1

CHAPTER 1

INTRODUCTION

1.1 Introduction

1.2 Banking System in India

1.3 The Place of Banks in the Whole Economy

1.3.1 Demand Side

1.3.2 Supply Side

1.3.3 Public Sector Banks

1.3.4 Private Sector Banks

1.3.5 Foreign Banks

1.3.6 Retail Banking

1.4 Retail Banks in Marketing Approach

1.4.1 Need Based System

1.4.2 Competition

1.4.3 Market Segmentation

1.4.4 Strategies for Increasing Retail Banking Business

1.4.5 CRM is the Best

1.5 Customer Relationship Management

1.6 Retail Banks at Kancheepuram

1.6.1 Industrial Scenario in Kancheepuram

1.6.2 Retail Banks in Kancheepuram

1.7 Statement of the Problem

1.8 Statement of the Objectives

1.8.1 The Specific Objectives

1.9 Statement of Hypotheses

1.9.1 Bank Customer

1.9.2 Bank Employee

1.10 Scope of the Study

1.11 Limitations of the Study

1.12 Organization of Chapters

2

CHAPTER 1

INTRODUCTION

1.1 Introduction

The traditional mode of marketing mainly focused on segmenting and

acquiring new customers by using tools and techniques developed for mass

marketing. In the present competitive era, this is in vain, as there are different

approaches to businesses such as relationship marketing, customer retention and

cross-selling leading to customer extension, which is a better means than the

traditional segmentation model.

The relative and marked emergence of Customer Relationship Management

(CRM) as a business strategy has radically transformed the way organizations

operate. There has been a shift in business focus, from transactional to relationship

marketing, where the customer is at the centre of all business activities.

Organizations are desperately trying to restructure their processes around the needs

of their strategically significant customers. The critical driver of such a seismic shift

towards customer orientation is the realization that customers are business assets

that when managed effectively can derive continuous and sustainable economic

value for an organization over their lifetime.

The dynamics of the banking business ecosystem have changed the way in

which retail banks do business both in relationship management and in streamlining

their operations. Relationship marketing or customer relationship management is

emerging as a core marketing activity for businesses in a fiercely competitive

environment. On an average, statistics suggest that businesses spend six times more

to acquire new customers than to retain them (Vikas Mehra, 2000) [1]. Therefore,

many firms are now paying more attention to their relationships with existing

customers to retain them and increase their share of customer purchases.

3

In order to improve the relations with the customers, retail banking

comprehensively concentrates on the quality of products and services offered to the

customer, as it is the basic foundation for maintaining and developing long-term

relations with the customer. Offering quality products and services is not only

essential to develop long-term customer relations, but is also essential to improve

marketing productivity and long run profits and growth. In sum, managing

customers has become a well-formulated and well-studied science and art known as

customer relationship management (CRM).

1.2 Banking System in India

The Indian Banking system, which occupies an important place in the

nation`s economy, remains no exception to the developments and is passing through

a major phase of transformation. The financial sector reform initiatives of the

government of India during the past few years enabled the entry of new players into

the market heralding competitiveness in the country`s banking and financial system.

Among the banking institutions in the organized sector, the commercial

banks are the oldest institutions having a wide network of branches, commanding

utmost public confidence and having the lion`s share in the total banking operations.

The retail banking operations in India fall under a number of sub-categories on the

basis of ownership and control of management, as evident from Figure 2.1 below.

4

Figure 2.1: Indian Banking System

The commercial banks in the country include:

� Public sector banks;

� Old private sector banks;

� New private sector banks; and

� Foreign banks.

� Public Sector Banks

Public sector banks still remain the key players in the market through serving

a large number of clientele of varied economic statuses at reasonable service cost

with a largest network of branches and huge manpower. Commonly known as the

government banks, these remain as the ‘common man`s bank’.

5

� Old Private Sector Banks

Most of these banks are regional and enjoy patronage from selected groups

of clientele. Through good corporate governance, and result-oriented endeavour, a

couple of these banks have carved a niche for themselves. A blend of traditional and

computer – based operations is expected from these banks in future.

� New Private Sector Banks

The financial sector reforms in the early 1990s enabled a new generation of

private sector banks to enter the banking arena. Guided by pure professional

approach, and supported by latest developments in information technology, these

banks have been making a systematic campaign to tap the potential by targeting the

cream of the clients.

� Foreign Banks

These banks are mostly confining their operations to metropolises, targeting

high –value customers and specialized services. Supported by the latest technology,

these banks are also able to extend IT based financial services to their clientele. In

addition to the facilities like totally mechanized operations, limited network,

positively oriented workforce and sophisticated clientele enjoyed by the new private

sector banks, the foreign banks have the expertise at par with the international

standards.

1.3 The Place of Banks in the Whole Economy

In India, as in many developing countries, retail banking sector has been the

dominant element in the country’s financial system. The sector has performed the

key functions of providing liquidity and payment services to the real sector and has

accounted for the bulk of the financial intermediation process. Besides

institutionalizing savings, the banking sector has contributed to the process of

economic development by serving as a major source of credit to households,

government, and business and to weaker sectors of the economy like village and

small scale industries and agriculture. Over the years, more than 30-40 per cent of

6

gross household savings have been in the form of bank deposits and around 60 per

cent of the assets of all financial institutions have accounted for by the retail banks.

1.3.1 Demand Side

The demand for retail banking products is exploding. However, there is a

wide variety in the risks and potential rewards associated with different products

and services. Mortgage lending, bank assurance sales, and wealth management

products will see high growth rates, relatively low risks, and high levels of

profitability. Deposit growth will continue to increase, but at slower rates than in the

past five years. The future of the cards market and personal lending market is

unclear. Some other retail banking products like Educational loans, automobile

loans, mobile banking and Demat services are allied with the scope of other

industries.

To understand the demand side drivers, let us look at the example of China.

Just five years back, Chinese banks were not considered in good fiscal shape, with

significant non- performing loans and being hampered by bureaucracy. Investments

in Chinese banks by global financial services players last year have been rather

significant as the global banks and investors that include the Bank of America, CITI

Group, HSBC and American Express have invested an aggregate of $15 to $20

billion into Chinese financial institutions. The important point to note is that even

the significant investments do not provide these foreign banks with control. With

stake of just 5 per cent to 10 per cent with limited board presence, these investors

have little say in matters of strategy or structure.

Compare this with the potential that the Indian market has to offer. The

Indian financial system is in much more robust shape than the Chinese. It may be

significantly smaller in size but the retail market is still significant compared to

other countries. The returns in the Indian market are also considered more attractive

than those in the Chinese market. More importantly, the foreign banks will be able

to own 74 per cent of a local bank - providing them with the required management

control to steer strategy. India may not be as big a market as China but the potential

7

avenue for growth, better return as well as strategic control would make India a very

attractive retail banking market when it opens up.

1.3.2 Supply Side

Factors like negotiable instrument, money and credit determine the supply

side of retail banking services. An optimum service delivery by the retail bank leads

to efficient functioning. It was only a few drivers that would influence the opening

up of the retail bank markets. The enabling supply side drivers include:

� Minimizing Systematic Risk

Healthy and robust financial system, with adequate capital to support growth

and manage the risk, is essential. For instance, the regulator is keen for all banks to

have a capital base of Rs. 3,000 million going forward and many old private sector

retail banks do not meet these requirements.

� Increasing Retail Banking Penetration

Increasing penetration of bank products, service geographies and customer

segments that are under-penetrated, are the essentials here. India may have more

than 90 scheduled commercial banks with nearly 70,000 branches, but this does not

indicate to the strength of penetration of banking services. RBI Bulletin-2006

estimates that, there are only 250 million accounts for more than a billion people,

without factoring multiple accounts with the same individual. This evidently shows

that the banking sector is under-penetrated. There is need to bring more people and

businesses under the organized financing umbrella.

1.3.3 Public Sector Banks

Advantages

1. These banks have old set up and established, therefore, capital assets are

more.

2. Rural penetration is higher.

3. Higher strength of employees.

8

Disadvantages

1. Less technology savvy.

2. Non Performing Assets are much higher.

3. Change sensitive due to high involvement of government.

1.3.4 Private Sector Banks

Advantages

1. State of art technology for faster processing.

2. Employee intervention in policies is less with much customer based

dynamism.

3. Openness in the global economy which led to the deregulation of banks

thereby increasing the freedom to operate.

4. Less Non Performing Assets.

Disadvantages

1. Less intensity in rural market.

2. Less number of branches across the entire market.

3. Service cost is relatively high.

1.3.5 Foreign Banks

Advantages

1. Vast capital resources.

2. High-end technology for processing and networking.

3. Global integration of operations.

Disadvantages

1. Focus on high income segments.

2. Operations are concentrated on Metropolises and Tier I cities.

3. Entry barrier reduces penetration.

9

1.3.6 Retail Banking

Advantages

Retail banking has inherent advantages, outweighing certain disadvantages.

Advantages are analyzed from the angle of resources and assets.

Resource Side

� Retail deposits are stable and constitute core deposits.

� They are interest-insensitive and less bargaining for additional interest.

� They constitute low cost funds for the banks.

� Effective customer relationship management with retail customers would

build a strong customer base.

� Retail banking increases subsidiary businesses of the banks.

Assets Side

� Retail banking results in better yields and improved bottom line for a bank.

� Retail segment is a good avenue for funds deployment.

� Consumer loans are presumed to be of lower risk and Non Performing Assets

perception.

� Helps economic revival of the nation through increased production activity.

� Improves lifestyle and fulfils aspirations of the people through affordable

credit.

� Innovative product development credit.

� Retail banking involves minimum marketing efforts in a demand–driven

economy.

� Diversified portfolio due to huge customer base enables banks to reduce their

dependence on few or single borrower.

� Banks can earn good profits by providing non-fund based or fee based

services without deploying their funds.

Disadvantages

� Designing own and new financial products is very costly and time

consuming for the bank.

10

� Customers now-a-days prefer internet banking to branch banking. The banks

that are slow in introducing technology-based products are finding it difficult

to retain the customers who wish to opt for internet banking.

� Customers are attracted towards other financial products like mutual funds.

� Though banks are investing heavily in technology, they are not able to

exploit the same to the full extent.

� A major disadvantage is monitoring and follows up of huge volume of loan

accounts inducing banks to spend heavily in human resource department.

� Long term loans like housing loan due to its long repayment term in the

absence of proper follow-up, can become Non Performing Assets.

� The amount borrowed by a single customer is very low as compared to

wholesale banking. This does not allow banks to exploit the advantage of

earning huge profits from single customer as in case of wholesale banking.

1.4 Retail Banks in Marketing Approach

1.4.1 Need Based System

� All round increase in economic activity.

� Increase in the purchasing power. The rural areas have large purchasing

power at their disposal and this is an opportunity to market retail banking.

� India has 2,000 million households and 400 million middle class population

of whom more than 90 per cent of the savings come from the household

sector. Falling interest rates have resulted in a shift. “Now People Want To

Save Less and Spend More.”

� Nuclear family concept is gaining much importance, which may lead to large

savings, and a large number of banking services which are increasing, day-

by-day.

� Tax benefits are available, for example, in case of housing loans and the

borrower can avail tax benefits for the loan repayment and the interest

charged for the loan.

11

1.4.2 Competition

With the entry of private and foreign banks, there is an intense competition

in the banking industry. This competition has led to advancement in terms of

services, technology and products. Every player in the banking industry is adopting

innovative strategies from time to time for holding their customer base. CRM

becomes the competence area for the bank to distinguish from their competitors.

1.4.3 Market Segmentation

In order to serve the customers in a better way, they have to be profiled

based on their expectations. A customized product and service is derived by sensing

the expectations of the customers. The segmentation is done based on income level

of the customer.

Retail bank markets can be segmented on the following characteristics.

a) Psychographic;

b) Geographic;

c) Demographic; and

d) Behaviouristic.

a) Psychographic Segmentation

The psychographic segmentation groups retail bank customers according to

their lifestyle. Activities, interests and opinion (AIO) surveys are a tool for

measuring lifestyle. Some psychographic variables include: Activities, Interests,

Opinions, Attitudes and Values.

b) Geographic Segmentation

The following are some examples of geographic variables often used in retail

bank segmentation.

12

� Region: by continent, country, state, or even neighborhood;

� Size of metropolitan area: segmented according to size of population;

� Population density: often classified as urban, suburban, or rural; and

� Climate: according to weather patterns common to certain geographic

regions.

c) Demographic Segmentation

The demographic retail bank segmentation variables include age, gender,

family size family lifecycle, income, occupation, education, ethnicity, nationality,

religion and social class. Many of these variables have standard categories for their

values. For example, family life cycle often is expressed as bachelor, married with

no children (DINKS: Double Income, No Kids), full-nest, empty-nest, or solitary

survivor. Some of these categories have several stages, for example, full-nest I, II,

or III depending on the age of the children.

d) Behavioralistic Segmentation

Behavioral segmentation is based on retail bank customer behavior towards

retail products. Some behavioralistic variables include:

� Benefits sought;

� Usage rate;

� Brand loyalty;

� User status: potential, first-time, regular;

� Readiness to buy; and

� Occasions: holidays and events that stimulate purchases.

Behavioral segmentation has the advantage of using variables that are closely

related to the product itself. It is a fairly direct starting point for market

segmentation.

13

1.4.4 Strategies for Increasing Retail Banking Business

� Constant product innovation to match requirements of customer

segments

The customer database available with the banks is the best source of their

demographic and financial information and can be used by the banks for targeting

certain customer segments for new or modified product. The banks should come out

with new products in the area of securities, mutual funds and insurance.

� Quality service and quickness in delivery

As most of the banks are offering retail products of similar nature, the

customers can easily switchover to the one which offers better services at

comparatively lower costs. The quality of services that banks offer and the

experience that clients have matter the most. Hence, to retain the customers, banks

have to come out with competitive products satisfying the desires of the customers

at the click of a button.

� Introduction of new delivery channels

Retail customers like to interface with their bank through multiple channels.

Therefore, banks should try to give high quality services across all service channels

like branches, Internet, and ATMs.

� Tapping of unexploited potential and increasing the volume of

business

This will compensate for the thin margins. The Indian retail banking market

still remains largely untapped giving scope for growth to the banks and financial

institutions. With changing psyche of Indian consumers, who are now comfortable

with the idea of availing loans for their personal needs, banks have tremendous

potential in this segment. Marketing departments of the banks should be geared up

and special training imparted to them so that banks are successful in acquiring more

and more of retail business in the market.

� Infrastructure outsourcing

This will help in lowering the cost of service channels combined with quality

and quickness.

14

� Profound market research

Banks may go for profound market research, which will help them in

knowing what their competitors are offering to their clients. This will enable them

to have an edge over their competitors and increase their share in retail banking pie,

by offering better products and services.

� Cross-selling of products

Public Sector Banks have an added advantage of having a wide network of

branches, which gives them an opportunity to sell third-party products through these

branches.

� Tie-up arrangements

Public Sector Banks with regional concentration can reap the benefit of

reaching customers across the country by entering into strategic alliance with other

such banks having intensive presence in other regions. In the present regime of

falling interest and stiff competition, banks are aware that it is finally the retail

banking which will enable them to hold the head above water. Hence, banks should

make all out efforts to boost the retail banking by recognizing the needs of the

customers. It is essential that banks would be imaginative in predicting the

customers' expectations in the ever-changing tastes and environments. It is the

innovative and competitive products coupled with high quality care for clients will

only hold the key to success in this area. In short, bankers have to run very fast even

to stay where they are now. It is the survival of the fastest now and not only survival

of the fittest.

1.4.5 CRM is the Best

In the highly competitive and dynamic market landscape, a key differentiator

for retail banks is the way their customers' view them: how satisfied / dissatisfied

they are from their respective bank services - in short, how loyal the customers are

towards the banks. It is found in a research that the cost of acquiring a new

customer is over six times the cost of retaining an existing customer. Add to this the

fact that the competition is always on lookout to wean away your customers; one

cannot be complacent as far as customer satisfaction is concerned. Apart from

15

enhancing the customer satisfaction, the adoption of CRM philosophy and its tool

leads to the following benefits:

� Real-time forecasting for true sales pipeline visibility and more accurate

decisions owing to the ability to predict what all products the customers are

expected to purchase over a period of time;

� Providing an integrated view of customers or prospects across companies

and channels, which makes cross selling and up selling easier? Research

shows that the more products a customer buys from a firm, the less likely

that person is to leave it. Cross selling to existing customers produces

incremental revenue at little cost, increases customer loyalty and improves

underwriting accuracy;

� Increased productivity of managerial executives, sales and customer service

staff;

� Reduced training costs;

� Streamlining of the business process across different functions aligned to the

best practices;

� Giving customers the ability to transact/interact through multiple channels

(phone).

� Turn around Time (TAT) for closing leads, opening accounts and closing

service requests can be drastically improved.

� Campaign definition and performance tracking on a periodic basis (for

different financial programs/promotions).

1.5 Customer Relationship Management

The processes of liberalization and globalization have unleashed competitive

forces transforming the sellers’ market into the buyers’ market, thus challenging the

retail banks to make customer communications truly interactive. The concept of

CRM is moving away from one to many mass communication philosophies to more

16

individualized, one to one communication. Real time automated marketing

communication in relation to the effective, personalized sales and services will

make the retail bank’s communications to the customer relevant and timely.

CRM can be defined as “activities that an enterprise performs to identify,

select, acquire, develop and retain increasingly loyal and profitable customers.

CRM integrates sales, marketing and service functions through business process

automation, technology solutions and information resources to maximize each

customer contact. CRM facilitates relationship among retail banks, customers and

employees”.

CRM aims at focusing all the bank’s activities towards developing long-term

collaborative relationship with customers to develop them as lifetime customers.

Retaining the customers through developing long term relationships is an issue

which is of increasing importance for all businesses, and is arguably of particular

relevance to services such as retail banking in which, building and maintaining a

long term customer relationship is seen as central to improve bank’s performance.

Research done over the years has clearly revealed the importance and the role of

service quality in contributing to a bank’s ability to retain the loyal customers and

improved bank performance.

CRM is very wide, encompassing for retail banking different areas like

customer satisfaction, customer loyalty, service quality, relationship quality and

market orientation. Among the different areas, there is a direct positive relationship

between service qualities and successful customer relationships; that is, one of the

determinants of the success of the relationship marketing strategies of a firm is how

the customer perceives the resulting service quality. This is because the perceived

service quality is a key driver of the perceived value. The perceived value

determines the strength of bank customer relationship.

Figure 2.2 explains the fact that a customer first considers the quality of the

product offered to start off his dealings with retail banks. Secondly, the customer

develops a relationship with the retail banks based on the quality of services

17

offered, which the bank exhibits through its performance, serviceability,

conformance, aesthetics and quickness of response.

Figure 2.2: Customer Relationship Management and Service Quality

Source: Aldaigan A H and Buttle F A (2002)[2]

When the quality of the services offered by the retail bank meets or exceeds

the expectations of the customer, the bond between the bank and customer

strengthens thereby improving the quality of relationship (which includes trust,

commitment and intimacy) between them. This helps the bank to progress towards

the ultimate goal of CRM (that is, acquiring a customer and maintaining him as a

life time customer).

Activities that Constitute Customer Relationship Management are:

1. Establishing and maintaining a customer information file;

2. Planning customer contact programs;

3. Analyzing informal customer feed back;

4. Conducting customer satisfaction surveys;

5. Managing communication programs;

6. Hosting special events or programs for customers; and

18

7. Auditing and reclaiming lost customers.

Figure 2.3 explains the creation of new customer base, focusing on the

efficiency of functional departments of a retail bank. The major parameters coded

for efficiency are customer driven vision, mission, rewards, appraisals, goals,

strategy and values.

Figure 2.3: CRM – Creating Customer Focus

Source: Barnes, J. (1994), [3]

Benefits of Customer Relationship Management

For Banks: There are

� increased revenues and reduced costs;

� decreased marketing and promotion expenses;

� profitable cross selling and up selling opportunities; and

� Increased customer satisfaction and responsiveness.

19

For Customers: There are

� receipt of greater value;

� a sense of well being and quality of life;

� reduction in consumer stress;

� consistent level of quality service; and

� Satisfaction of specific needs.

Nowadays, CRM faces increasing customer expectations and customer

relationship complexity, which is caused not only by the new, continuously

evolving technology, but also because of the wide range of choices available for the

customer in the retail banking and faster development of new products and services

by the competitors. Therefore, adoption of CRM by the retail banks becomes

inevitable for the survival as well as long term prosperity in the highly competitive

scenario.

1.6 Retail Banks at Kancheepuram

Kancheepuram district was an ancient division of Tamil country comprising

roughly the present districts of Kancheepuram, Chennai, Tiruvallur, Vellore

and Tiruvannamalai. The capital of Thondaimandalam was Kancheepuram. The

then Chengalpattu-MGR district was split into two as Kancheepuram and

Tiruvallur districts from 01.07.1997. On the same day, Tirukalukundram taluk was

demarcated by bifurcating Chengalpattu taluk. Thus the new Kancheepuram

District is formed from 01.07.1997 comprising of 10 taluks: Kancheepuram,

Sriperumbudur, Uthiramerur, Chengalpattu, Tambaram, Tirukalukundram,

Madrandakam and Cheyyur.

20

Figure 2.4: Kancheepuram District in Tamilnadu

1.6.1 Industrial Scenario in Kancheepuram

Kancheepuram is one of the largest industrial areas of Tamil Nadu and

has the pride in being the home to vital production bases of international industrial

groups like the Ford, Hyundai, Saint Gobain as well as many export houses in and

around the Madras Export Processing Zone. The reason for the industries to set up

their factories can be broadly classified into two: one, location preference and the

other, social preference.

21

Location Preference

The following are the reasons for location preferences:

� Proximity to the Chennai urban area;

� Proximity to an international airport and two sea ports at Chennai and

Ennore;

� Excellent connectivity through the world class East Coast Road and

upcoming upgraded NH4 and NH45;

� Good industrial parks at Maraimalainagar, Alanthur, Irungattukottai,

Sriperumbudur, Siruseri, Oragadam and Paranur; and

� Reasonably good power quality with the North Madras Power Station

and Kalpakkam Atomic Power Station, located in and around the

district.

Social Preference

The following are the reasons for social preferences:

� Moderate cost of land;

� Low Cost of Living; and

� Availability of skilled and highly qualified manpower at Chennai and

suburbs with IIT, Chennai and Anna University at a stone’s throw.

Product Range

The product range from factories in Kancheepuram extends to the following

range:

� Cars (Hyundai of S. Korea and Ford Motors of the USA);

� Phones (Nokia , Motorola);

22

� Auto parts (Sona Steering, Rane-TRW restraint systems, DAEWHA,

Brakes India, and AUDCO);

� Float Glass (Saint Gobain of France);

� Air conditioners (National of Japan);

� Leather Industries in Pallavaram; and

� Information Technology Industries on the IT Highway (TCS,

Cognizant, Infosys, American Megatrends, and WIPRO InfoTech).

The presence of various industries enhances the employability and income

of the employees, which lead to the need for retail banking services at

Kancheepuram District.

1.6.2 Retail Banks in Kancheepuram

The city is a home to two large nationalized banks, namely, the Indian bank

and State bank of India. All other nationalized banks and most of the foreign and

private banks have their branches in the city. The city’s banking needs are currently

served by 30 retail banks in Kancheepuram city. The break up is given below:

Table 1.1: Number of Banks in Kancheepuram District

Name of the Retail Bank Number of Banks

SBI and its associates 7

Nationalized banks 12

Private banks 9

Foreign banks 2

Total 30

Source: Questionnaire Survey May - 2010

23

Table 1.1 shows, the information about the number of retail banks in

kancheepuram district. There are 7 SBI and its associate banks, 12 nationalized

banks, 9 private banks and 2 foreign banks are taken for the research study.

1.7 Statement of the Problem

The intensity of competition in banking industry is bound to grow in the

years to come which in turn could make banking operations more challenging and

complex. A paradigm shift is noticeable in the banking industry in India. Such a

shift reflects in terms of number of banks, Volume of Business in banking as well as

nature of business operations. Bankers in general have moved a long way from

mere financial intermediaries to full-fledged financial institutions.

In the context of competing bankers who are performing with almost

undifferentiated services, for almost equal prices; the customers of one bank are left

with multiple options to move over to some other banks in search of better services,

with little or no barrier of switch over from one bank to another.

Bankers have to necessarily perform their banking operations with the

likelihood risk of the customer making a bank switches over at any given point of

time that might result in decline in revenue or loss of revenue on the whole.

To prevent or minimize this possibility of customer deflection; bankers have

to come out with customer centric strategic decision. Obviously the conditions draw

the attention in evolving meaningful CRM which would provide a platform for not

only retaining existing customers but also to expand the customer base by attracting

additional customers.

In a rapidly scaling up retail banking industry, the major issues are to hold

back the existing customers from migrating towards competitors and in acquiring

new customers. In retail banking, product development is limited to the government

regulations henceforth the other major challenge is to have product differentiation.

The service/product mix offered by the banks, the service delivery system

has drastically changed, thanks to the relentless improvement in the technology and

also in view of the phenomenal increase in the expectation of bank customers.

24

It is critical to identify the customer expectation, which is an influencing

element in retaining and increasing the customer base. The complexity in building

relationship strategies for retail banks needs clear classification of customers’

perceived service quality variables and the variables that need to be inducted to the

employees serving the customers.

CRM in retail banking gives rise to a number of issues that includes

influences contributing towards relationship and influences leading to dissolution of

relationship. In the retail banking business, there is complexity in measuring the

relationship quality as it is influenced by the value proposition of the products

offered and the quality of services delivered to the customer.

The perception factors that influences relationship differs between the bank

customers and bank Employees. A meaningful understanding of those influences

would obviously contribute towards arriving at profitable relationship building

strategies and misunderstanding of the influences leading to inappropriate

relationship strategies. Building a strategic model for retail banking industry, by

classifying and identifying service quality variables, is considered as a significant

problem for the study with the following objectives.

1.8 Statement of the Objectives

The broad objective of the study is to understand the CRM practices of retail

banks and to critically analyze the perceived service quality of the customers and

employees of retail banks in Kancheepuram district during the period 2006-11.

1.8.1 The Specific Objectives

Based on the above stated broad objective, the specific objectives are,

� To develop a conceptual framework for CRM Model, applicable to retail

banks.

� To assess the External and Internal Service quality perception with

respective to retail banks.

25

� To analyze the influence of service quality to customer behavior with

respective to retail banks.

� To identify the key variables that contributes to relationship building in

the order of their relative significance.

� To identify the customer relationship strategies that can be adopted by the

banks for better delivery of the services to their customers.

� To find out the customer satisfactions level and its influence in building

the customer loyalty to achieve a sustained market share and profit.

1.9 Statement of Hypotheses

1.9.1: Bank Customer

H1: There is no significant relationship between educational qualifications

of the customers and expectations of guidance from bank employees.

H2: There is no significant relationship between employment status of

customer and the service quality perception level of the customer.

H3: There is no significant relationship between educational qualifications

of the customers and the opinion on the external service quality

provided by the banks.

H4: There is no significant relationship between the level of satisfaction of

bank – customer relationships and years of availing the services of the

banks.

H5: There is no significant relationship between income level and reasons

for a customer to switch over from one bank to another bank.

H6: There is no significant relationship between terms of customer

relationship with the bank and the reasons for a customer to switch

over from one bank to another bank.

H7: There is no significant relationship between the intent of the customer

to switch over to another bank and the banking transaction.

26

1.9.2 Bank Employee

H1: There is no significant relationship between internal service quality

dimensions provided by the bank and level of customer satisfaction.

H2: There is no significant relationship between internal service quality

dimensions provided by the bank and the reasons for a customer to

select a bank.

H3: There is no significant relationship between presence of CRM

package in the bank and the availability of mechanism to understand

the level of customer satisfaction.

H4: There is no significant relationship between the factors influencing

banker customer relationship and the major reason for a customer to

select the bank.

H5: There is no significant relationship between the factors influencing

banker customer relationship and nature of complaints received by the

bank.

H6: There is no significant difference between the reasons for a customer

leaving the bank and the availability of mechanism to understand the

level of customer satisfaction.

1.10 Scope of the Study

The research study gives a clear picture about the practices of Customer

Relationship Management in Retail Banking. It also throws light on the various

benefits that the banks get from the proper implementation of the CRM and the

limitations inherent in the same.

The bankers by following the relationship practices can develop a base of

loyal customers and by up selling and cross-selling can reduce their servicing cost

and thereby earn more profits.

27

This study is also aimed at retaining customers by building relationship and

increasing their contribution. On this account the study throws light on the various

variables contributing to the enhancement of service quality

The study would be beneficial in understanding what the customer expect

from their banks. Also, it provides ample information on various strategies that are

very essential for CRM in retail banks.

1.11 Limitations of the Study

The findings of the study are purely an outcome of the responses given by

the sample respondents (both customers and officials of banks) of the six banks

considered for the study. The study is made primarily based on responses from the

two foreign banks, two nationalized banks and two private banks operating in

Kancheepuram. The customer responses are subject to personal biases and there are

undoubtedly such biases. The study has been made in the city of Kancheepuram

alone. As such generalizations cannot be made from the study and there is need for

enough care and caution in so doing using the findings of the study.

1.12 Organisation of Chapters

Focusing on the main objective “study on customer relationship management in

retail banks with reference to kancheepuram district, tamilnadu”, the thesis is

organized around seven chapters.

Chapter 1 Introduction to Customer Relationship Management

This chapter comprises of introductory information on customer relationship

management, kancheepuram and retail banking profile, CRM – as a component of

retail banking system, statement of the problem, objectives of the research,

statement of the hypothesis, scope, importance and limitation of the study and

organization of the chapters

Chapter 2 Presented in Growths and Development of Retail Banks

This Chapter provides the details regarding retail banking benefits &Scope,

Opportunities in Retail Banking, Economic Growth and Place of Bank, Problems in

28

Retail Banking, Development in Retail Banking, Indian Customer’s Attitude and

Behaviour Structural Change, Summary.

Chapter 3 Review of Literature

presented in a detailed introduction on the review of existing literature, Changing

Banking Environment, Evolution of CRM, CRM - A Theoretical Perspective,

Results of Various Research Studies , Customer Relationship Management and

Service Quality,.

Chapter 4 Research Model

This Chapter provides the details regarding Introduction about Research Mode, the

CRM Model for Retail Bank, Conclusion

Chapter 5 Research Methodology

This chapter of the thesis throws light on the Area of the Study-Kancheepuram,

Population, Sampling Procedure, Data Sources, Data Collection Tools, Pilot Study,

The Sample, Fieldwork, and Difficulties Encountered during the Phase of Data

Collection, Tools for Analysis.

Chapter 6 Data Analysis and Interpretation

This chapter comprises of two parts, the first part includes Retail bank customer’s

second part Retail bank employee taken for the study.

Further by employing extraction techniques, Chi-Square Test, Factor analysis,

Anova Test, T-Test, and Regression Analysis.

Chapter 7: Findings, Suggestions and Conclusion

In the last chapter of the thesis, provides the findings of the research report

and number of suitable suggestions to all concerned with retail banking towards the

improvement of Bank – Customer Relationships, followed by a the researcher has

given a reasonable conclusion of the study