The Influence of CRM in Banking:

The influence CRM has on a customer’s actual satisfaction with a bank is that it can effectively improve the relationship between the bank and its clientele thereby building customer loyalty. CRM promises to provide a competitive edge for businesses and is the key to unlocking value from the existing customer base. The mastery of the CRM strategy has the potential to unlock limitless value for any company. Using a Client Relationship Manager to execute the bank’s strategy, gives the bank an inside view as to what triggers customer behavior or buying patterns. Brink and Berndt (2004) state that the supply of goods and services is longer sufficient to differentiate organizations and that customers gravitate to making purchase decisions on perceptions of their relationships with organizations. Forward-thinking organizations have realized the importance of gaining customized insights and understanding their customers’ needs and lifetime value.

The Effect of Customer Relationship Management on Customer Satisfaction and Customer Loyalty in the Retail Banking Industry in Gauteng – Part 3

To build an emotional, meaningful connection with a customer, many companies use a combination of CRM Strategies to analyze customer needs, predict best-suited delivery methods and assess the risk of loss. This allows an organization to implement a Sales Plan, executed by a Customer Relationship Manager, who manages the quality of the coverage by the clever use of bespoke customer information (Durkin – 2004). This allows them to According to Xu and Walton (2005), assess the current needs of customers as well as predict what they plan on doing in the future, thereby building a long-term, two-way relationship.

Why is CRM Necessary in the Banking Industry

For banks to deliver a unique customer experience, it needs to have insight and a proper understanding of the profile of their customers.

According to Adewale and Afolabi (2014), various factors need CRM in the banking industry:

  • Extreme competition in the retail banking industry – there is intense rivalry amongst the banks in South Africa, all of whom are looking at ways to attract each other’s customers whilst retaining their existing customer base.
  • Knowledgeable and Tech-Savvy Customers – due to the advancements in technology, customers have numerous avenues to access information and stay abreast with consumer forums that detail their rights and provide great advice. Banks, therefore, need to ensure that existing customer relationships are well maintained, as most relationships are formed via a positive first-hand experience.
  • Declining Brand Loyalty – according to Business Tech (2016), bank loyalty is on the decline. The cost related to, and the ease with which customers switch banks has never been more seamless. Customers are looking for newer, innovative products, that are not only better priced but are superior to the offering of other banks in the market. Using CRM strategies has the potential to create bonds of trust, stronger customer loyalty, and maintain the strength of the banks’ brand image.
  • Reducing Customer Attrition – the cost of attracting a new customer is more expensive than it would cost to retain an existing one. Customer retention has become vitality important given the intense competition currently faced in the banking industry.

The Benefits of CRM

CRM implementation improves the ability of an organization to customize its offerings through effective communication as it provides timely feedback to its customers. As organizations learn how to effectively manage their CRM strategies and insights, they develop a one-on-one relationship with customers, thereby reducing costs and increasing profits which is crucial for any bank.

According to Alagoz (2003), there are several advantages for a bank to implement Customer Relationship Management strategies, namely:

  • CRM increases the total productivity of the bank and ensures optimum use of bank resources
  • Re-focuses and customizes the selling and marketing campaigns of the bank.
  • Successful CRM strategies provide a permanent advantage over the competition
  • Uses technology and innovation to bring personal sales concepts to the forefront.
  • Ensures that the bank’s management remains customer-focused by empowering them with information to make better decisions.
  • Customer satisfaction and increased loyalty
  • Allows the bank to leverage information from their databases which ensures customer retention and provides opportunities to cross-sell new products and services to existing customers.

From a Customer’s viewpoint, a bank that takes its time to gain additional insight into its customer profiles finds the following benefits:

  • Professional and targeted interactions with the bank
  • Relevant products and service offerings that are aligned with a customer’s stage of life or life or life event.
  • Instant access to customers’ history and profile, throughout the organization.
  • Customised communication and updates.

Customer Satisfaction  

Customer Satisfaction is the intertwined relationship between service quality and satisfaction. It is best described as a ‘pleasant gratification response’. According to Brown (1991), customer satisfaction is the difference between the customer’s expectation of service quality, and the perceived service quality, as against the actual service received. Customer satisfaction is the extent to which a customer perceives that an organization has provided a service or product that fully meets their needs. When the customer is 100% comfortable with the product or service received, they are deemed to be satisfied.

Any organization can lose customers, investors, and market share if their customers are not as satisfied as their competitor’s clients. For banks to successfully compete they need to focus on understanding the needs, mindset, satisfaction levels, and behavioral patterns of their customers (Kofi et, al -2012). Customer satisfaction is a predictor of service quality in a bank.

The consequences of not satisfying a customer can have disastrous consequences, namely:

  • Customers cancel their requests for goods or services, and/or return goods purchased, which affects the organization’s profitability
  • Customers complain to the company, via social media or the ombudsman, resulting in reputational damage and questions about the organization’s integrity
  • Customers’ negative word-of-mouth feedback to their network of friends and acquaintances can cause irreparable reputational damage(Kueh, 2006).

The Benefits of Customer Satisfaction

Customers insist that getting customer feedback correctly can be the single biggest return on investment for any organization, and can unlock a myriad of benefits, namely:

  • More Recurring Business – Customers have ultimate buying power. This ensures that customers are happy with their products or services, and will welcome the offering of additional products in the future.
  • New Business – The power of a word-of-mouth recommendation on a new product or service is invaluable in terms of brand awareness, and costs the company nothing. A happy customer will not risk their reputation by recommending an organization that gave them bad service.
  • Lower Attrition – Requesting face-to-face feedback from customers may make them hesitant to share their honest feedback. Giving customers another channel of communication shows them that you are serious about their feedback and willing to work on improving your service
  • Increased Online Conversions – Customers are comforted when other clients have endorsed your products and services and are more likely to try you out.
  • Winning Tenders – Customer recommendations can be included in your body of evidence, identifying customers who are fans, and loyal to the company.
  • Stronger Reputation – Happy customers spend more, come back and refer their friends, thereby increasing your brand reputation and creating awareness
  • Cross-Sell and Up-Sell Opportunities – Happy customers are open to hearing about other products and services you have to offer.
  • Morale and Motivation – Getting positive feedback will motivate employees and improve their morale to offer better service
  • Improving Skills – getting negative client feedback allows for training and improvement initiatives, making the service experience memorable for the customer.

Customer Loyalty

Many factors play a role in customer satisfaction, and ultimately customer loyalty in the banking sector. Oliver (1999) defines customer loyalty as “a deeply held commitment to re-buy or patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior.’

Hayes (2008) declares that customers drive profitable growth for any organization and customer loyalty can lead to profitability. Customer loyalty is seen as positive behavior with a mindset to a re-purchasing commitment of the customer. Loyal customers are less likely to switch to a competitor, making it essential for banks to look after loyal customers, who contribute to long-term profit.

Conclusion  

This study successfully provided an evaluation as to what influences a CRM, and its related strategies and offers suggestions on how CRM initiatives can improve client relationships, culminating in customer loyalty. Customer loyalty is a clear indicator that a business is satisfying its customers as well as building relationships, and can be the key to unlocking more leads and expanding its customer base. CRM systems can help to automate things like monthly campaigns or emails, so that businesses can send out better-targeted emails to loyal customers offering them access to unique rewards, or asking for feedback.

CRM systems should be used to pull information from customer data and used to help the growth of a business, finding what trends are relevant for audiences and how customer satisfaction can be improved.

Customer relationship management is not simply finding faults in businesses.

It is about understanding how businesses can improve for everyone involved.

Implementing a CRM system is important for improving processes and creating a company that shows that it values its customer relationships as well as its internal communications. Ultimately, CRM systems provide trackable data that every business can use to benefit their future campaigns, marketing communications, and sales processes.

References:

Adewale A., Afolabi B. (2014) ‘An empirical investigation into the effects of Customer Relationship Management on bank performance in Nigeria’

Alagoz, Selda, (2003) “Computing the effects of Customer Relationship Management (CRM) Technologies and the application in the banking sector”, Selcuk University, Institute of social sciences, Yayınlanmamıs doctoral thesis, Konya

Amoako, G.K. (2012). Improving customer service in the banking industry – Case of Ghana Commercial Bank (GCB). International Business Research, (5)4, 134-148.

Brink A. & Berndt A. (2004). Customer relationship management and customer service. Lansdowne: Juta and Co, Ltd.

Business live. Accessed 21/11/2018). <https://www.businesslive.co.za/fm/money-and-investing/2018-03-15-big-banks-brace-for-impact-of-new-entrants/>

Brown, S. W., Gummesson, E. Edvardsson, B., & Gustavsson, B. (1991). Service Quality: Multidisciplinary and Multinational Perspectives. Lexington, Canada: Lexington Books D. C. Heath and Company.

Durkin, M. (2004) ‘In search of the Internet-banking customer.” Int. J Bank Mark 22(7) 484-503

Fin24.com. Accessed 21/11/2018. < https://www.fin24.com/Companies/Financial-Services/big-sa-banks-stay-resilient-despite-economic-headwinds-pwc-report-20180910> and < https://www.fin24.com/Companies/Financial-Services/why-sa-banks-are-truly-world-class-20170709>

Hayes, B. E. (2008). The true test of loyalty. Quality Progress, 41(6), 20-26.

Kofi, K.F., Mintaa, D.P., Ernestina, A., Boatemah, A.E., Samuel, T.F. (2012). Assessment of customer satisfaction in the banking industry (A case study of the Trust Bank in Kumasi Metropolis). Christian Service University College. Business Studies Department.

KPMG. ‘Competition in the retail banking industry’ 2017 Accessed 19/06/2017. >https://www.sablog.kpmg.co.za/2014/02/competition-retail-banking-industry/> 

K.S Kavitha and P. Palanivelu (2012) “Customer Satisfaction: CRM in Canara Bank” SCMS Journal of Indian Management – A Quarterly Journal 2012

Kueh, K. (2006). Service satisfiers and dissatisfiers among Malaysian consumers. Australasian Marketing Journal, 14(1), 79-92.

Makhaya, T., Nhundu, N. and Guma, N. (2015). ‘Competition, barriers to entry and inclusive growth: Capitec case study‘.

Noor, N.A.M. (2012). Trust and commitment: Do they influence e-customer relationship performance? International Journal of Electronic Commerce Studies, 3(2), 281 – 296.

Oliver, R.L. (1999), “Whence consumer loyalty”, Journal of Marketing, Vol. 63 No. 4, pp. 33-44.

Price Water Cooper (2015) ‘Major Banks Analysis’ – 2015. Accessed 01/03/2017. <Http: www.pwc.co.za/banking>

PWC Strategy & a. “A Marketplace without boundaries–‘ The future of banking: A South African Perspective’ (2018). Accessed 01/11/2018. <Http: www.PWC.co.za/banking>

South African Reserve Bank (SARB) (2018) Accessed 22/11/2018. https://www.resbank.co.za/Lists/News%20and%20Publications/Attachments/7813/01%20BankSupAR2016.pdf

South African Treasury. ‘SA Retail Banking Diagnostic Report – June 2018’. Accessed 24/11/2018<http://www.treasury.gov.za/publications/other/SA%20Retail%20Banking%20Diagnostic%20Report.pdf>

Xu, M. and Walton, J. (2005) ‘Gaining customer knowledge through analytical CRM.” Ind Manage Data System 105 (7) 955-971

Latest posts by Regenesys Business School (see all)

Write A Comment