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Business is all about relationships, especially its relationship with customers. When a business manages its customer relationships well, it will grow and become more prosperous. To be successful, a business must do everything in its power to retain its existing customer base as well as extend it to new customers. This means that the business must connect with customers on multiple channels across many platforms. As more channels are opened to reach more customers, the management of those relationships becomes more critical and this is where customer relationship management becomes essential. Now that we have established the importance of business relationships, we need to establish what customer relationship management is all about.
Customer Relationship Management:
Customer relationship management (CRM) is a strategy that is used by companies to manage their interactions with their existing and potential customers. It helps organizations to build their customer relationships and have their processes streamlined so that they can increase their sales, improve their customer services and subsequently increase their profit.
Organizations are increasingly becoming aware that to remain relevant, they have to be more customer-focused. Customer Relationship Management (CRM) has become the primary thrust of organizations to retain customers. According to Noor (2012), it would cost up to five times more to attract a brand new customer, than it would cost to convince an existing customer to take up another product or service.
The South African Banking landscape, in establishing its CRM is facing irreversible and swift changes due to technology and its impact on customer behavior as well as policy and regulations. Due to each of these factors, the rivalry between the banks has forced them to streamline their efforts in an attempt to gain proper insights into what drives customer behavior, and their buying decisions, prompting the employment of various action planning tools to design and conform to their customer needs.
This study seeks to explore the influence of Client Relationship Management (CRM) strategies and how they affect customer satisfaction and customer loyalty in the commercial banking sphere. The fundamentals of the research are that customers who have a dedicated Relationship Manager, are generally more satisfied in their relationship with their bank, and are satisfied with the services being provided. This, in turn, builds customer satisfaction and establishes loyalty to a particular bank.
Retail banks in South Africa play a critical role, not only in the banking industry but in the broader economy. South Africa has a world-class banking system and is favorably compared to other developed countries (CCRED-2017). According to the Lafferty Group’s 2017 Global Bank Quality Benchmarking study (Fin24 -2017), South African banks achieved high ratings when compared to banks in Europe. Based on the study, one of the key factors identified in setting South African Banks apart from banks in Europe, where the government has bailed out banks, is that local banks in South Africa would not turn to the government for help, as they are well developed and effectively regulated, and capitalized.
According to Makhaya (2015), the major South African retail banks have taken advantage of various mechanisms such as the complexity of fees and the lack of price transparency to stop customers from switching banks. This has led to Retail Banks focussing on growing their existing customer transactional volumes, as well as, generating additional income through banking services such as transactional fees, membership fees, annual card fees, administration fees, and per transactional fees (KPMG – 2017).
Customer retention through increasing cross-selling and up-selling has become vitally important. Products and services are easily copied by competitors and do not provide for true differentiation. Customer Relationship Management is the key to identifying, attracting, maintaining, and growing high net worth customers. This helps the bank sustain profit margins, and gives them deeper insight into their customers, facilitating niche service and product offerings, tailored to the customers’ needs (Kavitha and Palanivelu – 2012).
The Fourth Industrial Revolution and Banking
With the onset of rapidly changing technology brought about the fourth industrial revolution and the turbulent macro-economic factors, the banking industry in South Africa has evolved from being a stable and docile institution to a complex, demanding, and competitive battlefield. There are currently 18 registered banks in South Africa, and thanks to the changes in regulatory and product offerings, it has opened a greater level of competitiveness by the smaller banks, which are targeting the lower Living Standard Measurement (LSM), and the previously unbanked population. (South African Banking Sector Overview- 2014)
The banking industry is rapidly evolving and this is due to new competitors, tech-savvy consumers with higher expectations, advances in digital solutions, and continuously updated technology. This study will provide suggestions on what customers are looking for from their bank, to keep them satisfied with their service and entrench their loyalty.
The banking industry has never faced so many regulatory, compliance, and fiduciary requirements as it has since the 2008 global financial crisis, leading to an economic meltdown of the financial services industry. With muted growth year-on-year, profitability remains a key objective for all major banks in South Africa. Customer Relationship Management (CRM) has become a key strategic lever and present era technology is used to lead the race and grow market share. Customer Relationship Management (CRM) plays a critical role in understanding and analyzing key customer information, giving banks the edge needed to quickly adapt to a customer’s changing financial status and needs, especially in this digital era.
Banks find themselves under an ever-increasing pressure to lower costs, deliver value to customers, and fulfill shareholder expectations. According to PWC’s Major Banks Analysis for 2018, the major banks have continued to spend considerable time and money on their digital solution strategies. They refined and simplified products, and service offerings, and enhanced their loyalty/rewards programmes, in a dedicated effort to attract a greater share of the “customer wallet”. With the fourth industrial revolution bringing about change at a precipitous speed, both locally and internationally, there is a range of economic, competitive, and broader social challenges that lie ahead which may directly affect the banking industry, going forward.
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