1.

Introduction The current study explores the association between deployment of customer relationship management (CRM) best practices and loyalty of profitable customers in scheduled commercial banks of India with respect to retail banking segment. This is important because a strong positive association will act as a significant motivator to organizations for making larger investments towards deployment of CRM best practices. On the other hand, a weak association will fail to provide necessary encouragement to the same organizations for CRM deployment. The paper begins with an introduction to Indian banking industry and delineates the scope of the study. It is followed by a literature review on CRM best practices as well as customer loyalty. The methodology used is discussed in detail followed by the findings and implications.

1.1. Indian Banking Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India which started in 1786, and the Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to

speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Puducherry, then a French colony, followed. HSBCestablished itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda,Canara Bank and Central Bank of India.

The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking". During the First World War (1914-1918) through the end of the Second World War (1939-1945), and two years thereafter until the independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following table: The total number of public sector banks (PSBs) stands at 28. In the category of private banks (PBs), there are 16 banks classified as old private banks (OPBs) which were existing prior to the liberalization of the banking sector. The new private banks (NPBs) were born after 1991-92 with the opening up of this sector to private players. The total number of NPBs, as of 1st May, 2007, is 8. Plus, there are 29 foreign banks (FBs), most of which are limited to the metropolitan cities (RBI, 2006). In all, the total number of scheduled commercial banks as of 1st May, 2007 is 81.

1.2. Retail Banking Retail banking refers to the dealing of commercial banks with individual customers, both on liabilities and assets sides of the balance sheet (Gopinath, 2005b). Similarly, Sood (2003) defines retail banking as catering to the multiple banking requirements of individuals relating to deposits, advances and associated services Types of banking

Commercial bank has two meanings:

Commercial bank is the term used for a normal bank to distinguish it from an investment bank. (After the great depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital markets activities. This separation is no longer mandatory.)

Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking). It is the most successful department of banking.

Community development bank are regulated banks that provide financial services and credit to underserved markets or populations.

Private banks manage the assets of high net worth individuals.

Offshore banks are banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.

Savings banks accept savings deposits.

Postal savings banks are savings banks associated with national postal systems.

Retail Banking services are also termed as Personal Banking services

1.3. Scope of Study

The current study focuses exclusively on the retail banking segment of scheduled commercial banks. However, within scheduled commercial banks, the regional rural banks are not being covered. These banks are expected to mobilize resources from rural areas and play a significant role in developing agriculture and rural economy (RBI, 2006). As it is understood today, retail banking is largely an urban phenomenon with a clear objective of increasing the banks bottom line (see Gopinath, 2005a). It is very apparent that the regional rural banks are outside the ambit of retail banking.

2. Literature Review Customer relationship management (CRM) is a widely-implemented strategy for managing a companys interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processesprincipally sales activities, but also those for marketing, customer service, and technical support. The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. Customer relationship management describes a company-wide business strategy including customerinterface departments as well as other departments.

Phases The three phases in which CRM support the relationship between a business and its customers are to:

Acquire: CRM can help a business acquire new customers through contact management, selling, and fulfillment.[3]

Enhance: web-enabled CRM combined with customer service tools offers customers service from a team of sales and service specialists, which offers customers the convenience of onestop shopping.[3]

Retain: CRM software and databases enable a business to identify and reward its loyal customers and further develop its targeted marketing and relationship marketing initiatives.

Challenges Tools and workflows can be complex, especially for large businesses. Previously these tools were generally limited to contact management: monitoring and recording interactions and communications. Software solutions then expanded to embrace deal tracking, territories, opportunities, and at the sales pipeline itself. Next came the advent of tools for other clientinterface business functions, as described below. These tools have been, and still are, offered as on-premises software that companies purchase and run on their own IT infrastructure. Often, implementations are fragmentedisolated initiatives by individual departments to address their own needs. Systems that start disunited usually stay that way: siloed thinking and decision processes frequently lead to separate and incompatible systems, and dysfunctional processes. Business reputation has become a growing challenge. The outcome of internal fragmentation that is observed and commented upon by customers is now visible to the rest of the world in the era of the social customer, where in the past, only employees or partners were aware of it. Addressing the fragmentation requires a shift in philosophy and mindset within an organization so that everyone considers the impact to the customer of policy, decisions and actions. Human response at all levels of the organization can affect the customer experience for good or ill. Even one unhappy customer can deliver a body blow to a business.[5]

Types Sales force automation Sales force automation (SFA) involves using software to streamline all phases of the sales process, minimizing the time that sales representatives need to spend on each phase. This allows sales representatives to pursue more clients in a shorter amount of time than would otherwise be possible. At the heart of SFA is a contact management system for tracking and recording every stage in the sales process for each prospective client, from initial contact to final disposition. Many SFA applications also include insights into opportunities, territories, sales forecasts and workflow automation, quote generation, and product knowledge. Modules for Web 2.0 ecommerce and pricing are new, emerging interests in SFA. Marketing CRM systems for marketing help the enterprise identify and target potential clients and generate leads for the sales team. A key marketing capability is tracking and measuring multichannel campaigns, including email, search, social media, telephone and direct mail. Metrics monitored include clicks, responses, leads, deals, and revenue. This has been superseded by marketing automation and Prospect Relationship Management (PRM) solutions which track customer behaviour and nurture them from first contact to sale, often cutting out the active sales process altogether. Customer service and support Recognizing that service is an important factor in attracting and retaining customers, organizations are increasingly turning to technology to help them improve their clients experience while aiming to increase efficiency and minimize costs. Even so, a 2009 study revealed that only 39% of corporate executives believe their employees have the right tools and authority to solve client problems.. The core for these applications has been and still is comprehensive call center solutions, including such features as intelligent call routing, computer telephone integration (CTI), and escalation capabilities.

Analytics Relevant analytics capabilities are often interwoven into applications for sales, marketing, and service. These features can be complemented and augmented with links to separate, purposebuilt applications for analytics and business intelligence. Sales analytics let companies monitor and understand client actions and preferences, through sales forecasting and data quality. Marketing applications generally come with predictive analytics to improve segmentation and targeting, and features for measuring the effectiveness of online, offline, and search marketing campaign. Web analytics have evolved significantly from their starting point of merely tracking mouse clicks on Web sites. By evaluating buy signals, marketers can see which prospects are most likely to transact and also identify those who are bogged down in a sales process and need assistance. Marketing and finance personnel also use analytics to assess the value of multifaceted programs as a whole. These types of analytics are increasing in popularity as companies demand greater visibility into the performance of call centers and other service and support channels, in order to correct problems before they affect satisfaction levels. Support-focused applications typically include dashboards similar to those for sales, plus capabilities to measure and analyze response times, service quality, agent performance, and the frequency of various issues. Integrated/Collaborative Departments within enterprises especially large enterprises tend to function with little collaboration. More recently, the development and adoption of these tools and services have fostered greater fluidity and cooperation among sales, service, and marketing. This finds expression in the concept of collaborative systems which uses technology to build bridges between departments. For example, feedback from a technical support center can enlighten marketers about specific services and product features clients are asking for. Reps, in their turn, want to be able to pursue these opportunities without the burden of re-entering records and contact data into a separate SFA system. Owing to these factors, many of the top-rated and most popular products come as integrated suites.

Small business For small business, basic client service can be accomplished by a contact manager system: an integrated solution that lets organizations and individuals efficiently track and record interactions, including emails, documents, jobs, faxes, scheduling, and more. These tools usually focus on accounts rather than on individual contacts. They also generally include opportunity insight for tracking sales pipelines plus added functionality for marketing and service. As with larger enterprises, small businesses are finding value in online solutions, especially for mobile and telecommuting workers. Social media Social media sites like Twitter, LinkedIn and Facebook are amplifying the voice of people in the marketplace and are having profound and far-reaching effects on the ways in which people buy. Customers can now research companies online and then ask for recommendations through social media channels, making their buying decision without contacting the company. People also use social media to share opinions and experiences on companies, products and services. As social media is not as widely moderated or censored as mainstream media, individuals can say anything they want about a company or brand, positive or negative. Increasingly, companies are looking to gain access to these conversations and take part in the dialogue. More than a few systems are now integrating to social networking sites. Social media promoters cite a number of business advantages, such as using online communities as a source of high-quality leads and a vehicle for crowd sourcing solutions to client-support problems. Companies can also leverage client stated habits and preferences to personalize and even "hypertarget" their sales and marketing communications. Some analysts take the view that business-to-business marketers should proceed cautiously when weaving social media into their business processes. These observers recommend careful market research to determine if and where the phenomenon can provide measurable benefits for client interactions, sales and support. It is stated that people feel their interactions are peer-to-peer between them and their contacts, and resent company involvement, sometimes responding with negatives about that company.

Non-profit and membership-based Systems for non-profit and membership-based organizations help track constituents and their involvement in the organization. Capabilities typically include tracking the following: fundraising, demographics, membership levels, membership directories, volunteering and communications with individuals. Many include tools for identifying potential donors based on previous donations and participation. In light of the growth of social networking tools, there may be some overlap between social/community driven tools and non-profit/membership tools.

Strategy For larger-scale enterprises, a complete and detailed plan is required to obtain the funding, resources, and company-wide support that can make the initiative of choosing and implementing a system successful. Benefits must be defined, risks assessed, and cost quantified in three general areas:

Processes: Though these systems have many technological components, business processes lie at its core. It can be seen as a more client-centric way of doing business, enabled by technology that consolidates and intelligently distributes pertinent information about clients, sales, marketing effectiveness, responsiveness, and market trends. Therefore, a company must analyze its business workflows and processes before choosing a technology platform; some will likely need re-engineering to better serve the overall goal of winning and satisfying clients. Moreover, planners need to determine the types of client information that are most relevant, and how best to employ them

People: For an initiative to be effective, an organization must convince its staff that the new technology and workflows will benefit employees as well as clients. Senior executives need to be strong and visible advocates who can clearly state and support the case for change.

Collaboration, teamwork, and two-way communication should be encouraged across hierarchical boundaries, especially with respect to process improvement

Technology: In evaluating technology, key factors include alignment with the companys business process strategy and goals, including the ability to deliver the right data to the right employees and sufficient ease of adoption and use. Platform selection is best undertaken by a carefully chosen group of executives who understand the business processes to be automated as well as the software issues. Depending upon the size of the company and the breadth of data, choosing an application can take anywhere from a few weeks to a year or more

Adoption issues Historically, the landscape is littered with instances of low adoption rates. In 2003, a Gartner report estimated that more than $1 billion had been spent on software that was not being used. More recent research indicates that the problem, while perhaps less severe, is a long way from being solved. According to CSO Insights, less than 40 percent of 1,275 participating companies had end-user adoption rates above 90 percent. In a 2007 survey from the U.K., four-fifths of senior executives reported that their biggest challenge is getting their staff to use the systems they had installed. Further, 43 percent of respondents said they use less than half the functionality of their existing system; 72 percent indicated they would trade functionality for ease of use; 51 percent cited data synchronization as a major issue; and 67 percent said that finding time to evaluate systems was a major problem. With expenditures expected to exceed $11 billion in 2010, enterprises need to address and overcome persistent adoption challenges. Specialists offer these recommendations for boosting adoptions rates and coaxing users to blend these tools into their daily workflow:

Choose a system that is easy to use: All solutions are not created equal. Some vendors offer more user-friendly applications than others, and simplicity should be as important a decision factor as functionality.

Choose the right capabilities: Employees need to know that time invested in learning and usage will yield personal advantages. If not, they will work around or ignore the system.

Provide training: Changing the way people work is no small task, and help is usually a requirement. Even with todays more usable systems, many staffers still need assistance with learning and adoption

Lead by example: Showing employees that upper management fully supports the use of a new application by using the application themselves may increase the likelihood that employees will adopt the application.

Key customer focus This is all about developing a strong customer focus and continuously delivering superior value to selected key customers through personalized/ customized offerings.

CRM organization It implies organizing the whole organization around CRM, which will lead to considerations like organizational structure, commitment of resources and human resources management.

Knowledge management Key facets of this construct include learning about customer needs and wants, dissemination and sharing of this knowledge and action.

Technology-based CRM Technology plays the role of enabler in CRM deployment (Das, 2004) and allows firms to achieve greater customization and better service at lower cost. A review of academic and practitioners literature was done to develop a comprehensive list of CRM practices. Please refer appendix I for the practices and their respective chief sources. Going over to customer loyalty, Oliver (1999) defined it as a deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situation influence and marketing efforts having the potential to cause switching behaviour. Thus, loyalty has both an attitudinal and behavioural dimension. Behavioural loyalty will include examples like repeat purchase, word of mouth, etc while attitudinal loyalty will comprise examples like trust or emotional attachment.

Further, behavioural loyalty does not necessarily reflect attitudinal loyalty, because there might exist other factors that prevent customers from defecting. Customer loyalty has been additionally related to profit levels. Besides, customer loyalty is one of the key objectives of CRM

Business Agility in Retail Banking Retail banks need to adapt quickly to changing market and business needs, continue to seek additional revenue, and improve operational efficiency. With millions of customers and hundreds of thousands of daily transactions, any retail bank needs to constantly analyze its market and customer requirements, allocate tasks and resources, and optimize products and business processes to meet new demands. Market dynamics, capital equipment expenditures, labor costs, and staffing volatility can all be managed through business agility, flexible load balancing, and superior business process management. Achieving optimized client service, improved operational efficiency, and higher profits presents significant technical challenges. To meet these demands, Service Oriented Architecture (SOA) provides a technical platform that delivers the agility required in retail banking. This paper includes a discussion of SOA that illustrates how it can support an agile business environment for retail banks.

3. Study Outline The current study has two parts as mentioned below: a. CRM best practices survey b. Case study research Following are the research questions associated with the current study: 1. What are the best practices with regard to CRM deployment? 2. What is the extent of deployment of the CRM best practices in the Indian retail banking sector? 3. What is the association between deployment of CRM best practices and loyalty of profitable retail customers in the Indian retail banking sector? The methodology used is discussed in the following sections.

4. Methodology: CRM Best Practices Survey This survey attempts to measure the extent of deployment of CRM best practices across the retail

banking segments of scheduled commercial banks in Surat city. This survey covers all the population elements and can be termed as census study and, therefore, the research design is descriptive.

Benefits of CRM and Customer Metrics for Retail Banking Both the measurement of customer value metrics and customer segmentation are essential for retail banks that want to offer customers superior services and products. They are the two pillars that improve operational efficiency and enable banks to develop sustainable and healthy growth and revenue increase. To date, few retail banks have realized the full potential of including customer value metrics in their business development model and building business strategies based on customer value management. As a result, CRM solutions are gaining increased attention as a means to providing retail banks with tools that include:

every contact point, helping them build strategic customer knowledge and insight over time. Account managers can anticipate changes in each client's life cycle and the market to make appropriate offerings, resulting in reduced sales time and increased wallet share. by real-time messaging, built on efficient customer segmentation and automated marketing lists. Marketing units can generate effective and measurable campaign activities to maximize campaign response across all channels and increase the number of leads and opportunities.

access to the customer profiles and information they need to plan and develop successful strategies that increase revenue and return on investment.

monitor every opportunity detail, provide and revise quotes, and efficiently create and process customer agreements once a proposal has been acceptedwith little or no human interaction, and at the same time increase customer knowledge.

complete portfolio of products held by each customer, increase service consistency, and enable

operational efficiency and collaboration across multiple units for higher customer satisfaction and better customer retention.

into integrated customer data, helping branch management and personnel better manage sales and conduct local events and marketing campaigns.

need change and allow clients to provide input relevant to service and product improvement, giving banks a second chance to serve and satisfy dissatisfied clients, strengthening customer relationships, and increasing customer retention.

Recommended Actions Bankers must focus upon five actions in designing customer loyalty programs : - Determine which behaviors and attitudes are most indicative of loyalty, and then measure them regularly and track results according to customer segments. - Keep product silos from undermining loyalty efforts by making sure that the whole relationship is acknowledged in all business units. - Calculate the profit contribution for every customer involved in a loyalty program so that the value of customers can be correlated to the value of the rewards program. - Reward customer loyalty according to the customers' priorities. - Determine the risks and realities of working with third-party or partner loyalty programs.

Conclusion Retail banks recognize the need to identify, attract, and retain profitable clients, but often lack a full or holistic view of their customers. In addition, client demand for flexible, customized services and products that can be accessed through multiple channels has leveled the competitive

playing field. Banks are looking for solutions that will empower branch personnel to make smarter decisions at the point of contact, provide them with a complete customer view that fuels greater customer intimacy, and support their ability to up-sell and cross-sell a full range of financial products and services. Though decision makers understand the value of this comprehensive approach, they are hesitant to take the plunge. They are concerned about high costs, user adoption, and the risks associated with time spent deploying a CRM system that addresses these needs.