Customer Relationship Management (CRM) in overall banking

sector of Bangladesh
Introduction
Banking has conventionally operated in a comparatively steady environment for decades.
However, today the industry is facing an intensely belligerent race in a new liberalized
environment. The net result of the recent competition and legislation is that traditional banks
have lost a substantial proportion of their domestic business to essentially non-bank
competition. Competition will undoubtedly continue to be a more significant factor. Thus it is
imperative for banks to get useful feedback on their actual response time and customer
service quality aspects of retail banking, which in turn will help them take positive steps to
maintain a competitive edge. Finding a place in this heating sun becomes vital to the longrange profitability and ultimate survival of the bank. Getting information about customers,
who they are and their purchasing behavior is a very important input for an organization. This
information will contribute to a better understanding of the customer and corporations can
use this knowledge to improve targeting, creating offers and shift merchandise.
With the marketplace rapidly changing and new competition just around the corner, an
effective Customer Relationship Management (CRM) strategy is critical to achieving
competitive advantage in a banking industry. Customer Relationship Management (CRM) is a
sound business strategy to identify the banks most profitable customers and prospects, and
devotes time and attention to expanding account relationships with those customers through
individualized marketing, re-pricing, discretionary decision making, and customized serviceall delivered through the various sales channels that the bank uses.

Customer Relationship Management (CRM)

Establishing and maintaining good relationships with customers provided few problems in
the past when businesses were small and customers were identifiable by sight rather than by
an ID number or code. The Manager of the small business knew each of his customers,
understood their value to him in terms of how much they spent and how often, remembered
their idiosyncrasies and their preferences. Customer relationship management was a term
unknown but a practice adhered to if business was to be successful.
Today, the sheer size of businesses and organizations and the wide range of customers mean
that good customer relationships must be explicitly managed if they are to be successful.
Thus, the concept of Customer Relationship Management or CRM has arisen. Customer
Relationship Management may be defined as:
Customer relationship management is a management strategy that enables an organization
to become customer-focused and develop stronger relationships with its clientele. It helps
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piece together information about customers, sales, marketing effectiveness, and

responsiveness and market trends. [Soutiman Das Gupta (2005)]
The three parts to CRM are technology, processes and people. In a sense, the technology part
of CRM the database - largely equates to the information that was previously stored 'in the
heads' of Managers of small businesses. But good customer relationships are about far more
than that. Processes, or key steps, have to be put into place to make sure that such data is used
effectively. In fact it is the processes that hold the whole thing together. And
the people involved in any way with the customer have to be aware of those processes and
preferably believe in those processes so that a seamless service can be delivered to the
customer.
CRM technology enables

information about the customer to be stored in databases

businesses to analyze that data, pull out customer preferences and make clear their
behavior

easy access to that data across departments that may be widely geographically
dispersed

easy access for customers in terms of online transactions

Speedy personalized communications that enable the customer to feel valued and
special.

Process Map section

By definition a business is only as successful as its processes (Phinney, 2001)

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Each company will have a number of discrete activities that occur from the initial
customer inquiry, through to completion of the sale, customer support and after sales
service. These are the processes.

It is unlikely that any two businesses will sell in exactly the same way, using the same
number of steps and the same procedures. In other words, different businesses will
have different processes in place.

Since processes are so critical to the success of any operation or business, the need to
document them carefully is critical (see section on process mapping).

The people

In the same way that it would be important for the Manager of the small business to
train his staff so that they understood his customers in the way that he did and
understood the benefits to the business in treating them in a certain way, so it is
equally important for people in large organizations to be suitably trained in the
processes and technology used.

No CRM implementation will be completely effective without the commitment or buy

in from the people involved. Without commitment, processes may be inefficiently
implemented, by-passed or break down completely.

Indeed, it is usually the people (or cultural factors) that define success or failure of the
CRM systems, not the technology itself.

The Components for Successful CRM

Banks in Bangladesh, of course, have been using customer information to enhance customer
sales and service for a long time. What is different today is that powerful tools now exist to
help banks mine the real gold in their customer information. Here are four CRM
ingredients that can help a commercial bank use the customer information already at its
disposal to enhance its bottom line:
Relate Information
Establish a Sales and Service Culture
Develop a Profitability Plan
Fit It All Together

Evolution of CRM
One of the important marketing tools in the developed countries is Relationship Marketing.
The CRM is a comprehensive approach for creating, maintaining and expanding relationship
with the customers. It has emerged as one of the most widely prescribed solutions for
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diminishing market share and sluggish growth of many industries in general and banking and
financial sector in particular. CRM is a simple philosophy, which places the customer at the
heart of the business processes, activities and cultures for improving customer satisfaction
and maximizing profits. In one of the encompassing definitions, CRM is described as the
establishment, development, maintenance, and optimization of long term, mutually-valuable
relationship between the customers and the organizations. It is a comprehensive approach for
creating, maintaining and expanding relationship with the customers.
The concept of CRM is very important to the business sector. The essence of the business has
been described by Mr. Peter Drucker, the Management Guru as, the purpose of the business
is to attract and retain a good customer. Good Customer Service is the best brand
ambassador for any bank. The entire business process consists of highly integrated efforts to
discover, create, arouse and satisfy customers needs. The modern business has realized it and
is making all out efforts to become customer-centric across the globe.
Hence, CRM is not a once-for-all affair but a continuous process. It is the way of carrying out
business covering all the aspects of the modern business. It is an integral approach of dealing
with customers by deploying the advanced information technology.
CRM is the Information Technology face of the business process that aims to establish
enduring and mutually-beneficial relationships with customers in order to drive customer
retention, value and profitability. It is meant for a common and equal good of the two
stakeholders-businesses and their customers. It calls for capturing pertinent data about the
prospective and current customers in respect of their buying pattern, shopping behavior and
usage habits. It represents the current philosophy that the businesses should be customer
oriented.
CRM is a tool for delivering a variety of marketing dreams such as:
To target and serve customers on an individual basis. It permits one to one marketing
as opposed to mass marketing.
It helps in establishing durable relationship with customers.
Importance of CRM in Banking Industry

Delivering superior customer value has become a matter of ongoing concern in

building and sustaining competitive advantage by driving CRM performance (Wang
et al., 2004; Farokhian, 2010). CRM facilitates developing relationships with
differentiated customers via interdependent collaboration with those of highest value
to the company (Lowe, 2008; Sadeghi and Farokhian, 2010). As many researchers
suggested, if companies want to improve the performance of their CRM they must
regulate their activities based on best value creation thought (Ahmad and Hashim,
2010).
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Moreover, CRM can improve customer data and develop customer-centric (Berger
and Bechwati, 2000; Kim et al., 2003; Mithas et al., 2005; Seeman and OHara,
2006). From the customer behavior perspective, CRM performance can increase
customer loyalty, retention and satisfaction (Kim et al., 2003; Fitzgibbon and White,
2005; Lari, 2008; and Irfan et al., 2009).

In line with the above argument CRM enables business to measure the behavior of
customers after they contact with the organization, such as decreasing of customer
complaint, repurchasing (Yoo and Park, 2007), and increases the volume of purchases
(Colleen and Yeol, 2007; Mashinchi and Selamat, 2008). CRM projects are located in
the commercial sector of information technology projects (Haghighat, 2008;
Fasanghari et al., 2008).

Also scholars argue that, the success of any organization primarily depends on how
effectively the organizations manage relationships with the customers that lead to
lifetime customers (Jagdish et al., 2008). Customer relationship plays a major role in
the competence development of business. Managers have found that the enhancement
of existing customer relations cause the benefit of profitable and sustainable revenue
growth (Lin et al., 2006).

Massey et al. (2001) argued that acquiring new customers can cost five times more
than it costs to retain current customers. Furthermore, repeat customers can generate
more than twice as much gross income as new customers (Winer, 2001; Fasanghari
and Habibipour Roudsari, 2008). The key to build lasting customer relationships is to
create superior value and satisfaction (Zangoueinezhad et al., 2009; Quee Ling et al.,
2010).

CRM involves building and maintaining profitable customer relationships by dealing

with all aspects of acquiring, keeping and growing customers (Kotler and Armstrong,
2010). The overall purpose of CRM is to improve marketing productivity and to
enhance mutual value forthe parties involved in the relationship.

Improving marketing productivity and creating mutual values can be achieved by

increasing marketing efficiencies and/or enhancing marketing effectiveness (Sheth
and Parvatiyar, 1995a; Sheth and Sisodia, 1995). They can also enhance marketing
effectiveness by carefully selecting customers for their various programs, by
individualizing and personalizing their market offerings to anticipate and serve the
emerging needs of individual customers, by building customer loyalty and
commitment; by partnering to enter new markets and develop new products, and by
redefining the competitive playing field for their company (Sheth and Parvatiyar,
1995).

Furthermore CRM serve specific role in banking sector. In this end, CRM consists of
a historical view and analysis of all the acquired or to be acquired customers. This
helps in reduced searching and correlating customers and to foresee customer needs
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effectively and increase business in banking industry. CRM contains each and every
bit of details of a customer, hence it is very easy for company to track a customer
accordingly and can be used to determine which customer can be profitable and which
not.
Implementation of CRM strategy in banking sector of Bangladesh
The success of any strategy is determined by the success with which it is implemented. This
is also true in the case of CRM strategies. Implementing CRM requires that the organization
and the associated business processes be in place in order to facilitate its success (Brunjes &
Roderick, 2002).
The role of customer service in CRM strategy:
In order to implement a CRM strategy, a key dimension is the question of customer service
and the way in which it is perceived by the recipient of the service. Customer service can be
defined as a task, other than pro-active selling, that involves interactions with the customers
in person, by telecommunication, or by mail. It is designed, performed and communicated
with two goals in mind: operational efficiency and customer satisfaction (Lovelock, 1991).
The quality of customer service is determined and evaluated by the customer, and this affects
the desirability of a relationship with the organization. Customer service creates the moments
of truth with the customer, and these service encounters need to be managed by the
organization (Payne, Christopher, Clark & Peck, 2001). Service encounters and CRM are thus
associated.
The steps in the implementation of CRM strategy:
In the countries like Bangladesh specially in banking industry, successful implementation
requires specific actions on the part of the organization. The implementation of a CRM
strategy as proposed by Peppers, Rogers & Dorf (1999) comprises four steps, namely the
identification of customers, the differentiation of service, interaction with customers and the
differentiation among customers.
Step 1: The identification of customers
The identification of customers enables the organizations to select those customers that they
regard as being strategically significant and who they believe can contribute to the success of
the organization. These customers have unique needs and due to their value to the
organization, will have products developed to meet these needs. It must be possible to
identify these customers and so obtain as much detail as possible. This involves collecting as
much data as possible in order to obtain as clear a picture as possible of the customer and
their profile. Having this information enables the organization to determine those customers
that have been with the organization for a long period and those that have recently started
using the products and services of the organization.
Step 2: The differentiation of service
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The differentiation of service implies that different customers receive a different level of
service and a different product from the organization, depending on the value to the
organization and their specific needs. This requires the organization to identify the top (or
most significant) customers and adapt service accordingly. Identification of these top
customers takes place using sales figures or by calculating the CLV associated with each
customer. As the organization is aware of the value of their customers, service levels can be
adjusted accordingly.
Step 3: Interaction with customers
This step refers to the importance of interacting with the customer in relationship building
efforts through a variety of communication tools and technologies. This is necessary as the
relationship can only develop and be sustained if there is communication with the customers
regarding their needs, perceptions and desires. This involves developing methods of
communication proactively with customers regarding the organizations products and
attempting to initiate dialogue with customers. Use can be made of technology, but this is not
essential (Brunjes & Roderick, 2002). The customers with whom communication takes place
are not necessarily all the customers, but only those that the organization regards as being
strategically significant. This interaction with the organization increases the expectations of
the customers regarding the service received as well as the quality of the relationship.
Step 4: Customization of products, services and communication
Customization is carried out by the organization in order to ensure that customer needs are
met. It requires that the organization adapts its product, service or communication in such as
way have something unique for each customer. Communication can be customized to address
the specific needs and profile the customer, and organization also makes use of
personalization as part of this process. Products can be customized as to the specific desires
that the customer has of the organization. In the case of the financial services, it refers to the
product package that is offered to the customer. The purpose of customization is to increase
customer satisfaction, and the loyalty that is exhibited by customers.

Benefits of CRM
Benefits of CRM can be categorized into three groups namely: Benefits for customers,
benefits for employees and benefits for banks.
(i) Benefits for Customers

There is a more coordinated and professional approach to customer contact.

With up-to-date customer information, Banks can offer more personalized services.

Customers feel empowered if they have greater access to products and services. For
example, 24 Hours banking.
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Targeted product and service offerings can be timed to coincide with customer events
and requirements e.g., Education Loans and Tourism Loans.

(ii) Benefits for Employees

Employees are empowered with the information to deliver high quality service and
meet customer expectations.

Employees have more time to serve customers.

Employees have higher satisfaction ratings.

(iii) Benefits for Banks

Managers are empowered with information that can help them manage customer
relationships and make better decisions.

Optimum use of resources.

Customer satisfaction and increased loyalty.

Improved customer acquisition and cross-selling.

It helps in capitalizing on short windows of opportunities in the market.

Challenges that faces banks in implementing CRM practices

The following are said to be challenges faced by many of the banks whilst implementing
CRM. They are classified into the following main categories namely; getting management
sponsorship; quality of customer data; alignment of people and processes; lack of skilled
people; determining the right time for customer needs; using customer data more
intelligently; incorporating customer data and customer preferences to the customer data
base; using right technologies; and real time data across all customer channels.
Scholars have identified the barriers to Customer Relationship Management which are
categorized with regards to their effect on CRM strategy in a particular organization as
follows;

Lack of Skills regarding the mechanics of CRM is the first hindrance factor. The
personnel of the modern organizations are not trained in the management of corporate
communication which also includes human relationship development. The art and
craft of public relations are not taught formally or informally to the personnel who
handle various aspects of Customer Relationship Management including application
of information communication technology and ultimately jeopardize gains expected to
be accrued from CRM.

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Inadequate Investment is the second barrier to CRM in an organization. Gaining

adequate funding for CRM requirements is an important issue for organizations,
particularly as many of the projects expanded dramatically in cost and sometimes in
scope. Some organizations had overcome the problem of funding by adopting what
was referred to as a quick wins Approach.

Poor Data Quality and Quantity is the third barrier for best CRM. Organizations at
different stages of CRM development experience different issues with respect to data
quality and data quantity. Moreover, failure to understand business benefit; low initial
awareness of the benefits of a marketing database among senior management is also a
barrier for companies which are less advanced in CRM implementation. This problem
tends to be overcome as the data warehouse goes live and begins to deliver results.

Functional Boundaries; Managers at the functional or business unit level may be

reluctant or unwilling to cooperate at the early stages of the CRM project. It may
require considerable organizational effort to make functional and business unit
managers aware of the benefits of greater company-wide operations and Crossfunctional working.

Lack of Leadership and Top Management Involvement; Experience also reveals that
the top management is least involved in the CRM activities which are normally
handled by the managers, supervisor and workers of the organizations concerned.
Their role is to ensure a high level executive, ideally at Board level, acts as a sponsor
and champion for the companys CRM activities and that the importance of
transforming the companys relationships with customers through CRM is understood
and shared by the Board and senior management.

Imminence of CRM in banking industry of Bangladesh

Customer service levels are critical in establishing and developing relationships.

Management need to examine existing processes and methods in which service is

offered, and where necessary make changes which can improve the service for
customers.

Training with respect to customer service and improvement in the service levels
offered by staff. This is a key area in the development of long term customer
relationships.

In any implementation, it is necessary to identify, differentiate and then interact with

customers in order to provide customized service. This requires that management
have the ability to identify customers who are important to the organization and then
be able to ensure that their needs are different. This will enable them to communicate
more appropriately with the customer.
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Continuous interaction with the customers are necessary in order continue with
relationship building activities over the long term. This may require new methods and
techniques in communication such as the use of email, SMS and other technological
communication devises.

The banks should have sufficient and dedicated resources for implementation,
including for training and data input/cleaning/extraction.

It needs good communication and selling of benefits, including at individual level, to

bring people on-board early.

It is important to spend time planning the project at a high level so that CRM results a
long time to embed and to realize benefits.

It needs to be driven from the bottom but supported from the top.

It is a people based process involving business process development and change

management, not an IT system implementation.

The banks have to make sure they work together rather than duplicating unnecessary
information.

Any institution that wants to undertake a CRM project should spend time learning
from a business perspective what a CRM system can and cannot do. In retrospect, a
problem we experienced was that we didnt fully understand what a CRM system
would really do (other than record everything).

In CRM, customers are grouped according to different aspects according to the type
of business they do or according to physical location and are allocated to different
customer managers often called as account managers. This helps in focusing and
concentrating on each and every customer separately.

Moreover, the strongest aspect of Customer Relationship Management is that it is

very cost-effective. This means, all the details in CRM is kept centralized which is
available anytime on fingertips thus, reduces the process time and increases
productivity.

Efficiently dealing with all the customers and providing them what they actually need
through CRM strategy increases the customer satisfaction which in turn increases the
chance of getting more business which ultimately enhances turnover and profit of an
organization.

Lastly but not least, CRM led to customer satisfaction, and therefore, satisfied
customer will always be loyal to the organization and will remain in business forever,
resulting in increasing customer base and ultimately enhancing net growth of business
and increase in profit and turnover of the entity.
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Conclusion
The overall banking industry of Bangladesh has recorded a phenomenal growth in the past
decade with the initiation of Economic Reforms. The banks, both Public and Private, have
transformed themselves into profit-oriented business organizations besides playing a
developmental role in the economy.
In an attempt to be more profitable, the banks have become competitive and more customer
oriented. This new orientation has compelled them to take a more pragmatic approach for
conducting the business. The CRM is one such tool which helps in meeting the customers
expectations according to their changing needs. Private Sector Banks have been able to
implement the CRM practices more effectively when compared to their Public Sector
counterparts. This indicates that strategically speaking, the Private Sector Banks have been
more innovative in understanding their customers and in building good relations with them.
One important thing in banking business customer retention suggests that the banks
(whether public or private) are equally affected by the kind of CRM initiatives they undertake
to retain the customers. The banks are now under tremendous pressure to retain the older
customers because of the competition in the Banking Sector. This would not only ensure
better customer relations but also loyalty among them, which is very critical and important in
todays competitive world.
Banks have started acknowledging the importance of the customers in developing their
business. They have recognized that it is essential to protect and grow its customer base and
ultimately its profitability. The banks can do this by building a strong relationship with the
customers. To meet the customer needs and to beat the competition, they must deliver
superior quality service. The CRM approach adopted by banks focuses on maximizing the
value for the customer and the bank.

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