Magazine article Journal of Services Research

Creating Customer Life Time Value through Effective Crm in Financial Services Industry

Magazine article Journal of Services Research

Creating Customer Life Time Value through Effective Crm in Financial Services Industry

Article excerpt

Customer Relationship Management (CRM) is a term for methodologies, technologies and e-commerce capabilities used by companies to manage customer relationships. The traditional database marketing captures customer information including demographic and psychographic data that helps the marketer to develop suitable target marketing strategy, forecast demand, determine type and quality of service required by customers and to build strategy for market entry, diversification and expansion. This macro marketing view has resulted in use of database for building strategic links for the benefit of the organization and customer in the face of rising costs and competition. In 1960s, Theodre Levitt suggested that the purpose of every business was to create and keep customers. He suggested that corporations should view the entire business process as consisting of closely held integrated effort to discover, create, arouse and satisfy customer needs.

Customer Relationship Management is now actively considered by organizations across the globe as an integration of database marketing with technology. Recent survey by Forrester suggests that the CRM software market is likely to grow by 700% in the next four years and is estimated to generate revenue of $3 billion by the year 2004. The basic proposition of a CRM strategy is based on the age old idea that knowing, understanding, and serving the customer is the best method of developing a sustainable competitive advantage. But building a sustainable and successful relationship with a large customer base is not the easiest thing to do and carries a direct impact on many core operational processes from development of new products to faster debt recovery in financial services industry.

It is not a tactical decision of software implementation but interaction of the entire business with customers through an integrated interface. The modern information technology allows larger organizations to individualize their products and services as per the varying needs of the customers. This research focuses on the customer relationship management issues in financial services area.

Customer Relationship Management is the establishment, development, maintenance and optimization of long term mutually valuable relationships between consumers and the organizations. Successful customer relationship management focuses on understanding the needs and desires of the customers and is achieved by placing these needs at the heart of the business by integrating them with the organization's strategy, people, technology and business processes (Fox & Stead, 2001).

At the heart of a perfect CRM strategy is the creation of mutual value for all the parties involved in the business process. It is about creating a sustainable competitive advantage by being the best at understanding, communicating, and delivering and developing existing customer relationships in addition to creating and keeping new customers. So the concept of product life cycle is giving way to the concept of customer life cycle focusing on the development of products and services that anticipate the future need of the existing customers and creating additional services that extend existing customer relationships beyond transactions. The customer life cycle paradigm looks at lengthening the life span of the customer with the organization rather than the endurance of a particular product or brand. A good customer relationship management program addresses the changing need of the customers by developing products and services that continuously seek to satisfy the lifestyle and need patterns of individual customers. Organizations tend to acquire a structure around customer segments and not on the basis of product lines to deliver customer satisfaction.

LITERATURE SURVEY

Berry (1983) formally introduced the term customer relationship management to the literature but several ideas of relationship marketing had emerged much earlier. …

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