THE IMPORTANCE OF IMPLEMENTING CRM CONCEPT IN THE BANKING SECTOR

Banke su tradicionalno poslovale u prethodnom periodu na pretežno stabilnom tržištu. Pojavom ekonomske krize i povećanog broja konkurenata situacija se značajno promenila. Danas se banke suočavaju sa agresivnom konkurencijom, što zahteva dodatne napore, kako bi se obezbedio opstanak na konkurentnom i nepredvidivom tržištu. Korisnici predstavljaju suštinu i osnov razvoja bankarskog sektora. Poslovanje banaka ne može funkcionisati bez korisnika. CRM (Customer Relationship Management) u bankarskom sektoru je od strateške važnosti. Upravljanje odnosima sa potrošačima pomaže bankama da ostvare profit kroz ostvarenje dugoročnog odnosa. Kvalitetno upravljanje odnosima sa klijentima se može zamisliti samo uz podršku kvalitetnog informacionog sistema. Praksa među kompanijama pokazuje da se investicije u CRM sistem i u odnose sa potrošačima najčešće javljaju intuitivno i na osnovu iskustva menadžmenta bez detaljnog plana investicije kao za druge oblasti ulaganja. Banke su shvatile da je upravljanje odnosima sa kupcima veoma važan faktor za njihov uspeh. CRM je strategija koja može da im pomogne da izgrade dugoročne odnose sa klijentima i povećaju profit kroz adekvatan sistem upravljanja i primenu strategije fokusirane na korisnika.


The concept of CRM
Customer Relationship Management -CRM is a relatively young concept, which in the contemporary market economy, alongside the information technologies development (including the database generation software), refers to the two-way communication between a company and its customers, as its business priority.CRM is an inevitable segment of business activities of all financial institutions.CRM can be defined as a business philosophy referring to customer relationship management, and a company's orientation towards keeping and upgrading the existing customers.
Ever since the concept of relationship marketing was introduced by Berry (1983, p. 25), and redefined by Gummesson (1994, pp. 5-20), CRM has been one of the most dominant marketing principles.Focusing on the customer, CRM is based on integrated market management, sales and provision of services to the clients, as the key banking functions which deal with customers on a daily basis.CRM is a strategic approach with a view to generating value for stakeholders, by developing relationship with the customers (Knox et al, 2003, pp. 268-269).
Banks, like all other market participants, always have two available strategies: aggressive approach with a view to attracting new customers, or defensive investment of effort to keep the existing ones (Kotler and Bliemel, 1995).In the former case, banks are aiming for as many "transactions" (closed sales) as possible, which is typical for markets with higher demand than supply.Aggressive approach implies attracting new customers and encouraging the customers already using the services of competitive banks to change their service provider.On the other hand, defensive strategy is targeted at defending the existing market share and protecting the customer database, i.e. keeping the existing customers and generating a future business strategy arising thereof.
Compared to relationship marketing, CRM analyzes the problem of long-term customer relations more intensively, starting from the overall elements, establishing the organizational structure and other preconditions of development (business culture, etc.), to the very programs for long-term relations establishment.As opposed to that, marketing relationships put bigger emphasis on the finalization and concrete programs for long-term relations establishment, such as communication, offer adjustment, loyalty program, etc. (Domazet, 2007, pp. 2-9).
For Kellogg's school, CRM is a common ground between a customer and the company, as a set of interactions with the customer, regardless of who initiated it, with the tendency to make every interaction specific and tailormade.According to Kellogg's authors, including Kotler, CRM should be dealing with the individuality of each customer.As such, CRM is a strategic tool providing competitive edge to companies.The basic goals of CRM include the optimization of customer lifecycle management, increase of profitability and achievement of the highest level of customers' loyalty.Many empirical studies have confirmed the necessity of continuous upgrading of the CRM strategy, along with the strengthening of customer relationship quality and long-term loyalty to the brand.If the CRM program for banks is well-designed and duly implemented, it will strengthen customers' loyalty.Otherwise, it will yield the opposite effects.
What has been repeatedly underlined is interactivity of CRM, according to which CRM is a process establishing the optimum balance between a company's investments and the satisfaction of its customers' needs, and comprising the following aspects (Shaw and Reed, 1999): • Measurement of all ingoing and outgoing components -from marketing, sales and servicing costs to profit and capital value; • Procurement and constant updating of information about the customers' needs, their behavior and motivation throughout the entire company-customer "relationship"; • Learning through positive and negative experiences with the customers; • Integration of the functions of marketing, sales and servicing, in order to achieve the common goal; • Implementation of appropriate systems for procurement and joint usage of information about customers, along with the assessment of CRM support efficiency; integrisano u poslovanje banke i podržano dobrim informacionim sistemom.Prilikom definisanja CRM-koncepta, polaznu tačku predstavlja činjenica da se novi koncept odnosa sa potrošačima zasniva na novoj postavci marketing miksa -4C, koji u stvari objašnjava kako potrošači gledaju na 4P (proizvod, cena, promocija i distribucija).Dok se formulacija 4P odnosi na akronim engleskih reči za elemente marketing miksa, instrumenti koncepta 4C su:
Tri su osnovna procesa u upravljanju odnosima sa potrošačima (Österle, 1995): • Permanent adjustment of the balance between the functions of marketing, sales and servicing based on the changes in customers' needs, with a view to maximizing profit.Customer relationship management yields expected results only if it is fully integrated into the bank's business and is supported by a sound IT system.The starting point in the process of defining the CRM concept is the fact that the new concept of customer relationship is based on a new angle on the 4C marketing mix, which actually explains how customers perceive the 4P (product, price, promotion and placement).While the 4P formulation is an acronym made of the English words denoting the marketing mix elements, the instruments of the 4C concept are:

Objectives of CRM
CRM is characterized by a management philosophy aimed at establishing long-term and profitable relations with the customers (Raab and Werner, 2009)."Long-term" means that a bank earns the permanent confidence of consumers enabling their lifetime connection with that bank's products and services.The important aspect in that process is to build the relationship in terms of the bank's orientation towards the consumer, instead of towards a product/service.The permanence of such relations ensures the achievement of profit in the long run.
The objective every bank is striving for is to motivate potential consumers to use their services to a greater extent, to subscribe, to register, to respond to inquiries and questionnaires, to generate recommendations, thereby ultimately affecting the bank's competitive position.Potential customers, just like the bank, have objectives of their ownsatisfaction of their needs, appreciation and strategies for achieving the planned goals.
The process in which a potential customer becomes and remains the actual consumer, thereby improving the company's business owing to his loyalty, is based on the wellestablished principles including analytics, art of communication, CRM concept and fundamental knowledge of economics.
The fundamental goal of CRM is to ensure a firm path towards achieving profit and maximizing customer equity, and such customer behavior that boosts income and profit, which is why this goal is essential.Moreover, the objective of CRM is to achieve a more effective (and efficient) realization of the bank's goals, through a more detailed and analytical consideration of actual needs of the consumers.Another objective is to generate value -in the process of identifying, attracting and maintaining long-term consumer relationships -which occurs as a result of the interaction between the bank and its consumers, in turn enabling the establishment of profitable relations with the clients.Just as it brings certain advantages to the bank, CRM should also generate customer value (Shaw and Reed, 1999) and customer equity (Helm and Günter, 2003), which is produced based on higher customer value, positively affecting the company's business results.Customer equity is defined as the net benefit of the business relationship from the offeror's perspective, whereas customer value represents the net benefit of the business relationship from the customer's perspective.Customer equity and customer value are two main objectives within the CRM concept.
The establishment and development of long-term relations with the customers generates value which adds some competitive advantage to the bank (and its customers).This is why CRM is highly positioned at the list of priorities of today's corporate agenda, and is closely related to the usage of information technologies, necessary for the implementation of CRM marketing strategies.

CRM as a process
What most affects the efficiency and success of CRM in the service industry, including bankcustomer relations, is proactivity, dedication to each customer, moderateness (modesty), personal approach, customer care, corporate ethics, recommendations by other consumers (recommendation-based promotion), and technology orientation (Jain et al, 2007).
There are three basic groups of processes within customer relationship management (Österle, 1995): • CRM management processes -i.e.processes that have the function of management and control over other processes (CRM strategy development, CRM processes management).These processes are not directly related to consumers, but they control and manage activities related to them.• CRM service processes -i.e.processes encompassing all activities related to direct contact with the consumers (managing campaigns, sales, services, complaints).• CRM support processes -i.e.processes enabling management and analysis of information and data obtained from the service processes.The results of these analyses enable higher effectiveness of service process outputs (customer segmentation, client education, reporting).These processes do not imply any direct contact with consumers either.
The efficiency of the CRM process, which should be integrated through marketing, sales and customer relations, implies the following aspects for the bank: The activities conducted by the bank wishing to build relationships lie in the core of its CRM strategy, just like its products and services lie in the core of its marketing strategy.The bank starts its customer orientation by defining its mission, value and culture (Figure 1).Banka bi, takođe, trebalo da identifikuje, izabere i implementira tehnologiju (CRM softver, veb sajt, intranet, ekstranet) i da pripremi ljudske resurse na upravljanje i sprovođenje CRM strategije.
Smanjenje troškova i povećanje efikasnosti sistema su osnovne prednosti koje nudi kvalitetan CRM za bankarske institucije.Pored toga, smanjuje se i kompleksnost i "zamršenost" koja nastaje usled proceduralnih Slika 2: Upravljanje životnim ciklusom potrošača increasing requirements of the clients.The key success factor of the CRM concept is customer expectations, which banks should be able to anticipate.To this end, it is necessary to create a platform enabling communication with the customers, and the subsequent collection and analysis of relevant information obtained from them.Thereby, records can be kept about customers' habits and their special interests.
CRM revolves around customer lifecycle (Figure 2).Banks start to acquire clients through traditional marketing channels or based on recommendations.Then, they strive towards client development, by personalizing communication and tailoring products and services, based on a mutual learning process.This is when they reach the stage of impacting customer value through post-sale processes, in order to, ultimately, retrieve or retain clients and their recommendations, with a view to attracting new customers.As a result of this thesis' development, banks start to highlight customer and client value as the company's biggest value and asset.Furthermore, there is the so-called IDIC methodology developed by the consulting company Peppers & Rogers.According to this methodology companies undertake four steps to develop their customer relations: identification, differentiation, interaction, and adjustment (Siddiqi et al, 2008).The stage crucial for implementation is the method enabling identification of customers at the very point of their connection with the bank.If it can achieve this, the IDIC methodology can achieve accurate and profitable results.

CRM in the banking sector
Companies like Siebel, Epiphany, Oracle, Broadvision, Net Perceptions, Kana, etc. populated the CRM field with all-in-one products, ranging from customer behavior monitoring on the Internet to anticipating their future activities, and sending direct e-mails.This has created a broad market for CRM products and services which was worth USD 34 billion back in 1999, and USD 125 billion in 2004 (Wahab et al, 2010).Hedley et al (2006) were the first to notice that 2015 will be a year of dramatic changes in the retail banking industry, because the clients will become even more individualistic, with a desire to control their relationship with the bank.On the other hand, for banks this implies that the traditional approach to customer segmentation will become outdated and "extinct".
Cost reduction and higher system efficiency are the main advantages offered by a quality CRM to banking institutions.Besides, it alleviates the complexity and "intricateness" occurring due to procedural steps, which customers often find ambiguous and confusing.The introduction of a CRM system in banks accelerates the response to customer inquiries, which leads to increased abilities and competencies of bank employees.Larger turnover and high ROI (Return on Investment) occur as a result of introducing a CRM software package (Stringfellow et al, 2004, pp.45-52).The example of Greek bank illustrates that the introduction of the CRM database enables 24/7 service, with 92% success rate (Blery and Michalakopoulos, 2006, p. 123).This bank's example illustrates many other benefits of CRM implementation: cost reduction (one longterm supplier), simplification (joint platform for all banks lowering the need for integration, providing a single contact point and reducing the need for technical support) and operational improvements (improved skills of employees, alleviated problem of maintenance and support thanks to the joint platform).Integration of "voice banking" into the CRM has helped the bank get closer to its customers, offering them telephone-based banking services (stock exchange transactions, loans, etc.).Moreover, the bank did not have to hire any extra employees, given that the new call center successfully handles the increased number of incoming calls.Many activities were transferred from branch offices to the call center, which, in turn, reduced the operating costs (the cost of a call center employee is half less than the cost of a branch office employee).Branch offices were now able to focus on specialized products and customer relations.As a result of such re-organization, the bank increased the number of its clients by 5%, thereby confirming the worth of its investment.
According to a study conducted in the banking sector of Sweden (Zineldin, 2005, p. 340), better location, prices, third party recommendations and advertisements are not the relevant factors when choosing a bank.From the client's perspective, the significant criteria are: accuracy and careful handling of accounts and transactions, efficient correction of errors, friendly and obliging bank employees.Therefore, the CRM attributes of high-quality products/ services, and subsequent differentiation, prove to be the most significant factors for clients.Another study, conducted in the European Bank (Blery and Michalakopoulos, 2006, p. 117) indicates that with CRM the bank was able to focus on profitable clients, through efficient segmentation towards individual behavior.Information about who purchases, what and how much they purchase, enabled the bank to employ a commercial approach based on the client, instead of on the product.This is why the bank was able to better satisfy and keep its customers.The bank's investment in the new telephone banking system reduced its servicing costs, after some operations were transferred from subsidiaries to the new call center, and at least 70 employees were redirected from other activities to sales, with a view to increasing the bank's profit.The bank's manager says: "The CRM solution gave us an opportunity to transfer over 70 employees from other operations to sales, thereby strengthening the probability of further boosting the bank's financial indicators".The CRM solution provided the bank with a higher level of effectiveness and performance, thus improving service quality and response time.Waiting time was reduced from about 20 minutes to less than 2 minutes, although the number of phone calls increased by about 40%.Despite the higher volume of services (banking transactions, stock exchange transactions, loans, etc.), the conversation time decreased by 50% thanks to the new call center.Over 75% of phone calls are processed by the call center employees and the rest by the bank's IVR and voice mail.The bank is now able to manage the increasing requests much more efficiently, without the need to hire 7 more people, as would have been necessary in the old system.
Moreover, CRM has increased the bank's capital value in terms of the following: • Coordination between the operating and marketing sectors; • Prospects for new marketing channels including telesales; • Possibilities for the promotion of higher service quality, in terms of a differentiation from the competition and the focus on customers instead of on sales.
Banks should be taking into account some factors at the strategic level.In order to gain strategic advantage, top management should be personally acquainted with the CRM potential and proactively engaged in its internal implementation, in order to manage it properly.
The usage of CRM for marketing purposes should be based on clear goals.A successful CRM implementation depends on how clearly the organization's strategic goals are defined.And while technological and business processes are crucial for the success of CRM initiatives, individuals at the operational level of cooperation with the clients are the ones accounting for the essence of customer relations.This is why CRM implementation requires some changes in the organizational culture of banks.CRM strategy and all relevant activities must be in line with the company's mission, culture and values.Finally, benchmarking plays a significant role in shaping the strategic direction to be awarded to the CRM package.At the tactical level, medium-term planning of specific organizational issues is extremely important.However, acceptance by the employees, integration with other systems, selection of the CRM software, training and updating of employees' knowledge about CRM systems, remain the main challenges in the process of implementing CRM systems in banks.

Conclusion
Banks have already invested billions into the CRM systems and it is an ongoing trend (Blery and Michalakopoulos, 2006, p. 116).According to a study conducted by the European IT Opportunity Financial Services, CRM is one of the priorities of banks (IDC, 2002).Successfully implemented CRM results in excellent relationship quality, reflects the customers' confidence in the bank (its reliability and honesty), along with the prominent devotion and loyalty of customers.
Evidently enough, the implementation of the CRM concept boosts a company's effectiveness.This has been recognized by many companies which have developed bonus programs for their loyal customers, thereby achieving certain competitive advantage.The introduction of "Miles and More" passenger loyalty program and loyalty cards has been very important for British Airways: 12% of their passengers fly this company exactly because of these programs (Kowalski, 2000, p. 338) Most authors believe that banks can profit substantially from using customer identification databases, in terms of customer profitability, satisfaction, duration, after which they can establish mutual interaction with these interakcija, direktan izazov za sve banke koje rade sa fizičkim licima biće da povećaju ove tačke interakcije.
Uprkos ovim izazovima, banke bi trebalo da preduzmu značajne korake u cilju osiguravanja emotivnog vezivanja, zajedno sa lojalnim ponašanjem, jer su najsnažniji brendovi oni koji imaju emotivnu privrženost korisnika.Nedavni izveštaji pokazuju da se Barclays banka (Menon customers, including the appropriate level of affiliation (contacts) (Menon and O'Connor, 2007, pp. 157-168).There has been a need in banks dealing with retail clients to upgrade their high-tech CRM strategies.One study (Menon and O'Connor, 2007, pp. 157-168) focuses on creating emotional connection in the process of interaction between clients and bank employees.There are many interactions that do not involve people, instead relying on technology used by clients to perform routine and more frequent transactions.However, emotional connection can also be created or diminished through technologically-mediated interactions.The present concept of emotional connection implying a relationship, confidence and a sense of common values, on the other hand, is rather based on intuitive than mutual interaction.When emotional connection is created during mutual interactions, all banks working with retail clients are facing the direct challenge of highlighting these interaction points.
In the 1980s and 1990s the usage of technology was integrated into the banks' strategies, with a view to reducing costs and improving service.Voice mail, phone banking and Internet banking encouraged clients to accept until then personalized services offered in an impersonal way.This migration of clients from banks into remote and time-limited providers, based on high technology, was supported by lower transaction prices, unlimited working hours and location, having resulted in a decreased number of interactions and contact points between the bank and its customers.Wishing to reduce their personal contacts in branch offices (thereby also reducing costs), banks did not count on missed opportunities for mutual interactions.A new challenge for banks will be to re-establish and once again increase the number of contact points with the clients without jeopardizing the comfort factor which has become well understood by now.Every act of mutual communication with the client should be oriented towards providing value for customers, which would, without pressure, enable improved banking services.The mentioned increase of contact points may include the initiation of periodical reviews of the customers' banking needs and utilization of such reviews, along with the possibility to stimulate interaction in order to identify ways to better satisfy their needs.
We should bear in mind that, in the largest part, technology can only be used for routine, simple banking services.In case of specific, nonroutine, and more complex banking needs, the clients will initiate contact with bank employees, and their presence will be a chance for bank employees to create emotional connection.This is a significant field for future research because a truly successful CRM strategy is the one precisely tailored to meet the clients' need for banking services and their banking behavior.Such careful consideration will enable a more efficient utilization of banking resources.The introduction of technology and software in banking was another reason behind the reduction of employees available for customer interaction.Moreover, there is some potential for conflict, given that retail bankers are trying to act as salesmen and financial experts.Therefore is the relevant training for bank employees in personal and technical skills, including sales techniques, of utmost importance in setting up high quality services.This also refers to comprehension and application of a desirable style of communication with the client during the contact situation, as well as the adequate adjustment of relevant interaction.
Despite these challenges, banks should undertake considerable steps to ensure emotional connection, alongside the loyal behavior of their customers, because the strongest brands are the ones that have achieved emotional devotedness of their clients.Recent reports indicate that Barclays Bank (Menon and O'Connor, 2007, pp.157-168) decided to use a strategy rather similar to the one proposed above.They integrated several types of databases into a unique database enabling their employees to target clients through several distribution channels and communication methods, offering banking services to these clients based on their respective financial needs and modes of behavior and connection.It would be largely beneficial for other banks to follow suit.