Crm in Banking Sector Essay Example

Australia, and the United Kingdom; few studies have explored this area in eastern cultures such as Thailand, China, South Korea, Malaysia or India. However, Aulukh (1996) conducted empirical research on relationship marketing and customer satisfaction in an Asian market. In addition to this study, Jamal Ahmad (2002) researched customer satisfaction in the retail banking industry while Lenskold James (2004) investigated integrating and optimizing customer profitability management for customers.

A study by Athanassopoulos (2004) revealed that equity and satisfaction have a positive relationship. However, there is a lack of research specifically exploring the correlation between relationship marketing and customer contentment, sales, and profits in southeast Asia's consumer service industry. While numerous works have tackled relationship marketing, only a few have delved into its implementation and customer satisfaction's role in it (Morris et al., 1999). Empirical articles related to this theme are also scarce (Perrien and Ricard, 1995), with little examination conducted in consumer retail marketing (Reynolds and Beatty, 1999). Therefore, this study intends to fill these gaps.

The primary aim of this paper is to analyze the connection between customer satisfaction variables and performance in the Indian banking sector. Additionally, the authors aim to construct a conceptual framework of satisfaction from the consumer's perspective when dealing with Indian banks. The study identified relationship marketing dimensions through customer satisfaction surveys of five different banks, with a focus on assessing customers' satisfaction with various service parameters and services offered by the bank on a customer facing level. In this research, 36 determinants of performance in retail banking were analyzed. The study aims to accomplish the following objectives: 1) identifying variables that increase customer satisfaction; 2) linking customer satisfaction

with banks' performances; and 3) evaluating differences in satisfaction levels between current and savings account customers.

In order to study customer satisfaction in the banking industry, a research process involving various steps was undertaken. The first step involved conducting a literature review to identify the parameters that needed to be considered. This was followed by focus group discussions with customers to identify evaluation criteria and factors for measuring customer satisfaction. Subsequently, a questionnaire was created and tested, following which a population and sampling procedure was established and methods of data collection and analysis determined. For this study, five banks were chosen.

The list includes five banks, with two being national banks- State Bank of India (SBI) and Punjab National Bank (PNB), while the other three are private sector banks- Housing Finance Corporation (HDFC), (Industrial Credit and Investment Corporation of India) ICICI Ltd, and Industrial Development Bank of India (IDBI). SBI and PNB were preferred due to their wide branch coverage across India.

ICICI, HDFC, and IDBI, as the first private banks to implement intelligent banking in India, have a significant retail presence and offer a wide range of information to customers. These banks have initiated efforts to provide added value services and customer satisfaction. Out of a data pool of 1,000 customers, 417 contacts were declined, leaving a sample of 583 bank customers surveyed via the questionnaire. Of this sample, 555 responses were accepted. The probability and systematic sampling methods were utilized to select this representative group from the larger population.

The customers' contact addresses were collected by contacting each of the five banks individually. To ensure representation from all five banks, three focus group discussions

were conducted. Feedback from experts, focus groups, and literature (Levesque and McDougall, 1996) was used to refine the research instrument multiple times based on pilot findings and suggestions. The scale for each item ranged from extremely satisfied/extremely good to extremely dissatisfied/extremely bad, and was measured on a seven-point semantic differential scale. This information is from the 37th issue of Singapore Management Review, Volume 30, Number 2.

The study also gathered additional demographics data and gathered 16 variables to determine customer satisfaction with the chosen five banks. The questionnaire was split into five sections and was randomly given to customers who were with the bank for three years. The first section focused on customers' satisfaction with general services, such as service scape (interiors), parking space, the bank staff's attitude, dissemination of information, promptness in query handling, and networking (branches). The second section focused on variables related to transactions.

Table 2 lists the services that involve transactions with customers, including ATM, debit card, credit card, demand draft facility, fixed deposit schemes, money transfer, locker facility, D-mat facility, tele banking, mobile banking and net banking.

The third section of the questionnaire is focused on satisfaction regarding loans. Table 3 outlines the different types of loans available such as home loans, car loans, personal loans education loans business loans and overdraft facilities/limits.

The fourth part of the questionnaire explores satisfaction with quality of services provided by banks. Table 4 includes categories like processing time for passbook updating cheques withdrawal/deposit and loan sanctions; process fee; acceptability (debit/credit cards); paperwork involved in operations; working days; working hours; and value-added services.

The fifth segment assesses satisfaction with ATM services. Table 5 details proximity

to ATMs linguistic variance cash limits efficiency password-based security.

To ensure accuracy raw data was recorded twice using spreadsheet software.

After importing the spreadsheet onto SPSS 11.0 for Windows, factor analysis was conducted to extract significant dimensions of customer satisfaction. An Alpha reliability test was conducted on the factor analysis results. The study also measured differences in satisfaction among account holders and the services provided by various banks. The analysis linked the dimensions of customer satisfaction to the overall performance of the banks.

Using sales per branch and profit before income and tax (PBIT) per branch as criteria, bank performance was evaluated. Additionally, sales per employee and PBIT per employee were also analyzed. The relationship between customer satisfaction and bank performance was established through the employment of regression analysis. In order to determine internal consistency, Cronbach's alpha (Cronbach, 1951) was implemented. Table 6 displays the values of Cronbach's alpha for the 16 scales, which encompass three principal components. The reliability tests for the three principal components are also found in Table 6 and indicate that Traditional Facilities, which includes five items, has a Cronbach alpha value of 0.

The study analyzed multiple aspects of banking satisfaction, including Multi channel Banking and Internal Marketing. The main analysis involved using principal component analysis, specifically the varimax rotation method, on 16 satisfaction variables. This resulted in three relationship dimensions being identified as the primary factors.

The Kaiser-Meyer-Olkin measure of sampling adequacy in our sample was .916, which is higher than the acceptably adequate score of .5. This implies that the data is suitable for factor analysis. Sixteen variables were examined under the general category of satisfaction levels, including satisfaction with overall

services, satisfaction with transactions, satisfaction with quality of services, and loans provided by the bank. Table 7 outlines these 16 variables and their interpretations across factors one to fifteen, which include traditional facilities like demand drafts and ATMs, multi-channel banking features like debit and credit cards, and internal marketing factors such as parking availability and staff attitudes.

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The variable's highest factor loading is highlighted in bold, with figures of 32, 0, 31, 0, and 43. Table 8 displays the performance of banks, including SBI, PNB, IDBI, ICICI, and HDFC. Their sales per branch are 3.47, 1.85, and 8.

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08/01/02 41 - SINGAPORE MANAGEMENT REVIEW, VOLUME 30, NO.2 - Factor one encompassed all statements concerning facilities provided by the bank, namely Interactions with the bank (traditional facilities). Factor two consisted of statements regarding customer convenience, without requiring physical presence at the bank.

The third factor, named internal marketing, focuses on the behavior of employees and the environment of the bank, which is also referred to as multichannel banking. The satisfaction of customers is linked with the performance of Indian banks through various relationship dimensions. Data from five banks (HDFC, ICICI, IDBI, PNB, and SBI) is used to calculate the weighted average of the factor loadings and mean for each of the 16 factors relating to sales per branch, sales per employee, PBIT per branch, and PBIT per employee from 2000 to 2003. This information comes from CMIE's (Centre for Monitoring Indian Economy Private Limited) Prowess.

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Table 9: DETERMINANTS OF PERFORMANCE IN RETAIL BANKING - Linking Performance with Satisfaction (cont'd)
Regression Model 7, 8, 9, 10, 11, 12:
- Dependent Variable: PBIT/Branch, PBIT/Branch, PBIT/Branch, PBIT/Employee, PBIT/Employee, PBIT/Employee;
- Independent Variables: Traditional facilities, Multichannel banking, Internal marketing, Traditional.
64 (2.00) 0.28 0.55 0.23 0.59 0.067 0.57

The multichannel banking facilities and internal marketing facilities have been rated at 3.22 (with a standard deviation of 2.54) and 1.70 (with a standard deviation of 0.44), respectively.

When these ratings are combined, the overall rating for both facilities is 4.17 (with a standard deviation of 2.17).

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Using the regression equation Y=a-f-bx-i-U, we found that the relationship between satisfaction and performance is as follows: R2 0.61, with coefficients of 0.04 (t=1.14), 0.05 (t=0.67), 0.05 (t=1.09), 0.03, 0.55, 0.30, 0.13, and 0.28.

The study aimed to establish that an increase in customer satisfaction with services provided by Hank leads to better performance. Specifically, it aimed to show that customer satisfaction builds better relationships with customers. The study used twelve regression models, with Hank's performance as the dependent variable, and customer satisfaction as the independent variable. Additionally, the study identified three main components (traditional facilities, multichannel banking, and internal marketing) using factor analysis, and performed t-tests to determine whether there were significant differences between the satisfaction levels of current account and savings account customers across five banks. Table 10 displays the results of these t-tests.

Table 10 displays the results

of an independent sample t test conducted on savings and current account customers in the 43rd issue of Singapore Management Review. The table shows the t statistics, probabilities, and standard errors for traditional facilities, multichannel banking, and internal marketing. The study reinforces the importance of identifying customer satisfaction variables in relationship marketing and highlights the criteria that lead to better performance by banks as customer satisfaction with their services increases, as supported by regression models.

The study aimed to show the positive correlation between better services and customer relationships, leading to increased satisfaction. It was based on Anderson and Sullivan's (1993) empirical findings and focused on western Uttar Pradesh, Union territory of Delhi, and Gurgaon (Haryana) in India. However, further research in other regions is necessary for a deeper understanding of banking services and customer needs. The study suggests that banks in India are at different stages of development and cannot implement a standardized global strategy for performance improvement. Instead, they should develop region-specific relationship marketing strategies.

We can deduce that the significance of customer satisfaction in building relationships is paramount in service industries, as external customers must interact with internal customers. Research concludes that customer satisfaction levels vary among banks and individual customers, thus influencing sales and profitability. One relevant reference is Anderson EA and MW Sullivan, 1993.

"The Antecedents and Consequences of Customer Satisfaction for Firms", Marketing Science, Vol 12 Spring, pp 125-43. Athanassopoulou, Peggy Johne, C Axel, 2004. "Effective Communication with Lead Customers in Developing New Banking Products", International Journal of Bank Marketing, Vol 22 No 2, Aulukh P, M Kotabe and A Sahay, 1996. Trust and Performance in Cross-border Marketing Partnerships: A Behavioral

Approach," Journal of International Business Studies, Vol 27 No 5, pp 1005-1032, Cronbach LJ, 1951, "Coefficient Alpha and the Internal Structure of Tests", Psychometrica. Crosby Stevens, 1987.

"Effects of Relationship Marketing and Satisfaction, Retention, and Prices in the Life Insurance Industry," Journal of Marketing Research, November, pp 404-411, Ennew CT and MR Binks, 1996. "The Impact of Service Quality and Service Characteristics on Customer Retention: Small business and their Banks in UK", British Journal of Management.Jamal Ahmad, 2002. "Customer Satisfaction and Retail Banking: An Assessment of Some of the Key Antecedents of Customer Satisfaction in Retail Banking", International Journal of Bank Marketing, Vol 4 No 5, p 146, Lenskold James D, 2004. "Customer-Centric Marketing ROI", Marketing Management, Jan/Feb,Voll3Nol, Levesque T and GHG McDougall, 1996. "Determinants of Customer Satisfaction in Retail Banking", International Journal of Bank Marketing, Vol 14 No 7, pp 12-20. Morris MH, BR Barnes and JE Lynch, 1999. "Relationship Marketing in Practice: Myths and Realities, Industrial Marketing Management, Vol 27, pp 359-371."

Oliver RL (1980) examines the cognitive model of satisfaction decisions in "Cognitive Model of the Antecedents and Consequences of Satisfaction Decisions" published in the Journal of Marketing Research (Vol 17, November, pp 460-469). Perrien J and L Ricard (1995) conduct a pilot study on the meaning of marketing relationships in "The Meaning of a Marketing Relationship: A Pilot Study" published in Industrial Marketing Management (Vol 24, pp 37-3). Reichheld FF (1993) presents the concept of loyalty-based management in "Loyalty Based Management" published in Harvard Business Review (Vol 71 No 2, pp 64-73). Reynolds KE and SE Beatty (1999) analyze the benefits to customers and consequences for companies in customer salesperson relationships in retailing

in "Customer Benefits and Company Consequences of Customer Salesperson Relationships in Retailing" published in the Journal of Retailing (Vol 75 No 1, pp 11-31, 45).