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Vanisha Oogarah-Hanuman and Sharmila Pudaruth, lecturers at the Faculty of Law and Management at the University of Mauritius, along with Vinod Kumar, a research scholar at the Department of Management Studies at the School of Management Pondicherry University, and Victor Anandkumar, a reader at the same department, conducted a study to analyze customer perceptions of CRM initiatives in India's banking sector and assess their effectiveness from the front-end.
This study is a descriptive empirical research that used primary data collected through a structured questionnaire to investigate the perception of Indian customers.
The results indicate that banks in India have not been able to impress their customers with their CRM efforts, despite technological advancements and implementation of new processes. The various CRM initiatives and dimensions measured in this study received unfavorable responses. These findings have important practical implications for banks operating in India, as they need to align their strategies with the feedback from their customers.
The research emphasizes the importance of keeping profitable customers for a lifetime and the growing relevance of CRM to improve customer satisfaction in the Indian Banking Industry.
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It addresses a previously unexplored area by examining CRM initiatives in the Indian banking sector. The study provides insights into CRM in this sector and proposes recommendations to assist banks in developing lucrative, enduring relationships with their customers.
Volume:01, Number:04, August-2011 www. theinternationaljournal. org Page 1
1. Introduction
In the current banking landscape, banks face challenges in building and sustaining strong relationships with customers due to the emergence of e-business, rapid innovation, and competition from agile newcomers.
Nevertheless, Customer Relationship Management (CRM) offers banks a guiding philosophy, reoriented information system, and communication tool that can facilitate the development of valuable and knowledge-based relationships.
In the banking sector, banks are prioritizing customer relationships over market share. The literature review highlights the significance of CRM in this industry and emphasizes the need for maintaining profitable connections with customers. Ultimately, fostering customer loyalty through this approach leads to profitability. To establish strong bonds with customers, effective coordination between IT and marketing departments is crucial for ensuring long-term retention of selected customers.
This paper aims to explore the important factors that customers value in customer relationships within India's banking industry. While there is abundant global literature on CRM, there is limited research specifically focused on its significance in India's banking sector. Therefore, this study reviews relevant literature on CRM in the banking industry and describes the methodology employed for data collection and analysis.
The paper examines the outcomes, importance, and strategic recommendations for enhancing customer relationships in the Indian banking industry. It also suggests potential avenues for future research in customer relationship management within the banking sector. The Indian banking sector has been greatly impacted by the economic reforms introduced by the Government of India around ten years ago [1].
The introduction of economic reforms in India has brought about a change in the customer base. This change has impacted the middle class and led to a diversification of players in the banking industry, including public sector units, private banks, and foreign banks. The increased competition resulting from these changes has created new demands from both existing and new customers. To thrive in this competitive environment, banks must recognize the importance of consumers and meet their needs with innovative products that utilize advanced technology. Consequently, modern and innovative banking services have significantly transformed customer perceptions and expectations.
For banks to maintain a sustainable competitive advantage, it is necessary for them to adopt a customer-centric strategy. This involves establishing and managing long-lasting relationships with their profitable customers. The literature of the past two decades emphasizes this shift in marketing approach. Nowadays, marketing requires focusing on relationships, networks, and interactions [2, 3, 4, 5, 6, 7].
Such a marketing approach is very different from the more traditional one based on transactions affecting the Four Ps (product, price, place and promotion). 3. 1. CRM in the Banking sector Customer relationship management (CRM) has been equally important to the banking industry at the beginning of the 21st century as it has been to any other industry. Many banks have utilized CRM tools to gain additional customers and enhance relationships with them. A crucial factor in banks adopting technological platforms and delivery systems is how this will influence bank-customer relationships.
Therefore, to achieve banking excellence, simply meeting customer needs and offering innovative products is not enough. It is crucial to strike a balance between the high costs of customer relationships and the need for profit growth. Failing to do so may result in a return to a transactional paradigm in marketing [8]. Additionally, growing customer expectations have created a competitive environment where the quality of the relationship between the customer and the institution has become highly significant [9, 10].
The establishment of successful customer relationships is strongly recommended as a crucial aspect of marketing strategies in the service industry (Ennew, 1996). As a result, in order to adapt to the altered circumstances and ensure continuity, numerous banks find it essential to establish enduring and secure customer relationships. For countless customers, a strong banking relationship holds the same importance as any other business-related connection they maintain. This grants CRM-focused banks an edge, as customers seek the advantages offered by a firm and reliable relationship.
Banks utilize CRM to provide customers with various advantages, such as increased access to services via branches, the Internet, and ATMs. Customers also benefit from service and support, discounted credit rates, and improved savings options. Additionally, customization opportunities are available. It is important to emphasize that attracting new customers is just one aspect of marketing; the ultimate goal is to establish strong relationships with these customers and cultivate their loyalty. This falls under relationship marketing, a crucial component of marketing that encompasses attracting, maintaining, and enhancing customer relationships in multi-service organizations [12, 13, 14, 15].
Customer selectivity is a crucial aspect of CRM. Research studies have shown that different customers bring varying levels of profitability to a company [16]. Furthermore, service providers in the banking sector play a significant role in CRM. While CRM is recognized as an important business approach, there is no universally accepted definition. Swift defined CRM as an enterprise approach to understanding and influencing customer behavior through meaningful communications, aiming to improve customer acquisition, retention, loyalty, and profitability [17].
Kincaid describes CRM as the utilization of information, processes, technology, and individuals to efficiently handle a customer's relationship with a company across all stages of the customer life cycle in marketing, sales, services, and support [18]. Parvatiyar and Sheth define CRM as an all-encompassing strategy and process that seeks to acquire, retain, and establish partnerships with particular customers in order to create exceptional value for both the company and the customer [19].
The success and profitability of a business rely on the satisfaction, loyalty, and retention of its customers. When customers are satisfied, they tend to stay loyal and form long-term relationships, resulting in higher profits and market share. An effective method for attracting new customers is to encourage existing ones to refer others [20].
When the quality of the relationship is strong, customers are more likely to recommend the seller's offerings to colleagues and purchase more from them [21]. Establishing good relationships with customers increases their willingness to provide referrals [22]. Although customer satisfaction and loyalty are closely related, they are separate concepts [23, 24].
Customer satisfaction with a bank relationship is a good foundation for loyalty, but it does not ensure it as satisfied customers may switch banks. Pricing is a key factor that drives customers to switch. To address this, banks have introduced customer loyalty programs offering economic benefits. Despite skepticism about their effectiveness, studies have demonstrated that loyalty programs have a noteworthy positive influence on customer retention and share of customer purchases.
The authors Reinartz and Kumar propose the idea of categorizing customers based on their share-of-wallet and profitable lifetime duration. They argue that each customer group should be targeted with a distinct strategy. By implementing this customer-focused approach, organizations can optimize the lifetime value of each customer by anticipating their needs and providing timely solutions. Similarly, Hartfeil emphasizes that customers, rather than products, are the source of profitability. When analyzing their customer base segment by segment, they discovered that each segment required a unique strategy to maximize profitability for the bank.
Every customer at National Australia Bank Ltd, regardless of whether they are a business or personal customer, has a designated banker who actively manages their portfolios. This includes considering factors such as the volume of business, interest margin spread, fee income, profitability, customer retention, and acquiring new customers [38]. Although there is plenty of literature on CRM in general, there is limited information on the advantages of CRM initiatives specifically within the Indian banking industry. There is also a scarcity of literature on how customers respond to the CRM measures implemented by banks.
The objective of this study is to investigate the perception of customers in India regarding CRM initiatives implemented by banks and evaluate the efficacy of CRM strategies in the banking sector. The research approach employed in this investigation is descriptive, and primary data was gathered through an experience survey. The survey comprised a 3-part structured questionnaire that utilized a 5-point Likert Scale. Part 1 of the questionnaire concentrated on the aspect of relationship building within CRM and encompassed 19 questions derived from relevant variables identified during literature review.
Part-2 of the study focused on the interaction with customer service representatives. Part-3 examined customer perceptions of complaint handling and their behavioral intentions. Demographic details were also collected for categorizing purposes. Before collecting data, a pilot test was conducted to ensure the questionnaire's comprehensiveness, clarity, and reliability. The questionnaire was pretested among 10 randomly selected customers, resulting in minor wording modifications for some survey items.
The questionnaire was administered through personal interviews in order to gather precise, dependable, and authentic information while establishing a comfortable social connection with the respondents. The target population for this study comprised individual customers of the Indian banking sector. To balance the need for a large sample size and research cost optimization, 150 customers were included in this study using the quota sampling technique. The selection of participants was based on net profit and market share as indicated in Table-1.
Analyzing CRM Initiatives in India's Banking Sector. (2018, Oct 01). Retrieved from https://studymoose.com/crm-banking-sector-essay
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