Customer Relationship Management (CRM) Best Practices and Customer Loyalty A Study of Indian Retail Banking Sector
Kallol Das School of Management, International Institute of Information Technology, P-14 Rajiv Gandhi Infotech Park, Hinjawadi, Pune, Maharashtra, India E-mail: firstname.lastname@example.org Jitesh Parmar Shrimad Rajchandra Institute of Management & Computer Application Gopal Vidyanagar, Bardoli Mahuva Road, Dist. Surat, Gujarat, India E-mail: email@example.com Vijay Kumar Sadanand Bhoj Reddy Engineering College for Women Hyderabad Vinay Nagar Saidabad, Hyderabad - 500059 Andhra Pradesh, India E-mail: firstname.lastname@example.org Abstract The current study explores the association between deployment of customer relationship management (CRM) best practices and loyalty of profitable customers in Indian retail banking sector. The study comprises two parts. The first part called the CRM best practices survey involves the use of descriptive research design. The second part viz. case study research involves the use of embedded customer loyalty survey. The hypothesis testing based on literal and theoretical replication is done using the concept of pattern matching. The findings reveal that there is no perfect bank, as yet, across the three bank types, which has deployed all the 29 CRM best practices to the fullest extent. The results of literal and theoretical replication done by using pattern matching technique indicates no strong association between deployment of CRM best practices in scheduled commercial banks and loyalty levels of both high and medium relationship value retail customers. The study develops a list of 29 CRM best practices, which may be helpful to the organizations toward achieving comprehensive CRM deployment. The results also imply that going for CRM deployment may not be a profitable strategy for retail banks, particularly in the Indian context. Keywords: Customer relationship management (CRM), customer loyalty, best practices, retail banking, India
The current study explores the association between deployment of customer relationship management (CRM) best practices and loyalty of profitable customers in scheduled commercial banks of India with
3. In all. This is important because a strong positive association will act as a significant motivator to organizations for making larger investments towards deployment of CRM best European Journal of Social Sciences – Volume 11. Number 1 (2009) 62 practices. 1. In the category of private banks (PBs). the regional rural banks are not being covered. as of 1st May. a weak association will fail to provide necessary encouragement to the same organizations for CRM deployment.
. 1. 1. Similarly. Sood (2003) defines retail banking as “catering to the multiple banking requirements of individuals relating to deposits. 9). most of which are limited to the metropolitan cities (RBI. On the other hand. The new private banks (NPBs) were born after 1991-92 with the opening up of this sector to private players. However. is 8. 2006). The paper begins with an introduction to Indian banking industry and delineates the scope of the study. 2005b). Scope of Study The current study focuses exclusively on the retail banking segment of scheduled commercial banks.respect to retail banking segment. 2006). The methodology used is discussed in detail followed by the findings and implications. Retail Banking Retail banking refers to the dealing of commercial banks with individual customers. there are 29 foreign banks (FBs). The total number of NPBs.1. It is followed by a literature review on CRM best practices as well as customer loyalty. advances and associated services” (p. 2007. Indian Banking The structure of schedule banks in India in shown in figure 1. The total number of public sector banks (PSBs) stands at 28. These banks are expected to mobilize resources from rural areas and play a significant role in developing agriculture and rural economy (RBI. 2007 is 81. both on liabilities and assets sides of the balance sheet (Gopinath. within scheduled commercial banks. the total number of scheduled commercial banks as of 1st May. there are 16 banks classified as old private banks (OPBs) which were existing prior to the liberalization of the banking sector.2. Plus.
In the case of FBs. where the researcher was based. Ratnakar Bank. all others have a presence in this city. Number 1 (2009) 63
Figure 1: Structure of Scheduled Banks in India
Scheduled Banks in India Scheduled Commercial Banks Public Sector Banks Private Banks Foreign Banks Regional Rural Banks Scheduled Co-operative Banks Scheduled Urban Co-operative Banks Scheduled State Co-operative Banks Old Private Banks New Private
. the entire segment of PSBs is existing for many years. Nainital Bank is in the process of getting merged with Bank of Baroda (PR Domain. the study was restricted to Surat city. European Journal of Social Sciences – Volume 11. 2007). the practices of the banks are consistent across cities/ regions as confirmed by their respective managers and further corroborated by the researcher’s personal observations. For matters of convenience. It is very apparent that the regional rural banks are outside the ambit of retail banking. The merger of Lord Krishna Bank with Centurion Bank of Punjab is on the cards (RBI. These four banks are Lord Krishna Bank. Nainital Bank. only 4 players are active in the retail banking segment for more than one year (Chowdhury. 2006) and the future of the other two PBs is uncertain. 2005a). Geographic Scope Many of the 81 scheduled commercial banks in the country have a pan-India presence in terms of branch network.As it is understood today. out of the 29 players operating in the country. In the case of PBs. out of which 3 banks are present in Surat (only HSBC Bank is not present). 2007). 1.4. Further. and SBI Commercial and International Bank. Another reason for accepting Surat as the place of study is the fact that except for one bank (State Bank of Patiala). retail banking is largely an urban phenomenon with a clear objective of increasing the bank’s bottom line (see Gopinath. thus ensuring that external validity will not be affected. except for four banks.
The scheduled commercial banks are into both retail and wholesale (corporate) banking. particularly. Also. Retail banking is an area of interest for all the banks today and the study has been restricted only to this segment of the banks for the purpose of focus. State Bank of Patiala. Parvatiyar and Sheth.9 million (vom Hove.. there is still much debate over what exactly constitutes CRM (Nevin. it was felt that business organizations need to complete a significant period of operation (in this case.5. 2006). one year) after which the practices can be considered to be well established and suitable for comprehensive description. 2005). in the retail banking segment. With this definition of the population. 2001. some of the themes represent a narrow functional marketing perspective while others offer a perspective that is broad and paradigmatic in approach and orientation. a PSB. The city was ranked 131st amongst the wealthiest cities of the world for the year 2005 and is predicted to be the 4th fastest growing city of the world (second in the country) for the period 2006 to 2020 (vom Hove. According to Parvatiyar and Sheth (2001). 1995.
. All these facts make Surat a very lucrative market for the banks. This line of thought was endorsed by other researchers and marketing practitioners who have provided their support in the conduct of the study. Interestingly. Literature Review
CRM has been a part of marketing literature since more than a decade. 2006). Population for the Current Study The population for the study is defined as the retail banking segment of scheduled commercials banks based in Surat city with at least one year of commercial operation. The city is ranked 70th amongst the most populous cities of the world for the year 2006 with an estimated population of 3. one NPB. was not studied as it was non-existent in the city as of November 2006. Similarly.
2. Yes Bank. had to be excluded from the scope of the study as it had not completed one year of existence as of November 2006 when the data collection phase got over. 2006). 1. This also explains the high representation of scheduled commercial banks in the city. Sin et al.Banks
Surat is the ninth largest city of India in terms of population as per 2001 census (Population.
Sin et al. CRM may mean customer retention or partnering (Peppers and Rogers. (2005) have proposed that CRM comprises the following four constructs: Key customer focus.One example of a narrow perspective is to view CRM as database marketing (Peppers and Rogers. 2005). Each of these is discussed as follows. In this direction. CRM organization It implies organizing the whole organization around CRM. Knowledge management and Technology-based CRM. 2002). 2005). 2004) and continuously delivering superior value to selected key customers (Parvatiyar and Sheth. 1991) and aftermarketing (Vavra. 1992). Electronic marketing encompasses all marketing efforts supported by information technology while aftermarketing efforts focus on customer bonding after the sale is made. Technology-based CRM Technology plays the role of enabler in CRM deployment (Das. it is essential to identify the key constructs of CRM. Other examples of a narrow approach include electronic marketing (Blattberg and Deighton. In order to develop a comprehensive list of CRM practices. commitment of resources and human resources management (Sin et al.
. Knowledge management Key facets of this construct include learning about customer needs and wants. Number 1 (2009) 64 On a broader level. Vavra. Sheth et al. 2000. 2004) and allows firms to achieve greater customization and better service at lower cost (Sin et al. Key customer focus This is all about developing a strong customer focus (Das.. Please refer appendix I for the practices and their respective chief sources. 2001) through personalized/ customized offerings (Dyche´. European Journal of Social Sciences – Volume 11... 1993. 1995) emphasizing promotional aspects of marketing by leveraging customer databases.. A review of academic and practitioners’ literature was done to develop a comprehensive list of CRM practices. 2004. dissemination and sharing of this knowledge and action (Sin et al. Vandermerwe. CRM organization. which will lead to considerations like organizational structure. 2005). 1992).
2004. 2001. 2002. 2004. 1996). Reinartz and Kumar. 1994).. Payne.. etc while attitudinal loyalty will comprise examples like trust or emotional attachment (Baumann et al. CRM best practices survey b. Behavioural loyalty will include examples like repeat purchase. 2005). Oliver (1999) defined it as a deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situation influence and marketing efforts having the potential to cause switching behaviour. Further. Dick and Basu. loyalty has both an attitudinal and behavioural dimension (Day. 2002).
3. Lindgreen. behavioural loyalty does not necessarily reflect attitudinal loyalty. 2005. Parvatiyar and Sheth. Sin et al. because there might exist other factors that prevent customers from defecting (Aldlaigan and Buttle. word of mouth. Thus. 2005).Going over to customer loyalty. Study Outline
The current study has two parts as mentioned below: a. Liljander and Roos. 2002. Case study research Following are
. Besides. customer loyalty is one of the key objectives of CRM (Das. Customer loyalty has been additionally related to profit levels (Reichheld and Teal. 1969.