Bachelor Thesis, 2008
93 Pages, Grade: 2
I. Management Summary
II. Table of contents
III. Solemn declaration
1.1 Current Situation
1.2 Problem Formulation
1.4 Scope of the Thesis
1.4.1 Limitation Criteria 1 : Target market
1.4.2 Limitation Criteria 2: Specific Period
1.4.3 Limitation Criteria 3: Strategic Decision Management Level
1.5 Out of scope
1.6 Methodical Approach
2 Definition of Terminology and Conceptual Clarifications
2.1 Definition of retail banking business
2.1.1 Defining the business segment
2.2 The attributes of retail banking business
2.2.1 In terms of products and services offering
2.2.2 In terms of customer-bank relationship
2.3 What are the Retail Banking Business Drivers?
2.3.1 Management of customer revenue
2.3.2 Cost Management
2.3.3 Decreasing loyalty of the retail clients and higher expectations
2.3.4 Increased competition between traditional banks and new banks
2.3.5 Consolidation in Retail-banking
2.3.6 Introducing Internet as a new channel for e-banking services
2.3.7 Summary of Business Drivers of retail-banking segment
2.4 The analysis of the Retail Banking Market Trends
2.4.1 The EFMA Retail Banking Survey
2.4.2 Methodology and Assessment model
2.4.3 The five pillars of the assessment model
2.4.4 Findings of the report
184.108.40.206 Business Intelligence and controlling
220.127.116.11 Multichannel Customer Management
18.104.22.168 People and Organization
22.214.171.124 IT and application systems
2.4.5 Conclusion of the report
2.4.6 Mapping EFMA report findings with Retail Banking Business Drivers
2.5 Fundamentals of customer orientation in retail banking
2.5.1 Customer orientation as a originator for successful relationships
2.5.2 Differentiation between market-orientation and customer-orientation
2.5.3 Success chain as an instrument for customer dialog
2.5.4 Problems in implementation of customer orientation process
2.5.5 Designing successful relationships
126.96.36.199 The Content Dimension
188.8.131.52 The Time Dimension - Customer Relation Life Cycle
2.5.6 The CRM Framework as a fundamental for customer orientation
2.6 The analysis of CRM market trends
2.6.1 The CRM 2006 Barometer study
2.6.2 Findings of the study
2.6.3 Conclusion of the study
3 Analysis of Retail Banking in Greece
3.1 Structure of the Greek Retail Banking System
3.1.1 The over-regulation period
3.1.2 Deregulation and Reforms
3.2 Overview of the current Banking landscape
3.3 Indications of a slowly saturated market
3.4 Future Challenges
4 SWOT-Analysis related to customer orientation strategy
4.1 Basic Principle
4.2 Determination of SWOT-Analysis assessment criteria
4.3 SWOT-Analysis of National Bank of Greece
4.4 SWOT-Analysis of EFG Eurobank
4.5 SWOT-Analysis of Alpha Bank
4.6 Discussion of SWOT-Analysis results
5 Conclusion and final recommendation
5.1 Introducing the layer concept for customer orientation
5.1.1 Strategic Layer
5.1.2 Analytical Layer
5.1.3 Operational Layer
5.1.4 Communicative Layer
5.2 Mapping the layers the CRM Framework content
5.3 Final Recommendation and closing
6.1.4 Telephone Interviews
6.2.1 Index of Tables
6.2.2 Index of Figures
Every year millions of tourists from all over the world choose Greece and the Greek Islands for their summer destination and travel to Greece to enjoy the friendly climate, the blue and clear seas and the fantastic hospitality and natural environment. Beside of this known face of Greece the last year’s Greek economy is one of the boosting economies in the European community. Quite after the successful organization of the Olympic Games in 2004, the domestic economy improves and the demand from the private sector and households for banking products services expands dramatically. The Greek Retail Banks benefit from this macro economic development and generate extremely good revenues and market shares in the domestic market with the current customer base and new acquisitions. Nevertheless, slowly signs of a saturated market and competition within the traditional Greek banks forcing the banks to optimize their bankcustomer relationships with their current customer base and to look for new channels to growth and to attain a competitive advantage against new Bank entrepreneurs in the market.
This thesis describes on a scientific and methodical method the problem of the slowly market saturation in the retail banking sector and develops a problem solution based on the question of how new perspectives and chances will arise through implementation of customer-orientation to support long-term and profitable bank-customer relationships. In addition, the SWOT-Analysis of the three key players in the Greek retail banking market identifies their internal and external capabilities of their current customer oriented strategies. Finally, the thesis closes with a recommendation and conclusion on how the CRM framework gives new perspectives with concepts, methods and tools contributes for a successful implementation of customer-orientation.
I hereby confirm that
- this Bachelor thesis was independently completed by the author, without using any sources or aids other than those indicated,
- the sources used - either literally or in terms of their content - have been identified as such, and
- This Bachelor thesis has not been presented to any commission of examination in this or any similar form.
Zürich, 29. Februar 2008
The idea for the subject of this thesis is a result of a discussion with Prof. Dr. Oec. Publ. Xevelonakis in October 2007 at the UASZ. As to the joint discussion about the current developments of the Greek retail-banking market and the slow signs of saturation, we were asked what new opportunities respectively chances might arise in the implementation of customer orientation for the bank-customer relationship to support the business strategies customer acquisition and retention of the Greek retail banks. In addition, the driver for the realization of this thesis was also my personal interest because I am active in the role as Business Development Manager Banking at SAP for the region Southeast Europe. Moreover, I hope that dealing with this subject synergy effects will occur for my professional life. Finally, the idea of the thesis is also to give on a transparent and structured way valuable knowledge about the relation between customerorientation process and a CRM framework to interested CRM decision makers within retail banks.
Therefore, I thank Prof. Dr. Xevelonakis who gave me the required guidance and coaching to create this thesis. I want to thank my parents who supported me during my studies and my employer SAP, who accepted and gave me the possibility and free space to study and work in parallel in a very dynamic and challenging banking environment. Finally, I want to thank my partner Nuran Caliskan who supported me the last two and a half years during this challenging period with her calm and strong personality and for her “logistical support” during countless nights and weekends from December 2007 to February 2008.
Dedicated to my sons Matthias and Stefan
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The Greek retail-banking sector has generated over the last couple of years excellent revenues with their branches network and expansion strategy to the neighbouring Balkan markets1 2 3. After the liberalisation of the Greek banking system in the 90s, the private sector and households started on demanding credits and loans. Furthermore, the adoption of the Euro in 2001 as new currency causes the private sector and households to continue their demand on for credits and other banking products and services.
In 2004, the successful organization of the Olympic Games helped to reposition Greece in the world and to open foreign investor’s opportunities in the Greek market for the post-Olympics period since 20054
Since then the domestic macro economy is improving and boosts the credits and loans expansion within the retail-banking sector. The private sector and households mainly demanded banking products as deposits, consumer credits, mortgages- and building loans, credit cards and services as customer advisory, phone banking and Internet banking. The last years Greek banks generated their excellent revenues from lending activities mainly in their home country.
Especially a strong competition between the traditional Greek retail banks (e.g. National Bank of Greece, Alpha Bank, Piraeus Bank etc.) the new retail bank entrants (e.g. Proton Bank, Millennium, Marfin Popular Bank etc.) and the indications for a slowly saturated market will force the Greek retail banks to focus more and more on new perspectives through customer orientation.
Because they want to benefit of the market momentum and to assure their relation ship banking5 with high customer profitability, customer satisfaction and longterm relations.
illustration not visible in this excerpt
Figure 1 - Michael Hadjipavlou, CEO Deloitte Greece, Evolution of total Lending in Greece of loans from 2001 - 2005 (2006,p.19)
As mentioned above the current retail banking market indicators of competition between the traditional Greek retail banks and the new bank entrants as well as the continuous lending boom and their expansion strategies follows to the question: “What are the new perspectives for customer orientation which will have an effect on customer satisfaction and customer profitability?”
Because the problem formulation at the beginning was rather inexact and not described in detail, the Ishikawa-Diagram was used as an instrument for the more exact problem capture and formulation of the question.
illustration not visible in this excerpt
Figure 2 - Source: Possible Causes and Effects on slowly saturated market - Author’s own graph
The diagram describes the possible main causes for a slowly saturated retail banking market and their effect on customer orientation and their results on customer satisfaction and customer profitability. Every bank in the end is interested on economic success6 of the customer relation and what measures must be carried out to keep and to identify profitable customers.
To understand what the new perspectives are, the aim of the thesis is to develop a problem solution for giving the answer and recommendations about new chances and opportunities for customer orientatiol banking sector. Furthermore, the results of the thesis could be used for other CRM related problems.
Following criteria’s, limit the scope of the thesis:
The thesis reflects the current Greek retail-banking sector with his dynamics and challenges.
Greek Retail-banking market data and sources are valid from the so-called post-Olympic7 year 2005 until now. For the solution development also survey results of two studies from EFMA Association from 2007 and Cap Gemini Consulting from 2006 where considered. One study reflects the status of retail banking market in Europe and gives an outlook until 2010. The second study reflects the importance of CRM-topics in companies from Germany, Austria and Switzerland.
The reader receives information which strategies are required for decision making to increase customer profitability and shows the ways to achieve from customer orientation to profitability.
The thesis focuses only on the retail banking business not for private or corporate banking business. It’s not an IT user manual for CRM systems implementation and doesn't describe any CRM IT-architecture in detail8
The research methodology of this thesis is based on a combination of different analysis and research instruments to derive the problem solution from the problem formulation. As mentioned before as a first instrument, an Ishikawa-Diagram9 is used to explain the possible main causes of the slowly saturated market and the main effects and results on the customer orientation. The presentation helps to grasp better the problem and introduce the hypothesis.
In the scope of the definition of terms of retail banking business and customer orientation, theoretical literature reviews is a further instrument for the analysis of the business attributes, the business drivers and the market trends of retailbanking. The same procedure applies for the theoretical analysis of the definition of the term customer orientation within the scope of Customer Relationship Management (CRM) framework.
The findings of the retail banking business driver’s literature review determine the assessment criteria for the SWOT-Analysis in relation to bank’s customer orientation strategy. The SWOT-Analysis identifies the internal and external environment factors of the three key players10 in the Greek retail-banking sector classified by specific typical assessment criteria’s for retail banks.
The research method refers further on my current work experience as responsible for Business Development in Banking for Eastern Europe, South Eastern Europe, Turkey and Middle East.
Finally, I will introduce in the thesis the new perspectives respectively dimensions for the customer orientation process followed with a conclusion and recommendation how a CRM Framework can support. Below, the methodical approach shown graphically:
Before the problem solution development can be worked out, the focus in these chapters is to clarify the terms retail banking business and customer orientation because both terms are of crucial importance.
In the market presence of the banks, in the Medias and literature often you will find the term retail banking. However, in our every day speech, the term is very common but we do not know exactly the precise meaning.
Therefore following questions results:
1. According to which criteria’s the bank defines the retail banking business segment?
2. What are the characteristics of this business segment?
3. What are the Business Drivers for the business segment?
4. What is the trend of retail banking business - Where do we go from here?
The following chapters try to answer the above questions based on the described models below.
Later, the results and answers are taken into consideration in the overall development of problem solution for the new perspectives.
Question 1: According to which criteria’s the bank defines the retail banking business segment?
According to the retail banking definition of Investopedia the target of retail banks are to offer one-stop shop financial services to their retail clients11 12 13. It is a typical mass market where the bank offers products and services to their domestic customers through their branches network and Internet channel. They offer a different types of banking services that may require more consultation for the specific clients instead of standardized services as for example current account or payments. Therefore, the banks segment their customers.
Usually banks use the income and assets situation, which are socio-economic segmentation criteria’s to segment their customers between wealthy private customers and non-wealthy private customers .
Of course, each bank on his own sets the limits when a customer is wealthy or not based on internal regulations and calculations. Other non-controllable segmentation criteria’s are usually used like marital status, age, sex, residence country, and price sensitivity.
The graph shows an example of customer segmentation at EFG Eurobank14 by income situation as segmentation criteria:
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Figure 4 - Source: Customer segmentation criteria by income - Author’s own graph
After this first customer segmentation the banks distinguishes between Retail Banking and Individual Banking (including Private Banking). Individual customers like corporates, institutions and wealty persons have different demands on services, consultancy and banking products (e.g. systematic wealth management) as “normal” customers which have the demand on basic and low- cost banking services and standardized products as for example current accounts, payment cards, and consumer loans.
This means that services should be developed and offered depending on the target customer segment.
Considering these facts that socio-economic, demographic or geographic segmentation criteria’s are usually used by the banks and result to separate customers between individual business and mass business the following model describes the relation graphically:
illustration not visible in this excerpt
Figure 5 - Source: Customer segmentation categorized by individual or mass business - Author’s own graph
For the further consideration I will focus only on the retail banking segment.
After answering the question how banks distinguish between Individual Business and Mass Business I want to analyse in the following paragraph the characteristics of the retail banking business in detail.
Question 2: What are the characteristics of this business segment?
As shown in the example of EFG Eurobank, the bank retail clients are private customers, professionals and companies with up to 2,5 Mio. EUR revenues so called Small Medium Businesses. Typically the biggest customer segment (approx. >70%15 ) are retail clients. These are employees, workers, officials, pensioners, pupils and students, professionals and Small Medium Businesses. In the literature16, you will find also the terms “standard customers”, “basic customer base” or “service customers”.
Today, the retail banks offer for this segment standardized banking products, which are uniformed products with defined characteristics and linked to a specific banking services and price.
All retail banks worldwide have included standard banking products in their offering as for example current accounts, savings account, payment cards (debit and credit), consumer loans, mortgage loans and investment funds.
1 http://www.welt.de/print-welt/article176805/Griechenland profit (December 2007), Griechenland profitiert vom Balkan-Boom, in: Welt Online of 10 November 2005
2 http://www.bankofgreece.gr/en/euro/Changeover.asp (January 2008), Bank of Greece
3 Hellenic Republic - Ministry of Economic and Finance, Fact Sheet of the Greek Economy January 2007
4 Hellenic Republic - Ministry of Economic and Finance, Presentation of Greek Economy from March 2004 to December 2007
5 Cf Petersen/Rajan (1995, pp. 407-443)
6 Cf Bruhn Manfred (2003, p.9)
7 Definition of time period after the Olympic Summer Games in Greece 2004
8 Cf Xevelonakis, Prof.Dr.Evangelos, CRM-Praxis in: UASZ Script 8th semester (2007, p.9)
9 http://en.wikipedia.ore/wiki/Ishikawa diagram (January 2008), Wikipedia explanation
10 Hadjipavlou Michael, CEO Deloitte Greece, Balance Sheet Highlights of the traditional Greek Retail Banks and new Banks sorted by Assets criteria (2006, p.28) - ranked by amount of assets
11 http://www.investopedia.com/terms/r/retailbanking.asp (January 2008)
12 Cf Nkoa Clement Mengue 2006, p.23 (quoted from Jacob 1993; Swoboda 1998, p. 155)
13 Cf Xevelonakis Evangelos, Prof.Dr., UASZ Script CRM-Praxis, Zürich(2007, p.34)
14 http://www.eurobank.gr/online/home/index.aspx?lang=en, EFG Eurobank, Greece (January 2008)
15 Derived from Annual Report 2006, p. 38, of National Bank of Greece http://www.nbg.gr/en/investor.asp?P ID=547 (January 2008)
16 Cf Nkoa Clement Mengue (2006, p.23)
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