customer retention in banking sector

7/29/2019 customer retention in banking sector

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Declaration

I am Vinita Naidu, from Thakur College of Science and

Commerce, student of T.Y.B.Com (Banking and Insurance), semester VI, andexamination seat no:-_________. Here by submit my project report on customerretention in banking sector.

I also declare that this project which is the partial fulfillment of therequirement for the degree of T.Y.B.Com (banking and insurance) of the MumbaiUniversity is the result of my own efforts with the help of experts.

Date:

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Acknowledgement

I have taken efforts in this project. However, it would not have been possible without the kind support and help of many individuals and organizations. I would

like to extend my sincere thanks to all of them.

I am highly indebted to Prof. Priti for her guidance and constant supervision as well as for providing necessary information regarding the project & also for hersupport in completing the project.

I would like to express my gratitude towards my parents & project co-coordinator Prof. Rekha for her kind co-operation and encouragement whichhelped me the in completion of this project. I would like to express my specialgratitude and thanks to our principal for giving us such attention and time. Mythanks and appreciations also go to my colleague in developing the project andpeople who have willingly helped me out with their ability

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CONTENTS

SR NO. PARTICULARS

1 EXECUTIVE SUMMARY

2 INTRODUCTION

3 OBJECTIVES

4 IMPORTANCE AND NEED OF CUSTOMERRETENTION

5 BEHAVIOUR OF ORGANISATION WHICHLEADS TO CUSTOMER RETENTION OR LOSSOF CUSTOMERS

6 CUSTOMER RETENTION AND BUSINESSCOMPETITIVENES

7 DIFFERENT METHODS OF CUSTOMERRETENTION

8 CUSTOMER SATISFACTION

9 IMPORTANCE OF TRUST IN CUSTOMERRELATIONSHIP

10 MARKETING STRATEGIES BRIGHTEN THEFUTURE CUCTOMER FRIENDLY BANKING

SERVICES11 DIFFERENT CASE STUDY12 ANALYSIS AND INTERPRETATION OF THE

STUDY13 IDENTIFYING YOUR CHALLENGES14 CONCLUSION

15 BIBLIOGRAPHY

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EXECUTIVE SUMMARY

It is defined as the activity that a selling organization undertakes in order toreduce customer defections. Successful customer retention starts with the firstcontact an organization has with a customer and continues throughout the entirelifetime of a relationship. A companys ability to attract and retain new customers,is not only related to its product or services, but strongly related to the way itservices its existing customers and the reputation it creates within and across themarketplace. Customer retention has a direct impact on profitability.

This project discusses the need to fully understand the causes of desertion todevelop an effective customer retention strategy. The project provides aframework to improve client retention and proposes an integrated system tomonitor the causes of desertion. The findings and framework of this project arethe result of research on customer satisfaction in different books and internet.Careful analysis of each of these factors reveals major dissatisfaction with

product features.

Quality of customer service is a complementary source of dissatisfaction, butto a lesser extent, since the emotional connection the customer possesses withthe bank mitigates most weaknesses in customer service. The purpose of thisproject is to provide insights into issues related to customer satisfaction, loyaltyand retention which will prove useful to managers in financial services.

Building a Successful Contact Center Customer Retention Program. Thecontact center is the focal point of customer interactions representing theenterprise to its customers. The contact center must have the support of all

departments within the company for a customer retention program to live up to itspotential.. Generally service quality relates to what customers think they shouldget, while customer satisfaction is concerned with individuals ideas of what theywill receive

In this project I have tried to bring out the importance and need of customerretention. Essential steps for customer retention. Different case study, andanalysis.

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Customer retention in Indian banking system

INTRODUCTION

Customer here means the customers who have already bought and received ourproduct OR the ones who has been our client or are in midst of being our client.Customer acquisition cost is an investment and customer satisfaction andretention (CSR) enhances shareholder value and makes your business morepredictable. Customer retention is absolutely necessary in banking sector due tothe growing competition.Customer retention statistics are typically expressed asa percentage oflong term clients, and they are important to a business sincesatisfied retained customers tend to spendmore, cost less .On the other hand,to retain customers, you have to employ methods that were found to be aneffective way to do just that for your business. One way of doing that as a tip is to

use promotional items or corporate gifts and distribute them to all your clients ona level per level basis like from a regular customer to a a prospect customer.

Now the only focus of all business is customer and Customer Satisfaction. ThisCustomer Satisfaction cannot be achieved without proper involvement of internalcustomer employees. Companies start their business philosophy from their maingoals or objectives and make clear statements showing their mission and values.

All lateral developments are performed on the basis of these predeterminedvalues. Modern businesses focus only on customer satisfaction. Customerretention is based mainly on customer satisfaction. Customers will satisfy if

company is sure about the persons, method and tactics of achieving customersatisfaction. Whole management and its team are responsible for achievingbusiness results so is the customer satisfaction. Modern management has nodoubt in it that customer satisfaction can only be achieved if all employeesregardless their departments work hard to satisfy customer. Customer retentionreflects the soul of the company. In order to serve the customer, an organizationmust think like the customer and the employee. Customer retention reflects thestate of mind that customers have about a company and its products or serviceswhen their expectations have been met or exceeded. This state reflects thelifetime of the operation of the bank and its profitability.

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MEANING

Customer retention refers to the percentage of customer relationships that, onceestablished, a small business is able to maintain on a long-term basis. Customerretention is an important element of business strategy in todays increasingly

competitive environment. In global business environment, customer retention isplaying important role for development of the business. The days are gone wheremain emphasis was given on profit making only. In present scenario, businessorganizations are giving main stress on its customers and their retention. Modernbusiness environment is famous for various new trends. An environment wherethe businesses used to hire employees for the sake of monetary benefits only isnow changed in multi dimensional and multi pronged environment. Now businessare not run for the sake of money and short term financial benefits only but for along time sustainable growth and development. retention level increases to amuch higher level as compared to a normal retention process. Silent attritioncauses the real damage to the organizations because they do not even know

when the customer defected. They find no time to implement the correctivemeasures to try retaining that particular customer or even determine if thecustomer can be retained or not.

Customer retention does not make sure that the customer is loyal. For example,a brokerage firm has both traditional trading platform and online trading platform.

A customer has his trading account in traditional platform but after some time hefeels to switch to online trading platform. Now in this situation, the customer is notconsidered to be loyal to the given services, but the customer is said to beretained by the same organization.

Customer retention is a strategic process to keep or retain the existingcustomers and not letting them to diverge or defect to other suppliers ororganization for business and this is only possible when there is a qualityrelationship between customer and supplier. Usually a customer is tendedtowards sticking to a particular brand or product as far as his basic needs arecontinued to be properly fulfilled. He does not opt for taking a risk in going for anew product. More is the possibility to retain customers the more is theprobability of net growth of business. Customer retention is the activity a com-pany undertakes to prevent customers from defecting to alternative companies.Successful customer retention starts with the first contact and continues through-out the entire lifetime of the relationship.

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Effective customer retention strategiesmust focuson measuring and achieving the following:

Delivering service thats consistent with your value proposition and brand

Cross-selling, up-selling and asking for referrals from existing customers

Developing programs to increase customer loyalty and decrease turnoverknowing the lifetime value for different segments

Using that data to improve marketing Prioritizing retention as a major focus inyour annual marketing plan

Take customer feedback across the channels as a blessing in disguise toimprove any lacuna in service / product. Structured / Unstructured feedbackusing various forums should be encouraged as customers may not tend to givedirect feedback but may use various social media networks, mails, discussionforums etc to highlight issues.

. Make customer service priority number one. Linking business objectives tocustomer retention helps offset the cost of obtaining new business. This newbusiness is what helps the company to grow, so having more money to devote towinning it is important. Keep current customers happy and the money they spendwill increase the marketing budget.

Make customer service priority number one. Linking business objectives tocustomer retention helps offset the cost of obtaining new business. This newbusiness is what helps the company to grow, so having more money to devote towinning it is important. Keep current customers happy and the money they spendwill increase the marketing budget.

Encourage customers to communicate by including requests for feedback in

newsletters and emails. Give customers an easy way to submit comments via the

company website and encourage product reviews on the company Facebook page.

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Objectives:

Maximize customer satisfaction for current customers.

Identify dissatisfied customers before they leave through a customer retentionprogram.

. Customer retention helps in the survival of banking business for a long time.

Objectives of banks in customer retention

1. To understand the role of Customer retention in Banking.

2. To evaluate the strategies of Customer retention in Banking.

3. To find importance of customer retention in Banking.

4. To take a study of customer retention initiatives undertaken by ICICI Bank.

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Importance and need for customer retentionin banking

That every individual sees their bank as a most important service provider is

not difficult to understand. Considering the relationship involves the managementof their hard-earned money, it is understandable people will be especially criticalwhen deciding upon a bank or deciding to remain with one. Accordingly, bankingcustomer retention is more of a challenge than it would be in different industries.In addition, the current economic downturn is heightening concerns and furtherthreatening customer loyalty.

Customers naturally gain a sense of security placing their money in an institutionthey believe shares their interests, and the nature of their precious financesmeans they need to know those interests are being catered to. Understandingthat their business is valued plays a role in this, as many consumers view bank

products and services primarily as commodities. Promising to safeguard andgrow peoples finances is only a portion of what a bank must offer to promotebank customer retention

Overall Customer Satisfaction depends on:

Service

Quality

Good Value

Competitive Pricing

Billing Timeliness

Accuracy of Billing

Knowledgeable

Employees

Courteous

Employees billing

Clarity, Quick Service, Helpful

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Why is it important to retain customers?

Customer retention has recently become one of the hottest topics for discussionin business circles.

Suddenly the buzz words are customer loyalty, customer focus delighting thecustomer and relationship marketing.

The reason for this new obsession is simple-improving customer retention paysbig dividends.

Studies have shown that increasing customer retention by just 5% can have abottom line profit increase of up to 75%.and the lifetime value of a singlecustomer can be measured in many thousands of pounds, depending on the typeof business.

We cannot escape from the simple fact that retaining customers, satisfying themand making them enthusiastic champions of our products are vital not just tobusiness success, but to business survival

Why focus on customer retention

Service encounters failures

Inconvenience

Response to failed service

Pricing Competition

Ethical concerns

Involuntary switching

Other factors

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Retaining customers when things go wrong

No one likes to deal with complaints. It can be hard work or upsetting to handlecustomers who are difficult or angry, and it is often time consuming to put thematter right. Yet if we pay full attention to the complaints we receive, we will

prosper. There are two reasons for this

If someone is complaining it means we havent satisfied them yet-and we need toknow why

We are also getting a wonderful opportunity to delight the customer in the waythat we resolve the problem

Today you will explore some guidelines for dealing with dissatisfied customersand turning failures into golden opportunities to delight customers and ensurethat they remain loyal

Focusing on customers, not products

Retaining customers means spending less time looking for new customers andmore time looking after the ones we already have, so that they will grow intobigger customers. His argument was that every customer should be consideredboth as an appreciating asset and as a powerful tool for word of mouthadvertising

To retain customers, it is vital to focus on what people want and need than onwhat we want to sell to them. For many years, organizations tended to be very

inward looking. They were primarily concerned about the quality of the goodsthey produced or the services they provided. They worried endlessly aboutdevising the most efficient systems and procedures they debated the benefitsand problems of different production methods and they spent a lot of timeconsidering how best to sell those goods and services to people out there in themarketplace. Customer service when it existed-was frequently an extra that wasbolted on at the end of the production line.

In recent times however all that has changed. Customers have become moreknowledgeable and more demanding than ever before-and they have far morechoice about what and where they should buy. This means that, even though an

organization may be producing the best product or offering the most efficientservice in the world, it will not be successful unless it bends all its efforts towardsfinding out what customers want and then offering this to them. to retaincustomers you have to base everything that you do on the needs, wants andexpectations of customers

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Why have things changed?

There are two main reasons why, in order to retain customers, it is nownecessary to concern ourselves primarily with their needs rather than with theservices or products we offer

1 The external environment has changed

2 customers themselves have changed

The business environment

Business organizations in the 21 century operate in a world of uncertainty,complexity and rapid change. you are probably well aware of the main factorsthat have brought this situation about Intensifying competition-all organizationsare to a greater or lesser extent influenced and affected by the global competitive

environment. But as competition intensifies, our ability to retain customers is themost important way of gaining the competitive edge Rapid technologicalinnovation-new information systems, the internet and intranet technologies havecreated new business possibilities, including methods of carrying out transactionsand communicating with colleagues and customers. these technologicaladvances have revolutionized the way many of us do business, they have helpedto improve general efficiency and have often resulted in substantial cost savingsConstant demand for higher quality and better value-in the face of increasingcompetition, its no good striving for quality and then sitting back once we haveachieved it. Instead, we have to work continuously to improve the quality of theservice we provide for our customers succeeding in the competitive environment

means never losing our awareness of changing customer needs. This involvesRecognizing and managing changes before they take control of us, anddeveloping our skills, our organizational structures and our business processes insuch a way that we can easily turn the threat of change into an opportunity forgrowth

Customers

In general terms, individual customers are today better educated and betterinformed than their parents or grandparents. They are aware of their legal andmoral rights and they take time to find out about the products that are available

and to compare features and prices, Added to this, customers have personaldreams and aspirations which go far beyond the modest expectations of previousgenerations. They are less likely to accept unquestioningly their situation in theworld they are often motivated by a need to improve their physical circumstancesand to realize their desire for self-fulfillment.

In addition, it has become more and more common for customers to own sharesin the organizations that serve them. Those that do have an extra stake have a

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further incentive to take an interest in that organizations overall performance.Although the consequences the demands and expectations of customers can besevere for business, it would be wrong to view these new attitudes and needs asa problem. On the contrary, we can gain distinct competitive advantage if werecognize and meet the characteristics of the new consumer. Increasingly, what

is important for them is not what they are buying, but how they are treated by theorganization doing the selling.

What does your customer want?

We have seen that all too often organizations are only concerned about theirgoods and services from the point of view of producing or providing them. Theonly route to success is to devise ways of getting close to customers, of listeningto what they want and then offering t this to them-

The things that customers want

You keep your promises

You are wiling to help

You inspire confidence

You treat customers as individuals

You make it easy for customers to do business with you.

Measuring your success

Living up to customer defined standards is not easy-it is not enough to meetthem in certain parts of the company or on certain days of the year. To keepcustomers coming back, everyone has to meet these standards for everycustomer every time they come to purchase. Only if you can do this can yousay that you are truly providing customer satisfaction

The only way of making sure that your organization is meeting your customerdefined standards is to introduce reliable measurement systems. The methodyou select will to depend on the types of standards that you have defined.Measurement is easier for certain characteristics than for others. In somecases, it is possible to judge the quality of products and services purely by

keeping count.

For example; the numbers of errors made by bank

However, with many other characteristics the only way of measuring theextent to which standards are being achieved is to seek customers opinionsdirectly. The usual ways of doing this are customers feedback forms, postalsurveys and customer interviews. As it is expensive to collect measurement

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information, you should measure only what you need to know. The questionsyou ask must be designed to elicit information on only the characteristics youhave already identified-the standards that you know you must meet tomaintain the loyalty of your customer.

Customer satisfaction can be created by following ways:

a) In order to satisfied customers, it is important to provide employees withcareer. Development opportunities and high degrees of involvement in thebusiness. If employees are satisfied only then they can serve organization anddeal with customer in better way.

b) Another possible strategy for satisfying customers involves institutionalizingcustomer relationships. Rather than just providing contact with individualemployees, a small business can provide value to customers through the entirecompany. For example, it could send newsletters or provide training programs in

order to become a source of information and education for customers.

c) Customers can also be satisfied by providing some benefits to them, forexample; Distribution of membership cards or convening frequent-buyerprograms is the direct incentives for customer satisfaction.

d) Electronic links can be created to improve the service they provide tocustomers. For example, e-mail connections could be used to provide updates onthe status of accounts, electronic order systems could be used to simplifyreordering and reduce costs, and online services could be used to providegeneral information.

e) Some strategies like stable prices over the customer life cycle, basing priceson the overall cost and profitability of the customer relationship, may be useful tobusiness organization, for customer satisfaction.

All of these strategies are intended to customer satisfaction and minimize thechanges and problems customers experience, thus making them wants tomaintain the business relationship. All these efforts may creates customersatisfaction and further customer satisfaction will lead to customer retention in theorganization.

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6 simple things to retain the customer withoutbreaking the bank rules

When customers leave, they often do so because the competition has one-

upped your company. Decrease the chances of this by developing customerloyalty programs and building brand loyalty by offering the highest-quality andmost useful products or services. Keep promotions and special offers flowing anddiverse. Everyone loves a great deal and these offers may keep customers loyaleven when the competition is fierce.

Make customer service priority number one. Linking business objectives tocustomer retention helps offset the cost of obtaining new business. This newbusiness is what helps the company to grow, so having more money to devote towinning it is important. Keep current customers happy and the money they spend

will increase the marketing budget.

Offer products or services of the highest quality because these increase thechances of repeat business. No matter how happy employees are, they cannotmake up for low-quality products or services. Whether a business is new or hasbeen around for years, quality should be an ongoing focus.

have fun! It is possible to be professional while at the same time loving whatyou do. A simple smile can diffuse an otherwise tense situation and make anyinteraction more memorable. People can hear the smile in your voice over thetelephone, see it in person, and infer it through wording used in an email.

Look internally when trying to satisfy customers because happy employeeslead to happy customers. Subject employees to ongoing training on customerservice skills. Provide them with opportunities to present feedback and ideas,exercise leadership skills, and play an active role in operations. Implementing acorporate bonus program based on company performance gives each employeea reason to focus on retaining customers.

Staying relevant to customer desires helps maintain the customer base.Customer tastes change, as do societal trends, so be aware of these shiftsbefore they happen. Once an opportunity is recognized, develop a product orservice around it. Test it on a sampling of customers and solicit their feedback

regarding improvements.

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Examples of existing customermanagement programs include:

Product design evolution

Payment automation optimization

Active customer complaints management

Cross-sell leads management

Product activation

Usage stimulation

Reproved products

IVR Messaging Offers

Leveraging sponsorships

Leveraging affinity marketing

High value relationship programs

Low value relationship programs

Local area marketing

3rd Party and Sales consultant commissions

Driving customers to highest ROI channel mix

Product bundling

Product Up sell Silent attrition management

Collections process

Move and Follow

Differentiated levels of service

Optimizing product mix

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Banks top 5 customer retention

mistakes :

1. Waiting too long to save an account. Banks maintain a rich repository oftransactional, personal, and contact channel information, so they are armed withthe tools to identify at-risk customers well before actual attrition occurs. Byusing financial services analytics to segment the customer base and track thehistory of account transactions and events, banks can build statistical models thatpredict the likelihood of customer attrition. These predictive statistical models canthen be embedded in business rules engines (BRE) that continuously monitoraccount transactions and events. In real-time, a BRE can identify customers witha high likelihood of attrition, so that action can be taken immediately. Forexample, a bank could pull at-risk customers from the IVR and send them directly

to a highly trained Retention Specialist to reengage them by offering on-line billpay, upgrades, bundled accounts or valuable rewards programs. Thisreengagement will create a more loyal customer with opportunities for futurerevenue growth.

2. Assuming an at-risk account that stays open is a good save. Justbecause the customer initially agrees to keep the account open does not meanhe or she will continue to keep it open. To avoid re-attrition, banks must not onlysave the account, but also reengage the customer. Offering rewards programs,direct deposit or special promotions can help to ensure that the customer willremain loyal. Again, financial services segmentation and analysis of historical

patterns can be used to determine which reengagement offer is appropriate foreach customer. Banks also need to develop incentives for agents based not onlyon saves, but also on increased account activity once the account is retained.Often agents are paid to save accounts, but the customer never reengages, sothe bank incurs the cost of saving and servicing a dormant account until thecustomer calls to close once again.

3. Trying to save every account. Businesses find it difficult to openly say thatthey do not want to keep every customer, however, just as it doesnt makeeconomic sense to approve every loan, it also doesnt make economic sense tosave every account. Customer lifetime value varies significantly, and often banks

are spending more to save an account than they can ever recoup. Banks needto consider the entire banking relationship, not just individual accounts. A BREeasily and no obtrusively integrates with numerous back-office systems to offer acomplete picture of customer lifetime value, so educated decisions can be madeabout salvaging accounts.

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4. Assuming every agent is good at retention. Often, we assume that justbecause an agent is good at service, he or she will be equally good at retention.Normally, this is simply not the case. Retaining a customers account requires aconsultative selling approach that even sales people find challenging. Having aspecially trained group handling these contacts will definitely yield better results.

Some banks try to minimize the load on their Retention Specialists, and allowfront-line agents to make part of the retention offer or do a reselling of theaccount benefits. This approach presents several real dangers: it becomeseven harder for the Retention Specialist to save the account, the customer canbecome frustrated by talking to two people, and the account will likely attriteagain if the customer never speaks with the Specialist to become reengaged.

5. Not using the customers channel preference. Some companies focusretention efforts heavily on one channel, such as the contact center. Creating aretention strategy that matches the customers channel preference candramatically improve results. For instance, if a customer typically banks online

and the predictive statistical model indicates that the customer is likely to attrite,the bank can proactively reach out and chat with the customer to makereengagement offerings. Developing the right preemptive retention strategy foreach channel can really pay off when customers feel that the bank haspersonalized communication for them.

As you evaluate your retention strategy, try to avoid these common, but costly,mistakes. Your reward will be improved customer retention in financialservices and significant cost savings.

( The following analysis is given byAngela Crawfords shehas spent overseventeen years in financial service contact centers and operations. She hasexperience in small, mid-sized and global financial services organization whereshe was recently a Senior Vice President responsible for contact center sales,retention and marketing. She has turned numerous contact centers into profitcenters, traveled throughout the country studying customer experience best

practices and redesigned numerous contact channels during her career.Currently she is a Director of Product Strategy focused on Financial Services forConverges. )

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Behavior of organization which leads customerretention or loose of customers

a) Making unsustainable promises:

New customers may receive incentives to convert a discount price or an extralevel of service. Sometimes this is made clear, but often it isnt. At work we wereinitially happy with a new supplier, but gradually the price rose and the quality ofservice deteriorated. It is understandable that quality of delivery varies byemployee, but companies should ensure the bare minimum is of acceptablequality.

b) Misleading sales services:

I find this issue more prevalent when the person/department for business

development is different to that for ongoing account management. The salespeoples bonuses are short-term and based on bringing customers; thisincentives them to oversell and make unsustainable promises. The project teamthen has an impossible task to live up to. And so it proved.

The above two examples highlight the problem of churn. There will always besome level of churn but a high level of departing (unsatisfied) customerscompletely counteracts the work that has gone into developing new business.Eventually the opportunities dry up, and the company retreats to its core.

c) Alienating the core audience:

Moving into new markets or new segments risks alienating the core audience, ifthe messages used to attract the potentials arent consistent with what attractsthe core audience.

d) Offering sub-standard products or services:

Reaching out to new audiences may divert resources away from maintaining thequality of a core product or its associated service. Not only are the core fansbeing deprived of their need to support their team, but the online customersupport has been completely independent.

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CUSTOMER RETENTION AND BUSINESCOMPETITIVENES

Today in global environment, there is need of use customer retention strategiesto compete cut throat competition in business. Strategy related with customers isthe most important technique to achieve the predetermined goals of the businessbecause customer retention directly linked with success of the business. Inmodern times of competition, business organizations do many efforts to attractcustomers more and more. Customer retention directly linked with more volumeof sale and more profits. After liberalization and globalization competition amongvarious kinds of businesses arises. Therefore, to survive in cut throatcompetition, a business organization should make various competitive strategiesregarding Customer satisfaction and retention of customers. In today's

challenging economy and competitive business world, retaining your customerbase is critical to International Journal of Research in Finance & Marketing yoursuccess. If the business organization doesnt give its customers some goodreasons to stay, the competitors will give them a reason to leave. Customerretention and satisfaction drive profits. It's far less expensive to cultivate theexisting customer base and sell more services to them than it is to seek new,single-transaction customers. Most surveys across industries show that keepingone existing customer is five to seven times more profitable than attracting oneBusiness development might make some short-term gains, but losing sight ofcustomer retention will only hurt in the long run. An organization needs to ensureit delivers on the factors that causes its core to be loyal advocates whether

uniqueness, timeliness, durability or aspiration. Its brand promise, essentially.

Customer lifetime value might be factored into business developmentstrategies. But without adequate support across the organization, it remainsunfulfilled as core customers depart and new customers reject the offer.Customer retention has direct impact on business development and businesscompetitiveness.

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Different method of customer retention inbanks.

Customer retention requires attention to customer details. Customer retention

strategies can be made by doing proper analysis of customers and behavior ofcustomers. For this purpose, customer retention plan is needed. Following arethe steps of customer retention strategy:

a) Organization should Contact top customers or clients regularly. A list of topcustomers should prepared and call them each at least quarterly. These numbersof customers should provided gifts, free coupons for shopping and other benefits.

b) Proper research programmer should be developed to satisfy the customer byproviding various services and products according to their taste and preferences.

c) Keep organizational name in front of all your customers. Advertise and createNetwork regularly. Send e-mail newsletters regularly. The key is doing thisregularly.

d) Top management should give current customers good deals. More effortsshould be made to attract new customers. Management must remember that, thecompetitors are targeting its customers with deals.

e) Management should Surprise them by doing something special andunexpected for some of the best customers. a small gift can be sent or addsomething extra to their order.

f) A good track should be kept for achieving more customers and retaining themby getting a database, contact manager; digital address book etc. a way shouldbe found to keep track of all the clients of past, present and future so that theycan be quickly cached.

g) Proper communication should be maintained with costumers.

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CUSTOMER SATISFACTION- THE EXCLUSIVE KEY FORCUSTOMER RETENTION

For customer satisfaction to be high, promises and expectations must be met.This involves the organization's ability to understand customer expectations.

According to Courtney Ramirez, The importance of customer satisfaction isapparent when you realize that, without customers, you don't have a business. Asingle unsatisfied customer can send more business away from your companythan 10 satisfied customers. The more you focus on customer retention andcustomer support, the more long-term business you'll get. It's worth it to focus oncustomer satisfaction strategies, no matter how large or small your company is.Understanding the needs of the customer is critical. Customer satisfaction doeshave a positive

Effect on an organizations profitability.

According to Hoyer and MacInnis (2001), satisfied customers form the foundationof any successful business as customer satisfaction leads to repeat purchase,brand loyalty, and positive word of mouth. Coldwell (2001): Growth StrategiesInternational (GSI) performed a statistical analysis of Customer Satisfaction dataencompassing the findings of over 20,000 customer surveys conducted in 40countries by Info Quest. The conclusion of the study was:

A Totally Satisfied Customer contributes 2.6 times as much revenue to acompany as a Somewhat Satisfied Customer.

A Totally Satisfied Customer contributes 17 times as much revenue as a

Somewhat Dissatisfied Customer.

A Totally Dissatisfied Customer decreases revenue at a rate equal to 1.8 timeswhat a Totally Satisfied Customer contributes to a business.

Satisfied customers are most likely to share their experiences with other peopleto the order of perhaps five or six people. Equally well, dissatisfied customersare more likely to tell another ten people of their unfortunate experience.

Furthermore, it is important to realize that many customers will not complainand this will differ from one industry sector to another.

Lastly, if people believe that dealing with customer satisfaction/complaint iscostly, they need to realize that it costs as much as 25 percent more to recruitnew customers.

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How can banks meet customers changing needs and preferences?

Amid sweeping regulatory change, slow economic growth and tightened margins,banks today are increasingly focused on their most important stakeholders their customers. Yet, despite their best efforts to attract and retain customers,

customer confidence levels in banks remain low. In response, customers arechanging their behavior and demanding lower fees for higher levels of service orother improvements. If these demands are not met, they are increasingly likely toshop around at other banks for competitive rates for services and products. Tobuild on our previous global consumer banking survey in 2011, and to help banksbetter understand what they must do to build and maintain customerrelationships, we surveyed 28,560 banking customers across 35 countries tolearn more about their needs and preferences. Our banking teams around theworld analyzed the responses. We hope the data and survey findings are usefulto you when planning strategies and adapting your business models to attaingreater customer loyalty and satisfaction

Our survey suggests that for banks to remain competitive, they must:

Give customers the opportunity to choose by making promises and serviceoffers more transparent.

Rebalance fee structures to achieve the clarity and sustainability requiredby regulators and investors.

Help customers shape their own banking experiences by improving howthey provide information and advice, recruiting online affinity groups and

by developing flexible loyalty programs. Develop models around customer needs by reprioritizing spending,

including increasing the use of low-cost digital models and using moreinnovative technology.

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MAINTAINING THE CUSTOMER STABLE

Banking industry statistics state clearly that recruiting new banking customers isa greater cost to the bank than retaining existing ones. Banks on average lose 20percent of their customer base every year, and yet by increasing retention by as

little as 5 percent, it is suggested these banks could increase profitability by up to100 percent! This statistic alone speaks volumes as to the importance of bankcustomer retention.

What gives this perspective even more weight is the fact that banks spend agreat deal of their marketing finances on what is called an acquisition cost percustomer. This cost to bring a single customer into their business stable ismarkedly greater in comparison to the cost a non-financial services businesswould incur to bring in a customer. Industry experts say banks have difficulty inrecovering acquisition costs as it is, and a high rate of customer defection makesthat recovery nearly impossible.

Again, the current economic climate makes this situation even more severe.Insiders agree prospects for organic growth in banking are starting to slim, andover 10 million financial customers are switching institutions eachyear. For allthese reasons, it is of the utmost importance that banks adopt strategies foreffective bank customer retention.

The growing value of customer retention

Any bank should know the extent to which customers see them to be a serviceprovider who is of the utmost importance. Wealth, however big or small, is hard

earned and people will be especially critical when either choosing a bank orchoosing to remain with one. As a result, bank customer retention is morechallenging than it is in other industries. In addition, the current economic climateis heightening concerns and further threatening customer loyalty.

Customers want to put their money in an institution they believe is looking out forthem, and the nature of money itself means these customers are looking for evenmore reassurance that their best interests are being catered to. A part of thissatisfaction is feeling that their business is valued, as many consumers see bankproducts and services as commodities. An offer to improve the dollars-and-centsbottom line is only but a part of what a bank must offer in their efforts towards

bank customer retention.

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Collection for customer care and retention

Collection agents can not only help banks salvage bad debt but also preservecustomer relationships that will demonstrate value once the economy recovers

As banks struggle with the current environment of weak revenue growth, effectivecost-control returns to the fore. This provides the Collections function with anopportunity to demonstrate its value to the organization not only by recoveringdefaulted debt but also by salvaging customer relationships that are worthpreserving in these difficult times. Long perceived as simply persistent callerssingle-mindedly intent on salvaging loans gone bad, Collections in many bankshas now become an essential, strategic part of the whole customer careapparatus.

This reinvention was born of necessity as the credit crisis and recession shiftedmany once-good customers into the Collections cycle, making Collections the

only conversation those customers were having with the bank.

Today, there remains, and will for some time, a sizeable percentage of customersstill a payment or two in arrears but also positioned to become profitablecustomers again. And given that its always more cost-effective to retain currentcustomers than to try to attract new ones, banks have a vested interest in thissalvage effort. It is through Collections that banks can successfully re-form theirrelationships with these customers and make them profitable again. Such arebuilding effort should be guided by these four principles:

Recognize the Good, the Bad, and the Good Again. It was natural, during two

decades of solid economic growth, for Collections to get used to dealing mainlywith bad customers customers with little prospect of being converted intoattractive customers for the bank. Back then, collectors rarely talked to high-potential customers.

But that changed in the last few years when job losses spiked, home valuesplummeted, and otherwise good customers fell into default. It is these customersthat collectors have dealt with over the past three years. When these customersrecover and restore their credit, some will represent future revenue potential revenue for their current lender if they have a positive collections experience butrevenue for a competitor if they do not. And banks will have a lot of competition

from all kinds of providers for these customers new-found cash.

In other words, banks are by default entrusting their future income streams totodays collectors, so it is critical to provide collectors with what they need tomanage those interactions to positive outcomes. Only sophisticated customeranalytics can help them distinguish between the good, the bad, and the goodagain. Collectors need to be able to base their customer retention efforts onsophisticated customer data analytics.

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Keep Having Customer Conversations. What is the holy grail for Marketing? Tohold that all-important conversation with the customer. What do collectors do?They talk to the customer. Every day, all day long, Collections is doing that mostvital function with three goals: have an authentic conversation with the customer,arrive at an agreeable outcome and make their bank the first choice when the

customer decides to make a payment or purchase an additional bank product.

The Collections model of people talking to people is a costly model. Despiteremarkable technology-driven advances in efficiency, Collections is still a labor-intensive function and the human capital cost of agents remains its greatestexpense. Making sure you get the most out of your most costly resource isnothing but good business.

Everybody knows it costs more to replace a customer than it does to retain one.If Collections can collect payments while keeping good customers happy, andkeep Marketing from having to replace that customer at greater expense, the

return on investment (ROI) on Collections becomes about as high as anyinvestment the bank might make. Everything you can do to make sure youragents are doing what they do best is money well spent. That means deployingtechnology and analytics to make sure they dont waste their time reaching wrongnumbers or talking to customers who cant pay or who will pay without a call.

Measure Value Not Just Volume. For Collections, the business metrics arereduced charge-offs, total dollars collected and customers retained. But forleading indicators, managers have traditionally focused on interim operationalmetrics such as accounts-per-collector; calls-per-account, penetration rate, agentidle time, and so on. If they performed well on those metrics, odds were good

they would also perform well on the business metrics. The correlation held wellenough to be part of most traditional Collections dashboards.

But today, volume-related metrics have less relevance. Sophisticated analyticscan tell collectors what channel is best for reaching debtors and the mostopportune time, which ones have money, which ones will pay, which ones wontand which ones dont even need a call. Collectors should be able to make fewercalls and still collect more money.

Therefore it is not unusual to see traditional operational metrics degrade evenwhen business metrics are improving. Managers need to be alert to that anomalyso that they are not tempted, for example, to staff based on historical patterns ifnew analytics have increased the odds that collectors will reach a higher numberof accounts and collect more dollars. For a 20% lift in payments, who really caresif agents had 5% more downtime?

Clearly, old volume-based metrics have their place. Somebody has to plan forresources by time of day and staffing capabilities. But it is critical not to lose sight

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of what makes Collections valuable: revenue collected, charge-offs reduced andgood customers retained.

Walk the Regulatory Tightrope. We got a frank answer when we asked a client ifhis view of Collections success has changed. He said, Yes, it has. Today, every

Collections phone call I dont make is one less chance for a lawsuit. Thats apowerful indication of the new risks Collections must manage. It is a shift from ageneral belief that more calls means more payments to its exact opposite: anaversion to making a single unnecessary call.

The motivation for his drastic change of heart is clear. Last year, consumers filedabout 14,000 lawsuits against collection agencies and creditors and theconsumer press has recently been highlighting the plight of the heavily indebted.Lenders and collectors are acutely sensitive to seeing their companys name inthe media in any way connected to harassment. The fallback position for many isextraordinary discretion.

Equally worrisome to creditors and Collections executives is the prospect ofregulatory action. Regulations can vary widely from state to state, changefrequently, and be interpreted differently in different jurisdictions. Rules thatrestrict collectors ability to call cell phones have already constrained their abilityto reach debtors for whom a cell phone may be the only reliable communicationsmechanism. The prospect of other restrictions holds collectors back from manytypes of outreach if they cannot be certain they are legal or if they fear theiractions may draw regulatory attention.

In this risk-averse climate, it is critical to have a technology platform that allows

for change on short notice, even during the calling day and without ITintervention. Technology and analytics that let collectors be proactive andtransparent serve to avert and mitigate reputation and regulatory risk.

During the crisis, Collections earned its place at the customer care table. It wouldbe a mistake to take a step backwards by denying Collections the tools it needsto perform in todays high-stakes, analytics-driven, customer care world. Giventhat advanced analytics and decision automation are still in early stages in theCollections functions at most banks, the opportunity exists for dramatic initialgains, followed by sustained high performance.

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The behaviors and preferences of banking customers worldwide arechanging

Although overall satisfaction remains high, trust levels remain low globally, andcustomers are demanding more customized attention, products and services

from their banks.

Select regional findings from the survey include:

Confidence levels fell in all European countries from last year, particularlythe countries heavily impacted by the financial crisis.

Trust levels improved in all Latin American countries, mainly due topersonalized and innovative service offerings.

Brazilians demonstrated only a slight increase in trust levels more thanhalf are unhappy with the quality of their offerings and advice.

Chinas confidence in banking has recovered over the last year, while the

level of confidence in Canada and Japan has remained neutral.

How can banks rebuild customer confidence ?

Encourage customer self service. Banks needs to improve the way they provideinformation and advice to interest and convince self-directed customers, includingfinancial planning tools, ranges of product and pricing bundles.

Personalized banking. Customers who report a more tailored experience areoften most willing to provide their banks with more frequent updates.

Better value and service. Customers are demanding more control of their

relationships and will look around for the most attractive fees and rates for thelevel of service provided.

Leverage customer advocacy. Banks should embrace the use of social media asa source of banking information, as views of online communities and affinitygroups become more influential.

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Banks are competing for the attention and loyalty of increasinglydemanding customers.

The proportion of customers planning to change banks has increased since2011, with 50% of customers globally citing high fees and charges as the primary

reason.

But customers appear to want more than a better deal they want the flexibilityto shape the relationship, contacting their bank whenever and however theychoose. They may prefer online channels for simple transactions, but demandhigh-quality, personalized services for more complex transactions.

Customers are also showing increased interest in loyalty programs, especially inemerging markets like India. Although these programs tend to be costly, theyoffer significant benefits in advocacy and loyalty.

How can banks offer more personalized services to customers?

Make pricing and service promises transparent. Pricing is critical tocustomer satisfaction, but most customers have no idea how much theypay each year. Transparency over pricing and service promises is vital if

banks are to deliver something customers value. Offer tiered levels of customer experience. Customers should have the

option to buy into certain products and services, and the ability to earnupgrades through loyalty, whether in terms of longevity or the share ofwallet handled by a particular bank.

Move from multi-channel to omni-channel distribution. Banks need to lookbeyond multi-channel distribution towards an omni-channel approach,which uses customer data gathered from branches, website visits, socialmedia and elsewhere.

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How can banks provide a better customer experience?

Make low-cost digital channels customers preferred choice. Banks shouldencourage customers to use digital channels whenever possible by usingprice incentives.

Prioritize investment on critical customer interactions. Banks should focusoperational improvements on customers most valued interactions,optimizing the resulting impact on attrition, dormancy and loyalty.

Use innovative technology to deliver the retail bank of the future. The useof technology is crucial to delivering a lower cost, more reliable, moreflexible but still personal customer experience.

Why do customers change banks

These are following reasons generally were customer changes banks

A specific service failing

High fees or charges

Lack of personalized contact

Poor branch experience

Poor brand image reputation Poor call centre experience

Poor financial advisory competent

Poor internet/mobile experience

Poor range of products and services

Poor rates on account Proximity of branches

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IMPORTANCE OF TRUST INCUSTOMER RETENTION IN BANKS

The simple definition of marketing, as defined by John Jantsch in his bookDuct Tape Marketing, is this, Marketing is getting people who have a specificneed or problem to know, like, trustand refer you to others.It represents allof your actions that make your customers love, hate or feel indifferent aboutyour service. Why is trust so important? Without it, we really dont have arelationship with our customers. If we dont have a relationship, we probablydont have loyalty. According to the financial and marketing experts, its fivetimes more costly to acquire a new customer than maintain an existingrelationship. In a time where dollars must stretch and customers are morethoughtfully spending, its imperative you make a remarkably pleasant andindelible impression with your customers.

Six questions to be asked for a good customer retention strategy.

1. What are the expectations of our customers and what it will take to exceedthem?

2. What differentiates our company in the eyes of our customers?

3. To what extent can we grow our business with our existing customers?

4. How do our interactions with our customers affect their satisfaction andbuying behavior?

5. Do we have any customer segments that require different treatment?

6. How loyal is our customer base and how can we improve it?

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MARKETING STRATEGIES BRIGHTEN THE FUTURE CUSTOMERFRIENDLY BANKING SERVICES

The author of Customer Relationship Management in Banking enumerates thebusiness imperatives for a successful CRM strategy. These include: Creating acustomer-focused organization and infrastructure; assessing the lifetime value ofthe customers profitability; maximizing the profitability of each individualcustomer relationship and understanding how to attract and retain the bestcustomers. While analyzing the implications of these imperatives the author alsoprovides an insight into the various modules which are used to analyze andpredict risk and profitability, maximize cross-sell and up-sell initiatives, amongothers.

Marketing Strategies Brighten the Future Customer Friendly Banking

Services emphasize that bankers need to embrace modern technologiesand adopt a modern strategic philosophy, besides maintaining the tempoof operational management of their services. Accordingly, banks need toadopt the right marketing strategies that are more relevant, qualitative andcustomer-specific to ensure a competitive edge over others in the serviceindustry

Marketing Strategies Brighten the Future Customer FriendlyBanking Services outlines how banks can gain competitive advantage

from CRM by becoming low cost players in the market, achievingoperational efficiency and maintaining customer loyalty. Ability to predictthe products that customers are likely to purchase over a period of time,increased productivity of managerial executives, sales and customerservice staff, streamlining of business processes are cited as some of thebenefits retail banks obtain by taking recourse to successful managementof customer relationship. The success of a CRM plan is dependent on thechoice of the software. Towards this end, the article identifies domainexpertise, credibility in the market, cost of implementation and therelationship with the vendor as factors on which the vendor selection isbased.

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Customer retention as a element in banking in todays

competitive world

Customer retention is an important element of banking strategy in todaysincreasingly competitive environment. Bank management must identify andimprove upon factors that can limit customer defection. These include employeeperformance and professionalism, willingness to solve problems, friendliness,level of knowledge, communication skills, and selling skills, among others.Furthermore, customer defection can also be reduced through adjustments in abanks rates, policies and branch locations. Clearly, there are compellingarguments for bank management to carefully consider the factors that mightincrease customer retention rates. Several studies have emphasized the

significance of customer retention in the banking industry. However, there hasbeen little effort to investigate factors that might lead to customer retention. Mostof the published research has focused on the impact of individual constructs,without attempting to link them in a model to further explore or explain retention.If retention criteria are not well managed, customers might still leave their banks,no matter how hard bankers try to retain them. These constructs were rated bycustomers as having strong effects on loyalty to their banks. Demographiccharacteristics (i.e. age, gender, educational level and income) were alsoassessed for their contribution to intentions of staying with or finding alternativebanks. Results suggest that the most important constructs were customersatisfaction, followed by corporate image and switching barriers. There was also

evidence that customers age groups and level of education contributed toexplaining respondents' propensity to stay with their current banks.

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CASE STUDY

Six secrets of outstanding customer retention(case study)

When I was Vice President of Sales for a New York based computer servicescompany, I walked by one of my salespersons desk when the phone began toring and picked up the phone to answer the call. It was one call that tested mycustomer service skills.

It was a call from a Senior Vice President for Chase Manhattan Bank, N.A. Shewas not happy with the service our representative was giving her and said shewas considering going to another vendor for her computer services. I let her talkas she vented her anger.

I reintroduced myself and let her know that I would personally appreciate hersharing her customer service concerns with me. I also let her know we valued heras a customer and wanted her business and that I would do whatever it took tomake her happy with our company.

She then let me know that someone better "make her happy" by the end of theday or we could forget about doing business again with Chase Manhattan Bank. Ilet her know I personally could see her in one hour, and she agreed to themeeting.

I put together the solution and took the #4 subway line to Wall Street to meet ather office. As I waited in the lobby of her building for an elevator, five womengathered around me to also wait for the elevator. The elevator arrived and we allwalked into the elevator.

I took the initiative and greeted the group of women and commented on theweather. This opened up the conversation between all of us and soon, withadditional exchanges, we were laughing about our day.

I left the elevator, and one of the women also got off on the same floor. I askedher where the Senior Vice President's office was located, and she said she would

be glad to take me to the office. We continued our engaging conversation alongthe way and, before I knew it, we were at the Senior Vice Presidents office door.

I was about to thank the woman for escorting me, when she walked around andbehind the Senior Vice President's desk and announced that she was SeniorVice President and how could she help me. Let's say I was surprised. Iintroduced myself, we both paused for a moment, and then we both laughed.

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To say the least, we had a very productive meeting, which led to a greatcustomer relation with Chase Manhattan Bank and her for many years and withthe bank even beyond her retirement.

She was so impressed with her positive experience that day that she became my

biggest advocate to other senior management within the bank, which led to newcustomers and millions in additional business.

What, then, are the secrets to customer retention and winning back an angrycustomer so that the situation becomes an outstanding customer serviceexperience?

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The following are six customer service secrets for winning back customers,increasing customer satisfaction, and increasing your bottom line:

1.Start with a Positive Attitude Look at any customer service situation as a

challenge and an opportunity to learn and grow, and take care of the customer'sneeds. Start with a positive attitude that says, "I want to help you and, together,we will find a solution." I always say, "You never know who is watching you, soalways give them your best face.

Because I had a positive attitude in the above situation, I put on my best facewhen interacting with the women in the elevator, and this led to a positiveimpression of me with the senior vice president."

2.Listen with Empathy Put yourself in the customer's shoes, experiencehis/her pain, and communicate to the customer you understand the pain. You can

communicate your understanding of their pain by saying, "Thank you for sharingyour concerns with me. If I were in your shoes, I would feel the same way."

3.Take Ownership Don't make excuses for what happened with the customer.Apologize and take ownership for what happened with the customer. The sooneryou take ownership of the customer service challenge, the sooner you can takeownership of the customer service solutions.

4.Communicate Your Plan of Action Let the customer know what you arewilling to do to take care of his/her concerns. The customer becomes frustratedwhen he/she feels uninvolved or uncertain as to what you are planning for thecustomer service solution.

Ask for the customer's commitment to the plan before proceeding with the action.My plan of action started when I told the customer that I was going to take thesubway immediately to meet with her, and the complete customer service planwas communicated during our first meeting.

5.Take Action The most important customer service secret is taking action.You can go through all the other customer service secrets and if you dont takeaction, all your actions and credibility are lost. You increase customer retentionwhen you make sure you deliver more than what is promised. Act quickly, actwith a quality solution, and act with integrity.

6.Ask for the Business During the customer service challenge, I expressedseveral times that I valued and wanted her business. This lets the customerknow that you dont take his/her business for granted. Its even more importantthat you express to the customer that you want his/her business after thecustomer service situation is resolved.

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You can also give an extra incentive to the customer for acting now to continuegiving you the business. It can be as simple as a discount coupon or some otherspecial offering.

Apply these customer service secrets with your customers and you will increase

customer satisfaction and customer retention and win back customers toincrease your bottom line.

STRATEGIES OF HDFC BANK

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HDFC banks using customer retention strategies

With bad economy, HDFC Bank has come out with well tailored customer

retention strategies. Though not known to be as aggressive as ICICI Bank, HDFCBank has now started to focus more on existing customers. This is done more inorder to prevent existing customers from switching accounts. Last morning I got acall from a lady who told me that she has been assigned to my account based onthe balance I maintain. So for my account1) All charges has been waived off2) Services like locker, de-mat etc would now be charged at 50%. Would let meknow in case it can be waived off completely3) The charges on my debit card have been taken off.4) Gave her number to contact regarding any serviceThis happened not only for my high balance account but all 4 accounts which my

wife, brother and father maintain. I was particularly moved by the way theywaived off all charges and converted my account to a classic account. While theyhave little relationship with HDFC but they were much ready to discuss the homeloan stuff and wanted to help on that front too.I see this more as a welcome move at the time when finance markets has to getdown to the basics i.e. look after their existing customers. I am sure others wouldnow follow suit and ultimate beneficiary would be the customer.Everyone must recall how last year people shifter tomes of money from privatebanks to public ones like SBI. Though too late, these banks have started toresponse.

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ANALYSIS AND INTERPRETATION OF THE STUDY :-

1. Facts of CRM Initiatives:

According to a research by Reichheld and Sasser in the Harvard Business

Review, 5% increase in customer retention can increase profitability by 35% inbanking business, 50% in insurance and brokerage, and 125% in the consumercredit card market. Therefore banks are now stressing on retaining customersand increasing market share.

2. Needs of a Bank

The banks now need to find out what to sell, whom to sell, when to sell, how tosell and how to be different to increase profitability. Banks need to differentiatethemselves by adding value-added service, offerings and building long-termrelationships with their customers through more customized products, enhanced

value offerings, personalized services and increased accessibility. Banks alsoneed to identify customers and products that would be most profitable and targetcustomers with products that are most appropriate to their needs and serve thecustomers with greater cost efficiency.

Banks also need to find out the avenues for increased customer satisfaction,which leads to increased customer loyalty. This may be explained better from twoinitiatives bank took in the past:

Earlier what drove many bankers to invest in ATMs was the promise of reducedbranch cost, since customers would use them instead of a branch to transact

business. But what was discovered is that the financial impact of ATMs is amarginal increase in fee income substantially offset by the cost of significantincreases in the number of customer transactions. The value proposition,however, was a significant increase in that intangible called customersatisfaction. The increase in customer satisfaction has translated to loyalty thatresulted in higher customer retention and growing franchise value.

Bankers invested in Internet banking, believing that the Internet was a lower-costdelivery channel and a way to increase sales. Studies have now shown,however, that the primary value of offering Internet banking services lies in theincreased retention of highly valued customer segments. Again customer

satisfaction drives the value proposition.

Thus, banks need to retain existing customers with enhanced personalizedservices and products, which best suits their needs and satisfies them the most.

3. Utility of CRM in Banks

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Customer Retention primarily caters to all interactions with the customers orpotential customers, across multiple touch points including the Internet, bankbranch, call center, field organization and other distribution channels.

The use of Customer Retention in banking has gained importance with the

aggressive strategies for customer acquisition and retention being employed bybanks in todays competitive milieu. This has resulted in the adoption of variousCRM initiatives by these banks to enable them achieve their objectives.

Customer Satisfaction and Customer Retention is not absolutely linear

That Customer Satisfaction leads to Customer retention is a conventional

wisdom. You may have situations where a customer is satisfied, but is still notretained. You may have situations where a customer will not be satisfied, but stillretained. Here are some examples of these paradoxical situations:

Satisfied Customer, but still attiring:

Your products are doing the right things, but they are not the rightproducts- Your products and services could be meeting customerexpectations, but customer could be attracted to more creative andfunctionally better products.

Customer wants to try something new- Customer may get bored of your

product, and they just want to try something new. Customer going for more competitive products- Competition is giving

better price vs. value equation.

Dissatisfied customer, but retained

Existing contract yet to expire.

Supplier market- More demand than supply.

Customer expectations are not well managed, but customer is staying dueto the value proposition of your product.

High Exit cost to the customer. example- Exit load for early termination of

your loan with a bank.

METHODOLOGY USED IN DATA COLLECTION:-

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Retail banking refers to mass-market banking where individual customerstypically use banks for services such as savings and current accounts,mortgages, loans (e.g. personal, housing, auto, and educational), debit cards,credit cards, depository services, fixed deposits, investment advisory services(for high net worth individuals) etc.

Before Internet era, consumers largely selected their banks based on howconvenient the location of banks branches was to their homes or offices. Withthe advent of new technologies in the business of bank, such as Internet bankingand ATMs, now customers can freely chose any bank for their transactions. Thusthe customer base of banks has increased, and so has the choices of customersfor selecting the banks.

This is just the beginning of the story. Due to globalization new generations ofprivate sector banks and many foreign banks have also entered the market andthey have brought with them several useful and innovative products. Due to

forced competition, public sector banks are also becoming more technologysavvy and customer oriented.

Thus, Non-traditional competition, market consolidation, new technology, and theproliferation of the Internet are changing the competitive landscape of the retailbanking industry. Today retail banking sector is characterized by following:

Multiple products (deposits, credit cards, insurance, investments and securities)

Multiple channels of distribution (call center, branch, Internet and kiosk)

Multiple customer groups (consumer, small business, and corporate)

Today, the customers have many expectations from bank such as

(i) Service at reduced cost

(ii) Service Anytime Anywhere

(iii) Personalized Service

With increased number of banks, products and services and practically nil

switching costs, customers are easily switching banks whenever they find betterservices and products. Banks are finding it tough to get new customers and moreimportantly retain existing customers.

Step 1

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Data sources and databases for retention: An important aspect for anorganization is to think what should be the reasons that enhance repeatpurchase. On paper it is not possible to make definite strategies to increase

customer retention. Hence, retention databases are created to have a widerrange of data and information which helps in measuring and analyzing theoreticalstrategies for modeling customer retention behavior. Database could help intracking and moderating all the interactions that a customer is indulged in withthe supplier. However, the interaction with customers or prospect customers donot generate any revenue for the organization but it important to monitor it as itmay return a potential profit in the coming future. This database is normally linkedwith a CRM system which helps the supplier to identify the reasons for customerdefect and also to analyze the possible strategies to overcome it. Take anexample of a loyal customer who spends $10,000 per annum with an airline totravel for business reasons. Now this customer is having a bad experience with

the airlines due to many delayed or cancelled flights or bad service provided byflight attendants. This customer could be on an urge to defect due to the overallnegative experience

Step 2

Decile analysis: Decile analysis method helps in determining profitabilityand product sales aspects of segmented customers. This type of analysisidentifies the most prominent percentage of customers who are

responsible for incurring the actual profit. Deciles are nothing but the topgrouping of customers which are ranked high according to the purchasesthey have made in a given period of time. The deciles percentage isnormally 10% or 5% or even 1%, sometimes depending upon theorganizational strategies. These deciles alone are responsible for 60 % to80% of sales and profit. Hence, after determining this range of customersit becomes easy for the organization to determine which customers areprofitable and which are not. After this, retaining strategies could beimplemented to retain valuable customer.

Step 3

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RFM analysis: RFM technique is the one of the best tool to predict futurevaluable customers. RFM stands for Recency Frequency Monetary value.Recency means customer purchase in recent time, Frequency meanswhat is the frequency of purchase and Monetary value means how muchthe customer is ready to spend. These three aspects are determined by

creating an RFM matrix and putting all analyzed data and informationinside this matrix. This technique is very important to characterizecustomers according to their buying habits so that according strategiescould be implemented to retain them.

Step 4

Targeting defectors: It is painful for supplier to loose loyal customers asthese are the ones who are responsible for the real profit to theorganization. If the organizations identify potential defectors before theydefect, then retaining becomes feasible. For this, recency sales (RS)matrix is created which is a simple but powerful method to targetdefectors. This process includes all the customers who have at leastbought products for three times. For each of these customers the followingthree statistics are computed:

Total time taken by the customer since last purchase. This is calledrecency.

Sales per period which the time taken by the customer since first purchase

divided by the total number of times he did purchase. Total number of periods gone until the customer is supposed to purchaseagain.

According to the above strong statistics, if the customer recency is morethan the first statistic, then the customer is more likely to divert. Henceafter identifying this possibility of defection it becomes easy to retain thecustomers.

Retaining and acquiring customers in changed banking landscape

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The current credit crisis is putting extraordinary pressure on most financialinstitutions to reduce costs and boost capital now. But a customer-focusedstrategy that attracts and retains clients is the only way to become a high-performance bank of the future. A winning strategy includes: the right balance oftime, money and talent to understand the customer; innovation across the right

channel mix; and the right set of key performance indicators to measure return.Listen to John McHugh, Customer Relationship Management lead for theAccentor Financial Services operating group, talk about what banks and theircustomers need to know and understand in this new landscape.

An Accentor survey of US banking customers estimates that up to 30 percent ofa banks customer base today is vulnerable. Elsewhere in the world, customerbehaviors, attitudes and preferences have also been forcibly altered by the globaleconomic downturn.

As banking customers everywhere reconsider their financial accounts and

banking options, high-performing banks not only need to retain their currentcustomers but also have an opportunity to acquire new ones.

Banks today must take a strategic approach to customer acquisition andretention that makes the best use of available time, talent and money. A strategicapproach can help a bank to:

Create actionable customer segmentation.

Develop flexible solutions and sophisticated pricing protocols.

Execute the right channel mix the right way.

Implement metrics that enable ongoing improvements.

Many banks today are in a fight for their lives, but some will differentiatethemselves by moving to a banking model that is demand-driven and customer-based. Such a move can also improve overall efficiencies and inspire a broaderoperating model transformation that will be the key to achieving sustainable,long-term profitability.

This pod cast was produced by consultants at Accentor as general guidance. It isnot intended to provide specific advice on your circumstances. If you requireadvice or further details on any matters referred to, please contact your Accentorrepresentative.

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BUILD AN ORGANIZATIONAL CULTURE THAT IS CENTERED ONRETENTION

To complement the process and technology highlighted, it is critical toensure your organization actively supports retention efforts. Success will

be limited unless the culture actively embodies retention ethics. Key areasto consider include

Use an enterprise approach to targeting To get the most out of theanalytical models, approach targeting from an enterprise view, usingcommon segmentation schemas. If your overall goal is to own a largepiece of the customers wallets, then the LOBs need to be aligned by howtheir products can appeal to the targeted customer. If individual LOBsapproach reaching out to customers and prospects with unique strategies,the results may include finding customers in need of or interested in asingle product.

Revise manager incentives to support collaboration Most product

manager and LOB manager incentives today reward based on theperformance of the single product profit and loss. So why would amanager work to price their product based on the customer relationship?What is the benefit to the home equity product manger to offer adiscounted loan rate to a high deposit customer when all she gets is asmaller incentive? To reward collaboration, compensation programs needto be redesigned in a manner that pays for overall division success e.g.,for product bundles, division profitability, or customer share of walletmeasures.

Incorporate advocacy into the culture. The four elements of customeradvocacy benevolence, trustworthiness, transparency, and simplicity

can become operating values for the organization, supporting bothcustomer and employee advocacy. By empowering staffmembers to dowhats right for the customer, not just for the companys bottom line, theyfeel good about their jobs and the organization for which they work.Employee engagement leads to customer engagement, and a good placeto start is to do right by the employees. Empower the teams to be able tofix problems rapidly for customers, and in turn, ensure your humanresources division employs the same goals.

Train and compensate staffmembers to recognize at-risk customers.Using analytic tools to develop alerts is one step in identifying customersat risk of attiring, but unless staffmembers follow-up on the leads,

ultimately there is no point. So, sales and service representatives needappropriate training and coaching to learn to recognize and act on thesealerts as opportunities. And if the sales force across the organization isntcompensated for saving customers at risk, youll lose momentum in theprogram. As a result, incentives should be modified to reward saves aswell as team efforts to save a customer when appropriate.

Challenges in customer retention

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IDENTIFYING YOUR CHALLENGES

Where should you start on your path to improving customer retention? Use this

diagnostic tool to assess your current capabilities and opportunities forimprovement and see how you stack up against your peers All scores areanonymous .Best Practices | Customer Retention Is A Process, Not An event .

Part 1 Targeting and acquiring the customer

Does the organization have a clear picture of what the key customersegments are and how it can help meet customer needs?

Does your organization bundle products and offers to meet the individualgoals of these segments?

Have you identified sub segments within the larger groups and defined

value propositions for them? Do you have formalized on-boarding programs for new customers that

include regular communication during the first year?

Are you able to price products based on individual customer relationships?

Do you have a simple, expedited process for opening a primary accountwith its commonly cross-sold products?

Are you working towards achieving the capability of universal enrollmentfor most products?

Part 2: Servicing and developing customer relationships

Does your organization develop common p

customer retention in banking sector

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