customer transactions. The value proposition, however, was a significant increase in that intangible called customer satisfaction. The increase in customer satisfaction has translated to loyalty that resulted in higher customer retention and growing franchise value. Bankers invested in Internet banking, believing that the Internet was a lower-cost delivery channel and a way to increase sales. Studies have now shown, however, that the primary value of offering Internet banking services lies in the increased retention of highly valued customer segments. Again customer satisfaction drives the value proposition. Thus, banks need to retain existing customers with enhanced personalized services and products, which best suits their needs and satisfies them the most.

3. Utility of CRM in Banks

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Customer Retention primarily caters to all interactions with the customers or potential customers, across multiple touch points including the Internet, bank branch, call center, field organization and other distribution channels. The use of Customer Retention in banking has gained importance with the aggressive strategies for customer acquisition and retention being employed by banks in todays competitive milieu. This has resulted in the adoption of various CRM initiatives by these banks to enable them achieve their objectives.

Customer Satisfaction and Customer Retention is not absolutely linear That Customer Satisfaction leads to Customer retention is a conventional wisdom. You may have situations where a customer is satisfied, but is still not retained. You may have situations where a customer will not be satisfied, but still retained. Here are some examples of these paradoxical situations: Satisfied Customer, but still attiring: Your products are doing the right things, but they are not the right products- Your products and services could be meeting customer expectations, but customer could be attracted to more creative and functionally better products. Customer wants to try something new- Customer may get bored of your product, and they just want to try something new. Customer going for more competitive products- Competition is giving better price vs. value equation. Dissatisfied customer, but retained

Existing contract yet to expire. Supplier market- More demand than supply. Customer expectations are not well managed, but customer is staying due to the value proposition of your product. High Exit cost to the customer. example- Exit load for early termination of your loan with a bank.

METHODOLOGY USED IN DATA COLLECTION:-

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Retail banking refers to mass-market banking where individual customers typically use banks for services such as savings and current accounts, mortgages, loans (e.g. personal, housing, auto, and educational), debit cards, credit cards, depository services, fixed deposits, investment advisory services (for high net worth individuals) etc. Before Internet era, consumers largely selected their banks based on how convenient the location of banks branches was to their homes or offices. With the advent of new technologies in the business of bank, such as Internet banking and ATMs, now customers can freely chose any bank for their transactions. Thus the customer base of banks has increased, and so has the choices of customers for selecting the banks. This is just the beginning of the story. Due to globalization new generations of private sector banks and many foreign banks have also entered the market and they have brought with them several useful and innovative products. Due to forced competition, public sector banks are also becoming more technology savvy and customer oriented. Thus, Non-traditional competition, market consolidation, new technology, and the proliferation of the Internet are changing the competitive landscape of the retail banking industry. Today retail banking sector is characterized by following: Multiple products (deposits, credit cards, insurance, investments and securities) Multiple channels of distribution (call center, branch, Internet and kiosk) Multiple customer groups (consumer, small business, and corporate) Today, the customers have many expectations from bank such as (i) Service at reduced cost (ii) Service Anytime Anywhere (iii) Personalized Service With increased number of banks, products and services and practically nil switching costs, customers are easily switching banks whenever they find better services and products. Banks are finding it tough to get new customers and more importantly retain existing customers.

Step 1

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Data sources and databases for retention: An important aspect for an organization is to think what should be the reasons that enhance repeat purchase. On paper it is not possible to make definite strategies to increase customer retention. Hence, retention databases are created to have a wider range of data and information which helps in measuring and analyzing theoretical strategies for modeling customer retention behavior. Database could help in tracking and moderating all the interactions that a customer is indulged in with the supplier. However, the interaction with customers or prospect customers do not generate any revenue for the organization but it important to monitor it as it may return a potential profit in the coming future. This database is normally linked with a CRM system which helps the supplier to identify the reasons for customer defect and also to analyze the possible strategies to overcome it. Take an example of a loyal customer who spends $10,000 per annum with an airline to travel for business reasons. Now this customer is having a bad experience with the airlines due to many delayed or cancelled flights or bad service provided by flight attendants. This customer could be on an urge to defect due to the overall negative experience

Step 2 Decile analysis: Decile analysis method helps in determining profitability and product sales aspects of segmented customers. This type of analysis identifies the most prominent percentage of customers who are responsible for incurring the actual profit. Deciles are nothing but the top grouping of customers which are ranked high according to the purchases they have made in a given period of time. The deciles percentage is normally 10% or 5% or even 1%, sometimes depending upon the organizational strategies. These deciles alone are responsible for 60 % to 80% of sales and profit. Hence, after determining this range of customers it becomes easy for the organization to determine which customers are profitable and which are not. After this, retaining strategies could be implemented to retain valuable customer.

Step 3

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RFM analysis: RFM technique is the one of the best tool to predict future valuable customers. RFM stands for Recency Frequency Monetary value. Recency means customer purchase in recent time, Frequency means what is the frequency of purchase and Monetary value means how much the customer is ready to spend. These three aspects are determined by creating an RFM matrix and putting all analyzed data and information inside this matrix. This technique is very important to characterize customers according to their buying habits so that according strategies could be implemented to retain them.

Step 4 Targeting defectors: It is painful for supplier to loose loyal customers as these are the ones who are responsible for the real profit to the organization. If the organizations identify potential defectors before they defect, then retaining becomes feasible. For this, recency sales (RS) matrix is created which is a simple but powerful method to target defectors. This process includes all the customers who have at least bought products for three times. For each of these customers the following three statistics are computed: Total time taken by the customer since last purchase. This is called recency. Sales per period which the time taken by the customer since first purchase divided by the total number of times he did purchase. Total number of periods gone until the customer is supposed to purchase again. According to the above strong statistics, if the customer recency is more than the first statistic, then the customer is more likely to divert. Hence after identifying this possibility of defection it becomes easy to retain the customers.

Retaining and acquiring customers in changed banking landscape

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The current credit crisis is putting extraordinary pressure on most financial institutions to reduce costs and boost capital now. But a customer-focused strategy that attracts and retains clients is the only way to become a highperformance bank of the future. A winning strategy includes: the right balance of time, money and talent to understand the customer; innovation across the right channel mix; and the right set of key performance indicators to measure return. Listen to John McHugh, Customer Relationship Management lead for the Accentor Financial Services operating group, talk about what banks and their customers need to know and understand in this new landscape. An Accentor survey of US banking customers estimates that up to 30 percent of a banks customer base today is vulnerable. Elsewhere in the world, customer behaviors, attitudes and preferences have also been forcibly altered by the global economic downturn. As banking customers everywhere reconsider their financial accounts and banking options, high-performing banks not only need to retain their current customers but also have an opportunity to acquire new ones. Banks today must take a strategic approach to customer acquisition and retention that makes the best use of available time, talent and money. A strategic approach can help a bank to:

Create actionable customer segmentation. Develop flexible solutions and sophisticated pricing protocols. Execute the right channel mix the right way. Implement metrics that enable ongoing improvements. Many banks today are in a fight for their lives, but some will differentiate themselves by moving to a banking model that is demand-driven and customerbased. Such a move can also improve overall efficiencies and inspire a broader operating model transformation that will be the key to achieving sustainable, long-term profitability. This pod cast was produced by consultants at Accentor as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accentor representative.

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BUILD AN ORGANIZATIONAL CULTURE THAT IS CENTERED ON RETENTION To complement the process and technology highlighted, it is critical to ensure your organization actively supports retention eorts. Success will be limited unless the culture actively embodies retention ethics. Key areas to consider include Use an enterprise approach to targeting To get the most out of the analytical models, approach targeting from an enterprise view, using common segmentation schemas. If your overall goal is to own a large piece of the customers wallets, then the LOBs need to be aligned by how their products can appeal to the targeted customer. If individual LOBs approach reaching out to customers and prospects with unique strategies, the results may include nding customers in need of or interested in a single product. Revise manager incentives to support collaboration Most product manager and LOB manager incentives today reward based on the performance of the single product prot and loss. So why would a manager work to price their product based on the customer relationship? What is the benet to the home equity product manger to oer a discounted loan rate to a high deposit customer when all she gets is a smaller incentive? To reward collaboration, compensation programs need to be redesigned in a manner that pays for overall division success e.g., for product bundles, division protability, or customer share of wallet measures. Incorporate advocacy into the culture. The four elements of customer advocacy benevolence, trustworthiness, transparency, and simplicity can become operating values for the organization, supporting both customer and employee advocacy. By empowering sta members to do whats right for the customer, not just for the companys bottom line, they feel good about their jobs and the organization for which they work. Employee engagement leads to customer engagement, and a good place to start is to do right by the employees. Empower the teams to be able to x problems rapidly for customers, and in turn, ensure your human resources division employs the same goals. Train and compensate sta members to recognize at-risk customers. Using analytic tools to develop alerts is one step in identifying customers at risk of attiring, but unless sta members follow-up on the leads, ultimately there is no point. So, sales and service representatives need appropriate training and coaching to learn to recognize and act on these alerts as opportunities. And if the sales force across the organization isnt compensated for saving customers at risk, youll lose momentum in the program. As a result, incentives should be modied to reward saves as well as team eorts to save a customer when appropriate.

Challenges in customer retention

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IDENTIFYING YOUR CHALLENGES Where should you start on your path to improving customer retention? Use this diagnostic tool to assess your current capabilities and opportunities for improvement and see how you stack up against your peers All scores are anonymous .Best Practices | Customer Retention Is A Process, Not An event . Part 1 Targeting and acquiring the customer Does the organization have a clear picture of what the key customer segments are and how it can help meet customer needs? Does your organization bundle products and oers to meet the individual goals of these segments? Have you identied sub segments within the larger groups and dened value propositions for them? Do you have formalized on-boarding programs for new customers that include regular communication during the rst year? Are you able to price products based on individual customer relationships? Do you have a simple, expedited process for opening a primary account with its commonly cross-sold products? Are you working towards achieving the capability of universal enrollment for most products?

Part 2: Servicing and developing customer relationships Does your organization develop common processes collaboratively across LOBs and channels (e.g., account opening, change of address, etc.) to simplify the customer and employee experience? Does your problem resolution process support escalations and measurements of SLAs? Do you have proactive retention programs to identify and approach customers likely to attrite? Does your CEO Champion a customer-centric sales and service culture across the enterprise? Do you have a formalized sales training and coaching program for improved employee performance? Are your sales and service representatives trained to recognize retention threats? Is there an incentive compensation program in place that rewards for saving customers? Do you have any loyalty programs established for products (e.g., credit card rewards)

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Part 3: Measuring results Do you have a clear denition of attrition for your LOBs? Are you tracking and reporting on attrition on a regular basis? Does your CEO review retention results on a regular basis? Do you track attrition by product and customer? Can you identify controllable versus uncontrollable attrition? Are your product managers compensated for retention as well as acquisition? Do you have the ability to measure the protability of individual customers or households?

CHALLENGES FACED BY INDIAN BANKING INDUSTRY

Developing countries like India, still has a huge number of people who do not have access to banking services due to scattered and fragmented locations. But if we talk about those people who are availing banking services, their expectations are raising as the level of services are increasing due to the emergence of Information Technology and competition. Since, foreign banks are playing in Indian market, the number of services offered has increased and banks have laid emphasis on meeting the customer expectations. Now, the existing situation has created various challenges and opportunity for Indian Commercial Banks. In order to encounter the general scenario of banking industry we need to understand the challenges and opportunities lying with banking industry of India.

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How To Match Bank Customer Retention Strategies to the Customer Lifecycle? There are many different bank customer retention strategies but to maximize their effectiveness you need to match them with their position in the customer life-cycle. The life cycle is shown below, along with the value that different types of customers contribute to the business at different parts of the cycle.

New: Customers new to your organization The single largest group of customer retention strategies that can be implemented in the New section of the customer lifecycle is customer on boarding. Customer on boarding is the process of bedding a customer into your organization and includes ensuring that their personal data is correct, that they understand the products they have purchased and how to quickly contact the organization. We have proved time and again that customers that are properly on boarded have a higher customer retention rate and spend more money than similar customers who were not on boarded.

Other areas of New customer management include:

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Data integrity management Cross-sell leads management Product benefit education Product activation Payment automation optimization

Existing: Customers you already have The best bank customer retention strategy for existing customers is to classify each type of customer (silent attrition, ideal and unhappy) and create appropriate initiatives to change their behavior. For instance, customers in silent attrition are those that have reduced or stopped using a product, but where the account is still open. Examples for instance are credit card accounts with little or no spending. For these customers, you must determine why they are no longer using your product (are you are their back of wallet card) and create initiatives to change their behavior.

Exiting: Customer thinking of leaving Customers that are Exiting are those customers that have started the process of moving their business to another company or are in the process of considering that move. The first step in creating bank customer retention strategies for Exiting customers is to identify which customers are in each camp. For customers in the process of moving their business you will need to understand the product drop cycle, i.e. the order in which customers drop your products before leaving. With this information you can create effective customer retention strategies to target those customers.

Exited: customers who have left

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Generically, strategies that are aimed at recapturing customers that have left the organization are called Win back strategies. This is the most expensive and lowest ROI place to try to implement your bank customer retention strategies. Mentally, customers have already moved to another organization and it takes a large inducement to bring them back. If you do choose execute then you will need to carefully manage the level of incentive that your staff can offer to customers. For instance, you will need rules to tailor the incentive level to each specific customer in order to ensure that the level of inducement is not larger than the future business generated by that customer.

How banks can keep customers happy 50

There's been a lot of criticism of large national banks lately over various new fee schemes they've attempted to impose to recover revenue lost to recent regulatory changes.

Interview with Mr. John Tschol for some customer retention strategies
Even if you take for granted that the banks need to raise checking revenue, it's hard to argue the way they've gone about doing it has been effective. To get some perspective on what banks should be doing instead, I spoke to John Tschohl, president of Service Quality Institute, a customer service consultancy that counts many banks among its clients. Here's what he had to say. What do you see as the mistakes banks have made selling their new pricing schemes and their new fees to customers? Arrogance. They forgot that they were in the customer experience business. They forgot that the best way to keep customers and get new customers is to create value. I think they forgot that they were in the service business. You say banks have failed to create value for customers. Can you elaborate on that a little bit? Particularly talking about the large banks. It is not the small banks. It is not the credit unions. It is the large banks who think and act like a monopoly. When you forget about your customers and your goal is, "How do I rip you off? How do I skin you for more money?" Not from creating great value, but from saying "OK, I have to figure out how to increase more of my bottom line so I could pay bigger bonuses to my executive team." I think you lost your focus, you lost your message, and that is the problem with some of these larger banks that are acting like a monopoly. If they were in Canada, they could get away with it because there are only six banks in Canada. But in this country, you have 5,000 banks, plus probably another 5,000 credit unions -- you have more competition in the United States.

So what could banks do better to deal with the new regulatory environment but still maintain their relationship with customers? 51

Take it back to focusing on the customer experience -- providing a high level of customer service. That does not mean adding more people, it means having better hours. If I was one of these large banks, they have hours that are more convenient to banks. Their hours, I think, are not very conducive to the customer. Some of them have voice mail instead of talking to a live person. I think you can grow your business faster by providing a better customer experience so you attract more customers, more money, more clients, more loans, more deposits. And I think their thought is, "How do I just extract more of what I have presently got without adding value?" Say you're a large bank and you have looked at your inflows and outflows, and you decide that you have to impose a new fee. How do you do that in a way that is not alienating customers? I can impose a new fee, but I need to have a new service that will have value that somebody wants to pay for. So if I, all of a sudden, want to charge $5 a month for somebody to use my checking account, and I have never charged before -- why? because I just want more money? I do not think that is adding any value.

Do you think that is why a lot of bank customers have expressed frustration both by moving accounts and by speaking up? I think so, and the best way the customer can react is when a bank starts to charge these fees, is just quickly switch banks. And when you close your account, make sure you tell the president of your bank why you closed it. There are so many options, there are so many other small banks you could move to that do not have some of these crazy fees. You can also go to credit unions, which tend to be very conducive. Huge options in terms of where you can go. U.S. Bank right now wants to charge a fee for having a checking account if you do not have $1,500 in the account. I told my son about it, and he said "No, my banker told me that it's not going to happen." Well, it is going to happen. I think that when you condone that type of behavior, you encourage them to do even more. I think the reason Bank of America folded on their fee for using a debit card is that they have a huge number of defections. There were people leaving Bank of America left and right. So you think it is a problem of banks taking their customers for granted.

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Taking them for granted and arrogance. See, it is the big banks that are doing this. It is not the small little banks. I believe that when you are paying people million-dollar salaries and all the people around are collecting huge amounts of income, they have no grasp of how 80 percent of their customers operate. They have lost touch with the customer.

So if tomorrow JP Morgan, Chase, or Bank of America, or some other of the top 10 banks in the United States came to you and asked, "How do we improve our customer experience?" can you offer any specific advice for them? I would say to do several things. No. 1 is to get rid of any voice mail-activated system, IVR. Have humans. No. 2, change the hours that you are open to make it more conducive to the customer, instead of having banker hours. No. 3, train every single person in your company on the art of customer service with something new and fresh every four months. No. 4, I would look at all the dumb rules and policies and procedures you have in place that piss off customers, that increase cost, that have no value and eliminate them. What happens is we increase the cost of operation because we put in place a lot of dumb rules and policies and procedures that have no value, and they dramatically increase the cost. If you can change policies, rules and procedures, streamline things to shrink the time by 90 percent it takes to get things done, you save millions of dollars, particularly if you are a large bank, and your customers are happier. So how did we get here, how did we get to a situation where the big banks customer care policies are so, in your view, out of whack? Banks have notoriously had millions of dollars available for marketing -- unlimited marketing money -- and so it has been more of an acquisition mode. They just keep spending money on marketing and advertising, and they do not really track their defection rates. And the other banks have not been as customer-driven as they could be, so people think that all banks are the same. TD Bank in the United States -- they bought Commerce Bank in 2007. Commerce Bank in 2007 was the most customer-driven bank in the United States, and it has dramatically slid backward. They lost their whole focus on customer service.

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So you think there is a wide variance in the customer experience in the banking industry. Night and day. I would say that probably 95 percent of all banks in this country believe they are awesome at service. If you were talking to the CEO, 95 percent would believe that they are awesome at service. If you were to survey your customers, the readers, they would have trouble identifying 5 percent of banks that provide great service. So my problem that I have is that when a guy thinks he is already perfect, and touches God every day, he really does not see the need to improve the customer experience. I use a credit union here in Bloomington, Minn., called Star Choice, and the credit union here is unbelievably good. I will just give you an example of the customer experience. I drove up to the bank; it was 7:15 in the morning. I did not know what time the bank opened up, so I was the first person there. An employee drove up, I got out of my car and asked what time the bank opened up. The girl said, "Mr. Tschohl, the drive-up opens at 7:30; the bank opens at 9. If you will wait just a minute, I will go into the bank and open up the front door for you." So you want to bank at places that provide great service, and not every bank does that. Credit unions tend to be better, but not all of them are great.

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Banks attract, retain customers with marketing driven skills

"Sign up today for a free checking account and receive a roadside assistance kit ..."

This example of an all-too-familiar marketing campaign is a go-to strategy for community banks around the country. To the delight of bank presidents across the nation, it attracts a variety of potential customers to the branch. However, as the industry has gravitated toward this customer acquisition approach, the value in these ubiquitous offers has been severely diluted. Banking executives have begun to question whether this approach to growth lends itself to building sustainable, long-term customer relationships, or whether it is a shortterm solution. According to the American Bankers Association, the average cost for acquiring a new customer is a staggering $3,500. To compound the issue, consumers are more savvy and more financially self-reliant than ever before. This means a bank can no longer assume that collecting a consumer's checking deposits results in loyalty with his savings, mortgage or credit needs. Considering the substantial costs and competitive hurdles to gaining new customers, bankers are now redirecting their efforts inwardly to focus on strategic customer retention programs.

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One size fits all

Free gift programs -- offering new toasters, cash or iPods -- do bring customers to the door. The problem is that the door has become a revolving one. This onesize-fits-all method misses the mark when it comes to identifying potentially profitable customers and understanding their specific needs, which will ultimately yield a greater share of the household wallet. Free gift and reward checking programs can be effective when working in concert to fit the unique requirements of an individual market or branch location. A finely tuned coupling of these offers attracts the right type of customer whose needs the bank can meet consistently and profitably.Customer retentionSophisticated and tailored reward checking programs are elevating the discussion from simple customer acquisition to customer retention, which is truly where the benefits are realized. The proper implementation, compliance knowledge and marketing expertise gives bankers the confidence to adapt to changing market dynamics. For instance, consumers' growing preference for debit card transactions presents new opportunities for banks to serve a need while building in rewards that benefit the consumer and the financial institution. Debit card reward programs create a checking account bundle that helps generate noninterest income in a world of flat yield curves and creates loyalty through a core product: checking. Reward checking programs lead to higher account balances, because customers want to take advantage of attractive interest rate offers. This provides a two-fold benefit for banks. Customers are less likely to become future charge-offs, so banks reduce their risk of loss. And, these programs breed "stickier" customers -they are retained because of the competitive interest rates and are promising prospects for cross-selling with traditional products such as CDs or loans.

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Win-win rewards
The top rewards programs clearly demonstrate benefits for both the customer and the financial institution. Successful marketing of these initiatives means customers are encouraged to use cost-saving electronic banking services that enable maximum efficiency and profitability. For example, consumers may be required to receive statements online, use their debit card a certain amount of times each month, use online banking or bill pay and/or enroll in direct deposit. This lowers personal service costs and statement costs (for printing and mailing) and gives bankers the time and resources they need to focus on building relationships with key customers. While terms vary from program-to-program, the benefit for customers is that they are typically enrolled in an interest-bearing, free checking account that has no minimum balance requirement and refunds ATM fees from other banks. Because the programs help banks trim operating costs, they can offer higher interest rates than typical checking accounts -- sometimes as high as 6 percent. This competitive advantage allows community banks to edge out large, national banks and aggressive online depository institutions. Trusted rewards program providers will work directly with the bank to determine which rate is most appropriate given their location, traffic patterns, market influences and customer base. Well-defined programs replace customer churn with strong relationship-building activities and increase average daily balances while driving efficiencies at the branch level. Will a roadside assistance package or rolling duffel bag emblazoned with a bank's logo lead to a better banking experience? Perhaps. But to generate sustainable results, banks must look to data-driven retention strategies that blend relationship-building tools with advanced integration, compliance expertise and marketing support.

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CONCLUSION
Customer retention is an important element of business strategy in todays increasingly competitive environment. In global business environment, customer retention is playing important role for development of the business. In present scenario, business organizations are giving main stress on its customers and their retention. Modern business environment is famous for various new trends. Customer retention and satisfaction drive profits. Customer retention is far less expensive to cultivate the existing customer base and sell more services to them than it is to seek new. Customer retention is directly linked with growth of business because today, customer is the king of market. Without customers none business organization can be run. Therefore, most of the business organizations perform their activities in order to satisfying customers and retaining the customers. Customer retention is based mainly on customer satisfaction. Customers will satisfy if company is sure about the persons, method and tactics of achieving customer satisfaction. Whole management and its team are responsible for achieving business results so is the customer satisfaction. Modern management has no doubt in it that customer satisfaction can only be achieved if all employees regardless their departments work hard to satisfy customer. Customer retention reflects the soul of the company. In order to serve the customer, an organization must International Journal of Research in Finance & Marketing. think like the customer and the employee. For retention, the business organization must perform efforts for customer satisfaction i.e. any business organization should properly communicate customers and serve well to maintain good relations with customers. It should know the clients needs and be ready to offer intelligent solutions to help them meet those needs. It should be concerned about the position and the plight of business, pressures, and challenges. Problems of the customers should be solved quickly and immediately to the complain.

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Bibliography

Books referred : CRM in bankingV V Gopal Customer retention in a weekJane smith Websites: Google http://www.ucti.edu.my

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