Customer Relationship Management in Banking Sector

Contents

1  General survey of the German banks  

2  Customer Relationship Management  

2.1  Definition  

2.2  Systematization of CRM  

2.2.1  Analytical CRM  

2.2.2  Operational CRM  

2.2.3  Collaborative CRM  

3  CRM in banking sector  

3.1  Expectations from companies in the banking sector  

3.2  Requirements of a successful  implementation

3.3  Analytical CRM: Determination of the target group  

3.4  Maesurement of the success of CRM in the banking sector  

3.5  Example of Dresdner Bank  

3.5.1  Departments where CRM was  implemented

3.5.2  Goals of the CRM  implementation

3.5.3  Realization of the CRM project  

3.5.4  Benefits gained  

3.5.5  What made this CRM project special  

3.6  Example of Deutsche Leasing  

3.6.1  What was  implemented?

3.6.2  Results of  implementation

4  Problem of  implementation

5  References  

  .Sources  

Abstract

According to the changing of the general conditions the German banks are forced to break new ground in order to assert their position: The market became much more lucent for customer because of new media.

The consequences are an increasing pressure of competition and demanding cus- tomer. Therefore a binding and long-term customer relationship seems to be neces- sary for many banks to react to the changed conditions and to guarantee the continu- ity. A majority of German credit institutions tried to implement concepts of Customer Relationship Management (CRM). In some cases the afford - to turn the customer re- lationship into the road to success - were unsatisfying and unsuccessful.

In this paper I want to show, how CRM works, how CRM can be implemented in banks and what problems can result from the implementation.

In the first chapter I describe the current situation of German banks. After a brief overview about CRM in general we analyze the previous attempts of CRM implemen- tation. Two examples – Dresdner Bank and Deutsche Leasing, a member of the “Sparkassen – Finanzgruppe” – follow. At the end I identify the problems of the im- plementation of CRM at the banks.

1 General survey of the German banks

In Germany the market of banks is fragmented compared to Europe. But in near fu- ture you can bargain for an initiation of consolidations according to the rising cost pressure. Moreover mergers would increase the competitiveness of German banks at the European and international stage. 1

In the long run the demand behaviour has changed: Since the fifties according to in- creased financial assets the demand for investment opportunities has increased. Through the movement of the demand the refinancing of credit transactions became more expensive.

Moreover the European Basel guidelines dictate the banks an aggravated minimum capital for covering the credits and better credit investigations. The consequences for banks were higher labour costs and more equity costs for covering the credits. Besides the price sensitivity and the interest sensitivity of the customers were obvi- ously increased and the customers´ willingness for changing the bank became higher.

As a result a trend towards a hard cutthroat competition is identifiable. This evolution is enforced by using of new and innovative concepts. The value chain of the classic banks, which so far includes product development, transaction banking, and retail banking, breaks increasingly open and so specialization is necessary. The majority of the banks will focus on the retail banking in the future.

At the field of corporate clients the traditional credit business has declined, because more and more quoted companies prefer obligations and foreign credits to the tradi- tional bank credit. As well the declining cyclical trend has a negative effect on the on the credit business. So far the commission surplus could not absorb this decline. 2 According to this evolution new distribution channels become more important. The key word is Multi-Channel-Distribution. For instance the internet allows the banks to reach a bigger customer group with lower deployment by using Multi-Channel- Distribution. This concept helps to offer custom-tailored products by the suitable dis- tribution channel. As the figure 1 shows the banks use multitude of different channels of customer contacts.

The traditional customer contact is still the counter (Point of Purchase), at which all businesses can be transacted. Such customer contacts could also take place by home visits (Direct Sales). The loosing of the direct contact was introduced by tele- phone banking, which gives the customers the possibility to transact the business via Call Centre or via Electronic Mail at home.

All these caused the structural changes at the bank market. Current information technologies like internet, multimedia, networking or digitalization afford new forms of corporation between vendor and customer. That creates new distribution outlets. On the other site the customer can use other und especially cheaper information chan- nels and distribution channels, for instance direct banking via World Wide Web. 1 see Bundesverband deutscher Banken (2004), p. 18 2 see Bundesverband deutscher Banken (2004), p. 10

Figure 1: Channels of Customer Contacts

Conventional and high-cost distribution structures force the banks to re-engineer their

marketing policy. 3

Not at least of this the banks are confronted with a considerably stress of competition.

Therefore many banks use systems and concepts to improve and to handle the cos-

tumer contacts. In the following of this paper the Customer Relationship Management

will be showed and analyzed.

3 see Bundesverband deutscher Banken (2002), p. 40

2 Customer Relationship Management

2.1 Definition

There are probably five different answerers, when five different companies were

asked about their views on Customer Relationship Management. CRM is not just a

single application that will solve all customer related problems in an organization.

Rather, CRM is almost a “state of mind” within an organization in which three key

functional areas of the organization are integrated. These areas are sales, marketing

and customer service.

Figure 2: Areas of CRM [Kalakota/Robinson: "e-Business 2.0", New York, p. 153.]

Therefore you can define CRM as follows: "CRM is a business strategy to select

and manage customers to optimise long-term value. CRM requires a customer-

centric business philosophy and culture to support effective marketing, sales

and service processes." 4

4 see www.crmguru.com