Retain Banking

Acknowledgement

Entrance, hard work gradual progress and an exciting year that

is how I reached this level and now as I stand at the threshold of the aside

world. I take a look of the part year which I have spend in this college my

performance with the devotion of profession.

So, first of all I like to thank our college SHRI CHINAI COLLEGE OF

COMMERCE & ECONOMICS and principal of this college Mrs. MALINI

JOHRI for this continuous faith, and MUMBAI UNIVERSITY who gave

this opportunity to do this project in this curriculum. I would also like to

thank our co-coordinator and project guide Prof. NISHIKANT JHA for

being very supportive and helped me to complete this project. I would like to

thank Mr. ALOK KUMAR who is PROBATIONARY OFFICER of

ORITENTAL BANK OF COMMERCE instead of their busy schedule they

had answer to my questions and also I like to thank our Liberian for

providing with the book which I needed.

So, this goes to all those who have knowingly or unknowingly been a

great support for me to accomplish the price of work.

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Retain Banking

DECLARATION

I, Mr.Jamshed Readymoney student of T.Y.B.COM (Banking & Insurance)

Semester Vth Shri Chinai College Of Commerce & Economics. Hereby,

declare that I have completed this project on RETAIN BANKING in the

academic year 2007-08. The information submitted is true & original to the

best of my knowledge.

Signature of Student

(Jamshed Readymoney)

CERTIFICATE

I, Prof Nishikant Jha hereby certify that Mr.Jamshed Readymoneyof

T.Y.B.COM (Banking & Insurance) Semester Vth, Shri Chinai College of

Commerce & Economics, has completed project on RETAIN BANKING in

the Academic year of 2007-2008. The information submitted is true &

original to the best of my knowledge.

Signature (Project Guide)

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Retain Banking

SUMMARY

The most important aspect of retain banking is customer service without which the working of it would become very difficult. Every customer should achieve perfect service from the bank in order to build a good relation with the customer. To allow any kind of profit to the bank there should be a healthy atmosphere and a good relation with the customer as a result the bank would be able to retain the customer and also help in achieving different type of wealth management services which would help the bank to grow and fight competition.

Once the customer is pleased with good customer service it would help in creating a good rapport between the customer and the bank as a result it would retain the customer for life time.

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DATE: 10/09/07

TO,WHOM SO EVER IT MAY CONCERN

SUBJECT :SURVEY CONDUCTED RELATING TO THE PROJECT

RESPECTED SIR, This is to inform you that Mr Jamshed Readymoney of Shri Chinai College of Commerce and Economics (TYBBI) Roll no 37 has successfully completed his survey on RETAIN BANKING under our guidance and I have seen the sincere efforts put by him in making the project. I have even tried to solve all his queries and doubts that he asked me with regards to the project. I appreciate his efforts that he has put in for this project.

Thanking You, Yours Sincerely,

(ALOK KUMAR)

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INDEX

Introduction to banking 1-3

Services offered by banking 1-3

Retain banking 4-13

Introduction to retain banking

Advantages of retain banking

Objective of retain banking

Introduction to relationship banking

Types of relationships

Retention of credit card customers

Attraction for customers

13-15

Introduction

ATM management

Electronic bill payment

Competitions faced by the

banks 15-17

Besides increased

competition or lowering of cost

At low cost, customer

satisfaction

Tipping point

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Pressing issues

Customer

retention

18-27

Introduction

Measures to be taken, in order to retain the customer

Tools

Cost pressure

Cost reduction

Differentiation

Customer centric model

Online banking 28-30

Introduction

Web banking bonanza

Scenario of retain banking 30-33

Present

Future

CRM in next generation

Acknowledging the value of gold customers 33-36

Treatment for gold customers

Cost

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Retention practices

36-38

Integrated Marketing Communication (IMC)

Growth & retention through personal sales

o Conclusion 39

Introduction to banking

1. The business of a bank.

2. The occupation of a banker.

3. Primarily the business of dealing in money and instruments of credit.

Banks were traditionally differentiated from other financial

institutions by their principal functions of accepting deposits—subject

to withdrawal or transfer by check—and of making loans.

Services offered by banking

Demand deposit accounts (DDA) –

Most individuals and virtually all business maintain some form

of demand account,usually in the form of a checking account.The funds in

a demand accountcan be withdrawn by the customer upon “demand” in the

form of cash , a cheque or electronically.

Time Deposits (TDS) –

The funds of time accounts are placed on deposit with a bank

for a definite or indefinite period of time. In return, the bank pays the

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depositor interest on those funds. The most common types of TDs are

savings accounts and Certificates of Deposit (CDs).

Safe deposit boxes –

Banks rent these boxes inside their vaults for the storage of

their customers’ valuable documents and assets.

Insurance and investment services –

Many banks now offer a wide range of these products in an

effort to expose customers to their need for, as well as the ease and

convenience of purchasing, such services.

Credit –

The extension of credit is one of the most well-known services

provided by banks e.g vehicle loan , house loan.

Merchant credit services –

Every business that accepts Visa, MasterCard, American

Express, or Discover credit cards must have a merchant account through

which to process those charges. Banks provide these accounts as well as

account management tools and support.

When requesting a loan, you as a borrower should keep in

mind the bank’s desire for your use of these other offered services. If you

can demonstrate to the lender that their extension of credit to you will also

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provide to them a loyal and more deeply rooted customer, the lender might

be persuaded to is more compromising in some ways to approve your loan

request or grant more favorable terms. A combination of a few of these

accounts could mean thousands of dollars in fee income to the bank and

provide a new source of inexpensive deposits for them.

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Of course, new relationship accounts won’t make a bad loan

proposal good (whether personal or business), but in can enhance a

questionable or “borderline” application and provide the lender with

incentive to give you a chance. If you’re a very strong borrower and don’t

need any type of assistance, additional relationship accounts can help to

improve the interest rate or other loan terms that the bank may offer.

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Retain banking

Meaning Of Retain

1. To maintain possession of.

2. To keep or hold in a particular place, condition, or position.

3. To keep in mind; remember.

4. To hire (an attorney, for example) by the payment of a fee.

5. To keep in one's service or pay.

Introduction

Retain banking is also known as relationship banking. It is

building a strong relationship with your customer base so as to ensure their

continued support and business brought about by the customers. It involves

not only retaining and maintaining a strong relationship with the existing

customers but also ensuring the flow of new and potentially long lasting

customers.

Importance and advantage of retain banking

In today’s fast paced and cruel business world, businesses are

competing with each other to stay afloat. The only way to ensure the

continued succession of the business is to develop a good relationship with

the customer base so as to ensure their faithful and trustworthy business

ventures. Businesses are stepping on each other to get ahead and obtain

customers from any source available even if it means the complete

annihilation of another business organization

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This retain banking or relationship banking can be obtained by

implementing a good and renowned retain banking program which enables

the banking industry or the banking organization which implements it to

ensure succession through the customer base. A vast customer base projects

a positive outlook on the banking organization.

Objective of retain banking

The basic and most fundamental objective of retain banking is

to retain its customer base by whatever means may be possible. By

achieving a trustworthy and sure customer base the bank can ensure its

succession and even its survival in the banking industry. As we all know the

main and fundamental resource of a bank is the general public through

which it generates income through deposits and loans. If a bank does not

have this basic resource of deposits it is unlikely to succeed in the long run.

1. Find out who your profitable customers are

Many business customers are unprofitable. Why would you

want to spend money trying to retain them? Before you try to build loyalty,

determine the profitability of each customer, and divide them into five

groups, from the most profitable (Gold) to the least profitable (the losers).

To determine profitability you will have to get some software written that

includes sales, margins, recency and frequency. The software should

calculate every customer’s profitability on a monthly basis.

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2. Spend service Rupees on the gold customers.

Banks top 20% customers typically represent 80% of Banks

profits. Don’t deluge them with marketing. Instead, figure out ways to give

them super service things that banks could not afford to do for all other

customers. Airlines let their gold customers fly first class. Banks pick up

their phone calls on the first ring. Rupees should be spent on customers in

the second, third and fourth quintiles. Don’t waste marketing rupees on the

losers at the bottom.

3. Create advisory councils.

Suppose that most of your business customers consist of

environmental companies, transportation companies and construction

companies. Set up three advisory panels, one for each group. Find out who

the key influencers or decision makers are in each of the most profitable

companies in each group, and invite them to become members of your

advisory panel. Get their advice by email. Create stationery with their names

and companies listed prominently. You can use this for acquisition, and you

will have these advisory panel members as customers for life.

4. Get Caller ID for your customer service.

Whenever a regular business customer calls you up, your customer

service reps should be able to see their entire purchase history on the screen

before they answer the call. This can be done by storing your customer’s

phone numbers in the database, and tying the DB to your phone service

caller ID, so that the appropriate record is on the screen. Your reps will

know when they are talking to a Gold customer. They will know the

problems that occurred in the past, and how they were resolved. You will

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make each customer feel that they are really well known and appreciated by

your company – even though the customer service rep has never spoken to

them before. This one, inexpensive, innovation could do more for retention

than a thousand "we appreciate you" letters.

5. Have contests for the best use of your product.

IMarket Inc. of Waltham, MA has an annual Bull’s Eye contest for

customers who use their business name lists and SIC coding system. All

customers are encouraged to enter, and many of them do. The winners

receive free trips and recognition. IMarket uses the entries to advertise their

services. The results are announced at a major trade show. It is a win-win

situation for all.

6. Debrief your defecting customers.

Why do your business customers stop trading with you? In most

cases, marketers haven’t a clue. Frederick Reichheld in The Loyalty

Effect outlines the use of a customer defection study. Such a study needs to

be conducted by phone, and in depth to determine the root causes of the

departure, business practices that need fixing, and sometimes to win the

customer back. In one such study at MicroScan, they discovered that

customers were concerned about the reliability of MicroScan’s instruments.

MicroScan took corrective action. They shifted R&D priorities, redesigned

their customer service protocols, and developed a new low-end model for

small labs. The result: they began to retain more customers, and became

market leaders. There is real gold in such studies, providing that your

company is prepared to take the results seriously, and act to correct the

problems uncovered.

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7. Learn your repurchase rate.

What is the real test of customer loyalty? It is the repurchase rate.

How many of your existing customers will buy from you the next time that

they buy in your category? Customer satisfaction surveys are, in many cases,

worthless. American automobile manufacturers typically have satisfaction

survey results of close to 90%, but repurchase rates of 30% to 40%. Many

companies have not calculated their repurchase rates. If you are interested in

customer loyalty, find a way to determine your current repurchase rate, and

compare it with other rates in the industry. It may be a sobering experience.

Once you know what it is, find a way to improve it. This is the way to build

true, measurable, customer loyalty.

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Relationship Banking

Relationship banking means banks maintain constant

consultations with their clients through various seminars , customers meets

etc to evaluate, improve and widen the range of service to

customer .However all customers are requested to keep banks imformed of

their experiences about the various services renedered by banks and feel free

to comment. Relationship Banking is not about having a "buddy-buddy"

relationship with your customers.  Customers do not want that.  Relationship

Banking uses the event-driven tactics of customer retention banking, but

treats banking as a process over time rather than single unconnected

events.  By molding the banking message and tactics to the LifeCycle of

the customer, the Relationship Banking approach achieves very high

customer satisfaction and is highly profitable.

The relationship banking process is usually defined as a series

of stages, and there are many different names given to these stages,

depending on the marketing perspective and the type of business.  For

example, working from the relationship beginning to the end:

Customer loyalty describes the tendency of a customer to

choose one business or product over another for a particular need.  In the

packaged goods industry, customers may be described as being "brand

loyal" because they tend to choose a certain brand of soap more often than

others.  Note the use of the word "choose" though; customer loyalty

becomes evident when choices are made and actions taken by customers. 

Customers may express high satisfaction levels with a company in a survey,

but satisfaction does not equal loyalty.  Loyalty is demonstrated by the

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actions of the customer; customers can be very satisfied and still not be

loyal.

Customer Loyalty has become a catch-all term for the end

result of many marketing approaches where customer data is used.  You can

say Relationship Banking or Database Banking and what you are really

talking about is trying to increase customer loyalty - getting customers to

choose to buy or visit more.  Increased customer loyalty is the end result, the

desired benefit of these programs.  All of the above approaches have two

elements in common - they increase both customer retention and the

Lifetime value of customers.

Customer loyalty is the result of well-managed customer

retention programs; customers who are targeted by a retention program

demonstrate higher loyalty to a business.  All customer retention programs

rely on communicating with customers, giving them encouragement to

remain active and choosing to do business with a company.

Banks want customers to do something, take action..  And once

they do it for the first time, banks want them to continue doing business with

them, especially when the bank is probably paid big money to get them to do

business with them for the first time.  Banks don’t want to pay big money

the second time.  You want to create a "loyal" customer who engages in

profitable behavior.

Customer data and models based on this data can tell you which

customers are most likely to respond and become loyal, no matter what kind

of front-end marketing program you are running or how you "wrap it up"

and present it to the customer.  The data will tell you who to  promote to,

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and how to save precious marketing dollars in the process of creating

customers who are loyal to you longer.

Types of relationships

Profitable relationships

Relationship marketing has received a good deal of audiology

press in recent times. Readers are referred to those articles for tactical

information on implementing relationship marketing. Relationship

marketing is an important part of the IMC process for a number of reasons.

Lost customers typically voice their dissatisfaction to at least nine

other people, causing brand erosion and lost revenues.

Selling to repeat customer’s costs less than acquiring new customers.

Because of the Life Time Customer Value (LTCV), small increases in

customer retention produce large revenue increases.

Customers benefit from brand relationships by reducing their risk of

purchase, having to make fewer decisions, avoiding switching costs,

receiving more latitude and special treatment from the practice, and

gaining a personal association with the brand.

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Unprofitable relationships

The final step in identifying relationships in need of nurturing

and growth is to recognize that not all patients and customers are profitable

to your practice. Every audiology practice has patients who consume more

time and complain more than the rest of the practice’s patients. In fact, you

might say that 20% of your patients create 80% of your practice’s problems,

which certainly affects your bottom line. The Pareto Rule may work both

ways in this case. It is unnecessary, not to mention unethical, to rid your

practice of these people. At the same time, it is in your practice’s and other

patients’ best interest to devise messages that deter and deflect the constant

trouble makers. That, too, is part of the IMC approach

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Retention of credit card customers

Once you have a credit card customer, there is one sure way to

keep her. Sell her a second product. Sell her a checking account, a savings

account, a mutual fund, an auto or personal loan, or a home equity loan.

Banks who have built a customer database have discovered that loyalty is a

function of the number of products owned.

The problem is that banks are not organized to take advantage

of this situation. There is a VP for Credit Cards, a VP for Retail, a VP for

Home Mortgages, etc. The VP for Credit Cards does not get a bonus if his

customers sign up for a checking account. Often these VPs don’t even share

the names. But the fact is, the number one best way to keep a credit card

customer is to sign the customer up for a checking account. She will begin to

identify with the bank’s branch and its personnel. She will be embarrassed to

have them know that she has dropped the bank’s credit card. So she won’t.

Attraction for customers

The key encounter is when the customer opens an account. People still

tend to open their accounts in a branch, and that might be the only time they

are going into a branch, but if they have a positive experience they might go

back, like my mom does. For account opening you want to make sure you

have the appropriate person and appropriate systems to expedite it. There’s

nothing like sending people off with a bag of coffee beans like Umpqua

does. Then the customers are reminded of Umpqua every time they grind

coffee beans. That’s just smart.

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ATM Management

Banks can also help you with ATM Management, including

new advanced-function products that gain customer loyalty, drive foot

traffic, and boost your ATM profits. For example, let us introduce you to a

revolutionary banking solution for your customers who have not established

bank accounts and/or don’t use debit or credit cards. In essence, we create

"virtual" bank accounts so that customers can access financial products and

services via ATMs. For example, customers can wire funds domestically or

internationally, access payroll checks, or recharge prepaid phone plans – all

without accessing a traditional bank account.

Our ATM program includes:

Choice of ATM equipment

Complete signage

Real-time online ATM activity reports– simply go to a dedicated

web site to view up-to-the-minute reports for your machine – no

need to wait for monthly reports. This feature also helps you

better manage your ATM cash levels.

Shipping, installation, and training

Unparalleled customer and technical service support

Monthly residuals deposited directly to your bank account

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Machine maintenance program (optional)

Online monitoring – our customer support personnel contact

you uptime

Electronic Bill Payment

Another payment service that will provide an additional hook to

win and retain important business clients is in the rapidly growing field of

EBPP. Like consumer bill pay, EBPP solutions automate paper-based

Accounts Receivable and Payable processes for your business clients. EBPP

reduces costs, improves efficiency, and enables better cash flow

management.

Competitions faced by the banks

Besides increased

competition or lowering of cost

These issues have always been there and all banks have to cope

with these. In today's world of narrowing margins, a serious look at costs

definitely is an imperative. One obviously has to ensure product superiority

and operational excellence. However, to my mind, the biggest challenge

today is to establish a customer intimacy without which the other two are

meaningless. In the financial world, product superiority does not last for

long, as it is relatively easy to copy products. So, the real strength comes

from operational excellence and understanding the customer and developing

rapport with him.

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At low cost, customer satisfaction

Notwithstanding what banks may feel about their products, customers

utilize these products only for a few minutes. The key lies in making those

few minutes convenient, efficient and effective. There are multiple ways to

achieve these objectives. For instance, we introduced welcome kits wherein;

a customer who comes in to open an account with our bank walks out with a

fully enabled account, debit card, chequebook, Net Banking account, and

phone banking account—in a matter of minutes.

Another key area that I can immediately think of is integration

of services. Why should a customer receive multiple mailers from the bank

when he can instead receive integrated financial statements? Why should a

customer have multiple login IDs for different electronic channels?

These measures not only lead to customer convenience, they

also help the banks save on cost. Identifying customer needs and tailoring

products to match these needs is another area where a lot can be done. For

example, we recently launched a 110 percent Housing Loan to address other

needs of a customer when he goes for a housing loan.

Tipping point

The opening up of the Indian banking sector to private players

acted as 'the tipping point' for this transformation. The deregulatory efforts

prompted many financial institutions (like HDFC and ICICI) and non-

financial institutions enter the banking arena.

With the entry of private players into retail banking and with

multi-nationals focusing on the individual consumer in a big way, the

banking system underwent a phenomenal change. Multi-channel banking

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gained prominence. For the first time consumers got the choice of

conducting transactions either the traditional way (through the bank branch),

through ATMs, the telephone or through the Net. Technology played a key

role in providing this multi-service platform.

The entry of private players combined with new RBI

guidelines forced nationalized banks to redefine their core technology and

strategy was central to this change.

Pressing issues

Today banks have to look much beyond just providing a multi-

channel service platform for its customers. There are other pressing issues

that banks need to address in order to chalk-out a roadmap for the future.

Here are the top three concerns in the mind of every bank's CEO.

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Customer retention

"The aim for any business is to win customers.... 

And keep them."

Customer retention is one of the main priorities for banks today. With

the entry of new players and multiple channels, customers have become

more discerning and less 'loyal' to banks. Given the various options, it is

now possible to open a new account within minutes. Or for that matter shift

accounts within a couple of hours. This makes it imperative that banks

provide best levels of service to ensure customer satisfaction. Customer

Retention marketing is a tactically driven approach based on customer

behavior.  It's the core activity going on behind the scenes in Relationship

Banking. It’s a sad fact that many banks are continually looking for new

customers and not recognizing the “Goldmine” that lies within their current

user base.

The Operating Lease “Customer Retention Program” has been

designed to mine your entire current client base, systematically providing

advanced notice of up-grade opportunities. These notices contain detailed

finance proposals to allow your sales team to easily upgrade your customer’s

current equipment to your latest technology.

Customer Retention is one of the most challenging and

rewarding aspects of Business Equipment sales. The long-term investment in

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customer retention improves your business and allows your company to plan

for growth into the future. Customer Retention program is based on

managing the Entire Customer Lifecycle. Finance provides an ideal tool for

being able to lock in your customer base over the long term.

Measures to be taken, in order to retain the customer

1. Past and Current customer behavior is the best predictor of

Future customer behavior. 

Think about it.  In general, it is more often true than not true,

and when it comes to action-oriented activities like making purchases and

visiting web sites, the concept really shines through.

We are talking about actual behavior here, not implied

behavior.  Being a 35-year-old woman is not a behavior; it’s a demographic

characteristic.  Take these two groups of potential buyers who surf the ‘Net:

People who are a perfect demographic match for your site, but

have never made a purchase online anywhere

People who are outside the core demographics for your site, but

have purchased repeatedly online at many different web sites

If you sent a 20% off promotion to each group, asking them to

visit and make a first purchase, response would be higher from the buyers

(second bullet above) than the demographically targeted group (first bullet

above).  This effect has been demonstrated for years with many types of

Direct Marketing.  It works because actual behavior is better at predicting

future behavior than demographic characteristics are.  You can tell whether a

customer is about to defect or not by watching their behavior; once you can

predict defection, you have a shot at retaining the customer by taking action.

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2. Active customers are happy (retained) customers; and they like to

"win." 

They like to feel they are in control and smart about choices

they make, and they like to feel good about their behavior.  Marketers take

advantage of this by offering promotions of various kinds to get consumers

to engage in a behavior and feel good about doing it.  

These promotions range from discounts and sweepstakes to

loyalty programs and higher concept approaches such as thank-you notes

and birthday cards.  Promotions encourage behavior.  If you want your

customers to do something, you have to do something for them, and if it’s

something that makes them feel good (like they are winning the consumer

game) then they’re more likely to do it.

Retaining customers means keeping them active with you.  If

you don't, they will slip away and eventually no longer be customers. 

Promotions encourage this interaction of customers with your company,

even if you are just sending out a newsletter or birthday card.

The truth is, almost all customers will leave you eventually. 

The trick is to keep them active and happy as long as possible, and to make

money doing it.

3. Retention Banking is all about:Action – Reaction – Feedback –

Repeat. 

Banking is a financial conversation.  Banking with customer

data is a highly evolved and valuable conversation, but it has to be back and

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forth between the marketer and the customer, and you have to LISTEN to

what the customer is saying to you.

For example, let's say bank looks at some average customer

behavior.  Bank looks at every customer who has made at least 2 purchases,

and bank calculates the number of days between the first and second

purchases.  This number is called "latency" - the number of days between

two customer events.   Perhaps you find it to be 30 days.

Now, look at your One-Time buyers.  If a customer has not

made a second purchase by 30 days after the first purchase, the customer is

not acting like an "average" multi-purchase customer.  The customer data is

telling you something is wrong, and you should react to it with a promotion. 

This is an example of the data speaking for the customer; you have to learn

how to listen.  

4.  Retention banking requires allocating banking resources.  You have

to realize some marketing activities and customers will generate higher

profits than others.  You can keep your budget flat or shrink it while

increasing sales and profits if you continuously allocate more of the budget

to highly profitable activities and away from lower profit activities.  This

doesn't mean you should  "get rid" of some customers or treat them poorly.  

It means when you have a choice, as you frequently do in

marketing, instead of spending the same amount of money on every

customer, you spend more on some and less on others.  It takes money to

make money.  Unless you get a huge increase in your budget, where will the

money come from?

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Retain Banking

If you always migrate and reallocate marketing towards higher

ROI efforts, profits will grow even as the marketing budget stays flat. 

You have to develop a way to allocate resources to the most

profitable promotions, deliver them to the right customer at the right time,

and not waste time and money on unprofitable promotions and customers. 

This is accomplished by using the data customers create through their

interactions with you to build simple models or rules to follow.  These

models are your listening system , like the "30 day latency" model above . 

They allow the data to speak to you about the customer.

How you manage your customer relationships—and the

information that powers them—is paramount to your success. You have to

truly understand, serve and satisfy your customers if you want them to be

loyal to your company.

With  marketing and information management solutions, you

know your customers like never before—enabling you to foster enduring

and profitable customer relationships. In short, we enable you to:

Recognise and retain profitable customers

Determine customer lifetime value

Strengthen customer relationships

Increase share of wallet

Increase number of customer touch points

Recognise customers at risk of attrition or churn

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The solutions maximize marketing and customer relationship

efforts. The Banking industry has leading Customer Information

Management solutions that include Customer Data Integration (CDI) and

customer recognition. This gives you the power of immediate information

that also helps bank to develop a more complete picture of each customer

using their comprehensive Customer Information solutions so the bank can

offer the products and services that their customers want.

Bank Customer Information Consulting solutions also provide

consulting, analytics and privacy expertise. Banks helps them to honors their

customers’ privacy preferences - vital to building trust-based relationships.

Additionally, banks consulting and analytics services help banks to provide

them with a true understanding of their products.

Tools

Most banks and finance companies can provide equipment

finance. But not all financiers want to be involved in helping you win sales.

Not all financiers keep the Retention of your Customers as their end goal.

When was the last time your bank or finance company called

you to tell you about a possible sales lead?

The Customer Retention Program provides your sales team

details of up-grade customers each month. Potentially with this tool, they

could have 50% of their monthly sales budget locked in. This makes

reaching their targets easier and enables them to spend more time

concentrating on new prospects.

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Our upgrade program can utilise your current customer base to

extract this information immediately. Alternatively, we can develop this tool

over the long term once our finance program has been implemented.

Banks should do a meeting annually to keep their customers

updated abouth the changing needs and even allowing for existing contracts

to be varied to add or remove equipment, as the customers requirements

change.

An important aspect of the Customer Retention Program is that

Banks systems have been designed and modified based on years of

experience. But it has also been designed to be adaptable so that Customer

Retention Program can be tailored to banks current business systems.

Cost pressure

Cost pressures come into play when banks are not able to afford

the cost of a certain service or initiative although they want to or need to

have it in place. This is primarily because the cost structure at the backend is

not efficient enough to offer that kind of service to the marketplace.

Increased competition: The entry of new players into the

banking space is leading to increased competition. A recent example would

be of Kotak Mahindra Finance Limited (KMFL)—a financial services

company focused on investment consulting, auto finance, insurance, etc—

morphing into Kotak Bank. Many other such players are waiting on the

sidelines.

Technology makes it easier for any company with the right

channel infrastructure and money reserves to get into banking. This has been

one of the major reasons behind this kind of competition from players who

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do not have a banking background. Kotak Bank overcame the initial costs of

setting up its own ATM network by getting into a sharing agreement with

UTI bank.

New entrants with strategies such as these make the banking

game tougher

With this banks have redefined their business priorities. They

are now focused on

Cost reduction

Product differentiation

Customer-centric services

Although the ways in which banks implement these vary, the underlying

objectives remain the same.

Cost reduction

Reduced costs basically translate to higher profit margins. If

banks can reduce costs, it can go a long way in increasing profits.

The focus is on increasing the profit margins by cutting costs

where it matters—on the operations side. Banks have woken up to the fact

that they need to get into shape fast in order to handle competition.

"Banks have been increasingly facing sliding margins and fierce

competition. It is imperative for them to increase the volumes and reduce the

cost of operations," says K.P. Padmakumar, Chairman, Federal Bank.

Differentiation

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The customer is interested in how he/she can benefit from the

bank and its products. That's why it becomes necessary for a bank to

differentiate its products from the others. Some of the ways in which

differentiation can be introduced are through specialization, new products,

and increasing the

added value.

Specialization basically means that the bank gets involved only

in selected areas. For example, the bank might be getting involved only in

housing finance. Or, it could be limiting its services just for corporate

banking clients. Another way to specialize could be by handling just specific

sets of portfolios.

Banks can differentiate themselves by adding new products to

their range of services. This will provide the bank with better yields per

contact. Increasing the added value of products is another way of

differentiation for banks. Operational excellence is also a key factor in

effective differentiation from the competition.

Customer centric model

Indian banks have realized that it no longer pays to have a

'transaction-based' operating model. This has led to the development of a

relationship oriented model of operations focusing on customer-centric

services.

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While banks have to ensure product superiority and operational

excellence, the biggest challenge today is to establish customer intimacy

without which the other two are meaningless.

"In the financial world, product superiority does not last long as

it is relatively easy to copy products. So, the real strength comes from

operational excellence and understanding the customer and developing

rapport with him," says Gunit Chadha.

In this context, it is very important that banks identify and

understand customer needs. This will help banks in tailoring their products

according to customer needs. It also helps in new business opportunities like

cross-selling and 'upselling,' which takes cues from customer aspirations and

transaction patterns.

Customer relationships have to be managed in the best possible

manner. This will ensure that the customer comes back to the bank. In

addition to good customer retention rates, it will also provide better income

generation capability. This is because a major chunk of income of most

banks comes from existing customers, rather than from new customers.

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Online banking

Introduction

Online banking presents a real mix of opportunities and

obstacles for financial service providers. Customers in this market are

intelligent and tech savvy and are 50 percent more likely to stay with their

bank than customers using traditional services.

Unfortunately, many financial institutions do not have adequate

technological infrastructures to reap the rewards of this channel. Banks are

known for legacy systems and information silos--segregated databases from

autonomous divisions with separate record keeping, customer information

and agendas to protect. Online channels are said to be the most un-integrated

of all channels and can easily pose more problems than they resolve.

Over the last few years, most banks took a laissez-faire

approach to online banking initiatives. Now they acknowledge the need to

invest heavily, and they know that CRM--a key factor in an industry built on

trust and relationships--is key to fully integrating this channel and to

maximizing return on investment.

Richard Bell, director of e-Banking at TowerGroup, a

Massachusetts-based banking technology consulting service, says banking

institutions are beginning to realize that offering their existing services on

the Internet probably doesn't have a strong business case behind it. "But," he

says, "there are things they can do once those services are online that do

have strong business cases."

According to Bell, if a bank can find out enough about its

customers' financial environments and it can make more appropriate offers

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that strengthen its ties with consumers, then that has value. "This is where

there is a strong tie between Internet banking and CRM because people, who

do Internet banking, by their actions, provide a real gold mine of data about

what their financial needs and activities actually are."

Web banking bonanza

This emerging financial services tenet comes at a moment when

online banking is in transition. Until recently there was not a lot of value in

banking via the Internet: It actually took longer to pay a bill online than it

did to write, stamp and mail a check. One third of early online banking

adopters retreated to offline channels with more services.

According to Bell, the percentage of households banking online

has increased from approximately 15 percent to 19 percent over the last two

years. (These numbers vary widely depending upon institution, region and

specific geographic location.)

Experts disagree on the actual number of current and future

customers banking online. Estimated 6 million in 1999 and predicts 23

million by 2004. Gartner's similar figures range between 27.5 and 55

million, respectively. Different definitions of what actually constitutes an

online customer contribute to the blame--the industry is that green. These

numbers, which may seem low, could represent as much as 40 percent of the

total possible market. Yet, obstacles remain. In the United states, between

one third to one half of banking customers are currently unwilling to use an

ATM.

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Scenario of retain banking

Present

Accenture believes that the key to effective CRM is to cultivate

meaningful insights about customers--insights that reveal not only what

makes the customer satisfied, but also what brings profitability to the

organization. Although most companies understand that developing insights

about individual customers can increase satisfaction and drive sales, few

truly understand which insights are critical, how to use them to deliver

value, or how to develop them in the first place.

Through more than a decade of work in this area, Accenture has

identified six key insights that enable companies to obtain a more accurate

reading of their most valued customers:

Current value—-

How Valuable Is This Customer To The Organization Right Now?

Share-of-customer

How Much Of The Customer’s Financial Services Activity Is With This

Organization?

Future value

How Valuable Is The Customer Likely To Become In The Future, As Life

Stage And Wealth Change?

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Best next product

Which Is The Next Best Product Or Service For This Customer, The One

That Will Increase Value For The Customer And The Organization?

Attrition risk

How likely is the customer to leave?

Future

We believe the answer lies in the new wave of technology

innovation that promises to help transform CRM yet again. “Reality

Online”—Accenture’s vision of the future of technology and business—will

be instrumental in enabling companies to further enhance their ability to

build and maintain lasting, profitable customer relationships. Bringing

together the virtual and the physical worlds, the next generation of CRM

embraces technology as the critical enabler. These solutions will create a

world where objects will sense, reason, communicate and act; where every

physical entity or event has a corresponding “virtual double” and where the

time between stimulus and response approaches zero. In this world, insight

will be bought and sold in a market that rewards those who build trust and

harness the real-time economy.

CRM in next generation

So how do financial institutions convert the nemesis of data

overload to the nirvana of customer insight? Without doubt, there is both an

opportunity to be realized and value to be unlocked. If you can tap into the

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immediate value of the six customer insight building blocks, your

organization is well positioned for the longer-term opportunities such as

increasing customer retention, fighting the brand wars, protecting your

customers’ privacy, gaining greater value from your customer base and

creating a new set of offerings in the future. If you understand the potential

value of your customers, you can make decisions about where not to invest

as well as how to draw even greater reward from the high potential value

customers.

Thinking creatively about this vision while maintaining a laser

focus on the customer and on value, you will position your organization to

compete effectively now and in the new world of financial services.

Traditional one-to-one customer interaction is unsustainable as customer

numbers grow. The goal for the financial services sector therefore is to use

customer insight to understand how to create an effective multi-channel

customer experience that is personalized and relevant, differentiated by

value and respectful of privacy concerns.

As technological advances continue, many more applications

will emerge. One thing is clear for now: The “Reality Online” vision has

tremendous potential to make the next-generation CRM initiatives more

effective and more profitable than those of the past. New capabilities will be

required for capturing, storing and analyzing greater amounts of data. But by

making this a part of the future of CRM strategies, financial services

companies will be much better positioned to keep pace with the demands of

their customers and competitors and, above all, to grow profitably in the

years to come.

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Acknowledging the value of gold customers

Treatment for gold

customers

Every company has gold customers – they are the life blood of

their revenue stream. Gold customers represent 20% or less of the customer

base, and about 80% of the revenue. Some companies have not yet identified

these valuable people. That is a mistake, since the health of any business

depends onthem.Gold customers have a higher retention rate. They are more

loyal, less price sensitive, and buy more products, more often.

Once you know who they are, how should your marketing strategy address

them? One school says, “Market to them like mad. Get them to buy more.”

That might work, but, in most cases, is probably a mistake. The proper

course is to work to retain them.

Five percent of their customers provided 80% of their profits. Getting these

five percent to put more money in their bank would have been a fruitless

enterprise.

Whatever banks can do, they should make gold customers aware that they

are very important to us , and show it by really valuable services. Banks

should create a services budget just for the gold customers.

So where should you put your marketing dollars? With that segment just

below gold. Here is where you can make the maximum impact per dollar

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spent. Let these folks know how close they are to gold status. Encourage

them to spend a little more to get the services that go with gold. You could

use points, or monthly statements to make them aware of what they need to

do. Many customers and companies will respond to these incentives.

We soon learn that each customer segment needs to be treated

differently based on their contribution to overall profits. If we segment the

customer base into five quintiles, based on lifetime value, for example, we

get a picture that looks like this:

The top quintile, our Gold customers, are where the bulk of our

revenue and profits are generated. We must treat these customers with

respect. Don’t, necessarily, market to them. Provide them with super

services – service so good that you could not possibly afford to provide it to

every one of your customers. The marketing dollars should be aimed at the

second, third, and fourth quintiles. To the second quintile, you tell them how

close they are to qualifying for Gold. You tell them how wonderful it is to be

Gold, and how easy it would be for them to move up.

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Cost

There is only one way: Set aside a control group of gold

customers who do not get these benefits. Monitor the performance of those

who get the benefits with those who do not. You will soon be able to see the

difference in retention and sales. Control groups for gold customers are

difficult to manage. The word gets around, and some in the control group

ask to be included in the benefits. How do you respond? “There was a

computer error. Of course, you are included in the gold program.” Only a

small percentage will complain and can easily be handled. Nieman Marcus

solved this problem with their gold customers. They called the ones that they

switched to the gold program the “out of control group”.

If you have not yet developed a special program for your gold customers,

begin at once. It may be the If you have not yet developed a special program

for your gold customers, begin at most important single customer

relationship program in your company.

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Retention practices

Integrated Marketing Communication (IMC)

Integrated Marketing Communications (IMC) focuses on

building brand by creating databases that continuously monitor and respond

to market needs as relationships are fostered between practices and

customers (e.g., patients, referral sources). The first two articles in this four-

part series focused on two aspects of IMC: Customer Relationship

Management (CRM) strategies for database mining and building brand

awareness through strategic messaging to target markets.

The purpose of IMC is the same as traditional marketing, which is to

maximize profitability of a business. IMC is an ongoing, circular process

that requires continual communication between an audiology practice and its

target markets. This communication dynamic is what distinguishes

traditional marketing from IMC: the former works to increase profitable

transactions , whereas IMC works to increase profitable relationships. This

is not a semantic quibble. The concept of a profitable relationship requires

that both parties benefit and “profit,” as described by Schultz. IMC is based

on continual exchange between marketer and customer. The former seeks

and stores information on each individual customer in a database. The latter,

through transactions, surveys, and other methods is encouraged to

communicate back. Thus the fields of experience of both become greater and

more useful to both parties.

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Growth & retention through personal sales

Personal sales are the most important part of relationship-

building in an audiologist practice. In IMC parlance, we are engaged in

“solution selling” – working in collaboration with every customer,

developing customer-specific dialogues to extract the most from our brand

features to solve as many of the customers’ problems as possible and retain

the customer within the practice. One of the great strengths of personal

selling is that it allows flexibility to each provider as a means to integrate

customer needs/wants/demands with the practice’s offerings

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QUESTIONNAIRE

Q1 Retain Banking is also known as relationship banking. So what

Measures have you implemented to retain your customer?

The needs of a customer are met with quality service like free ATM

cards , Drafts etc.

Q2 Do you prefer to retain your customers or make new ones?

Both are important at the same time because as it is said that “Old Is

Gold” and new customers to achieve targets.

Q3 Do you have some special or attractive offers in order to attract

Or retain your customers?

Yes we have a scheme called CASA (Current And Savings Account)

with Rs 50,000/- of free accidental insurance.

Q4 Do you have a CRM department or relationship management

department in your bank?

No.

Q5 Do you provide any extra benefit or special service for loyal

regular customers?

No

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Q6 What type of people do you cater to?

All types of people but mostly we are having clients who are

self employed .

Q7 Does your bank have a motto or a saying or a favourite line to

which it stands by and performs?

Yes. The Favourite line is “Where Every Individual Is Committed”

Q8 At what level of management does the decision of retain

banking or the retain department are taken?

Top level management.

Q9 Does the RBI have any influence or say in the matter of retain

Banking?

Yes

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CONCLUSION

The most important aspect of a bank is to retain customers than

attracting new ones. Customer Retention is one of the most challenging and

rewarding aspects of business equipment sales. The customer of a bank

should feel proud while receiving the services from his bank. The bank

should retain its customer base by whatever means may be possible. The

succession of a bank is to develop a good relationship with the customers to

retain them in the bank.

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BIBLIOGRAPHY

Internet websites

www.goggle.com

www.answers.com

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