Dissertation Topic on Customer Relationship Management in Financial Services
Project Report on Customer Relationship Management in Financial Services
PhD Research Proposal on Customer Relationship Management in Financial Services
Eight major benefits of developing relationships
The four key benefits associated with the retention of existing customers and the development of long-term satisfying relationships are outlined below.
Many customers are unprofitable at the initial stages of the buyer seller relationship. Students, for example, are unprofitable while at university. After graduation they may enter careers, take out mortgages and start savings and their profitability to their financial institution increases, thereby increasing the need to attract and maintain their custom even while they are not ‘financially stable’.
There are often substantial start-up costs associated with attracting new customers. These include advertising, sales commissions and the operating costs of setting up an account. Sometimes these costs can outweigh the revenue expected from the new customer in the short term.
Repeat customers often cost less to service
Repeat customers are more likely to be familiar with the company and its products and may make fewer demands on the time of employees.
Opportunities for cross-selling
Over time, business customers often grow larger and may need to purchase in larger quantities. Individuals may purchase more products as their families grow or as they become more affluent. Both types of customer may decide to consolidate their purchases with a single supplier who provides high quality service. Another advantage of an increase in cross-sale is the corresponding effect on the organisation’s share of the customer’s total consumption in the particular market. This has been referred to as an increase in the share of wallet and is simply a measure of the consumer’s expenditure with the organisation as a percentage of his or her total expenditure in that market.
Example of opportunities for cross-selling
A customer saves £2,000 per year to spend on holidays, of which £500 is spent every year on a week’s vacation in Spain, booked with the same travel operator. Thus, the travel operator has 25% of the customer’s wallet. Suppose the travel operator decides to send a mail shot to all existing customers with details of a long weekend in New York, priced at £300. The customer in this example takes up the offer, foregoing a trip he intended to take with a competitor. By booking the New York trip, the traveller increases his total annual expenditure with the travel operator to £800. Thus it can be said that by cross-selling the trip to New York the organisation has increased its share of wallet from 25% to 40%.
Defection less likely
Satisfied customers will be less susceptible to the pull of competition. Moreover when customers trust a supplier, they may be more willing to pay higher prices in return for the assurance of quality service.
An indirect benefit of customer retention is employee retention. The stress associated with dealing with customers who are unhappy with products and services can lead to high employee turnover and poor quality. Conversely, customer satisfaction can improve employee morale and encourage them to remain with the firm.
One of the key factors influencing the choice of many purchases for young people is parental influence. Hence it is assumed that building a relationship with one family member will have an impact on other members of the same family.
Satisfied customers provide referrals and may be willing to pay a price premium
Satisfied customers may generate positive word-of mouth and provide free and credible advertising for the institution.
Referral markets have various names within different industry sectors including: intermediaries, connectors, multipliers, third-party markets, agencies, networks and referral sources. In the case of a bank for example, the key referral sources could be accountants, financial journalists, financial advisers and existing customers. The present and future importance of these sources of referrals should be identified and a specific plan developed to determine the appropriate levels of marketing resources that should be devoted to each of them. Additionally, a cost benefit analysis should be conducted to evaluate the results of the marketing activities. While a highly focused pilot scheme can sometimes suggest where the greatest benefit can be obtained, it should be emphasised that the development of these relationships takes time.
Source-Business Insights-CUSTOMER RELATIONSHIP MANAGEMENT STRATEGIES IN
FINANCIAL SERVICES - By Sarah Dougan
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