RELATIONSHIPS MANAGEMENT IN COMMERCIAL BANKS

 

 

Lecturer DANIELA HARANGUS, PhD

“TIBISCUS” University, Timisoara, Romania

 

Abstract

 

The new relational strategy with customers, which was introduced in the 20th century bank management has as a primary purpose the maintaining of bank credibility and financial stability, the increase of bank prestige and performance.

     In the bank management a new customer relational strategy was established. This regards mainly the aspects: the approach of an efficient communication, cooperation and creativity in the bank-customer relationship, the development of an organizational culture, etc.

     The banks, as financial entities, also activate in a global environment, in a new world, a world in which the management of customer relationships will itself achieve new dimensions.

 

Key words: customer relationship management, commercial banks, new strategy.

 

Introduction

Over the past two decades, the literature has argued that businesses across all sectors will have to change their approach to marketing, which should now be carried out through relationships, networks, and interactions. The customer market is one of the many different markets that businesses need to consider – with research suggesting that customer retention leads to increased market share and bigger profits. Although the promises of how customer relationship management (CRM) can improve the performance of a business are many, the practical guidelines on how to design and implement CRM successfully are few, and practitioners have been struggling because of that. The context of marketing is changing dramatically with regard to physical distance, time, markets, and competition, and is leading to fundamental changes in the way that marketing is being practiced. Customer Relationship Management is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer. The bank moved from a mass orientated vision, minimizing costs and maximizing revenues, to a consumer orientated vision, developing and retaining customer relationships. The bank defines CRM as a marketing strategy that allows it to:

. Focus on profitable clients through discriminated segmentation.

. Understand different combinations of clients, products, and volumes. Indeed, information about “who buys what and how much” enables the bank to have a commercial approach based on the client and no longer solely on the product.

. Set-up a mix of distribution channels with standardized or specialized services according to the individual client’s importance for the bank.

 

Problem definition

In the bank management of the 21st century a new customer relational strategy was established. This regards mainly the following aspects:

1.The approach of a new philosophy in the customer- bank relation, a modern concept which emphasizes the implementation of the team spirit and the respecting of some principles concerning: collaboration and loyalty, business partnership, the management of opportunities portfolio, etc.

2. The development of an organizational culture, which would support a customer relational strategy, adequate for their specificity.

3. The knowledge and understanding of customer commercial and financial activity, so as the bank has the capacity of offering viable solutions, counseling and consulting of a high professionalism to its clients.

4. The re-dimensioning of the importance of customer satisfaction, which is placed at the same level with the relationship profitability. This strategy makes it compulsory for the coordination of the offered services unfolding process on the part of the bank.

5. The approach of an efficient communication, active cooperation and creativity in the bank- customer relationship. In this direction the new relational strategy regarding customers concerns, the personalizing of relationships and the consolidation of trust in the bank they have chosen for their business.

6. The creative combination of customer needs with a daily briefing regarding bank products and the market. Also, depending on the bank policy, the portfolio structure and the bank services shall be re-dimensioned depending on the customer needs, but in the same time the market development.

7. The planning of the customer- bank relationship represents an important dimension of the new customer relation strategy which is promoted by the banks. The development plan of customer relations may be developed yearly by the banks, containing mainly the list of new clients that are to be approached, the meeting program, the negotiation tactics, the management of client needs, the list of unfolding transactions, the estimated profitability, etc.

In the practice of great commercial banks this planning of customer- bank relationships is mainly realized within the “corporate banking” activity, being the responsibility and under the control of the bank relationship manager. The report of the development plan of customer relationships is usually made on a monthly basis, with the description of the bank objectives that were achieved.

In the client- bank relationship, another very important aspect regarding the bank is the knowledge and management of client information.

These informations about the client are mainly about the following aspects:

-         the juridical statute of the customer: legal or physical person. If the client is a legal person the bank is interested in the legal framework of customer commercial activity and his main activity object (form the statute or company contract for the juridical person);

-         the organizational structure, the shareholders structure or the company owners and its executive managers;

-         the activity branch to which the client belongs (industry, commerce, buildings, transportation, agriculture) and the performance registered within that sector of activity;

-         the persons who hold the company patrimony, their quality, contact persons and their telephone numbers for contacting purposes;

-         main clients and suppliers, and competitors;

-         the competition within the client’s sector of activity and the competition performances;

-         the financial and business performances on the part of the bank customer;

-         the customer’s management strategy;

-         the customer’s relationship with other banks, regarding chiefly his attitude and behavior as a debtor;

-         other information connected to the customer, obtained by the bank from various sources (from the press and mass-media from competitors, etc).

All these information about the customer help the bank in sketching a customer relational strategy and in the establishing of the bank’s competitive position in regard to the customer.

All these information about the customer help the bank in sketching a customer relational strategy and in the establishing of the bank’s competitive position in regard to the customer.

The new relational strategy with customers, which was introduced in the 20th century bank management, has as a primary purpose the maintaining of bank credibility and financial stability, the increase of bank prestige and its performance.

A large portion of front-office activities in the commercial banks are directed towards the clientele. The banks operate banking transactions in the account in the name of their customers. This means the dimensions and quality of customer relationships must be very important for any banking institution.

 

Results

      The bank’s interactions with its clients should provide transparent information, which can then be used by the “back office” for better marketing and peripheral services. The important elements top be taken into account are: clients’ attitude and needs; socio-demographics; actual and potential profitability; and behaviour in terms of distribution channel use and products.

Implementing the CRM strategy has not been an easy and fast procedure. Indeed, change management needs to be present at both organisational and personnel level within the bank. Great importance has therefore been put on the human resources, and the general understanding of the organisation’s new mission.

The major steps within change management are:

. establish the needs for change;

. create and communicate a clear vision of change;

. acquire a solid engagement of the top management;

. include the employees all along the change processes; and

. establish performance measurement procedures.

In their relations with clients bank managers must be concerned about the implementation of priorities regarding:

 

1.     The good organization of front office activities and all banking activities connected to customers.

 

In this respect the foreign banks in the Romanian market have implemented bank branch models in which the environment and flux of banking activities connected to customers are well thought and have as a primary goal the satisfying of the clientele needs. The first such modern branches were implemented in the territory by Raiffeisen Bank, their example being afterwards followed by other commercial banks in the Romanian banking system.

 

2.     The good service for customers.

 

This goal that any bank aspires to, means a series of problems for management concerning:

-         the structuring of waiting time at the front office;

-         operability, professionalism and clarity in the operations solicited by customers;

-         the initiation of a dialogue and addressability that is accessible for the client. These must be implemented depending on the cultural level, the training and degree of understanding on the part of the customer;

-         the personalizing of customer relationships, depending on the specific customer. Bank management must employ trained and oriented personnel, both in what the collaboration with traditional clients is concerned and in the cooperation with sophisticated clients (large corporations).

 

3.     Offering some bank consulting and counseling services of a high professionalism, which to fortify the client trust in the bank.

 

The client must see in the bank a business partner, in relation to which they both have advantages. The bank- client partnership must be fundamental on:

-         mutual trust;

-         mutual advantages;

-         efficient cooperation and communication;

-         confidentiality;

-         respecting the moral and ethical principles specific in the bank business involving customers.

In the banking practice, the bank relationship managers who permanently work with the bank customers must be attentive to the satisfying of customer needs and their expectations, the customers beginning to be more and more sophisticated.

The performances of bank management in relationships with the customers lead to the increase of bank prestige and credibility. Beyond the performance, what is important in bank management is the building of a solid relationship with the customers.

 

Summary

Another challenge for the bank is to change some of its clients’ behaviour towards the least expensive distribution channel, the internet. However, changing a behaviour implies changing underlying attitudes, which is clearly not an easy task. The bank is thus facing major challenges for the years to come.

More than that, banks are confronted with clients who have no moral or material guarantees. They must have a clear strategy for rejecting this type of customers (loud, critical, willing to initiate conflicts, etc). For this type of clients the bank management must have an approach plan and a plan for conflict solution, a plan that is known by the front office personnel, who must diplomatically solve any incident.

In order to solve complex and diverse issues regarding their clientele the large commercial banks organized special departments for customer working, such as: customer operations compartments, consulting and counseling compartments for the customers- retail and corporate, etc. also these banks organize permanent training for the sales personnel from the front office, personnel who have a permanent contact with the bank customers and must know the product and service portfolio the bank has to offer to its customers.

The management of customer relationships also means attracting, retaining and satisfying customers through a personalized marketing. The banks realize the sales of products and services for the customers through the web, call centers or directly. Under these conditions the management of customer relationships may also be realized in the Internet space, a space which configures the new economy, with new rules and laws, the Internet economy.

This new dimension of customer relationship management is also materialized in the bank management of online payments in the virtual world. The commissions of the banks in the virtual world for these online transactions are actually comfort taxes.

The banks, as financial entities, also activate in a global environment.

Globalization will bring along this new online economic world, the so- called CIBER economics, a world in which the management of customer relationships will itself achieve new dimensions and valence.

 

Sources

1.     Lindgreen, A., Antioca, M. (2005): Customer relationship management: the case

of an European Bank, Marketing Intelligence & Planning, vol. 23, no.2, p.136-154.

     2.  Foss, B. and Stone, M. (2001), Successful Customer Relationship Marketing: New thinking, New Strategies, New Tools for Getting Closer to Your Customers, Kogan Page, London.

     3.   Landberg, S. (2001), “Connecting with the customer”, Best’s Review, Vol. 101, No. 9, p. 102.

     4.  McKenzie, R. (2001), The Relationship-Based Enterprise: Powering Business Success Through Customer Relationship Management, McGraw-Hill, Ryerson, Toronto.