CUSTOMER RELATIONSHIP MANAGEMENT IN

BANKING SECTOR - A COMPARATIVE STUDY OF

PUBLIC SECTOR AND PRIVATE SECTOR BANKS IN
VIRUDHUNAGAR DISTRICT
J. Ashok kumar 1, Dr. S. Mathivannan 2, S. Prabhakar 3
1, 3
Ph.D. Research Scholar, 2 Associate Professor and Head
P.G. and Research Department of Commerce, Sri S.R.N.M.College,
Sattur, Tamilnadu (India)
ABSTRACT
Customers are the focal point in the development of successful marketing strategy. Marketing strategies both
influence and are influenced by consumers’ affect and cognition, behavior and environment. In the banking field
a unique ‘Relationship’ exists between the customers and the bank. But because of various reasons and
apprehensions like financial burdens, risk of failure, marketing inertia etc., many banks are still following the
traditional ways of marketing and only few banks are making attempts to adapt CRM. It is with this background,
the researcher has made a modest attempt towards the idea that CRM can be adapted uniformly in the banking
industry for betterment of Banking Services. The lack of understanding on Customer Relationship Management
(CRM) is always a concern among the service providers especially banks. Banks have their own way of
managing their relationships with the customers. However, the perception of customers on CRM practices
among banks should also be taken into consideration. Here in this paper, effort is given to study the
comparative perception of SBI customers and other nationalized banks customers’ in the issue of CRM
practices. It is observed that the approach of CRM by SBI and other nationalized are to some extent same and
one but the reach is quiet distinguishable. It is due to the profile, their capability and the strategy of CRM in
making it and reaching down to customers. On the contrary, it can also be asserted that the background of both
banks also found as a big cause for reaching the top CRM. Hence, CRM is an inevitable tool of marketing that
can be considered as Critical Responsibility of Market with regard to Banks in present context.

Keywords: Banking Industry, Customer Satisfaction, CRM practices, Desires of the customers, Marketing
Strategies.

I. INTRODUCTION
Customer Relationship Management is one of the strategies to manage customer as it focuses on understanding
customers as individuals instead of as part of a group (Lambert, 2010). Managing customer relationships is
important and valuable to the business. The effective relationship between customers and banks depends on the
understanding of the different needs of customers at different stages. The ability of banks to respond towards the
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customers‟ needs make the customers feel like a valuable individual rather than just part of a large number of
customers.
CRM manages the relationships between a firm and its customers. Managing customer relationships requires
managing customer knowledge. CRM and knowledge management are directed towards improving and
continuously delivering good services to customers. To understand more in customer relationship management,
we first need to understand three components which are customer, relationship and their management (Peppers
and Rogers, 2004). More often, managers always make mistakes by seeing customers‟ satisfaction from their
eye not from customers‟ eye (Peppers and Rogers, 2004). Banking sector is a customer-oriented service where
the customer is the KEY focus. Research is needed in such sector to understand customers‟ need and attitude so
as to build a long relationship with them. Customer Relationship Management includes all the marketing
activities, which are designed to establish, develop, maintain, and sustain a successful relationship with the
target customers. CRM identifies the present and future markets, selects the markets to serve and identifies the
progress of existing and new services.
Thus, CRM is a managerial philosophy that seeks to build long term relationships with customers. CRM can be
defined as the development and maintenance of mutually beneficial long-term relationships with strategically
significant customers (Buttle, 2002). It 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.

1.1 CRM in Banking Sector

In banking context, CRM is a system which deals with a large number of individual retail customers. It has the
analytical capability to manage the customer retention rates of the bank and to enable them to cross-sell their
product effectively (Buttle 2009).
The idea of CRM is that it helps businesses use technology and human resources gain insight into the behavior
of customers and the value of those customers. If it works as hoped, a business can: provide better customer
service, make call centers more efficient, cross sell products more effectively, help sales staff close deals faster,
simplify marketing and sales processes, discover new customers, and increase customer revenues. It doesn't
happen by simply buying software and installing it. For CRM to be truly effective an organization must first
decide what kind of customer information it is looking for and it must decide what it intends to do with that
information. For example, many financial institutions keep track of customers' life stages in order to market
appropriate banking products like mortgages or IRAs to them at the right time to fit their needs. Should be
collected to run process engine: 1) Responses to campaigns, 2) Shipping and fulfillment dates, 3)Sales and
purchase data, 4) Account information, 5) Web registration data, 6) Service and support records, 7)
Demographic data, 8) Web sales data.

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1.2 Benefits of Using CRM in Banking Industry
Certainly a benefit for each company is to achieve better economic results thanks to achieving higher value from
every interaction with a customer. Competition is very sharp in current market. Companies must take care of a
customer in every area of their specialization by using various communication channels. Customer expects
perfect services whether he calls a help line, asks a dealer, browses a web site or personally visits a store. It is
necessary to assure him in a feeling that he communicates with the same company whatever form of
communication, time or place he chooses.
According to Matusinska (2009, p. 191) the basic advantages and benefits of CRM are these:
• Satisfied customer does not consider leaving
• Product development can be defined according to current customer needs
• The ability to sell more products
• Optimization of communication costs
• Proper selection of marketing tools (communication)
• Trouble-free run of business processes
• Greater number of individual contacts with customers
• More time for customer
• Differentiation from competition
• Real time access to information
• Fast and reliable predictions
• Communication between marketing, sales and services
• Increase in effectiveness of teamwork
• Increase in staff motivation

1.3 Implementing CRM

To ensure the well-functioning of the concept of Customer Relationship Management for successfully
implementation in banking sector prospects, and devotes time and attention to expanding account relationship
with those customers through individualized marketing, reprising, discretionary decision making, and
customized service through the various sales channels that the bank uses. Any financial institution seeking to
adopt a customer relationship model should consider six key business requirements (Chary & Ramesh, 2012),
these are:
1. Create a customer-focused organization and infrastructure.
2. Gaining accurate picture of customer categories.
3. Assess the lifetime value of customers.
4. Maximize the profitability of each customer relationship.
5. Understand how to attract and keep the best customers.
6. Maximize rate of return on marketing campaigns

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1.4 Challenges Faced by Banks in Successful Implementation of CRM
• The difficulty of obtaining a complete view of customers.
• The need to move away from disjointed, standalone, and inconsistent channels to provide a cohesive,
multichannel offering.
• The burden of disconnected legacy systems and disparate databases that store client financial data.
• The cost and complexity of meeting stringent government regulatory and client security and privacy
requirements.
• The pressure on margins and growth prospects from increased competition.
Although CRM can help banking institutions efficiently manage their customers, many banks fail to meld the
concept into the prevailing work culture. But the high incidence of CRM failure has very little to do with the
CRM concept itself. Usually it's a case of the banks failing to pay attention to customer data they already have.
A lot of banks underestimate the magnitude of CRM. They tend to treat it just like any other application
technology, without realizing that CRM, if done properly, is a strategic initiative that touches all areas of an
organization.

II. STATEMENT OF THE PROBLEM

Modern Marketing philosophy advocates the concept of CRM that creates customer delight. This applies to all
sectors of Sales and Marketing includes the banking. In the banking field a unique „Relationship‟ exists between
the customers and the bank. But because of various reasons and apprehensions like financial burdens, risk of
failure, marketing inertia etc., many banks are still following the traditional ways of marketing and only few
banks are making attempts to adapt CRM. It is with this background, the researcher has made a modest attempt
towards the idea that CRM can be adapted uniformly in the banking industry for betterment of Banking
Services. The role of CRM is quite different and distinguishable to traditional type of Marketing, CRM
participate not only in Marketing but also in implementing the business as a strategy to acquire, grow and retain
profitable customers with a goal of creating a sustainable competitive advantage. Particularly in banking sector,
the role of CRM is very vital in leading the banks towards high level and volume of profits. So there is a need to
study the role of CRM in development and promotion of banking sector through the sidelines of the practices,
problems and impact of the CRM on banking sector all the time.

III. OBJECTIVES OF THE STUDY

The main objective of the study is to examine the importance of CRM in banking sector, and its impact on the
„Customer Satisfaction‟ with a special reference to Public Sector banks and Private Sector banks in
Virudhunagar district.
The other objectives of the study are:
1. To review the literature on the concept and use of CRM in banking sector.
2. To analyze the perception of customer on CRM as a tool of banking sector in retention of customers.
3. To offer pertinent suggestions based on the findings of the study.

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IV. METHODOLOGY
The present study is a comparative and analytical one through the perceptions of the customers of the selected
banks. Primary data were collected through a well-structured qualitative questionnaire from the selected banks.
A Questionnaire with 21 statements was adapted from different literature with modifications to suit the setting
in the banking sector. Perceptions on CRM practices are measured by using 3 point Likert scale as follows: 1=
Disagree; 2= Neutral; 3= Agree. A sample of 512 customers of the selected banks, Public sector banks (256
customers) and Private sector banks (256 customers) of Virudhunagar district of Tamilnadu were selected for
the purpose of the study. Data whatsoever collected were processed, tabulated and analyzed by using various
statistical tools, like, Arithmetic mean, Standard Deviation and „F‟ test.

V. HYPOTHESIS
Ho: There is no significant difference between the perceptions of customers of public sector and private sector
banks towards CRM.

VI. ANALYSIS & FINDINGS

CRM has emerged as a popular business strategy in today‟s competitive environment. It is a discipline that
enables the companies to identify and target their most profitable customers. It involves new and advance
marketing strategies that not only retain the existing customers but also acquire new customers. It has been
found as a unique technique which can bring remarkable changes in total output of companies. Through the
literature survey and data analysis it can be inferred that CRM tries to find out the relationship between
perception and satisfaction, commitment and loyalty that underlines the significance in Indian Banking Sector.
Customers largely select their banks based on how convenient the location of bank was to their homes or
offices. With the advent of new technologies in the business of banking, such as internet banking and ATM‟S,
now customers can freely chose any bank for their transactions. Private Banks have traditionally viewed
themselves as exceedingly “Customer Centric” offering what they believe to be highly personalized services to
the High Net Worth Customers. It is also found that the structured approach of CRM can provide various
benefits to a bank, namely a distinctive and consistent customer experience, clear identification of the
organization, technological and process-related capabilities. The banking industry is much further along than
other industries in recognizing the value of CRM and implementing decision support systems to support CRM.
Though most of the banks have already focused on tactical point solutions, they‟re ready for a transition toward
strategic, enterprise-wide CRM initiatives that cross major business lines. An effective decision support system
for CRM enables to collect data about customer from every touch consolidate this information into a single view
of the customer, and use this information for customer profiling, segmentation, cross-selling, up selling and
retention efforts. As banks continue to seek a unified understanding of customer relationships across diverse
channels, the importance and penetration of CRM is expected to grow like anything. With regard to various
aspects of CRM through the opinions of bank customers the following findings are drawn and shown in Table 1.

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 TABLE 1: CUSTOMERS PERCEPTION ON CRM CONSTRUCTS
Public Sector Bank Private Sector Bank
S. No. CRM Constructs
A.M. S.D. A.M. S.D.
1 Alternate marketing approach of bank 4.67 9.42 4.88 9.97
Big challenge for the bank is customer
2 4.55 8.43 5.13 12.18
retention
3 Ensure basic and key facilities and services 4.55 8.43 5.13 12.18
4 Prompt services in mean time 4.5 9.03 4.58 9.16
5 Retention of existing customer 4.71 9.28 4.58 12.18
6 Enhances customers loyalty 4.6 8.68 4.5 10.19
7 CRM is centered in Annual report only 4.8 2.6 20.2 9.4
Existence of CRM practices are prevalent
8 4.75 10.3 4.68 9.2
throughout all the levels
CRM creates customer awareness about
9 4.51 9.07 4.33 8.10
different services offered by bank
CRM is undertaken by employee approach to
10 4.83 9.5 4.51 10.60
customers
CRM objective is to increase bank-customer
11 4.91 10.77 4.61 8.85
relationship
12 CRM objective is to frame customer data base 4.5 8.6 4.8 9.6
13 Bank itself is interested in CRM activities 4.7 9.3 4.4 8.2
14 CRM benefits to retention of customers 4.33 8.8 4.28 7.6
15 CRM attract new customer 4.8 9.7 4.3 7.8
16 CRM helps to build customer loyalty 6.0 11.13 4.7 9.52
CRM benefits bank performance and
17 4.7 9.73 4.4 8.33
productivity
18 CRM promotes customer awareness 4.61 10.5 4.71 9.8
CRM is implemented at the quest of Customer
19 4.33 8.05 4.56 9.3
urge
20 CRM boosts customers confidence 4.68 9.70 4.51 8.76
21 CRM create all round friendly environment 4.35 8.6 4.66 8.89
F test
5.96
Value
D.o.F. 42
P Value 0.0143
Remarks Rejected
Source: Computed Primary Data

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1. From the analysis, it is found that only few customers recognize that there is a change in marketing approach
of Banks due to changing business environment. Majority of customers uncertain that the CRM is centered in a
particular department and very few customers have accepted that CRM is prevalent through all the levels in the
Banks. CRM undertaken by employee approach to customers is found very poor. It is further observed that the
CRM activities are initiated and implemented by the Banks in a serious manner, so that the customers in
particular and the society in general benefited a lot. Providing service to customers has been identified as the
prime responsibility of the Banks and therefore, Banks considered that CRM is the best tool to perform the job
of rendering good services.
2. It is found that Customer Retention is not a big challenge to Banks as per the opinion of customers of selected
Banks. It is found that though CRM activities have not helped to increase the confidence of the customers in
meeting the changing needs, it helped to increase the confidence of the customers while rendering services in
mean time efficiently. CRM activities of the selected Banks are not up to the mark in retaining the key
customers.
3. It is beyond doubt that when banks through CRM activity attend the needs of customers without delay in
time, the banks can create more awareness to customers and can create a customer data base very significantly.
According to the perception of customers enhancing customer loyalty through different activities is not an
absolute activity. According to the analysis, it is observed that CRM activities have not helped to increase
rapport with the customers of the selected banks as expected. Most the customers have not accepted that the
selected Banks are not showing interest in CRM activities with full attention but maintaining the same as a
compulsion. Most of the customers are uncertain about the CRM‟s benefit in building the customer loyalty. It is
further observed that CRM activity does not help the Banks to get immediate commercial returns and also to
have a favorable public image over the long run unless the CRM activities are taken up by all the departments in
the banks.
4. All the customers are uncertain about CRM of their Bank that contains creation of complete customer
database. Technological advancement adopted by Banks was not useful to get the update and latest information
over CRM.
5. Through the study, it is observed that the selected Banks customers are being exposed to the new techniques.
It is found that CRM is centered only to a mention in the Annual report, of the public sector Banks. It is also
observed that customers are strongly disagreeing and some of them are uncertain about CRM activity is
undertaken by e-Marketing by their banks. It is observed that the awareness level of all respondents is less as far
as the other modes like advertisement etc. by the Bank is concerned.
6. Most the customers have not accepted that the selected Banks are not showing interest in CRM activities with
full attention but maintaining the same as a compulsion. CRM activity has been felt as an additional workload
by the employees but they have feel CRM is useful to customers and also the Banks. The attention of
management on CRM activity is totally different between and among the Banks.
7. It is found that the technological necessities for the implementation of CRM do not require the environments
of advanced countries. The basic services providing infrastructure facilities and technological tools that are
available in India suit the implementation of CRM by banking industry in India.

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8. The reach of CRM of both public sector and private sector banks are compared and tested through „F‟ Ratio.
It is assumed that there is no significant difference between the perceptions of customers of public sector and
private sector banks towards CRM. As the calculated value (5.96) of „F‟ is higher than the P value (0.0143), the
hypothesis is rejected and inferred that there is significant difference between the perceptions of public sector
and private sector banks customers towards CRM.

VII. SUGGESTIONS
1. The Indian Banking Sector is flooded with different banks of the same molecule. In such a competitive
environment, the Banks should adopt suitable marketing skills rather than depending on the trading skills.
Hence, new services should be constantly introduced to ensure the growth of the Banks and to be competitive in
the market and to keep up the enthusiasm of the employees and customers etc.
2. Implement a Customer Centric Process in Banks.
3. Employee Relationship Management first before Customer Relationship Management.
4. Increase customer experience through the web site.
5. Develop channel integration for effective Customer Relationship Management.
6. Proper training should be given to the bank personnel regarding the behavioral patterns by the Banks before
they come and work in the field.
7. More importance should be given to handling online transaction and using m-commerce and mobile banking
services.

VIII. CONCLUSION
The general discussion can be said that the bank is yet to develop an integrative approach which focuses on the
customer needs and to deliver to it. As shown by the study, the bank is far from developing a customer centric
approach both for the customer as well as for the employees. Thus, for Customer Relationship Management to
deliver to its expectations, it should play an integrative role within the bank and ensure that all processes are
integrated in the bank global strategy, which is far from reality in the study above.

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[3]. Dr. M Kumaraswamy and Jayaprasad “Customer Relationship Management in Kaveri Grameena
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