Customer Relationship Management-E-CRM-Critical Strategies for Financial Institutions-Dissertation Topic
Project Report on E-CRM-Electronic Customer Relationship Management
Dissertation on Customer Relationship Management in Financial Services
The two main drivers behind the growth of CRM are as follows:
- Customer acquisition and retention have become top management priorities. This additional dimension of business strategy has not come to the fore just because systems suppliers and management consulting firms have promoted the ideas. It is because senior managers realise that this is a dimension of competitive strategywhich, if managed well, can lead to much more profit. However, if it is managed badly, it can lead to the loss of best customers, missed opportunities in developing customers, and high costs of customer acquisition and management. These all affect company profitability.
- The shift towards eBusiness and the increasing importance of the Internet as a customer care and sales channel has brought a feeling of uncertainty to organisations. Poor identification of the value model has led to many organisations suffering very high customer acquisition costs. Adding a new channel has created problems for old channels. So organisations have been looking for approaches which help them integrate old and new ways of managing customers, in particular an increasing demand for an integrated view of the customer, and a switch in spending on information technology from increasing back-office efficiency to improving front office effectiveness.
This is an appropriate place to define another term essential to any discussion of state of- the-art implementations of CRM. A channel is a physical or virtual delivery infrastructure through which products and services are distributed to customers by users. For example, for a financial institution, a bricks-and-mortar branch is clearly a physical channel, whereas an Internet banking service is, with equal clarity, a virtual channel. Increasingly, all organisations, and particularly financial institutions, are coming to recognise the fact that they need to combine physical and virtual channels for maximum effectiveness in the CRM arena. Why? Because, very simply, customers want to have maximum choice when it comes to accessing channels. Hence the importance of the multi-channel concept. A popular expression of this is the overused but nonetheless reasonably apt term ‘bricks and clicks’, which indicates the combination of the traditional channel of the physical branch or other retail sales outlet, with the state-ofthe-art channel delivered via the Internet.
Another problem facing users is that despite concerns about customer privacy and security, these are actually poorly managed in most organisations. Throughout Europe, most large organisations are not compliant with data protection law because they have no process for being so, e.g. undertaking a proper data protection audit and having a process for repeating it. It is only through an audit that organisations discover the full extent of the customer data they hold and the quality of that data. When organisations conduct audits, they usually discover that they are holding far more data than they thought, at far lower quality. The data is rarely concentrated on a single database, except in relatively simple businesses (e.g. single product or single channel). If as a result of doing an audit a company becomes compliant (or nearly compliant) with the
data protection legislation, as soon as one year later it may well have become noncompliant. This is likely to be because someone has set up another customer database that is not properly tied to the first and has records that overlap with it. This makes it more or less certain that one or other customer record is incorrect! Hence the importance of regular audits. Many organisations do not record the declarations made to customers whenever they capture customer data. If a company does not know, it should refresh the declaration by sending the data to customers and asking them to sign a fresh declaration, or it should restart its data collection process with clear separation between old and new data. It is not sufficient under the law for the consumer to be referred to declarations – they must be visible at the point of data collection. For example, asking a customer to click on a data protection item on a website is not enough. At the very
least, a summary of the terms must appear, with the detail accessible by a click.
Finally, although most of the effort required to improve customer management is implementation effort, there is an acute shortage of the relevant skills – those involved in getting systems to work properly and those involved in using the systems to manage customers.
There is a largely unspoken assumption amongst senior managers that a focus on ‘customer relationship management’ is desirable as a concept, but actually may not be the panacea that it is often heralded to be. There is a commitment to it (at least verbally and with ‘mission statements’) in boardrooms all over the world, but when margin pressures increase, the focus from senior management often can become myopic –
leading to a focus on short term financial measures. This myopia is often illustrated by a loss of focus on key customer management measures in the areas of customer behaviour, attitude and long term value and less of a focus on good customer service and service standards, which begin to slip. This, together with the impact of (1) a squeeze on costs and (2) a shift in focus towards productivity (rather than a more balanced effectiveness and efficiency), often results in the demotivation of the people who deal with customers. For these reasons, the customer experience degenerates and a downward spiral of volumes, margins and motivation may be perpetuated. To win the hearts and minds of senior managers and convince them that good customer management is important, especially in tough market conditions, it is important to be able to answer the fundamental question:
Is business performance really related to how well a company manages its customers?
The contention of this report is that this is indeed so, and that it is likely to become even more so in the future. Side-by-side with this contention, it is necessary to concede that the vast majority of organisations – even those that have spent great sums on CRM implementations – is still very far from having fulfilled the potential in this area. Merlin Stone, a CRM commentator recognised as a world authority on the subject and
currently a consultant with IBM, has extensively researched the link between business performance and the effectiveness with which an organisation manages its customers.
For the purposes of this report, he offered the following conclusions regarding the way organisations handle their CRM requirements:
1. Organisations are not particularly smart in the way they manage customers.
2. There is a significant prize (worth many millions of pounds for the organisations assessed) to be gained by focusing on improving the way they manage customers.
3. The approach to improvement involves examining an holistic view of customer management by ensuring that a focus is maintained on all areas of the organisation where it interacts with customers and prioritising a series of actions designed to improve the whole CRM model. Ideally, the internal sponsor or advocate of this holistic review must be a reasonably senior manager who can encourage co-operation between departments.
4. To gain maximum impact on business performance, IBM believes that most organisations need to focus improvements in three critical areas (in this order) of their CRM activity:
- The leadership and the development, management and motivation of people andcore suppliers;
- development of clear customer management measurement criteria and acting on these criteria to implement solutions which provide the organisation withbenefits derived from them;
- carrying out some practical, sensible customer management activities.
drive it or over-complicate it.
6. IBM advises organisations not to focus unduly on process development and improvement. This can cause organisational focus to shift from an external, customer, viewpoint toward an inward focus that can often stifle good business practice and absorb ‘organisational energy’.
7. Most organisations could focus on simplifying what they do and the way they do it and consider the key principles of customer management summarised below.
8. Organisations should maintain focus on demonstrating and encouraging good customer management behaviour even when market conditions become tough.
IBM has also developed a high-level strategic checklist for organisations wishing to maximise their business performance by correspondingly maximising the calibre of the CRM infrastructure they put in place. The following items are on this checklist:
- Have you adopted an holistic model of customer management that makes sense to you and your organisation and used it to plan your customer management approach?
- Have you worked to understand customer value and behaviour, and determined which customers you actively want to manage, and which you don’t?
- Are you clear, as a whole organisation, about your core (profitable) customers’ core needs and how these needs can be delivered efficiently without error, in a way that allows the customer to enjoy the experience?
- Have you set up and do you measure the service standards defined in the proposition?
- Do senior managers reinforce basic customer management principles, show that they care about customer service and cascade clear people targets related to retention,penetration, acquisition and efficiency objectives?
- Are your people and supplier competencies and activities aligned with the achievement of the only four things that matter - retention (often through excellence in customer service), acquisition, penetration and efficiency? This is a leadership issue as well as a target and remuneration issue.
- Do you listen to and act on the feedback from your employees? On balance, are they happy at work?
- Have you influenced the key job roles in your or your suppliers’ organisations (not necessarily customer facing) that influence the customer experience? Have you ensured that they are competent to enhance the customer’s experience?
- Do you have a system plan to support the holistic customer management approach?
- Have you identified the every-day core processes and policies, especially those that impact on customer experience? Did you check that they are robust (nothing falls through the cracks), customer friendly (customer perception) and measured (internal compliance against set standards). Have you done this for your company and your customer facing suppliers?
- Does the technology actually support the business model, or does it hinder good customer management? Have you checked that the enabling systems are not overengineered?
- Is the customer experience of your overall proposition monitored and are any issues quickly identified and remedied?
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