Customer-driven approach will be the game-changer for banks

People changing banks was a concept unheard of until recently. Indeed, the trend in India has long been of a committed, often inherited, relationship between a customer and his/her bank.

Until a few years back, the marketing activities of banks were designed as per the traditional approach, keeping in mind relationships with existing customers. With little competition going, such strategies worked well in tandem with the overall organisational approach.

However, as the markets disintegrate into heterogeneous segments, a more precisely targeted marketing technique is required, which creates a dialogue by clustering customers based on individual needs. Intense competition, together with high level of growth in gross domestic product and per capita income, diverse cultures and advent of technology, has resulted in marketing becoming a ‘game breaker’ or ‘game changer’.

As the economy matures on the lifecycle front, demographic changes result in rapid shifts in needs and wants, and the buying behaviour pattern seems to undergo a change. In the same way, the Indian consumer has undergone a significant change on an overall basis. The changes are pronounced, and would significantly affect the way business is done. This impact would be felt by every business, more so by banks.

The growth of retail banking has undoubtedly been stunning and it would be a key area of banks’ profitability going forward. But an affluent population with an age profile skewed to the younger side would require banks to focus on customer profitability and not chase traditional marketing metrics.

This sector is one of the most fiercely competed for and customer-sensitive by nature and would only get more so in the time to come. It faces the threat of customer migration, what with informed customers switching to banks where they find better services and products. Banks are finding it tough to not only find new customers, but also to hold on to old ones.

Switching cost being nil, product differentiation blunted and technological advancement available to all, the two key drivers left for customer acquisition, retention and overall profitability are customer understanding and service. In order to take on competition, banks need to get their customer relationship functionalities ready.

The structured approach to customer relationship management (CRM) provides various benefits to the bank, viz., a consistent distinctive customer experience, clear identification of the organisational, technological and process-related capabilities and prioritisation of these capabilities.

Some tangible benefits for banks implementing CRM are as follows:

Database marketing: Banks usually have a huge database, which can be put to good use by using CRM. Database recording minute details of a customer can help in customer segmentation and can be marketed. 

Lead and opportunity management: Organisations can use CRM to effectively manage leads and opportunities and track the leads through deal closure, the required follow-up and interaction with the prospects. 

Business intelligence: Banks need to monitor the customer trends regularly to uncover any major behavioural change, track seasonality and discover the true business value of customers. CRM functionalities would help banks significantly in managing and calculating customer life time value, optimising revenue cost management and maximising revenue per customer, and help profitability.

Efficient marketing resources: Customer segmentation coupled with behavioural trends would throw up robust data, which would help banks use their marketing resources effectively and also make the marketing activity more return on investment driven. Money could chase the best of customers from the marketing resource kitty and also drive revenue for the organisation.

Cross-selling opportunities: Today, most banks have a portfolio of products. Behavioural trends tracked by CRM functionalities would give the sales team robust wherewithal to cross-sell products to a certain set of customers and even move sets of customers to higher levels of the revenue grid. 

Removal of operational inefficiencies: CRM can help in strategy formulation to eliminate current operational inefficiencies. An effective CRM solution supports all channels of customer interaction including telephone, fax, e-mail, online portals, wireless devices, ATMs and face-to-face contact with bank personnel. It also links these customer touch points to an operations centre and connects the operations centre with the relevant internal and external business partners.

As mentioned earlier, retail banking is undergoing rapid changes, which would demand extraordinary steps to stem competition. The ability to mass-customise and yet acquire and retain old sets of customers would be a big challenge. Consolidation would take shape. Technological developments are significant, but the success of banks would also depend upon the adoption curve of available technology. As the competition heat develops and erupts, banks will have to get their CRM functionalities right to survive the war.

(Sudarshan Rajan is senior business director & Ramaswamy Ranganathan business group head, MediaCom. Views are personal)