Customer Relationship Mamagement in Banking Sector Essay Example

Rogers (1995), the definition of CRM is the market place of the future undergoing a technology-driven transformation. Therefore, in order to implement CRM efficiently, the IT and marketing departments must collaborate closely. In the banking sector, CRM aims to use technology and human resources to gain insights into customer behavior and their value. The desired outcomes of effective CRM are improved customer service, increased efficiency in call centers, enhanced cross-selling of products, faster deal closures by sales staff, simplified marketing and sales processes, discovery of new customers, and higher customer revenues.

However, achieving these outcomes does not solely rely on purchasing and installing software. To ensure that CRM is truly effective, an organization needs to determine the specific customer information it seeks and how it intends to utilize that information. For instance, financial institutions often monitor customers' life stages to offer appropriate banking products such as mortgages or IRAs that meet their specific needs at the right time.

The organization needs to analyze the various channels through which customer information is obtained, the locations and methods of storing this data, and its current utilization. Different companies may interact with customers through several means such as mail campaigns, websites, physical stores, call centers, mobile sales staff, and marketing efforts. Robust CRM systems connect all these touchpoints. This data is exchanged between operational systems (such as sales and inventory) and analytical systems that identify patterns within these records. Analysts can then examine the data to gain a comprehensive understanding of each customer and identify areas requiring improvement in service.

In CRM projects, the following data should be collected to run the process engine:

• Responses

to campaigns,

Web sales data.CRM at Indian Banks. Indian banks have experienced significant growth in the past decade due to economic reforms. Both public and private banks have transitioned into profit-oriented organizations while also contributing to the economy's development. To increase profitability, banks have become more competitive and customer-oriented, requiring a pragmatic approach to conducting business.

In the backdrop of this scenario, the study focused on the implementation of Customer Relationship Management (CRM) and its impact on service quality and customer retention in ten public and private sector banks of India. The study revealed that Private Sector Banks were more successful in implementing CRM practices compared to their Public Sector counterparts. The findings also supported the notion that the service quality offered by these banks differed significantly. Both public and private sector banks scored lower on responsiveness and empathy factors. However, Public Sector Banks performed better in terms of reliability and assurance, while Private Sector Banks excelled in tangibility, reliability, and assurance. Garanti Bank, a leading bank in Turkey, aimed to enhance its customer potential and service quality through electronic banking methods, which had proven successful in acquiring new customer groups until the end of 2001.

Afterwards, they made a strategic decision to re-engineer their core business process to improve the bank's performance. This involved developing strategic lines to

meet the needs of large Turkish and multinational corporate customers, expand commercial banking business, focus on expansion in retail and small business banking, utilize various delivery channels for growth, and enhance operating efficiency through investments in technology and human resources.

Garanti Bank has implemented several projects since 1992 to support this strategy, including branch organization, process improvement, and information systems. By centralizing administration burden in the branches and prioritizing marketing and sales, they have significantly reduced operational complexities. They then enhanced their operational systems and introduced innovative channels such as internet banking, call centers, and self-service options. At the same time, they embraced technology for internal communication by implementing intranet, email, workflow systems, and management reporting on a widespread scale.

CRM Development

To adapt to changing economic conditions, particularly a rapidly decreasing inflation rate scenario, Garanti Bank has proactively focused on developing a customer relationship management (CRM) system. Currently, there are approximately two million customers, but this is expected to increase to around three million as mergers with Osmanli Bank and Koferzbank are completed and growth targets are met. The bank recognizes the importance of managing relationships with their customers, which has driven collaborative projects with IBM over the past three years. Throughout these projects, essential technological and architectural decisions have been made to successfully implement the entire process. The initial project has prioritized the routine collection and cleansing of customer data, acknowledging the significance of having access to accurate customer information. This project exemplifies the commitment and spirit that have defined the development of the CRM system.

The project has promoted significant involvement from various branches, specifically portfolio managers, and campaigns have been initiated to

raise awareness among branch staff about the importance of collecting and maintaining trustworthy customer data. Additional methods have been tested for customers not included in portfolios (pool customers), such as sending mail or distributing questionnaires at branches, utilizing automatic teller machines (ATM), and the call center. The bank's staff has developed data checking and testing methods for regular use. The results obtained are highly satisfactory, with 98% data availability for commercial portfolio customers and 85% availability for retail portfolio customers. However, the availability drops to 65% for pool customers due to their weaker relationship with the bank. The Data Warehouse and Data Mining play a crucial role in the CRM system. Garanti Bank has taken an incremental approach to implement its Data Warehouse, integrating the development of information systems with the business strategy.

Instead of fully designing a corporate Data Warehouse before implementation, the bank has decided to develop a portion of the Data Warehouse for customer relationship management and management reports. The Data Warehouse follows the IBM BDW model, developed in collaboration with IBM and numerous banking customers. This model is currently utilized by 400 banks globally. The Garanti Bank Data Warehouse is regularly filled with data from operational systems and intermediate sources, obtained through partial preprocessing of the raw data.

Figure 1. The process of Relational Marketing includes customers' demographic data, product ownership data, and transaction data or product usage data, as well as risk and profitability data. Most data are monthly averages, and the historical depth today is 36 months starting from 1/1/1999 to 12/31/2001. As new data are produced, they are temporarily placed in an intermediate storage location, where they undergo preprocessing before

being transferred to the warehouse. The significance of the Data Warehouse comes from the analysis of Figure 1.

Customer analysis is conducted using continuously updated data and analytical methods and tools resulting from strategic decisions. The CRM group analyzes the obtained results and devises action plans such as campaigns, promotions, and special marketing initiatives. These plans are implemented through various channels used by the bank to reach customers. The evaluation of results completes the cycle, with the results becoming an integral part of the bank-customer relationship description in the warehouse. This completes the learning cycle, allowing the reuse of obtained results in future analyses and marketing plans.

The Data Warehouse is continuously enriched and updated as the Relational Marketing activity develops. OLAP analyses are conducted using the web version of Business Object. CRM analysts utilize this tool to issue complex SQL queries on the Data Warehouse or Analytical Datamart and perform statistics on customers' population or selected groups. Figure 2 illustrates the general structure of the Relational Marketing Activity. This process is supported by a computing infrastructure where various software packages are integrated with the bank's information system. Data Mining analyses are conducted on the Analytical Data mart using IBM Intelligent Miner software package [Cabena et.al.].

In 1999, Garanti Bank started using the same mainframe as the Data Warehouse to serve as a computing and data server. The bank believes that these tools and methodologies are a strong competitive weapon and is investing heavily in the human resources necessary to develop these analyses.

The Analytical Data mart is created from the Data Warehouse through the following steps:

1. Raw data processing, including data selection, data extraction, and data
   

verification and rectification.

The above processes are based on traditional data analysis and closely depend on the specific process being investigated. For example, the creation of new variables aims to combine information from raw data into more meaningful variables. One simple example is aggregating the number of credit transactions on a current account, which encapsulates much of the information from individual transactions in a more analyzable and representable form. Variable discretization, on the other hand, leverages the distribution of original variables to generate categorical variables that better reflect the real-world aspects of the problem being studied.