Customer Relationship Management & Marketing

Kamal Kalra

Diffrentiation StrategiesAll PSU /Private and Foreign Banks are offering Anywhere banking /ATM on a shared network etc The need is to build a strong brand and sustainable competitive advantage by usingA leverageable advantage that can be used as a springboard to new advantages. This has to be a continuous processCompanies have to deliver what the customer wantsThe company has to follow a SIPOC system in reverse to meet customer needs

Marketing in Retail BankingLargely driven by number of customers a Bank possessesGreater number will mean more profitability /strength of modelDeryk Vander Weyer has the following proactive strategy :1. Identify most profitable markets2.Assess present and future needs of the customer3.Set business development goals to meet them4.Adapt to changing environment in market placeUltimately a business strives to attain business objective of growth and profit

7 Ps of Marketing Mix in Retail BankingThe 7 Ps of Marketing Mix are:1. Product: A bank product is anything which provides satisfaction desired by the Customer eg Deposit accounts , Loans and Services2. Price: Price refers to the transaction cost the customer has to bear eg. In the case of a loan the interest and the arrangement fee are the costs to be borne by customer3. Promotion Efforts of the Bank to reach the customer eg. Ads Promos etc4.Place: Refers to where the product is being offered .5.People: Despite the use of technology people are indispensable to the process. Retail Banking being delivery of services depends on People6.Process: Processes are crucial & need to be optimised to deliver results7.Physical Evidence: refers to tangibility to be attached to banking services eg. Clean and well functioning ATMs/ Branch premises, customised cheque books, immediate attention etc.

Customer Adoption ProcessAdoption is a customers decision to become a regular user & is followed by loyalty. New product suppliers aim to rope in early adopters use theories of innovation diffusion which is spread of a new idea from source to end user Adoption follows the steps: Awareness-Interest-Evaluation-Trial-Adoption Banks have to adopt the same process when they launch innovative products

Retention Dynamics Acquiring new customers can cost 5 times more than retention of an existing customer The average company loses 10% of its customers annually Profit rates tend to increase over life of a retained customer Customers move up thru a marketing funnelTarget Market-Aware-Open to trial-Trier-Recent user (once/3months)-Regular-often-Loyal

Customer Databases It is use of customer information in an upto date database for acquisition and retentionEg Novartis keeping data on 100000 farmers in Argentina to know their pesticide purchases groups them by value and treats them accordingly (segmentation approach) Database contains a wealth of info about the customer his preferences and spending habits and risk from competition etc.

Data Warehouses and Data Mining All contacts with customer used to add to DB Tele marketeers respond to customers based on a comprehensive info stored in DW Eg Tesco did not stop a low selling bread as it was the reason for visits by a wealthy group DM uses maths & stats to extract and analyse useful information of customers, trends/ segEg Royal Caribbean cruises filling seats, Mars candy, petfood Amex precisely targetted offers in mailing of bills to 35m card holders

Downside of DB marketing & CRM 5 main problems can prevent some companies from effectively using CRM: Some situations not conducive to DB mgmt when cost of sale low eg candy / piano sale HW/SW cost , comm links, staff cost etc. high Difficult to get all in company to be customer centric & use information available Customers may feel privacy has been invaded Assumptions behind CRM may not hold good

Steps in the Segmentation Process Group Customers based on similar needs How demographics are distinct for groups Decide overall attractiveness of segments Determine Segment Profitability Segment positioning on Product-price Create Segment test to check attractiveness Marketing Mix strategy 4 Ps to include Product, Price, Promotion and Place

HSBC the Worlds Local Bank & Different ValuesThe second largest Bank in the world with 9500 branches/100m customers has started a marketing drive showing how it works as a Local BankWorlds Local Bank US businessman after a hole in one has to buy expensive gifts for playing partners and not a round of drinks. Discounts on cards other freebiesDifferent Values Shows three photos of beauty pageant winner, man on moon and boy tying shoelaces: The more you look at the world the more you realise what matters to people

Achieving excellence in Services Marketing External: Normal work of product /promotion Internal: training & motivating employees Interactive: serving customerCharles Schwab largest discount brokerage house in the US ; services 8 m customersResolves all customer issues daily. US Airways improved services by handheld scanners to reduce mishandling of baggage by 50%.

The power of analyticsWe know the power of the killer Apps which can transform the way business is conducted. Corporates know through analytics a great deal about customers and their needs as well as how they can be met. Analytics can tell you:- Needs of the customer-what they will pay for the product-how many will they buy in their lifetime-what triggers people to buy a product-how salary can be related to performance-how to keep inventories low and performance highEmployees work to a strategy championed by the top mgmt.Capital One thru IT has increased its growth 20% every year

AnalyticsIn sports its not steroids but analytics behind growth of Boston RedsTop of the list of Analytics users is Mariott Hotel chain which has perfected over 20 yrs providing optimal prices for its guest roomsCapital One tries 30 k experiments/yr with intt rates and incentives to maximise growth of customers who will repay card dues.Progressive use similar experiments for Insurance when they analyse high risk policies which other companies do not touch eg they may take college grads above 30 with a certain credit score or above, no accidents and sets prices based on analytics which will make business profitable and tests results with financial simulationDifferent Excel spreadsheets floating around in a corporate means potential errors. A centralised DB gives consistency of data /analyticsSome apply same approach to people eg Proctor & Gamble an interesting quote from an analyst- In God we trust all others bring data

Expertise in various corporatesFunction Description CorporateSupply Chain Optimise SC, Dell Wal Mart reduce inventory AmazonCustomer Identify most Capital One,Loyalty profitable & retain BarclaysPricing Price to maximise Progressive, Marott ProfitHuman Capital Select best man for job Boston Red SoxProduct & service Detect quality defects Honda Intel early R&D Improve quality/ Safety Novartis, Amazon

StrategyMarketing has been difficult to quantify being rooted in psychologyNow a multi attribute utilility theory and advertising is using econometrics a stat tool for measuring impact of different advertisementsCorporates like P&G, Gallos (wines), Wal Mart use customers to help them in preventing stock outs by sharing data in joint initiatives , reducing costs etcAs a strategy you therefore need the right people and the right technology

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