Academic journal article UTMS Journal of Economics

Customer Relationship Management: Concept and Importance for Banking Sector

Academic journal article UTMS Journal of Economics

Customer Relationship Management: Concept and Importance for Banking Sector

Article excerpt

INTRODUCTION

The development of Customer Relationship Management (hereinafter referred to as "CRM"), as a concept and a specific method of communication is result of trends that occurred during twentieth century. Transaction marketing (4Ps: product, price, place and promotion) is insufficient if organizations are competing in complex environment (Denison and McDonald 1995, 54). Today`s aim is to break down customers into different groups with different needs in order to better serve them (Day 2003, 77).

The concept of CRM originated in developed economies, primarily in organizations whose priority is to retain existing customer base as an important business segment especially in competitive environment. CRM is a philosophy, process, concept of development and management of customer relationships. With implemented CRM concept banks are able to identify and anticipate customer`s needs and desires.

Rapid changes in technology and changes in customer's everyday life have enabled successful implementation of CRM concepts and new forms of communication. CRM concept is based on a marketing strategy which integrates internal processes, functions and external networks in order to create value to customers, in order to achieve profit (Buttle 2009, 15). CRM concept helps banks to effectively coordinate efforts to present a unified message to individual customer. Therefore it is necessary to submit a unique proposal to customer by phone, mail, personal contact or by email; in accordance with method of communication that customer has chosen.

1. CRM: CONCEPT AND OBJECTIVES

Customer Relationship Management is a complex process which is based on a good knowledge of habits and needs of customers. It assumes constant collection of information of customer's behavior, as bank's goal is to give offer to customers based on his needs.

Establishing a CRM concept implies continuous changes on customers and bank side. There are four primary reasons why banks adjust their business processes to customers' needs:

· Retention of existing customers,

· Attracting new customers,

· Encourage customers to deepen cooperation with bank,

· Informing customers about portfolio of products, services and communication channels, with aim of increasing profits or prevent losses.

Group of authors (Peppers et al. 1999, 152) believe that well-implemented CRM concept allows:

· Identification of customers via channels of communication, interaction and transactions with aim to create value for each customer with slogan "the right product at the right time."

· Client segmentation. Each customer has specific needs for products and services; bank has to determine which group customer belongs (age, sex, income, transactions, channel utilization, etc.). Grouping customers, who have similar needs or similar behavior; require information about customers, as customer needs are very complex. Monitor changes in customer behavior is major challenge for bank. Therefore, a higher number of interactions and more frequent communication with each customer, increase likelihood that bank will collect better information about customer`s needs and behavior.

· Interaction with customers. One of the most important goals of CRM concept is to monitor behavior of customers and their needs over time. Interaction with customers is a communication process, initiated by bank to collect customer information, monitor their reactions and to determine value that customers have for the bank. On the other hand, customers receive necessary information about bank's activities which can satisfy their needs. Unlike traditional marketing, where goal is to generate messages for customers, goal of modern marketing is to generate feedback from customers.

· Personalization of relationships with customer. Personalization means that bank treats each customer separately, differently and uniquely, through adjustment of offer to customer, in order to achieve long-term loyalty. …

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