Docstoc

Navneet_IDBI

Document Sample
Navneet_IDBI Powered By Docstoc
					                            PROJECT REPORT

                                       On

                   RELATIONSHIP BANKING
                                      For

                                   IDBI Ltd




      Under the Guidance of:

External Guide             Internal Guide

 Mr. Dipankar De               Mr. Madhvendra Misra
DGM(MRD)         Lecturer (IIIT)
IDBI,Mumbai

         Submitted In Partial Fulfillment of
     Master of Business Administration Programme
                                      By:
                          Navneet Barwa
                         I.I.I.T, Allahabad


Indian Institute of Information Technology, Allahabad   -1-
                        ACKNOWLEDGMENT
For any project to be successful, it requires not only persistence on the part of the person
who is responsible for doing it but also active support from the people around him. It
gives me great pleasure to say that IDBI provided me just the same atmosphere.
My two-month stay at IDBI during the course of completion of the project had been a
great learning experience for me. It had been so, not only in terms of the application of
knowledge and skills acquired in my institution but also in terms of interacting with
employees in different departments and sharing their experience and getting the much
useful and enriching inputs from them. Undoubtedly it has helped me in getting a much
clearer picture of how things move.
At the very outset, I would like to thank my Internal Project guide Mr Madhvendra Misra
for his kind guidance and corporation. I would also like to express my sincerest gratitude
to Dr Arpita Khare for providing me various inputs at many stages.
I would like to thank the Human Resources Department of IDBI (Cuffe Parade, Mumbai)
for giving me an opportunity to do my summer internship programme at such an
esteemed and reputed organization
I would like to thank Mr. K Ramakrishna, G.M, Market Research Department for
providing me an opportunity to work in the Market Research Department .I would like to
express my gratitude towards Mr.Dipankar De, Deputy General Manager, Market
Research Department for guiding me throughout the project tenure and providing me
with necessary and useful documents and hence, helping me to have finer understanding
of the things.
I would also like to thank Mrs. Bela Choudhury (DGM-Library) and all the library staff
for providing me with all the necessary support and encouragement without which my
work would have been incomplete
Lastly I will always be indebted to IDBI for giving me an insight into how a financial
institution works.
                                                             (Navneet Barwa)


Indian Institute of Information Technology, Allahabad                                  -2-
TABLE OF CONTENTS
   1. Objective-----------------------------------------------------------------5

   2. Preface-------------------------------------------------------------------6

   3. Summary ---------------------------------------------------------------7

   4. Chapter 1. Profile of IDBI Ltd ---------------------------------------21
              1.1Basic Profile of IDBI Ltd -------------------------------23
              1.2 Milestones ----------------------------------------------23
   5. Chapter 2. Theory of Relationship Management-----------------26
              2.1 Introduction---------------------------------------------28
              2.2 What is CRM? ------------------------------------------29
              2.3 Drivers of CRM -----------------------------------------29
              2.4 Marketing Financial Services ------------------------31
              2.5 Economics of CRM ------------------------------------32
              2.6 Reasons for Failure of CRM --------------------------32
              2.7 Origin of Integrated Systems -------------------------33
              2.8 Shift from Transactional Banking to Relationship
                  Banking--------------------------------------------------34
              2.9 What is Relationship Marketing? --------------------36
              2.10 Advantages of Relationship Marketing ------------37
              2.11 Is Relationship Marketing always Appropriate –--38
              2.12 Relationship Management in context to Banking
                    Industries -----------------------------------------------39
              2.13 Four C’s of Marketing ---------------------------------40
              2.14 Understanding Relationships ------------------------40
              2.15 Phases of Relationships -------------------------------43
              2.16 Relationship Management Framework --------------44
              2.17 Know Your Customer ----------------------------------47
              2.18 The Relationship Space -------------------------------52
              2.19 Relationship Strategy ----------------------------------53
              2.20 Delivery Structures for Relationship Department--58
              2.21 Structure of Organization -----------------------------61
              2.22 How the conversations are designed?----------------61
              2.23 Role of Business Mission ------------------------------64
              2.24 Competitive Advantage and Differentiation----------65
              2.25 Types of Customer of Banking Industry--------------66
              2.26 What are Communication Channels?-----------------67




Indian Institute of Information Technology, Allahabad                               -3-
   6. Chapter 3. Role of I.T in Relationship Banking----------------------68
              3.1 Data Mining -----------------------------------------------69
               3.2 Predictive Behavior Pattern -----------------------------70
               3.2.1 The Data ------------------------------------------------71
               3.2.2 Predictive Models --------------------------------------72
               3.2.3 Segmentation Techniques ----------------------------73
               3.2.4 The Application ----------------------------------------74

   7. Chapter 4. Strategy Recommended for IDBI Ltd.--------------------75
              4.1 Blue Print for IDBI Strategy ----------------------------76
              4.2 Knowing Your Customer --------------------------------77
              4.3 Concepts and Role of Relationship Manager ---------78
              4.4 Different units of Relationship Department ----------81
              4.4.1 The Industries Unit Department----------------------81
              4.4.2 The Government Unit Department ------------------86
              4.4.3 The Customer Unit Department ---------------------90
              4.5 Service Quality Gap Model ------------------------------93
              4.6 Questionnaire ---------------------------------------------95

   8. Chapter 5. Suggestions ------------------------------------------------97

   9. Bibliography ------------------------------------------------------------105




Indian Institute of Information Technology, Allahabad                           -4-
                               Objective
The objective of the report was to do an Exploratory
Research on the following: -

    To suggest a model for IDBI Ltd to become a
     Relationship Bank: -How does the bank restructure itself in order
     to give more importance to Relationships with the customers and to
     have a long and faithful relationship with the customers?


    To suggest some potential places where Bank can open its
     branches/ATMs in order to increase its network and
     reach.




Indian Institute of Information Technology, Allahabad              -5-
                                 PREFACE

Relationship Banking-defined as ―attracting, maintaining, and enhancing customer
relationships‖. This report tells us about the basic theory of Relationship Banking. To
accomplish the required task, information has to be gathered by constant consultations
with various employees and by analyzing various articles in journals. Also the task was to
find out how work has been previously carried out and what can be the most suitable
solution to improve the working of the bank in this respect.

The term Relationship Banking is fast becoming the Buzzword for most of the banks.
Innovative banks with redefined Relationship Management strategies are picking off the
most profitable customers, selling the most lucrative products to them. But just by
thinking and putting forward a model for a Relationship Strategy is not enough to
guarantee its success. There are various issues that need to be considered like
organizational change, complying with the vision and mission of the bank, work
environment, nature of the staff etc. It is a slow and gradual process and the banks have
to be patient enough to reward its fruits.

The Relationship banking is all about building relationships with the potential customers.
Here, the bank has to take care of two points. Firstly it has to know what does the
relationship means to the bank. It has to define a proper meaning to it. Secondly, It has to
find out the proper customers from where bank can be sure enough that here lies the
potential and enough benefits. Although to find this set of particular customers is rather a
difficult task but here comes the technology part. The technology has enough potential to
solve this problem, it has developed some techniques where bank can find enough
information about its past and existing customers and on the basis of this information, the
bank can put forward its judgments.




Indian Institute of Information Technology, Allahabad                                  -6-
                          SUMMARY OF

                               REPORT




Indian Institute of Information Technology, Allahabad   -7-
The aim of the training was to do an exploratory research on Relationship Banking for
IDBI ltd. By Exploratory Research we mean, ―Research designed to investigate an
area on which little information exists. This includes the use of pilot studies, which
are trial runs of an experiment. The aim is to gain more information before doing
more thorough research‖.
So the whole work of this research was to gather information on every possible aspect
from wherever possible so that it can provide future researches a good initial start.

The research was conducted by constant consultations from the employees of
M.R.D(Market Research Development). Initial situation, which was there, can be stated
as
    No separate department was there.
    No clear structure how to target customers
    No clear Roles and responsibilities of Relationship Manager
    No records of past and present interactions with clients
    No Formal Structure for conversations with clients or customers

This research was aimed to highlight these issues and provide various suggestions to
overcome the same. The whole task was divided into phases. Each phase was
characterized by gathering information. Based on the gathered information, some
suggestions were suggested in consultation with the meeting held with different
employees

PHASE 1 was to float the idea of separate Relationship Department, instead of having
separate employees working alone as Relationship Manager.

PHASE 2 was to identify the target customers like various industries corporate or high
value customers and the organize yourself to serve them properly

PHASE 3 was to gather information how the Department can be structured. What can be
possible options to structure the whole department?

PHASE 4 was to define the roles and responsibility of Relationship Manager according
to unit of Relationship department he is serving

PHASE 5 was to do some research on finding the various possible new location for the
IDBI Bank in Haryana.




Indian Institute of Information Technology, Allahabad                             -8-
The summary of whole report is presented here. This report describes the overall process
of conversion from product-centric approach towards customer-centric approach
from banks of this age.

This report is divided into four main parts starting from describing the theory of
Relationship Management to the strategy which can be followed by the bank in order to
lay down the foundation for the bank to become a fully relationship based entity. This
report just gives a foundation where much higher building can be laid down. It gives you
a brief idea about every details of every concept involved in Relationship Management.

    Introduction: -

The first section of the report talks about the basic theory of every concept of
Relationship Management. The basis of business success in today‘s corporate banking
market is related to a bank‘s ability to design and deliver unique value creating solutions
for its clients. Relationship Management is evolving, becoming more professional in its
approach to creating client value. Long gone are the days when a financial
organization could rely mainly on a „social‟ or „historical‟ relationship to sustain an
acceptable share of profitable business.

CRM is defined as ―The strategies, processes, people and technologies used by
companies to successfully attract and retain customers for maximum corporate growth
and profit”.

Various benefits of CRM are as given below:

A competitive advantage through:
Increased understanding of and ability to meet customer needs
Deepened relationships with existing customers
Optimization of capital resources

Increased revenues from:
Improved prospect targeting and acquisition
Improved customer ―focus, hold or exit‖ decisions
Higher cross-sell success due to better profiling of customer needs and product
applicability

Reduced marketing and support costs by:
Optimizing the use of relationship management and product specialist resources
Increased relationship manager ―face time‖ with high potential customers
 Improved marketing discipline through better targeting and tracking of customer
  marketing and development costs




Indian Institute of Information Technology, Allahabad                                 -9-
Like every coin has two sides, Relationship Management has some faults due to which
the whole projects ends up in failure. Some of the reasons for this failure are:


      Failing to view it as a strategy that impacts on the whole organization
      No clear strategic direction and leadership
      Poor change management policies
      Going for ―Big bang‖ approach rather than pacing the change to meet the
       situation of the company
      Poor Project management so there are cost and time overruns
      A poor understanding and alignment of the core processes that deliver the end
       benefits to customer
      Technology failing to deliver the claimed benefits
      Poor Coordination between IT functions and marketing in defining the outputs
       required
      The lack of effective benefit measurement
      Sales forces undermining the system
      Failure to change reward systems to match new performance measure

Need of Relationship Based Enterprise: -
Growth, growth and more growth, it‘s the measure of business success. But how do
companies achieve growth and garner business success? Product innovations,
commitment to quality, strategic acquisitions, marketing campaigns and advertising all
contribute to growth, but the costs are considerable .To reduce these costs while
achieving the needed growth, companies are seeking ways to build customer loyalty.
They want to win mind share, increase wallet share. People issues, organizational
issues, business issues and the complexity of the much-needed information makes it very
time consuming, costly and downright difficult. In today‘s world its getting harder and
harder to lock customers into loyalty programs. Due to Internet today‘s customers are
better informed, more demanding and more in driver seat than ever before, They can
choose what they want from anywhere on the globe at the click of mouse. Relationship
based enterprise matches the internal view of the enterprise with how the customer
view it from the outside .It offers a model for establishing long term relationship with
the customers. It structures the whitespace that exists between the enterprise and the
customers as well as the economic exchanges that occur between these spaces so that the
relationship can be sustained. Relationship based enterprises take a new and different
view of relationship .A relationship with a customer or a business partner or between
organizations is not a thing. It is not an asset that once established will last long. Instead
it is a process of human interactions and a constant work in progress. It involves far more
then the simple exchange of money for products and services

For a Relationship based enterprise a relationship is a series of conversations.

These conversations consists of




Indian Institute of Information Technology, Allahabad                                   - 10 -
   1)   A set of economic exchanges
   2)   The offering that is the subject of the exchange
   3)   The space in which the exchange occurs
   4)   The context of the exchange

Understanding Relationships: -
Relationship is a process of human interactions .A relationship is defined formally as a
series of conversations meaning not just talks but also many type of human interactions.
In this industrial world there is need of relationship-based enterprise one that converses
with customers rather than managing traditional customer relationships .It created value
with the customers rather than delivering value to customers. Rather than targeting
customers, it becomes target playing the role of hunted rather than hunter

A relationship is a series of conversations. The relationship between a bank and customer
grows from a series of conversations about mortgage rates, credit cards, and other offers
from bank. It is only when these conversations extend over a period of time it is safe to
say that a relationship exists between a bank and a customer

Relationship Management Framework: -
For sustaining conversations with the customers requires structure- a relationship
management framework. A relationship management framework enables the relationship
Based enterprise to converse fluently at many levels over an extended period of time,
with many different customers. It is a comprehensive management framework for
handling the continuous and varied set of management activities that are required to
organize conversations. It is a way to take action, repeatedly and successfully.

A relationship management framework for relationship decisions and actions should be
based upon the model of 3 Ds
    Discovery
    Dialogue
    Discipline

Discovery focuses on the customer, it is centered on learning and it is the basis for
recognizing, remembering and understanding customers
Dialogue focuses on the relationship .It is centered on conversations and ensuring that
value is created in every conversations with a customer
Discipline focuses on the management decisions that must be taken considering the
organizational and management mechanism that enable continued discovery and
dialogue.




Indian Institute of Information Technology, Allahabad                               - 11 -
                   Discovery                                     Dialogue




                                         Discipline



Know Your Customer: -

Relationship management starts with customer segmentation. Firms using static or one-
dimensional assessment of customer performance or those that focus largely on the
relationship manager‘s assessment does not have sufficient information to evaluate
customer performance.
The most effective segmentation schemes adopted by firms:

Combine objective assessment of future customer needs and product applicability with
the judgment of the relationship managers and product specialists
Focus on potential relationship value based on an understanding of current profitability
Define segments in terms of desired financial and product usage outcomes
Drive customer relationship management and resources allocation decisions, e.g.,
―hold,‖ ―invest‖ or ―exit.‖

What we do is to collect all the possible information about our past and existing
customers and then divide the customers into different groups. The typical customers
groups are named as follows

Patron, Customer, Client and Partner

The Patron Group: -
Members of patron group have a relationship with the enterprise characterized by very
simple conversations. They buy products or standard services anonymously trading
money for what is on offer and move on .A patron limits the information‘s exchanged to
―my credit card number is ― or a similar bit of data. Exchanges of money for product are
conducted impersonally ―over the counter‖ Organizations that serve patrons well offer
them high quality commodities at lowest prices and an efficient purchasing experience.
The enterprise has only very limited knowledge of patrons




Indian Institute of Information Technology, Allahabad                               - 12 -
The Customer group: -
Members of the customer group also have relationship with the enterprise that can be
characterized by very simple relationship. However the enterprise has intimate
knowledge about the customers, most likely in the form of precise segmentation by type.
Organizations that serve the customer group well focus on customizing their products and
services to meet the needs of specific type of customers. They specifically track the
buying patterns and offer rich products lines matched to specific segments. Enterprise
focused on the customer group invests more in products and service rather than
relationship with individual customers. Their efforts are based on their understanding of
finely segmented marketplace.

The Client group: -
Member of the client group has a relationship with the enterprise characterized by rich
conversation concerning specific requirements, services or problems. The enterprise has a
great deal of knowledge about the specific customers however it has limited knowledge
about the client group as a whole. The clients it does converse with are engaged in far-
reaching, complex conversations and they attach value to a lively, interactive exchange.
Enterprise that serves the client group will personalize their conversations. They are
prepared to personalize channels, electronic interfaces and the processes they use for
interacting with their clients. But they are not prepared to track buying patterns or offer
rich product lines matched to specific client segments. The relationship itself is far more
important than the product or services

The Partner group: -
Member of the partners group like those in the client group have a relationship with the
enterprise characterized by rich conversation and cooperation, the enterprise maintains a
great deal of knowledge about the individual partners, as well as about them as a whole.
Partners cooperate closely with the enterprise to co-create value, entering into a rich
exchange of information and other resources. Effective partnering with this group of
customers creates value through multi-faceted conversation. This type of relationship
may involve a joint venture or the kind of sharing that is common among the member of
community.

The Relationship Space: -
The relationship space provides a map of main styles of relationship that can be designed
and built with customers. This framework maps relationship styles along two dimensions:
the amount known about the customers along the discovery axis and the richness of the
conversations with those customers along the other axis.




Indian Institute of Information Technology, Allahabad                                - 13 -
Located on the four axis are four quadrants that highlight four possible relationship
styles. At the outer corners of the quadrants at the most extreme limits of the axes the
styles are as follows:




                                              Discovery Centered
                                Product Centered       Value

              DISCOVERY Customers                                    Partners
              Richness of
              Knowledge of
              Customer
                           Price Centered                            Need Centered

                                Partners                             Clients



                                                Dialogue -Richness of conversation
                                       and degree to which they are conducted in real time

Price Centered Relationship: -No knowledge of customers and little or no dialogue. This
type of relationships is associated with the sales of commodity products at the lowest
price. Here the enterprise exhibits operational leaderships

Product Centered Relationship: -A great deal of knowledge about types of customers,
not likely in the form of customer segmentations, with little or no dialogue with specific
customers. Products and service are customized to meet the needs of finely defined
customers segment. Here the enterprise exhibits product/service leadership

Need Centered Relationship: -Little knowledge about the customers but a great deal of
dialogue concerning the requirement, needs and problems of specific customers. In this
type of relationship the process for delivering products and services is personalized to
meet the needs of each individual customers. Here the enterprise exhibits exchange
leadership

Value Centered Relationship: - A great deal is known about the individual customers
and significant dialogue with those customers. This type of relationship is associated with
organizations that work together with their customers to create needed products and
services. Here the enterprise exhibits conversation leadership.

The relationship-based enterprise has the flexibility to use any and all of the relationship
styles depending upon the nature of conversations required by the customers.




Indian Institute of Information Technology, Allahabad                                 - 14 -
Delivery Structures for Relationship Development: -

To achieve the full potential of relationship management, organizations must realign how
they market to and service customers, particularly in delivering both advisory and
commercial banking products. Customer relationships are typically managed through one
of three basic organizational structures

The Super Banker relies on the relationship manager as the main point of contact to the
customer. Product specialists support the relationship manager.
The Coordinator pulls together the total marketing effort, but product experts market
directly to customers.
The Tandem System has two separate relationship managers, one for commercial bank
and one for investment bank activities, who oversee product specialists.
The Functional model identifies different specialists for sales, underwriting and
maintenance roles.


    Role OF IT In Relationship Management: -

This section of report will give you the brief idea of role of I.T techniques, which can be
used to gather useful information from the whole bunch of data. Two techniques have
been mentioned in the report, which are

1) Data Mining
2) Predictive Behavior

Data Mining: -
In simple words, Data Mining can be explained as ―The process of analyzing data to
identify patterns or relationships”. It can be used for searching large volumes of data
looking for patterns that accurately predict behavior in customers and prospects. Analysis
of large volumes of relatively simple data to extract important trends and new, higher
level information. For example, a data-mining program might analyze millions of product
orders to determine trends among top-spending customers, such as their likelihood to
purchase again, or their likelihood to switch to a different vendor. Another example can
be to find statistical information on ATM usage or to require information on all those
credit card customers who have bought single items of over 1,000 in value in the
preceding two years. To answer all these queries we need to know data-mining
techniques

Predictive Behavior: -

Behavioral data goes beyond knowing that a customer has purchased a certain product. It
involves capturing customer events and actions over time and using these stored
interactions to determine typical behavior and deviations from that behavior.



Indian Institute of Information Technology, Allahabad                                - 15 -
Customer analytics exploit customer behavioral data to identify unique and actionable
segments of the customer base. These segments may be used to increase targeting
methods. Ultimately, customer analytics enable effective and efficient customer
relationship management. The analytical techniques vary based on objective, industry and
application, but may be divided into two main categories.

Segmentation techniques segment groups of the customer base that have similar
spending and purchasing behavior. Such groups are used to enhance the predictive
models as well as improve offer and channel targeting.

Predictive models predict profitability or likelihood and timing of various events
based on typical customer behavior and deviations from that behavior.


        Strategy Recommended: -
This section of report talks about the recommended strategy for the IDBI ltd. The whole
strategy revolves around three units of Relationship Department. The proposed three
units of Relationship Department are

     The Industries Unit
     The Government Unit
     The Customer Unit

The Industries Unit: -

The basic purpose of this unit is to identify the customers, recognize their needs and
wants and then has meaningful conversations with them. The customer here represents
Companies from the different Industry .The main task is to find which are the existing
clients of the IDBI and who can be the future client of the IDBI and then take this
relationship from unknown customer to loyal and faithful customer

Given below are the sub-units, which are clubbed together on the basis of their closeness
or degree of similarity, or we can say integrating it on the basis of value chain.
For Industries unit, the structure of Industries to target it as follows:

    1.   Logistics & Infrastructure Industry, which Includes
        Roads
        Electricity Generation
        Port
        Airports
        Civil Aviation
        Large Transport Operators/Urban Transport
        Shipping



Indian Institute of Information Technology, Allahabad                              - 16 -
   2.   Computer, Electronics Related Industries, which includes
       Computer (Hardware/Software) Industry
       Electronics Industry
       Telecomm Services
       IT –Enabled Services
       Electrical Machinery Industry

   3.   Chemical & Allied Industries, which includes
       Petrochemicals
       Fertilizers
       Basic Industrial Chemicals
       Refineries
       Oil Exploration

   4.   Manufacturing Industry, which includes
       Iron Industry
       Steel Industry
       Cement Industry
       Non Ferrous Metal Industry
       Coal Industry
       Paper & Paper Related Industry
       Diamond Industry
       Others

   5.   Automobile & Auto Components Industry, which Includes
       Car Industry
       Truck Industry
       Motorcycle Industry

   6.   Services, which Includes
       Financial Services
       Medical and Health care Industry
       Education Industry
       Hotels
       Construction Industry
       Civil/Mining Contractors
       Entertainment Industry
       Retail Industry

   7.   Apparel & Clothing Industry, which Includes
       Cotton Industry
       Textile Industry
       Apparel Industry
       Man Made Fibers



Indian Institute of Information Technology, Allahabad              - 17 -
    8.   Food –Processing Industry, which Includes
        Agro Processing Industry
        Sugar Industry
        Beverages and Drinks Industry
        Liquor Industry

On the basis of the above demarcation, we need to have different person heading each
related industry so the specific persons are there for specific industries

The Government Unit: -

The Government unit department will be the department, which will handle all the
conversations or relationship with the ruling government. This department will be the
central theme of the whole Relationship Department as being an government owned bank
if we will efficiently and consistently provide good support to government policies, it will
help the bank to grow more. We need to handle this department very carefully as the
other department Industries unit department will partly be dependent on the information
being provided by this department. This unit is being designed to carry out conversations
with the government, nurture its already existing relationship with the government so that
all the projects and plans, which the government has in near future, will be supported by
the IDBI Bank Ltd.

So, the main goal of the department to have cordial relationships with government lobby
to further enhance the existing relationship with the government

Like the clubbing we have done in the Industries unit we will similarly club the similar
kind of ministries together and then approach them

   Sub Unit 1, which include
         1.Finance

   Sub Unit 2, which include
         1.Communication & Information Technology
         2.Information & Broadcasting

   Sub Unit 3, which include
         1.Coal
         2.Mines
         3.Petroleum & Natural Gas
         4.Water resources
         5.Chemicals & Fertilizers
         6.Power

   Sub Unit 4, which include
         1.Sports Affair


Indian Institute of Information Technology, Allahabad                                 - 18 -
       2. Consumer Affairs & Public Distribution
       3. Food & Civil Supplies
       4. Health
       5. HRD

   Sub Unit 5, which include
       1.Road Transport & Highways
       2.Shipping
       3.Railways

   Sub Unit 6, which include
       1.Steel
       2.Textiles
       3.Cotton
       4.Urban Development
       5.Small Scale & Rural Industries
       6.Rural Development
       7.Agriculture

On the basis of above demarcation, we have to be in touch with the
ministries/departments.

The Customer Unit: -

This department will handle the daily consumers of the bank. The retail consumers are
the one about which nothing can be predicted. They are the highly unpredictable
customers as they keep on changing banks and never can be your faithful and trustful
customers. So the question that we have to address here is how to retain them or make
them extra faithful towards our bank. It is simple only if we provide better after sales
service and better customer care. These customers will notice the bank only if the bank is
different from others. Since the products provided by all the banks is almost the same, so
we need to be different from other so that the customers notice. We have to give them
better services and it should look to them that they are the main focus persons and we are
there to serve them and fulfill their wish and requirements.

Relationship Manager: -

The person who is responsible for
    Managing a portfolio of corporate customers
    Developing and maintaining proactive relationships with new and existing
       customers to provide them with quality business solutions
    Maximizing income for the banks through retention, growth and targeted
       acquisition of clients




Indian Institute of Information Technology, Allahabad                               - 19 -
Basic Skills for Relationship Manager: -
 Given below are the basic skills of a relationship manager.

Planning Monitoring and Control
        o Strategic Business and Market Planning
        o Project Management
        o Set the goals and identify the team‘s objective
        o Organize the team around its two critical tasks which are
            a)Creating an in-depth understanding of the customer and
            b) Managing customer development plans
        o Establish criteria to measure team performance
        o Develop information analysis techniques and reporting procedure
        o Generate options for business-winning action

Resource Management
        o      Performance management planning and assessment
        o      Techniques of motivation
        o      Recruitment and Selection
        o      Leadership
        o      Coaching
        o      Training
        o      Understanding of team dynamics
        o      Higher level interpersonal skills
        o      Good communication skills
        o      Change Management

Conceptual Skills
        o Managing innovation and creativity
        o Problem Solving




Indian Institute of Information Technology, Allahabad                       - 20 -
                              CHAPTER 1


                      Profile of IDBI LTD.




Indian Institute of Information Technology, Allahabad   - 21 -
“We are envisaging the new Industrial Development Bank of India as a
central co-ordinating agency, which ultimately will be concerned, directly
or indirectly, with all the problems or questions relating to the long and
medium term financing of industry, and will be in a position, if necessary,
to adopt and enforce a system of priorities, in promoting future industrial
growth”

      - Late     T.T.Krishnamachari,       then   Union   Finance   Minister.
          Excerpts from speech in the Parliament, while introducing the Bill
          for setting up IDBI in 1964




Indian Institute of Information Technology, Allahabad                   - 22 -
1.12) Brief Profile of Industrial Development Bank Of India


The Industrial Development Bank of India (IDBI) was established in 1964 by the Indian
Government under an Act of the Parliament named as The Industrial Development Bank
of India Act, 1964. It has been functioning as the principal Financial Institution for
coordinating the working of institutions at national and state levels, engaged in financing,
promoting and developing industries. It has played a dominant role in balanced industrial
development of India. It has been instrumental in the evolution of financial institutions in
the country, set up with the principal objective of providing term finance for fixed asset
formation in industry.


Development banking in the pre-reform era transcended the narrow confines of long term
project lending in pursuit of broader development goals aligned to government‘s varied
socio-economic objectives. These included, balanced industrial growth through
development of identified backward areas, modernization of specified industries,
employment creation, extension and support services in the field of entrepreneurship and
capital market development. IDBI was entrusted with the additional responsibility of
acting as principal financial institution for coordinating the activities of institutions
engaged in the financing, promotion or development of industry.


1.2) Milestone:
   1) July 1964: Set up under an Act of Parliament as a wholly owned subsidiary of
   Reserve Bank of India.

   2) February 1976: Ownership transferred to Government of India. Designated
   Principal Financial Institution for coordinating the working of institutions at national
   and state levels, engaged in financing, promoting and developing industries



Indian Institute of Information Technology, Allahabad                                 - 23 -
   3) March 1982: International Finance Division of IDBI transferred to Export-Import
   Bank of India, established as a wholly-owned corporation of Government of India,
   under an Act of Parliament.

   4) April 1990: Set up Small Industries Development Bank of India (SIDBI) under
   SIDBI Act as a wholly-owned subsidiary to cater to specific needs of small-scale
   sector. In terms of an amendment to SIDBI Act in September 2000, IDBI divested
   51% of its shareholding in SIDBI in favour of banks and other institutions.

   5) January 1992: Accessed domestic retail debt market for the first time with
   innovative Deep Discount Bonds; registered path-breaking success.

   6) December 1993: Set up IDBI Capital Market Services Ltd. As a wholly owned
   subsidiary to offer a broad range of financial services, including Bond Trading,
   Equity Broking, Client Asset Management and Depository Services. IDBI Capital is
   currently the leading Primary Dealer in the country.

   7) September 1994: Set up IDBI Bank Ltd. In association with SIDBI as a private
   sector commercial bank subsidiary, a sequel to RBI‘s policy of opening up domestic
   banking sector to private participation as part of overall financial sector reforms.

   8) October 1994: IDBI Act amended to permit public ownership up to 49%.

   9) July 1995: Made Initial Public Offer of Equity and raised over Rs.20 billion,
   thereby reducing Government stake to 72.14%.

   10) March 2000: Entered into a JV agreement with Principal Financial Group, USA
   for participation in equity and management of IDBI Investment Management
   Company Ltd., erstwhile a 100% subsidiary. IDBI divested its entire shareholding in
   its asset management venture in March 2003 as part of overall corporate strategy.

   11) March 2000: Set up IDBI Intech Ltd. As a wholly owned subsidiary to undertake
   IT-related activities. Targeting BPO assignments through the establishment of a
   Contact Center.

   12) June 2000: A part of Government shareholding in IDBI converted to preference
   capital, since redeemed in March 2001; Government stake currently 58.47%.




Indian Institute of Information Technology, Allahabad                                     - 24 -
   13) August 2000: Became the first All-India Financial Institution to obtain ISO
   9002:1994 Certification for its treasury operations. Also became the first organization
   in Indian financial sector to obtain ISO 9001:2000 Certification for its forex services.

   14) March 2001: Set up IDBI Trusteeship Services Ltd. To provide technology-
   driven information and professional services to subscribers and issuers of debentures.

   15) 2002: Associated with select banks/institutions in setting up Asset Reconstruction
   Company (India) Limited (ARCIL), which will be involved with the strategic
   management of non-performing and stressed assets of Financial Institutions and
   Banks.

   16) 2003: The Industrial Development Bank (Transfer of Undertaking and Repeal)
   Bill 2002 is passed by both Lok Sabha and Rajya Sabha in December 2003.

   17) 2005:- The Board of Directors of IDBI Limited, at its meeting held on January
   20, 2005, approved the Scheme of Amalgamation, envisaging merger of IDBI Bank
   Ltd with IDBI Ltd




Indian Institute of Information Technology, Allahabad                                 - 25 -
                                 CHAPTER 2


         Theory of Relationship Management




Indian Institute of Information Technology, Allahabad   - 26 -
“There is only one definition of business purpose: to create a customer.
It is the customer who determines what a business is. What the business
thinks it produces is not of the first importance – especially not to the
future of the business and its success. What the customer thinks he is
buying and considers “value” is decisive – it determines what a business
is, what it produces and whether it will prosper”

                                                         Peter Drucker




Indian Institute of Information Technology, Allahabad               - 27 -
The shift from a product-oriented business strategy to a customer-focused one has been a
major change agent in companies recently. Many companies have invested heavily in
technologies enabling a customer-focused relationship marketing strategy. However,
there are mixed results as to how successful firms have been in implementing customer
relationship management systems.

2.1) Introduction
Relationship building and management, or what has been labeled as relationship
marketing, is one of the leading approaches to marketing. Practitioners as well as
academics suggest that customer relationship management (CRM) provides an actual
platform for the operational manifestation of relationship marketing. Recent studies show
that the movement to customer relationship management is gaining momentum, but still,
after several years of implementing information technology to support relationship
marketing, up to 55% of all CRM projects do not produce results. Some of the studies
suggest that in order to succeed in one‘s CRM effort, one should hit multiple targets at
the same time. In one survey they have found that three targets that is important:
applications, infrastructure, and transformation. Some say, ―organizational transitions are
the most disruptive and difficult CRM targets to reach‖. The majority of responses pinned
the failure of their CRM programs on the lack of adequate change management. These
studies suggest that if a company fails in transforming the organization and its processes
(marketing, sales, and customer service) to become more ―customer focused‖, the
investment in the CRM system might not pay back in the long run. Consequently there is
a high financial risk involved in a CRM industry.




Indian Institute of Information Technology, Allahabad                                - 28 -
2.2) What Is CRM (Customer Relationship Management)?

The strategies, processes, people and technologies used by companies to successfully
attract and retain customers for maximum corporate growth and profit. CRM initiatives
are designed with the goal of meeting customer expectations and needs in order to
achieve maximum customer lifetime value and return to the enterprise. As a primary sale,
service and retention touch point for many companies; the Contact Center is a critical
component of a successful CRM strategy.

For example, an enterprise might build a database about its customers that described
relationships in sufficient detail so that management, salespeople, people providing
service, and perhaps the customer directly could access information, match customer
needs with product plans and offerings, remind customers of service requirements, know
what other products a customer had purchased, and so forth.

2.3) Drivers of CRM (Customer Relationship Management)

Given below are the main drivers that are necessary and essential for the sound working
of CRM.

   1) The Marketplace: -

The market in which today‘s company operates has been changed. There is no steady
state, but increasing flux, more high winds, storms and floods with few English or even
Indian Summers. In short, more unpredictable risk than potential reward.

Among the broader environmental issues that the banks and their customers face in these
times are:
   - Rising stakeholder expectations (such as customers, staff, shareholders and the
       community)
   - Industry consolidation both inside and outside of banking
   - The shift of power from bank to customer as a result of easier access to
       information and knowledge
   - Increasing competition as traditional markets, margins and business models come
       under threat from increasing transparency (the ability of the customer to see how
       you make your profit)
   - The changing profile of earnings towards fee income as corporate customer
       borrow less and disintermediate the banks
   - The management of risk in an increasingly volatile marketplace
   - The risks and cost of staying on the technology curve
   - The trend towards networking and partnering by both banks and customers to
       deliver products and services underpinned by technology e.g.- outsourcing, just-
       in-time delivery, multi-partner service delivery



Indian Institute of Information Technology, Allahabad                             - 29 -
          -   Developing staff to operate in an environmental of increasingly extensive
              regulation

      These challenges place a premium on clear thinking and leadership within all companies.
      It also places a premium on the ability to continuously refine, re-define and re-invent –to
      develop an organizational flexibility that is capable of continuous change and
      improvement.

      Banks have been therefore forced to reevaluate the way they do business.

      Old style of Banks                                          New Style of Banks
-   Emphasis on traditional banking skills           -Marketing led, emphasis on
                                                   - Relationship management & branding skills

-   Authority determined by grade and function       - Differential pricing based on value of
                                                       customer to organization

-   Hierarchical & functionally based structures     - Delegation of decision making to front line


-   Multiple interfaces, several      points   of - Flexible team-based organizational Structures
    relationship management

-   Primary measurement and management by - Multiple customer interfaces, single
    channel and/or product                  point of customer relationship management

                                                     - Primary profit measurement and
                                                     management by customer and customer segment




      b) The Strategic Imperative: -

      Successful banks today are those that they have a very clear understanding of what they
      are, what they can do and hose customers they want to attract and serve. Gone are the
      days when companies can afford to be all things to all men. This concept of strategic
      intent is an important one because it provides the benchmark against which all activities
      should be accessed. It‘s important to remember that this focus needs to be sufficiently
      flexible to respond to changing market conditions and customer needs, not to mention
      sever national and international external shocks such as changes of government,
      exchange rate movements, the oil crisis etc.

      Increasingly companies today are focusing around the trilogy of customer intimacy,
      product leadership and operational excellence. Classically companies are encouraged to
      focus on one of these three areas as a source of competitive advantage. The risk in no


      Indian Institute of Information Technology, Allahabad                                     - 30 -
doing so, as Michael Porter describes it, is to be ―stuck in the middle‖. Customer
intimacy goes straight to the heart of CRM. In corporate banking product leadership is a
prerequisite and all banks continually look to reduce their fixed infrastructure and
variable operating costs. An important point is that they are able to exercise choice about
the markets and customers they serve and the product array that supports this activity.



 Sources of Competitive Advantage

                                          Product Leadership




              Operational Excellence                                Customer Intimacy


2.4) Marketing Financial Services
The marketing of services has always been regarded as more difficult then for example,
car, electrical goods or the vast array of products commonly seen today on supermarket
shelves. This is because they have a number of characteristics that make them difficult: -

   -   Intangibility: - A service cannot be seen, touched or displayed. A customer may
       purchase a service but typically has nothing physical to display as a result of that
       purchase e.g. a forward exchange contract
   -   Inseparability: - Delivery and consumption of the service occur at the same time
       whereas tangible goods have a cycle of production, delivery and consumption e.g.
       a meal at a restaurant
   -   Heterogeneity: - Many services providers face the difficulty of maintaining
       consistency in delivery. Typically this is because people are involved and
       programming complete consistency needs robots. There is of course a continuum
       here from say, McDonalds at one end to barrister at the other
   -   Perishability: -It is not possible to store services. Additionally since the
       ―manufacturing‖ capacity is the staff, matching resource levels to meet the
       variable customer demand levels is an additional challenge e.g. public transport
       during the rush hour

Financial services marketing has another overlay of features such as risk, complexity and
information level. The term ―confusion marketing‖ comes to mind, with many suppliers


Indian Institute of Information Technology, Allahabad                                - 31 -
still cloaking their product offerings in a fog of detail and legal jargon. This creates a
perception of power in the hands of supplier that is increasingly being undermined as
access to information and product comparability improves. In any market, exercising this
supplier power is dangerous, in the corporate market where the balance of power may in
fact lie with the customers, the risks are self-evident.

2.5) Economics of CRM
In essence the marketing and sales activities of companies have two main objectives.
These are to recruit new customers and to retain existing customers –more specifically
those that are of value to the organization. If we consider a company‘s activities in this
way, then some interesting economics emerge. The conventional wisdom is that it is
fifteen times more expensive to recruit a new customer than to sell to an existing
customer-so there is a strong economic argument for retaining existing customers

A number of other benefits accrue:

   -   Existing customer are typically more responsive to the offers you make to them –
       they have in a sense already bought the brand
   -   Existing customers give you a warm prospect base for cross-selling and up-selling
       your products
   -   There is a strong positive correlation between the number of products a customer
       holds and levels of satisfaction and loyalty
   -   The more products a customer has, the less likely they re to defect a competitor
   -   The longer a customer is with you the more likely they are to provide you with the
       information –this helps to target products offers better
   -   There is over time an opportunity – by understanding how the customers prefers
       to buy from you to re-shape your delivery costs, particularly if you can integrate
       your customers to lower costs channel,
   -    If customers stay with you, all things being equal they are more likely to
       recommend you-thus reducing recruitment costs
   -   Studies point to a correlation between customer retention and staff retention-the
       outcome is improved staff morale
   -   Companies that understand the economies of retention typically invest in early
       warning process and defined recovery processes for defecting customers
   -   Newly recruited customers may be serially dissatisfied with banks in general and
       therefore increasing service costs

The challenge is then is to position yourself as the preferred supplier for your customers.
One of the difficulties with financial products is predicting when customers might need
them.

2.6) Reasons for Failure of CRM: -
Failure to deliver the expected benefits of CRM is high-somewhere in the region of 50%
to 70%.


Indian Institute of Information Technology, Allahabad                                - 32 -
Various reasons are given for this including: -
   Failing to view it as a strategy that impacts on the whole organization
   No clear strategic direction and leadership
   Poor change management policies
   Going for ―Big bang‖ approach rather than pacing the change to meet the
      situation of the company
   Poor Project management so there are cost and time overruns
   A poor understanding and alignment of the core processes that deliver the end
      benefits to customer
   Technology failing to deliver the claimed benefits
   Poor Coordination between IT functions and marketing in defining the outputs
      required
   The lack of effective benefit measurement
   Sales forces undermining the system
   Failure to change reward systems to match new performance measure

The technical challenge should not be understated. The biggest technical difficulty is
integrating legacy systems and technologies to build a single view of the customer across
the organization

2.7) Origin of Integrated CRM Systems
Integrated CRM systems have their origin in the combination and coordination of
databases driving direct mail activity; call center management and sales force automation.
Usually there is a sequential history to the building of a CRM System with some or all of
the following components

   a) Marketing Automation: -
This covers customer‘s personalization, profiling, telemarketing, e-mail marketing, and
campaign managements. These activities are designed to get the right mix of the
company‘s products and services information, presenting opportunities to customers and
measuring success. They involve understanding what customers do and want, matching
that knowledge with product and service information, presenting opportunities to
customers and measuring success. This ability to measure the efficacy of direct marketing
activity, in particular direct mail, has been a source of major competitive advantage for
some companies

   b) Sales Automation: -

Sales involve the direct transferring of products and services to customers. It covers both
making sure the customer receives the correct product and the activities of people within
the organization who are responsible for selling- say in branches or call centers.
Activities in the sales category might be client or campaign management, sales-call
management and contact management


Indian Institute of Information Technology, Allahabad                                - 33 -
  c) Sales Force Automation: -

This includes territory planning, account and lead management systems. Collaborative
tools that enable all parties to the transaction to interact with one another fall into this
category, as well as systems that put sales peoples directly in touch with customers at the
point of sale. Frequently this involves laptop applications with the ability to upload and
download information.


 d) Service and Service Fulfillment: -
This area encompasses the ability of the company to serve customers it already has.
Initiatives here might be in the area of email response management, telephony
capabilities such as automatic call distribution, computer-telephony integration,
queue/workflow management, interactive voice response and predictive dialing


  e) Customer self-service: -
Some companies may consider CRM more specifically as electronic systems or
capabilities that can be triggered by the customer. These would Web self-service, search,
interactive chat, e-mail voice over IP, browser and application sharing, conferencing and
―call me‖ capabilities. This is more accurately described as e-CRM, which utilizes
Internet access via PC and wireless devices such as mobile phone and PDAs


  f) E-commerce: -
Electronic commerce or E-commerce as it often called, is not new. For over twenty years,
companies have used form of electronic commerce to conduct their business. E-
commerce is defined as-―The automation of commercial transactions using computer and
communication technologies‖.

2.8) Shift from Transactional banking to Relationship
banking
Rapid changes in Financial Services are threatening commercial banks. Banks are finding
themselves in greater competition with one another as globalization and deregulation
weaken geographical boundaries and complexity of reaching to customers. Due to these
fundamental developments a fundamental question is raised, ―Will banks focus more on
―Relationship Banking‖ whereby banks invest in building relationship with borrowers –or
on ―Transaction Banking‖ which involves ―arm‘s length‖ transactions rather than
relationships.


Indian Institute of Information Technology, Allahabad                                 - 34 -
        Banks engage in both relationship banking as well as transaction banking. However, how
        much each the bank does is a strategic choice and is affected by technology, competition,
        and regulation and other factors.

        But, the modern literature on financial intermediation has primarily focused on the role of
        banks as relationship lenders. Relationships emerge as a prime source of an incumbent
        bank‘s comparative advantage over de novo lenders.
        Difference between these two types
        Transactional Banking                                        Relationship Banking

-   Single-sale focus                                    -   Customer-retention focus

-   Product-feature focus                                -   Product-benefit focus

-   Short timescale                                      -   Long timescale

-   Little Customer Service                              -   High Customer service

-   Quality comes from production                        -   Quality comes from people

-   Transaction source of profit                         -   Lifetime revenue

-   One-way product knowledge                            -   Two way interpersonal skills

-   Sufficiency of Product                               -   Trust

-   Marketing=selling                                    -   Marketing=harnessing the corporate
                                                             capabilities for the benefit of the customer



        So, Why there is Need of Relationship-Based Enterprise?

        Growth, growth and more growth, it‘s the measure of business success. But how do
        companies achieve growth and garner business success? Product innovations,
        commitment to quality, strategic acquisitions, marketing campaigns and advertising all
        contribute to growth, but the costs are considerable .To reduce these costs while
        achieving the needed growth, companies are seeking ways to build customer loyalty.
        They want to win mind share, increase wallet share. People issues, organizational issues,
        business issues and the complexity of the much-needed information makes it very time
        consuming, costly and downright difficult. In today‘s world its getting harder and harder
        to lock customers into loyalty programs. Due to Internet today‘s customers are better


        Indian Institute of Information Technology, Allahabad                                 - 35 -
informed, more demanding and more in driver seat than ever before, They can choose
what they want from anywhere on the globe at the click of mouse. Relationship based
enterprise matches the internal view of the enterprise with how the customer view it from
the outside .It offers a model for establishing long term relationship with the customers. It
structures the whitespace that exists between the enterprise and the customers as well as
the economic exchanges that occur between these spaces so that the relationship can be
sustained. Relationship based enterprises take a new and different view of relationship .A
relationship with a customer or a business partner or between organizations is not a thing.
It is not an asset that once established will last long. Instead it is a process of human
interactions and a constant work in progress. It involves far more then the simple
exchange of money for products and services

For a Relationship based enterprise a relationship is a series of conversations.
These conversations consists of

   1) A set of economic exchanges
   2) The offering that is the subject of the exchange
   3) The space in which the exchange occurs
   4) The context of the exchange

Given this definition, it is easy to see that relationships do not just happen rather, they are
the result of management decisions-decisions about the best way to design and execute
conversations. And a successful relationship based enterprise treats all relationship as
conversations.

2.9) What is Relationship Marketing?
In the current era of intense competition and demanding customers, Relationship
Marketing has attracted the expanded attention of scholars and practitioners. Marketing
Scholars are studying the nature and scope of relationship marketing and developing
conceptualizations regarding the value of cooperative and collaborative relationship
between buyers and sellers as well as the relationship between different marketing actors,
including suppliers, competitors, distributors and internal functions in creating and
delivering customer value. Many scholars with interests in various sub-disciplines of
marketing, such as channels, services marketing, business-to-business marketing,
advertising, and so forth, are actively engaged in studying and exploring the conceptual
foundations of relationship marketing.
.
The concept or relationship marketing is commonly illustrated with the example of a
small shopkeeper, who would generally know most customers by name, through regular
contact. He or she would, therefore, talk to customers frequently; know about their likes
and dislikes; and be aware of any special requirements particular customers may have –
such as for cream cakes on a Friday, for example. This direct knowledge enables the
shopkeeper to order stock, plan services and add value on the basis of known customer
requirements.




Indian Institute of Information Technology, Allahabad                                    - 36 -
In essence, relationship marketing involves knowing about your customers, encouraging
two-way communication with them, and seeking to create a mutually beneficial
relationship with them, where appropriate. So relationship marketing can be defined as

“The building of long-term, loyal, committed and profitable relationships with
potential and existing customers through communication and the provision of
quality goods and services.‖

Grönroos (1994) defines relationship marketing as follows: “Marketing is to establish,
maintain, and enhance relationships with customers and other partners, at a profit, so
that the objectives of the parties involved are met. This is achieved by mutual exchange
and fulfillment of promises”.

Copulinsky and Wolf (1990) define relationship marketing from a different angle
stressing the role of IT as a “process where the main activities are to create a database
including existing and potential customers, to approach these customers using
differentiated and customer-specific information about them, and to evaluate the life-
term value of every single customer relationship and the costs of creating and
maintaining them”.

The aim of relationship marketing is to convert an individual or organization with initial
interest in purchasing goods or services into a loyal customer, and the focus is as much
on retaining existing customers as on bringing in new ones.

Relationship marketing can be shown as a gradual process of development through
evolutionary stages and typical steps that tend to be described are:

Prospect: a potential customer
Customer: a sale made
Client: repeat sales made
Supporter: regular customers who passively support the organization
Loyal customer: regular customer who actively recommends the organization to others
Partner: customer working in partnership with the organization.

By working through these stages organizations should ultimately be aiming to gain as
many ‗partner‘ customers as possible.

2.10) The Advantage of Relationship Management

Realigning the underlying processes of relationship management can yield significant
bottom line benefits for financial service firms, which are:

A competitive advantage through:
Increased understanding of and ability to meet customer needs
Deepened relationships with existing customers
Optimization of capital resources


Indian Institute of Information Technology, Allahabad                               - 37 -
Increased revenues from:
Improved prospect targeting and acquisition
Improved customer ―focus, hold or exit‖ decisions
Higher cross-sell success due to better profiling of customer needs and product
applicability

Reduced marketing and support costs by:
Optimizing the use of relationship management and product specialist resources
Increased relationship manager ―face time‖ with high potential customers

  marketing and development costs

2.11) Is relationship marketing always appropriate?
Relationship marketing may not always be the right approach for organizations to take
and, sometimes, transaction marketing remains the most appropriate strategy.

The feasibility of relationship marketing will depend upon factors such as:

              The type of purchase concerned
              The context of the particular organization
              The type of customer

Where customers make one-off purchases of small-unit, low-profit products, for instance,
it is not worth spending a large amount on attempting to build up relationships with them
and to retain their custom. The investment in relationship marketing is likely to prove
worthwhile, however, for most services, for bigger products, such as cars or computers,
and for retailers who sell large purchases of small unit goods, such as supermarkets.

The kind of supply chain involved, and the organization‘s position in it, will be a factor in
deciding whether and where to build customer relationships. Manufacturers of small-unit
goods, for example, while unlikely to focus relationship building on end customers, will
find it worthwhile with direct customers such as wholesalers or retail chains.

It is important to take the characteristics of the consumer into account when evaluating
the viability of a relationship marketing approach. In some instances, customers have no
interest in loyalty bonuses, high levels of service or taking up any kind of relationship:
they just want low cost purchases and are looking for the cheapest price.

It is necessary to distinguish between different customer segments in deciding where to
apply a relationship marketing approach. Not all of an organization‘s customers are
necessarily profitable enough to merit expenditure efforts to retain them. Some bank
customers, for example, actually cost more to serve than is gained from their custom, and
it would be wasteful for the bank to spend money on building up a relationship with
them.


Indian Institute of Information Technology, Allahabad                                  - 38 -
Thus, Relationship marketing is defined as “attracting,
maintaining, and – in multi-service organizations –
enhancing customer relationships”

2.12) Relationship Management in Context to Banking Industries
Banks are placing big bets on the future by merging with one another and with securities
Firms, believing success will come from selling a broad array of financial services to an
ever-growing customer base. Most wholesale bankers believe business will continue as
usual, only on a larger scale.

While acquisition is a sound strategy for many financial services organizations, size alone
cannot guarantee success. To attract customers that consume a broad array of financial
services and products, wholesale banks must re-examine their approach to relationship
management. All revenues are not created equal, and banks must learn to identify and
pursue customers who return the most profits. Banks that think traditional relationship
management will suffice will soon find themselves left behind. Only through relationship
management realignment can banks hope to counteract recent industry trends:

      Declining profitability
      Lack of revenue growth
      Increased competition
      The need to maximize their investment in investment banking services

We already see that innovative banks with redefined relationship management strategies
can pick off the most profitable customers, selling the most lucrative products to them.
Their competitors will discover that the meager returns of what‘s left scarcely will be
able to sustain growth.

The three practices that together form the core of relationship management:

1. Customer Segmentation: - Leading firms have a deep understanding of customer
needs. These firms understand their strengths and seek to match those with there most
potentially profitable customers. These customers command the lion‘s share of the firm‘s
marketing efforts and resources.

2.Organizational Structure: - Leading firms organize their resources to deliver the
right solution to the right customer at the right time. Market leaders successfully
overcome turf issues and facilitate continual communication among product specialists
and relationship manager to better serve the customer.

3.Information structure and IT systems: - In this global economy, where one
corporation can be buying dozens of discrete services from an institution, no single
relationship manager can stay on top of monitoring and executing against customer


Indian Institute of Information Technology, Allahabad                                - 39 -
needs. In the middle market, relationship managers face the challenge of managing an
increasing number of customers. Institutions must rely on comprehensive and integrated
information systems to provide a more holistic view of customers as well as link that
knowledge to the relationship manager.


2.13) Four C‟s of Marketing: -
                                      The four P‘s of marketing become four C‘s of
relationship marketing, which are

   1. Product becomes Customer: -as in customer‘s needs and wants, the era
      whatever you can make can be sold is over and you can only sell whatever
      someone wants to buy
   2. Price becomes Cost: - price is only one aspect of the cost to the customer –
      perceptions of risk, security and the all ancillary costs of time, reconfigured
      systems etc. are all part of the bundle from the customer‘s perspective
   3. Place becomes Convenience: - how easy do you make it for the customer to
      buy from you?
   4. Promotion becomes Communication: - a dialogue that engages the
      customer across multiple channels and communication media, reflecting the how
      and when of their contact needs.

2.14) Understanding Relationships
Relationship is a process of human interactions .A relationship is defined formally as a
series of conversations meaning not just talks but also many type of human interactions.
In this industrial world there is need of relationship-based enterprise one that converses
with customers rather than managing traditional customer relationships .It created value
with the customers rather than delivering value to customers. Rather than targeting
customers, it becomes target playing the role of hunted rather than hunter.

A relationship is a series of conversations. The relationship between a bank and customer
grows from a series of conversations about mortgage rates, credit cards, and other offers
from bank. It is only when these conversations extend over a period of time it is safe to
say that a relationship exists between a bank and a customer.

A conversation is a series of exchanges or more specifically a series of economic
exchanges. If the conversation is about securing a new mortgage then each of exchanges
or interactions that the customer has with the lender concerning that mortgage is a part of
conversation.

An exchange is a discrete interaction between a customer and an enterprise, an
interaction that happens all at once or at a point of time. Once an exchange has begun, I
continue until it is complete. Each exchange includes an offer.



Indian Institute of Information Technology, Allahabad                                - 40 -
An offer is more than a product or a service. It can include anything a product, service,
solution, information, knowledge or any other resource. Any of these can be the content
of the offer. For bank content may be the information about the mortgage rates, advice on
housing markets, or solutions to a home financing problem. Each offers carry either an
implied or explicitly stated value proposition the value proposition in the case of the bank
might be ―convenient home financing at the lowest possible rate ―.

The content of offer is conveyed through some predefined or accepted infrastructure or
channel.

Context includes all that is known about the customer and the situation surrounding the
conversation with that customer. It include the role of that the customer plays in an
exchange, information concerning prior conversations, as well as any interpretations that
can be made from a combination of the knowledge of the customer and the knowledge of
the past and present conversation .in the example of conversations about the mortgage,
the context includes information on the financial situation of the household, the customer
history with the bank as well as the lenders knowledge of the goals, objectives and
dreams of that customer. The context has a strong influence over the value proposition
that is a part of every offer

Business design includes all the decisions taken by the bank with regard to its mission,
goals, objectives, policies, procedures, processes, and infrastructure –decisions that it
must make to conduct its business successful.




Indian Institute of Information Technology, Allahabad                                 - 41 -
                                               Relationship




                                              Conversations




 Context                                      Exchanges                      Business Design




                                                 Offer




Value Proposition                                Content                      Infrastructure




While the new language of relationships contains relatively simple and straightforward
definitions, this does no means that the business situations that they describe are just as
simple and straightforward. In fact they are not. Enterprises have many conversations
occurring simultaneously with many different customers. And because organizations very
often have multiple business lines and multiple offerings, they will be engaged in many,
many conversations. In some of the situations organizations will be even involved in a
number of conversation with the same customers.




Indian Institute of Information Technology, Allahabad                                - 42 -
                                              Relationships
                                                                                 An Enterprise may
                                                                                 have Diff. Line of
                                                                                 Business
                                              Conversations




       Context                                  Exchanges                           Business Design


                                                                                    An Enterprise
                                                                                    may have many
                                                  Offer                             Diff.Offerings




   Value Proposition                             Content                            Infrastructure




                                                                               An Enterprise may
                                                                               use Diff. Channels



These conversations as such are not problems but they do become a problem if enterprise
doesn‘t realize that two different departments are conversing with the same customer, or
does not track the patterns of its conversations with the customers or is unable of
recalling its last conversations with the customer. The opportunity for cross selling is lost
The opportunity for up selling is lost .the opportunity for multi-channel branding is lost
and the opportunity to build a relationship with the customer is lost forever.

2.15) Phases of Relationships

A Relationship can have different stages. You cannot reach at the peak of the
Relationship without undergoing different stages. A Bank has to take different steps one
at a time to achieve the highest efficiency. A Bank may undergo several phases while
following Relationship Management.




Indian Institute of Information Technology, Allahabad                                  - 43 -
These phases can be shown below




                                          Strategic Partner



                                          Consultative
                                          Approach


                                          Excellent Service
                                          Provider


                                          A Better Bank


                                          A Utility Bank



2.16) Relationship Management Framework: -
For sustaining conversations with the customers requires structure- a relationship
management framework. A relationship management framework enables the relationship
Based enterprise to converse fluently a many levels over an extended period of time, with
many different customers. It is a comprehensive management framework for handling the
continuous and varied set of management activities that are required to organize
conversations. it is way to take action, repeatedly and successfully. The relationship
management framework translates picture of what conversations should be into practical
designs that work for real customers, customers who may not all want the same style of
relationships.


A relationship management framework for relationship decisions and actions should be
based upon the model of 3 Ds
    Discovery
    Dialogue
    Discipline

Discovery focuses on the customer, it is centered on learning and it is the basis for
recognizing, remembering and understanding customers




Indian Institute of Information Technology, Allahabad                              - 44 -
Dialogue focuses on the relationship .It is centered on conversations and ensuring that
value is created in every conversations with a customer

Discipline focuses on the management decisions that must be taken considering the
organizational and management mechanism that enable continued discovery and
dialogue.

                   Discovery                                      Dialogue




                                          Discipline


The relationship management framework focuses actions around three preoccupations:
discovery, Dialogue and discipline. Together discovery, dialogue and discipline are the
preoccupations that create, Sustain and manage customer relationships.

Discovery:
Being preoccupied with discovery means seeking ways to build ongoing knowledge
about customers. Consequently, discovery is centered on learning .it can be supported by
a variety of technologies such as data warehousing, customer information systems, data
mining and analytical software‘s. Discovery provides the basis of recognizing,
remembering and understanding customers. It enables the enterprise –in the world where
the customers is constantly changing-to identify and define their customers, customers
preferences, and the customers potential value to the enterprise. This knowledge provides
the context for the exchanges that grow into ongoing conversations that build and sustain
relationships with the customers. Discovery is the practical response to the desire for the
perfect information‘s about the customers.

Dialogue:
Being preoccupied with the dialogue means creating relationships with the customers
based on conversations. The preoccupation is centered on ensuring that the value is
created in every conversation with a customer. The objective of the dialogue is to create
the value that both the customer and the enterprises seek. Dialogue means working
together, it means sharing resources, and it involves an offer. Dialogue is where the
―Conversations design‖ becomes an operational reality. Dialogue enables the enterprise
to define the relationships that the customer desire, the type of conversations and
exchanges that will support that relationships and how the enterprise can foster continual
exchange and share control of the relationships.




Indian Institute of Information Technology, Allahabad                                - 45 -
Discipline:
Being preoccupied with discipline means making management decisions about the
operational mechanisms necessary to enable continuous discovery and dialogue .the
objective of discipline is to design the business in a way that supports conversations with
the customers and therefore the desired relationships. Discipline enables the enterprise to
develop its identity and branding, its organizational structures and infrastructures, is
methods of measuring and managing performance, and its ability to change and to
manage change.

Discovery, dialogue and discipline are actually linked together to form a system of
preoccupations for dealing with the constant change




                              Domain                Goal                 Means           Variable


   Discovery                  Customer            Customer               Context         Value
                                                  Knowledge                              Proposition


   Dialogue                   Relationshi         Value                  Conversati            Content
                              p                                          on

                                                  Business               Business          Infrastructu
   Discipline                 Manageme            Outcomes               Design            re
                              nt

The relationship based enterprise constantly discovers it customers, replenishing its
customers knowledge through conversations and its understanding of the context of those
conversations and adjusting value propositions as necessary. Engaging customers in
dialogue enables discovery by building and sustaining relationships, created by
conversations that consists of value exchanges, with the content of these conversations
adjusted as necessary to sustain the relationships. And discovery and dialogue are
enabled through management discipline, which focuses on achieving specific business
outcomes for customers by ensuring the business is properly designed to facilitate the
right conversations and relationships. Market Research gives way to conversations and
knowledge sharing, which enables customers to help design products, channel and value
creating conversations.




Indian Institute of Information Technology, Allahabad                                 - 46 -
2.17) Know Your Customer
Relationship management starts with customer segmentation. Firms using static or one-
dimensional assessment of customer performance or those that focus largely on the
relationship manager‘s assessment does not have sufficient information to evaluate
customer performance.
For example, here‘s how three market leaders have better segmented customers to
enhance relationship management and overall returns. One global wholesale bank
segments its target customers based on a clear understanding of its strength—developing
complex financial solutions for global companies. The organization refined its
segmentation strategy to include needs-value criteria so that resources were focused on
those customers with the need for complex solutions delivered on a global basis. The
second, a super-regional bank, and segments its customers based on the intersection of
customer needs and its capabilities. For example, corporate finance solutions will be
developed only for some types of customers but not others. The institution treats each
customer segment differently. Another large global wholesale bank categorizes customers
into tiers based on their revenue potential. Different marketing and delivery models are
deployed for each segment. For example, the customer tier will determine the
composition of the relationship management team and the prioritization of resources to
service the customer needs. These examples show how three major financial service
organizations have refined their segmentation strategies to enable them to better target
customers and allocate resources more efficiently.

―Wallet sizing,‖ in which a firm measures how much a prospective or existing customer
spends in total on financial services and transactions, is a good first step. A wallet-sizing
exercise yielded surprising results for one organization. After pursing a big-name
customer for 10 years, the bank crunched the numbers and surprisingly discovered the
customer‘s wallet was too small to contribute meaningful profits to the institution. If the
firm had done its homework at the outset, it would have saved 10 years‘ worth of time
and resources trying to land the account.

In summary, we found that the most effective segmentation schemes adopted by firms:

Combine objective assessment of future customer needs and product applicability with
the judgment of the relationship managers and product specialists
Focus on potential relationship value based on an understanding of current profitability
Define segments in terms of desired financial and product usage outcomes
Drive customer relationship management and resources allocation decisions, e.g.,
―hold,‖ ―invest‖ or ―exit.‖

The basic thing that a Bank needs to do is to know what is the customer actually? For this
the following theory will help the bank in identifying the actual customer, its types and
the needs.

To find out where the customers and customers groups are possible in the relationship
space we need to answer the following questions


Indian Institute of Information Technology, Allahabad                                  - 47 -
1) How well do we know and understand our customers?
2) How dynamic are our conversations and exchanges with that customer?

What we do is to collect all the possible information about our past and existing
customers and then divide the customers into different groups. The typical customers
groups are named as follows

Patron, Customer, Client and Partner

The Patron Group: -
Members of patron group have a relationship with the enterprise characterized by very
simple conversations. They buy products or standard services anonymously trading
money for what is on offer and move on .A patron limits the information‘s exchanged to
―my credit card number is ― or a similar bit of data. Exchanges of money for product are
conducted impersonally ―over the counter‖ Organizations that serve patrons well offer
them high quality commodities at lowest prices and an efficient purchasing experience.
The enterprise has only very limited knowledge of patrons

The Customer group: -
Members of the customer group also have relationship with the enterprise that can be
characterized by very simple relationship. However the enterprise has intimate
knowledge about the customers, most likely in the form of precise segmentation by type.
Organizations that serve the customer group well focus on customizing their products and
services to meet the needs of specific type of customers. They specifically track the
buying patterns and offer rich products lines matched to specific segments. Enterprise
focused on the customer group invests more in products and service rather than
relationship with individual customers. Their efforts are based on their understanding of
finely segmented marketplace.

The Client group: -
Member of the client group has a relationship with the enterprise characterized by rich
conversation concerning specific requirements, services or problems. The enterprise has a
great deal of knowledge about the specific customers however it has limited knowledge
about the client group as a whole. The clients it does converse with are engaged in far-
reaching, complex conversations and they attach value to a lively, interactive exchange.
Enterprise that serves the client group will personalize their conversations. They are
prepared to personalize channels, electronic interfaces and the processes they use for
interacting with their clients. But they are not prepared to track buying patterns or offer
rich product lines matched to specific client segments. The relationship itself is far more
important than the product or services




Indian Institute of Information Technology, Allahabad                                - 48 -
The Partner group: -
Member of the partners group like those in the client group have a relationship with the
enterprise characterized by rich conversation and cooperation, the enterprise maintains a
great deal of knowledge about the individual partners, as well as about them as a whole.
Partners cooperate closely with the enterprise to co-create value, entering into a rich
exchange of information and other resources. Effective partnering with this group of
customers creates value through multi-faceted conversation. This type of relationship
may involve a joint venture or the kind of sharing that is common among the member of
community.

The relationship-based enterprise preoccupation with the discovery, dialogue and
discipline means that it can continually discover and rediscover its customers-constantly
adjusting the understanding of who they are –as its customers grow, evolve and change.

Discovery focuses the enterprise attention on customers –and three critical questions

Who are our customers?
What do our customers want and expect
What is their value potential?

Answering all these questions results in a constantly current profile of customers. This
profile consists of their characteristics, their preferences and their value potential




        Customer
        Characteristics Profile

          Customer
          Preferences Profile


                     Customer Value Profile



Organizations need to understand exactly what the term customer means if they are going
to start conversations or design conversation with their customers.

One way to define the customer is to define a customer role. A customer is simply the
recipient of the products or services resulting from a conversation




Indian Institute of Information Technology, Allahabad                                   - 49 -
Another way to define the term customer is through context. Understanding the multiple
dimensions of customers depending on context allows the relationship-based enterprise to
create appropriate conversations.




Discover the customers: -
All the previous data about every customers needs to be stored and then it is segmented
into groups .The marketing team mapped all of their customer data into the relationship
space .So the customers are classified as patrons, customers, clients and partners.


Prepare customer characteristics profile:
Based on the previous information and data and on the judgment develop a overview of
current and future customer characteristics and list them in characteristics profile which
will give simple platform for three linked management process.

1) Articulating the business design and marketing strategy as it is evolved
2) Building the customer knowledge needed to support expanded conversations and
relationships
3) Building the information systems required supporting customer definitions and more
continually current profiles

How to identify customers on contact:
Customer definitions and overview provide vital information for marketing, operations
and strategic planners. The most immediate problem in changing business however is to
identify customers. To achieve instant recognition we need to employ certain data
markers. Data markers depend upon the nature of business and the employee actions that
must be taken once customers are recognized as belonging to some group or category.
So the ideal way is to classify the customers by the style of relationships as patrons,
customers, client and partners. Each will be looking for a particular kind of conversation
and value exchange and it is the enterprise ask to focus on its ideal customer and structure
conversations accordingly .To maintain conversations and to create broader, deeper
relationships, the relationship based enterprise also needs a way of anticipating what
customers will need next. A customer characteristics profile listing current and future
relationships potential is one way of doing this .In addition everyone in the organization
need to have the ability to recognize customers on contact. This kind of instant
recognition is achieved by embedding data markers in the design of conversation. Each
conversation then becomes a response to some condition or opportunity linked to specific
type of customer, revealing who he or she is. Finally enterprise also need to remember
each customer so that whenever and however the customer contacts the enterprise the
customer is known and has a history.



Indian Institute of Information Technology, Allahabad                                 - 50 -
Long-term relationships depend on “getting inside the customers
head”


Preferences profile: -
 A new operational challenge was to determine the best way to keep an accurate record of
the products, services and solutions purchased by key customers groups and by individual
households. CRM software will play a key role in meeting this challenge. But the broader
challenge was to make sense of the mountain of information and in particular to
understand what drives customer preferences and the evolution of these preferences.
These preferences profile would be different from traditional market segments. They
would contain more information‘s. The profiles would describe the customer preferences
for products, services and channels. But they will also probe for les tangible, more
judgmental factors-customer attitude to ―value‖, their ―experience‖ of the relationships,
and the degree to which they wanted to cooperate with the company in creating value

Value profile: -
A value profile when combined with characteristics profile and preferences profile gives
the relationship based enterprise sound and practical basis for evaluating its investments
in customer relationships. It helps forecast how long the enterprise can retain the
customer business and how customer relationships will evolve.
And it answers questions such as Can this relationship be sustained?
Will it grow and how? or Should it be allowed to fade?

The traditional, market centric view is that the customer generates value in response to
advertising and sales program. The job of the advertising agent is to connect with
customers from a distance, with the aim of getting their attention, mind share and wallet
share creating a simple relationship characterized by brand awareness and completion of
a sale. The job of sales executive is o approach customers directly and leverage the
company‘s marketing efforts to create more personal relationships-in essence one on one
loyalty programs-that result in repeat sales. The value generated by these marketing and
sales relationships is measured in terms of higher prices, higher revenues and higher
profits.

In contrast relationship based enterprise takes the view that value is generated through the
process, operational and information economies created by competition, coordination,
collaboration and cooperation. This value generate does not fit easily into financial mold

The first step is to list the ways that customer relationships generate value
For the starting point three different view of value potential can serve as starting point




Indian Institute of Information Technology, Allahabad                                   - 51 -
1) Historical value: -This view provides a summary of the purchasing pattern and the
revenues and profits produced by the customer to date. This summary provides the
essential background information

2) Current value: - This view provides a summary of the customer‘s value today. This
value can be projected with the assumption that the relationship is maintained and repeat
purchase are continued

3) Future potential value: - As with current value, this view provides a summary of the
customers value today, but it assumes that the relationship grows through cross selling,
related sales, price premiums and other factors, all contributing in future revenues and
profits

2.18) The Relationship Space: -
The concepts of discovery and dialogue can also be used to find solutions to a central
problem of every enterprise, that of customers segmentations. That enable the
organizations to complement traditional demographic and psychographics segmentations
with true relationship-based segmentations: the precise identifications of customer groups
according to the relationship style and type of conversations they want with the
enterprise. Relationships, conversations and exchanges can be designed and managed to
meet the needs of specific customers and customers groups even down to segment of one.
The relationship space provides a map of main styles of relationship that can be designed
and built with customers. This framework maps relationship styles along two dimensions:
the amount known about the customers along the discovery axis and the richness of the
conversations with those customers along the other axis.
Located on the four axis are four quadrants that highlight four possible relationship
styles. At the outer corners of the quadrants at the most extreme limits of the axes the
styles are as follows:

                               Product Centered                    Value Centered
             DISCOVERY
              Richness of      Customers                            Partners
              Knowledge of
              Customer

                               Price Centered                       Need Centered

                               Partners                             Clients



                                    Dialogue -Richness of conversation
                                    and degree to which they are conducted in real time




Indian Institute of Information Technology, Allahabad                               - 52 -
Price Centered Relationship: -No knowledge of customers and little or no dialogue. This
type of relationships is associated with the sales of commodity products at the lowest
price. Here the enterprise exhibits operational leaderships

Product Centered Relationship: -A great deal of knowledge about types of customers,
not likely in the form of customer segmentations, with little or no dialogue with specific
customers. Products and service are customized to meet the needs of finely defined
customers segment. Here the enterprise exhibits product/service leadership

Need Centered Relationship: -Little knowledge about the customers but a great deal of
dialogue concerning the requirement, needs and problems of specific customers. In this
type of relationship the process for delivering products and services is personalized to
meet the needs of each individual customers. Here the enterprise exhibits exchange
leadership

Value Centered Relationship: - A great deal is known about the individual customers
and significant dialogue with those customers. This type of relationship is associated with
organizations that work together with their customers to create needed products and
services. Here the enterprise exhibits conversation leadership.

The relationship-based enterprise has the flexibility to use any and all of the relationship
styles depending upon the nature of conversations required by the customers.

2.19) Relationship Strategy: -
A relationship Strategy is needed to answer these questions. To put together such a
strategy; organizations need to use the relationship space. The relationship space
identifies four separate relationship styles and four different customers. Each relationship
style delivers or creates value in its own distinctive pattern. Each involves a distinctive
pattern of conversation and a distinctive way for an enterprise and its customer working
together. Each is suited therefore to a different customer group

                                                       Dialogue
                                  Product Centered                  Value Centered
                                  Relationship                      Relationship


               Discovery
                                  Price Centered                     Need Centered
                                  Relationship                       Relationship




Indian Institute of Information Technology, Allahabad                                 - 53 -
1) Price Centered Relationships: -

This style is suite for patrons, the kind of people who derive from everyday low prices.
They look for nothing less than the best deal in the marketplace. And the enterprise learns
to deliver them by delivering standard products at competitive prices .the key is efficient
marketing and distribution-management of highly effective exchanges

Conversation is limited. It usually consists of only the exchanges required to complete the
transaction-information, product and money. Communications are mainly one-way from
company to customer via traditional marketing and advertising channels. Monologue
prevails dialogue. Limited conversations reflect the traditional value-delivery model, in
which patrons need attractive information on price and product features to promote
accurate comparison. Price centered relationships can be characterized as competitive.
The customer is seen, as an average statistic .the enterprise knows a great deal about such
customers segments but very little about individual customers. Products and services for
those in the patron group are created with very little dialogue or feedback. The enterprise
that focus on patrons must ensure that it focuses all of its energy around the idea that
customers are aggressive, price sensitive shopper and these customers will insist on
getting the best deal that the market place can offer.

Price Centered Relationship
Enterprise View                                Patron is average Statistic
Dialogue                                       Traditional Market research & Inquires
                                               Products & Services are created without
                                               much feedback
Purpose of Communication                       Gain access to & target predetermined
                                               groups       of      buyer.    One-way
                                               Communication



                           E                         C




                                       O

                                       Competition

Here, E- Enterprise
      C- Customer
      O- Offering



Indian Institute of Information Technology, Allahabad                                - 54 -
2)   Product Centered Relationships: -
 This relationship style is suited for the customer group. They derive value from the
 customization of products and services to meet the specific need and preferences. In
 simple terms the delivery of customized configuration of products, services, information
 and solutions that precisely meet their needs. Companies make money and generate
 growth opportunities by becoming adept at:

     1)   Market micro segmentation
     2)   Directly observing customers and understanding their needs
     3)   Providing ways for their products and services to be reconfigured
     4)   Customizing and mass customizing their offers

 Product Centered Relationship
 Enterprise View       Customer is individual, statistic in transaction
 Dialogue              Shift from selling to customize and providing help through
                       call centers. Reconfigure product and services through deep
                       understanding
 Purpose           of Database Marketing. One-way Communication
 Communication



                       E



                               O
                         O                        C


                                    Competition


 Here, E- Enterprise
       C-Customer
       O- Offering

 Intimate knowledge and information on customers is required to support customization o
 products, services or solutions to precise customer specifications. Companies build such
 customer knowledge through 3 ways. First one is excellence in market segmentation
 using traditional market research methods. This enables the company to learn about the
 segment in depth without engaging individual customer in direct conversation. the second
 method is scrutinize a customer buying and usage patterns, a form of indirect
 conversation that become a part of sales and service routines. The third method is to
 engage customers directly in delivery of the product or service. These conversations are


 Indian Institute of Information Technology, Allahabad                             - 55 -
very effective, since they are usually limited in time and rightly focus on customization
of products and services.



3.Need Centered Relationships: -

This relationship style is suited for client group they derive value from the ability to
personalize service processes channels and interfaces to help them solve complex
changing problems. The client group looks fro access to personalized service and advice
through convenient channels that save them time and money. Their problems are not with
standard products but with the act that there may be to many products to choose from,
many different ways products can be used. They may also find it hard to use standard
service and delivery channels. To deal with these issues clients need suppliers who can
converse with them freely, intelligently and on a wide range of issues, clients want
personalized service channels and processes that put them in driver seat when it comes to
selecting the when, where and how of service. Companies make money and generate
growth opportunities from the relationship by becoming adept at

1) Conversing freely with the client and understanding their problems
2) Working with clients as channels co designers
3) Personalizing channels, market spaces and services processes

Need centered relationships provides stable frameworks for cooperation over a long
period of time. The three typical drivers of cooperation are that

   1) Joint action is required to solve complex problems that often arise in
      unpredictable ways.
   2) It takes time for members of the client group to select, buy, use and dispose of the
      products and services in question
   3) It takes time for suppliers to learn what members of this group need

As cooperation grows, conversation become rich, free flowing and interactive.
Conversation focus on variety of buys and uses challenges, issues and problems

Need Centered Relationship
Enterprise View                               Client is a person, cultivate trust &
                                              relationship
Dialogue                                      Shift from selling to Personalizing.
                                              Providing help through interactions
                                              centers. Redesign products & services
                                              based on dialogue
Purpose of Communication                      Relationship    Marketing.    Two-way
                                              Communication




Indian Institute of Information Technology, Allahabad                               - 56 -
                                                            C
                         E




                         O


                                  Competition


Here, E-Enterprise
      C-Customer
      O-Offering

4) Value Centered Relationships: -

This style is suited for the partner group that creates value through jointly developed
solutions and long-term collaboration. They want value that can only be created through
the joint design of solutions that involve products; services, channels and interfaces, to
develop these solutions hey need to achieve high levels of collaboration. The
conversation are rich free flowing and interactive. Exchange of knowledge, information
and other resources is extensive. The enterprise and it partner develop intimate
knowledge of each other. All this forms he basis for sustained collaboration supported by
joint investments of resources over time. Value centered relationship come in many
forms partnerships, joint ventures, strategic alliances, and web-enabled communities.
Value centered relationship depend on intensive and extensive collaboration. A
collaboration, value centered relationship is a series of conversations between an
enterprise and a customer that occurs over an extended period of time. The conversations
are personalized and spawn customized products and services. In this type of relationship
the added value comes from the fact that it provides the customers with the right
combination of supplier relationships. Collaboration embraces the joint action needs to
achieve complex shared objectives over extended periods of time.




Indian Institute of Information Technology, Allahabad                               - 57 -
Value Centered Relationship
Enterprise                  Partners are enhanced network, they are collaborates &
                            developers
Dialogue                    Companies and lead customers have joint roles in
                            education, shaping expectations & cocreating products
                            & services and market acceptance
Purpose                of Active dialogue. Multilevel Communication
Communication




                            E
                                                                  C




                            O

                                      Competition


Here, E- Enterprise
      C- Customer
      O-Offering


2.20) Delivery Structures for Relationship Development
To achieve the full potential of relationship management, organizations must realign how
they market to and service customers, particularly in delivering both advisory and
commercial banking products. Customer relationships are typically managed through one
of three basic organizational structures

The Super Banker relies on the relationship manager as the main point of contact to the
customer. Product specialists support the relationship manager.
The Coordinator pulls together the total marketing effort, but product experts market
directly to customers.
The Tandem System has two separate relationship managers, one for commercial bank
and one for investment bank activities, who oversee product specialists.
The Functional model identifies different specialists for sales, underwriting and
maintenance roles.




Indian Institute of Information Technology, Allahabad                              - 58 -
                                                         Customer
                Customer



                                                                        R.M
                           R.M




                                                             P.S               P.S
              P.S          P.S           P.S



          THE SUPER BANKER                              THE COORDINATOR

                Customer                                     Customer




               R.M                     R.M



                                                         S          ST          M


   P.S          P.S              P.S           P.S



       THE TANDEM SYSTEM                             THE FUNCTIONAL MODEL
Here, R.M- Relationship Manager
      P.S- Product Specialists
      S-Sales
      ST-Structuring
      M-Maintenance




Indian Institute of Information Technology, Allahabad                         - 59 -
The super banker is an echo of simpler days, when one person could be familiar with a
bank‘s complete line of products. Today, this concept is difficult to use for the large
global corporate market, however it may still work in the middle market. The difficulty
lies in the complexity of needs, speed of response and breadth of relationships that the
super banker must cover to effectively manage the customer relationship. In the large
global corporate market, it is impossible for one person to talk with all key customer
counterparts, stay abreast of developments, assimilate that knowledge and make sure the
right resources are directed on the right issues. In all markets, however, it will be the use
of leading technologies in managing customer information that will enable the super-
banker concept to be effective in today‘s global environment.

Several post-merger financial service organizations have embraced the tandem system to
represent their dual capabilities in commercial and investment banking, believing an
M&A specialist can‘t adequately sell cash management services, just as a former lender
may overlook the potential for a capital markets financing. That may be true, but the
danger here is that two-relationship manager can widen the gulf between the services,
heightening the potential for internal competition and customer confusion. Because the
product-line approaches are autonomous from each other, tandem relationship managers
need to be in constant communication in order to own a greater size of the customer
wallet with multiple product line sales. However, our survey indicated that in some
organizations, managers did not communicate for long periods of time. The tandem
system may have benefit in providing product expertise for specific needs; however, it
may not be the most holistic approach to improving relationship management strategies.

The coordinator model is the most promising. In the center is the relationship manager-
the CEO of the relationship—transferring knowledge about the account to independent
product people, who continuously feed back information. The customer has direct access
to the product people while the relationship manager monitors their activity and the
overall profitability and potential of the customer. Direct exposure to product staff
provides an information flow that helps generate a greater number of creative ideas for
enhanced products and services. Some of the most innovative organizations surveyed
operate this way. The success of this approach, however, is contingent on clear
communication and strong information management.

A fourth model, the “functional” model exists primarily in the middle market. In this
model, also referred to as the ―finder/grinder/minder‖ model, different specialists are
responsible for sales, underwriting and maintenance. This model is used as a method to
lower delivery costs. With no central point of customer contact, banks have found this is
not an ideal way to develop customer relationships.

Each model has its pros and cons, and is only as good as the information that sustains it.
Relationship management is becoming an increasingly information-intensive activity. No
bank can attempt to properly manage its customer relationships without a comprehensive
overhaul of its data systems.




Indian Institute of Information Technology, Allahabad                                  - 60 -
2.21) Structure of the Organization: -
Traditional organizations have structured themselves to support the demands of an
organization. The Relationship-Based enterprise structures itself to focus on both
integration and connection. This structure is organic, multi-dimensional and self-
reorganizing. The growth of these structures is guided by three main imperatives

        1. Visible customer orientation
        2. Moving closer to customer
        3. Delivering personalized services

By visible customer orientation means that anybody viewing the organizational structure
from outside gets the sense that customers are important. This message, communicated
internally and externally, can significantly alter the corporation‘s culture and operational.
Relationship-based enterprise aims to select a design that demonstrates its commitment to
the customer

Moving closer to customer suggests that a balance exists in the organizational design
between centralization and decentralization. The enterprise is structured to leverage the
demands from one customer into an offering for another customer

Delivering personalized services enables the corporation to reap the benefits of its
relationships. Personalized services transfer control over the service to the individual by
providing a series of choices that make the service unique to one person. Personalized
services demonstrate that the enterprise can deliver the conversation wanted by its
customer. The relationship based enterprise leverages its personalized services to increase
is value proposition in the relationship

2.22) How the Conversations are designed: -
To foster exchange: - there are two fundamental principals to conversational design:

   1) Conversations must be designed exchange by exchange
   2) Each exchange must create value

The essential context for conversation design is to define broadly the relationship styles
preferred by various customer groups. Each of relationship styles involve a different type
of conversation and what might be called a different working relationship –competition,
coordination, cooperation and collaboration. Using high-level insights into the
relationship styles preferred by customers, the relationship-based enterprise could then
design conversations that support the target relationships. This activity can usefully be
viewed a translating a strategy into a tactical design.




Indian Institute of Information Technology, Allahabad                                  - 61 -
For this, we need to focus on four primary management activities

1) Listening
2) Engaging
3) Enabling
4) Learning

All these four activities of conversation design focus manager attention specifically on
how to foster more interactive types of exchanges with customers. The emphasis is on the
process of sharing.

Listening: -

Sharing perspectives and knowledge. Listening is a type of exchange that is critical to
conversation. To foster exchange, organizations need to create listening posts and forums
for customers to express their opinions and suggestions. Listening process must be
designed into conversations. Listening is vital to success of any conversation. But
listening is not necessarily a prominent capability of every organization. For the most part
listening problems are largely related to the way businesses have been designed.

Engaging: -
Linking value-creation processes in order to engage customers in conversation. Every
exchange needs to create value to sustain a conversation. Value is created exchange by
exchange, with each exchange linking the value creation processes of customer an
enterprise. Good conversation designs foster interactive exchanges. Interactive exchanges
fuel dynamic conversation. The key types of exchanges that can make up conversations
are:

   1.   Talk (Selling, bargaining, negotiating, consulting) etc
   2.   Messaging (Structured information exchange)
   3.   Knowledge creation and transfer
   4.   Resource sharing and pooling
   5.   Working together
   6.   Buying and selling
   7.   Returning goods
   8.   Exercising warranties

Some conversations involve money and some do not. Value can be created through the
exchange of such valuable resources as time, knowledge and information. Conversations
must be designed to create ―the possible shortest route to value‖ for both the customer
and the enterprise.




Indian Institute of Information Technology, Allahabad                                 - 62 -
Enabling: -
Sharing channels places of business, and meeting spaces to ensure that the exchanges
create value. Making Conversation seem personal wherever, whenever and however
customers do business with you enables them to converse freely. Clients want to do
business in shared meeting spaces and forums for dialogue rather than traditional one
way ―deliver channels‖ owned by the company. They are ready to co-design those
spaces. If value needs to be created exchange by exchange, then personalization of
service processes and delivery channels with clients represents a major opportunity to
foster exchange and link value creation processes. New communications technologies
and CRM personalize the places, spaces, and time in which clients and enterprises deal
with each other. ―Channels‖ and ―Marketplaces‖ and ―Portals‖ are becoming
infrastructures that clients are co-designing and sharing with enterprises. Meeting places
and forums for dialogue are replacing traditional one-way ―delivery channels‖ owned by
the company. Personalized conversations need to be designed .his can only be happen
consistently when supported by human and technological systems. Here is a shortlist of
conversational ideas:

   1. ―Team conversations‖ between a client and a virtual team. These teams can
      include many units of large organization-call center agent, web site agent, sales
      person, account manager
   2. ―Many to many conversations‖ between clients and call center agents. The
      agents are supported by efficient switchboards and shared customer profiles that
      enable them to recognize clients and respond quickly
   3. Interaction in a conversational mode between a client and web site, an
      ―intelligent‖ software agent, and an efficient e-mail response system
   4. Messaging in a conversational mode between two ―intelligent‖ software agents,
      one representing the customer and another the enterprise

Learning: -
Sharing information, knowledge and product design interfaces to ensure that exchanges
create value. Customizing products and the contents of offers rests on learning about, and
from, customers. Customers can teach the enterprise about their product preferences or go
further to act as direct co-designers of products. By sharing information, knowledge and
product-design with customers, customers can contribute value as product co-designers.
Customization of product and solutions create major opportunities to foster exchange and
link value creation process.

For the relationship based enterprise, answering the question ―Who are we?‖ means
branding conversations. The challenge is to design conversation for different relationship
styles without diffusing brand identity, either internally (for employees) or externally (for
patrons, customers, clients, partners)




Indian Institute of Information Technology, Allahabad                                  - 63 -
2.23) Role of Business Mission: -
 Traditional organizations often tailor the message about how they are to suit the various
markets that they serve. A Relationship Based Enterprise takes this standard practice one
step further. It will position itself in one or more of the quadrants of the relationship
space and engage in different conversations with patrons, customers, clients and partners.
Each group may be presented with a different view of enterprise, based on the type of
conversations the enterprise has structured for that relationship.

To the Patron Group, the Relationship-Based Enterprise may present itself as provider of
standard, low cost products and services. To Customers it may present itself as the owner
of industrial strength products and services that can be customized to meet the needs of
every customer. To Client it may present itself as the suppliers who understands their
need intimately and is prepared o help them find unique solutions to their business
problems and opportunities. And of course to Partners it would present itself as supplier
willing o share knowledge, information and resources.

Another important factor in creating brand strategies is that information, support,
products, services or whatever that is needed can be obtained in real time or near real
time. Customers want to do business on their time and on their turf. Under such
conditions enterprise must deliver the message about ―Who We Are‖ instantaneously and
consistently across all possible channels.

Any organizations that expects to establish long term relationships must ensure that focus
and scope are obvious to all

2.24) Competitive Advantage and Differentiation: -
At the heart of any marketing strategy is the challenge of making customers want to buy
from you. This powerful and compelling reason to buy is called competitive advantage-
why customers come to you rather than go to your competitors. The aim of any company
is to be the automatic choice for that product or service category but failing that, to be on
the mental list of potential suppliers the customer will have. if the relationship is good,
then your expectation would be that the customer would come to you before going to
anyone else.

Creating this advantage once will not be enough. To be successful companies must do
this on a rolling basis. If this happen-and for as long as it continues to happen-it is called
a Sustainable Competitive Advantage. In a mature, well-supplied and highly competitive
market such as corporate banking sustainable competitive advantage is difficult. But in
all cases the starting point for an understanding of competitive advantage must be an
understanding of customer‘s needs compared with what your competitors are currently
offering and what your understand their business development strategies to be.



Indian Institute of Information Technology, Allahabad                                   - 64 -
                                      Differential Advantage




            What Do Customer Want?                        What Are Competitor‘s Strategies



             Value Analysis                                         Competitor Analysis




        -    Who are our Customers?                            -   Who are our competitors
        -    What are their needs?                                 today?
        -    How do they operate?                              -   Who will they be tomorrow
        -    How do they make decisions?                       -   What are their strategies
                                                               -   What are our Opportunities?




                                            Business Model




2.25) Types of Customers of Banking Industry: -
Usually Banks have two types of business they deal in, which are

   a) B2B Business
   b) B2C Business




Indian Institute of Information Technology, Allahabad                              - 65 -
B2B Business: -
B2B stands for "business-to-business," as in businesses doing business with other
businesses. The term is most commonly used in connection with e-commerce and
advertising, when you are targeting businesses as opposed to consumers

B2B e-commerce can save or make your company money. Some ways companies have
benefited from B2B e-commerce include:
       Managing inventory more efficiently
       Adjusting more quickly to customer demand
       Getting products to market faster
       Cutting the cost of paperwork
       Reigning in rogue purchases
       Obtaining lower prices on some supplies

B2C Business: -
This is a transaction that occurs between a company and a consumer. The term may also
describe a company that provides goods or services for consumers

B2C ordinarily refer to on-line trading and auctions, for example, on-line stock trading
markets, on-line auction for computers and other goods. B2C e-commerce refers to the
emerging commerce model where businesses /companies and consumers interact
electronically or digitally in some way. One of the best examples of B2C e-commerce is
Amazon.com, an online bookstore that launched its site in 1995


2.26) What are the Communication Channels: -
Over the last few decades there has been rapid expansion in the number of channels and
even more in the variety of choices that customer have for the way that they do business
with a company various channels are

   1.   Persons to person contact in a branch
   2.   Home visits
   3.   Telephone of fax calls
   4.   Correspondence through mails
   5.   Near real time interaction through email
   6.   Get product information through interactive or mass media
   7.   Get information from friends or affinity group partners
   8.   Tap into information databases-self service facilities
   9.   Use link to company website


Indian Institute of Information Technology, Allahabad                             - 66 -
                             CHAPTER 3


    Role Of I.T in Relationship Banking




Indian Institute of Information Technology, Allahabad   - 67 -
This chapter will give you the basic tools, which are used for obtaining important and
useful information, which we can use to gather important information about the customer,
and its behavior, which can be useful for a bank in order to understand its customers.

Such tools are given below.

3.1) Data Mining: -
In simple words, Data Mining can be explained as "The process of analyzing data to
identify patterns or relationships". It can be used for searching large volumes of data
looking for patterns that accurately predict behavior in customers and prospects. Analysis
of large volumes of relatively simple data to extract important trends and new, higher
level information. For example, a data-mining program might analyze millions of product
orders to determine trends among top-spending customers, such as their likelihood to
purchase again, or their likelihood to switch to a different vendor. Another example can
be to find statistical information on ATM usage or to require information on all those
credit card customers who have bought single items of over 1,000 in value in the
preceding two years. To answer all these queries we need to know data-mining
techniques

Data Mining can also be explained as "A hot buzzword for a class of database
applications that look for hidden patterns in a group of data. For example, data mining
software can help retail companies find customers with common interests. The term is
commonly misused to describe software that presents data in new ways. True data
mining software doesn't just change the presentation, but actually discovers previously
unknown relationships among the data".

The process of Data Mining can be explained in three stages, which are as follows:
1. Initial Exploration
2. Model Building or Pattern Identification
3. Deployment

Exploration Stage: -
This stage usually starts with data preparation, which may involve cleaning data, data
transformations, selecting subsets of records, and – in case of data sets with large
numbers of variables ("fields") performing some preliminary feature selection operations
to bring the number of variables to a manageable range (depending on the statistical
methods which are being considered). Then, depending on the nature of the analytic
problem, this first stage of the process of data mining may involve anywhere between a
simple choice of straightforward predictors for a regression model, to elaborate
exploratory analyses using a wide variety of graphical and statistical methods in order to
identify the most relevant variables and determine the complexity and/or the general
nature of models that can be taken into account in the next stage.



Indian Institute of Information Technology, Allahabad                                - 68 -
Model Building: -
This stage involves considering various models and choosing the best one based on their
predictive performance (i.e., explaining the variability in question and producing stable
results across samples). This may sound like a simple operation, but in fact, it sometimes
involves a very elaborate process. There are a variety of techniques developed to achieve
that goal – many of which are based on so-called "competitive evaluation of models," that
is, applying different models to the same data set and then comparing their performance
to choose the best.

Deployment: -

 This final stage involves using the model selected as best in the previous stage and
applying it to new data in order to generate predictions or estimates of the expected
outcome

3.2) Predictive Behavior Pattern: -
Behavioral data goes beyond knowing that a customer has purchased a certain product. It
involves capturing customer events and actions over time and using these stored
interactions to determine typical behavior and deviations from that behavior.

Customer analytics exploit customer behavioral data to identify unique and actionable
segments of the customer base. These segments may be used to increase targeting
methods. Ultimately, customer analytics enable effective and efficient customer
relationship management. The analytical techniques vary based on objective, industry and
application, but may be divided into two main categories.

Segmentation techniques segment groups of the customer base that have similar
spending and purchasing behavior. Such groups are used to enhance the predictive
models as well as improve offer and channel targeting.

Predictive models predict profitability or likelihood and timing of various events
based on typical customer behavior and deviations from that behavior.

Customer interactions include browsing, purchasing, paying and communicating with
customer service or sales. It is these interactions that may be used to develop customer
profiles and eventually predict future actions. It is important to understand which of these
interactions were marketing-driven and which were due to chance. Understanding the
impact of marketing, risk and customer service decisions and how those decisions
influence customer behavior must also be tracked. The knowledge that a customer
purchased due to a marketing campaign may be used to optimize future campaigns.
Customer behavioral analysis combined with increased marketing efficiency will enhance
future customer interactions. Setting aside time series samples (control groups) will allow


Indian Institute of Information Technology, Allahabad                                 - 69 -
for marketing effectiveness tracking as well as the continued enhancement of the
customer analytic applications.

3.2.1) The Data: -

Once all interactions and their data sources are identified, the next step is to develop a
time dependent data repository. It is important that the data is stored in time series. True
behavior can only be identified over time. The sudden increase of inexpensive storage
and data warehousing techniques has made the once unimaginable a reality to all
industries. Issues in the past-included access to centralized data and the time needed to
identify and extract the data. Now, with massive data warehouses and seamless extraction
tools, models may be built and deployed faster than ever. Combining all available data
sources and developing the data warehouse can be difficult and time-consuming, but is
well worth the effort. When predicting events and developing segmentation systems, it is
important to understand that the data and the correct use of the data will maximize the
results.

The most time-intensive part of the analytical process is data extraction and
transformation. Transforming the raw data into actionable behavioral-identifying
attributes takes work; but over time, the process may be streamlined. This process
matches and aggregates the database sources into the final data set and is best completed
outside the database environment. Other tools, including various analytical software
packages, have been optimized to complete this type of batch processing. Databases have
the overhead of referential integrity, data consistency rules, undo logs and redo
functionality, all of which slow the processing and data transformation required when
building the "minable" data set.

The best way to determine the transformations needed is to work backward from the
event to be predicted (the dependent variable). Based on the modeling objective, list the
behaviors that are known to indicate that potential action. For example, if a mortgage
company would like to identify customers who have a greater chance of paying off a loan
in the next three months, identify those behaviors that indicate said potential outcome
(e.g., a sudden stop in prepaying principal, rate checks on the Web site, current market
interest rates more than 1 percent less than their rate and revolving credit lines
significantly increased the past few months).

Once all the possible actions are listed, identify the data attributes needed to develop the
final transformations. During this process, extract as much data as is feasible. Although
certain attributes may not seem relevant, the interaction with additional behaviors may
enhance the predictions and segmentations. It is the responsibility of the statistician and
data miner to select the most favorable combination of attributes. Given obvious time
constraints, when asked if a particular attribute may be useful, the answer is almost
always "it can't hurt."

When available, use customer interaction data prior to purchasing additional attributes.
Depending on the objective, models utilizing rich customer behavioral data will


Indian Institute of Information Technology, Allahabad                                 - 70 -
outperform models with only static demographic data by as much as 300 percent. Once
the customer behavior data has been used, research and test additional enhancement data
sources. Enhancement data provides a key role in customer analytics. Purchased
demographic, lifestyle and credit data may be used to help describe model outputs. Link
customer segments to similar prospects in the development of prospecting models.


3.2.2) Predictive Models
Predictive models attempt to predict a binary event (e.g., respond, purchase, default) or
continuous types of outcomes (e.g., margin). The statistics and data mining techniques
vary based on analytic objectives. When trying to predict a binary event, the predominant
techniques are logistic regression and neural networks. When predicting continuous
effects such as contribution to margin, the predominant techniques are neural networks
and regression. Additional techniques have been optimized for those modeling objectives
that do not fit into the previous categories. Poisson regression may be used to predict
ordinal outcomes (e.g., 0, 1, 2) and hazard models may be employed to predict the time to
an event. Examples of their use include predicting the number of collection calls needed
to receive a payment and optimizing retention efforts (time until attrite).

The data miner's experience is a primary driver for which technique should be used.
Several appropriate modeling techniques are typically available for each objective and
tend to produce similar results. When selecting techniques, other issues to consider are
the number of variables selected and the model application environment. For instance,
neural networks tend to choose more variables than regression techniques. This may
cause issues in future model scoring or implementation costs if enhancement attributes
are used. Also, the best model may not produce the greatest ROI if it contains expensive
enhancement attributes or customer attributes that are very difficult to implement. The
total cost to implement the analytical solution should be taken into account when
selecting the final model.

During the model build process, the optimal transformation and combination of variables
must be determined (data reduction techniques). These techniques vary based on the
modeling technique used. Regression techniques tend to see linear relationships well,
while neural network and various other techniques are superior in noticing nonlinear
relationships. The goal in data transformation and reduction is to maximize the
relationship between the variables used to predict the event (independent variables) and
the event of interest (dependent variable) while minimizing error.

Many times, the final model variables may not be the best individual variables. For
example, if age and income are the most predictive attributes, one of these may not be
selected in the final model because age is highly related to income - as age increases, so
does income. Much of the information collected within age and income independently
overlaps, and this overlap creates error. Data reduction techniques minimize this error in
order to maximize the model's predictive power. Once the final model is selected, it
should be verified with a separate data set. The verification data set may be a sample


Indian Institute of Information Technology, Allahabad                               - 71 -
from the same time frame; however, if possible, it is best to have several verification data
sets from various time frames. Verification data sets from alternate time frames ensure
that the modeled data set was a good representation of the customer universe. Seasonality
issues may also be explored with several verification data sets from different time
periods.

3.2.3) Segmentation Techniques

The goal in developing a segmentation scheme is to place customers in groups that are as
similar as possible. As the behavior variation within the groups decreases, the results of
the targeting efforts will increase. These groups may be used to target product, channel
and creative factors as well as several additional marketing and risk components. These
groups also enhance the predictive models. Segmentation techniques vary from age by
income cells to full clustering systems. Many companies deploy segmentation schemes
by cherry-picking those in certain demographic attributes and using 5 to 10 groups as the
basis for all marketing efforts. This is a good start; however, if customer interactions are
tracked and stored, more sophisticated techniques are available. These techniques use all
customer behavior data available to develop unique clusters that are similar in interest,
browsing and purchasing behavior. Once the clusters are developed on the customer
behavioral data, then additional demographic data may be appended to obtain a better
understanding of the clusters. Knowing whether to include the demographic data within
the clusters requires knowledge of the customers and marketing requirements. The
clustering techniques provide output statistics, which help determine if a certain
clustering system provides more "distinct" clusters.

Similar to predictive models, the first step in all segmentation studies is to define the
objectives with all departments and extract the data. Each attribute used should provide
information about the customers' interactions with the company. Additional enhancement
data may also be used; however, the cost associated with that data should be considered
when comparing clustering systems with and without the demographic data. If it is
determined that the demographic data does not provide additional segmentation, then that
demographic data may be used to describe the final clusters. When demographic data is
used to describe clusters, it is a simple process of appending the data after the clusters are
built to construct demographic profiles for each cluster. If the demographic data is used
to build the clusters, then that data must be updated (repurchased) when the clusters are
updated. The update schedule varies based on customer volatility, customer interaction
frequency and data needs.

When developing clusters, it is best to standardize the variables. Standardizing the data
allows each attribute to contribute the same information. Data transformation techniques
are also available if marketing or the data miner would like certain attributes to contribute
more or less to the final clusters. After the attributes are standardized, they may be placed
within the clustering technique of choice. If enough time is available, a principal
component analysis (PCA) should be completed. PCAs squeeze out much of the overlap
across the input variables, reducing error. The output of the PCA is then placed into the
clustering technique.


Indian Institute of Information Technology, Allahabad                                   - 72 -
Two categories of clustering techniques are available - hierarchical and non-hierarchical.
Nonhierarchical techniques place customers into a predetermined number of segments
while hierarchical techniques start with the full customer base and then develop splits
based on the attributes. The various clustering techniques include K-means, nearest
neighbors (single linkage), farthest neighbor (complete linkage) and average distance. K-
means is a simple non-hierarchical method that is often used.

Clustering techniques are powerful methods. If used properly, they will increase overall
marketing effectiveness. It is best to develop the clustering scheme(s) prior to building
the predictive models. This allows for an up-and-running descriptive targeting tool that
may be used to enhance the predictive modeling efforts. Knowing in which cluster(s) a
customer resides places valuable information into the modeling tool because the clusters
contain individuals with similar behaviors.


3.2.4) The Application

Similar to data transformation, model application and scoring is best completed using a
tool outside the database environment. This process includes extracting data,
transforming the attributes, scoring the models, updating the clusters and storing the
results back in the database. Placing the scores and clusters in the database allows
marketing, customer service and risk to use this information for all customer relationship
management (CRM) decisions. In accordance with the time-series fashion of the data
warehouse, the scores and segments should be retained over time. This allows for future
analyses of how customers migrate from cluster to cluster or how their model scores
increase or decrease over time. It is this "change in behavior" that may be used to further
enhance future models.

Predictive modeling and segmentation application issues tend to encompass data timing.
The data warehouse loading interval must be considered during the model planning and
application stages. The age of the data when it is available, the time required to apply the
model and the time to complete the campaign process must be determined prior to
selecting the model, and verification samples must also be considered during the
application process. Data timing also refers to how recent the data must be to deliver the
required power. The most advantageous scenario would be working with up-to-the-
minute customer interactions at the time of the proposed marketing or risk intervention.
In most instances, however, that requires more resources than it is worth. Additional
analyses should be completed to compare the power of recent data to the resources
required. Data recency is defined as the amount of time since the last activity with the
customer. The data recency analysis should compare the results of marketing and risk
applications on data of various ages (e.g., one day old, two days old, one week old).

Customer analytic applications enable enhanced customer relations resulting in increased
efficiency and customer profitability. The data warehouse and analytic applications


Indian Institute of Information Technology, Allahabad                                 - 73 -
deliver a suite of capabilities that drive revenue into the business units. Although it is the
data and the analytical techniques that provide the segmentation, the business process
should drive the data-driven decisions because spending valuable time to create a
powerful model may not add efficiencies. Business processes can only be made more
efficient when data about the process is captured and stored. Data, especially customer
behavioral data, allows the analytical techniques to effectively segment and predict. It is
these segmentations and predictions, known as customer analytics that drive long-term
customer profits and loyalty

On the basis of above tools, we will be able to refine our database as much as possible so
that future conversations/relationships are based on much stronger grounds. By using
above techniques we will be able to differentiate between different types of customer and
hence for each particular customer we can have different type of mechanism to handle the
relationship according to the particular customer need and want. And hence we will be
able to match our product and service and relationship style with their need and wants.




Indian Institute of Information Technology, Allahabad                                   - 74 -
                                 CHAPTER 4


               STRATEGY RECOMMENDED
                               FOR IDBI LTD.




Indian Institute of Information Technology, Allahabad   - 75 -
4.1) Blue Print for IDBI Strategy: -

      1. Knowing Your Customer

      2. Role and Responsibilities of Relationship Manager

      3. Different Units For Relationship Department

                          The Industries Unit
                          The Government Unit
                          The Customer Unit

      4. Service Quality Gap Theory

      5. Questionnaire For Taking Information




Indian Institute of Information Technology, Allahabad        - 76 -
4.2) Knowing Your Customer: -
First of all, we have to collect all kind of past data and information. This is the most basic
and most important step incase we want to be Relationship-Based Enterprise, because
Relationship Banking is all about what you know about Customers. For this we need to
collect as much information we can collect from our past record so that we can answer
basic questions like

Who are our customers?
Which are most profitable ones?
What is the period in which they likely to need the help of our bank?
Who are our long-term customers and short-term customers? Etc.

These are the basic questions we need to know. For this, we have to dig into all out
previous data and then from the findings we can know our existing customers and all
their characteristics. But the main problem is how to find all the relevant information
from the previous information. Various techniques, which have been explained in the
previous chapter, will be useful in obtaining the required information. On the basis of
these information and data we can further base our model of demarcating different
segments of customers

Classification Matrix: -

As we have studied earlier, based on the past data and information, we need to divide our
existing customer base into 4 types of customer groups which are

1.   The Patron Group
2.   The Customer Group
3.   The Client Group
4.   The Partner Group

                                By dividing our existing Clients into these four types of
Customer we can easily can have different practices for different types of clients.
However, it won't be so easy to just classify different clients into each group .We need to
have some parameters on the basis of those we will classify different clients onto these
groups.

These different parameters can be

    Degree of Knowledge of Personal Details
    Degree of Knowledge of Financial Details
    Familiarity Level
    Trust Level
    Duration of Relationship/Contact
    Degree of Feedback


Indian Institute of Information Technology, Allahabad                                   - 77 -
 Buying Pattern.

There can be more parameters, but these parameters are necessary and essential to be bale
to divide the client's base into above four groups.

Customer Characteristics Profile: -
After dividing each of customers into its respective groups the next step will be to
prepare a customer characteristics profile. This will be a huge task if we start preparing it
for every customer. What we can do is to prepare this profile for every Corporate Identity
plus for the public customers, which are profitable for us. However how to decide which
customer are more profitable for us than others. There can be various factors on the basis
of which we can decide our decisions. These factors can be like

       Amount of deposit
       Life of Customer
       Buying Pattern
       Loyalty
       Frequent Visits
       Feedback

Based on the previous information and data and on the judgment develop a overview of
current and future customer characteristics and list them in characteristics profile. As
explained earlier, this customer characteristic profile would consist of three profiles,
which are

       Customer Characteristics Profile
       Customer Preferences Profile
       Customer Value Profile

It is the task of Bank to know what the customer is, what will be its future need and what
value does it hold to the Bank. This Customer Characteristics Profile is one way of
achieving this. A Relationship Manger should immediately know on contact that this
customer belongs to which category and how to approach towards the conversation

4.3) Concept and Role of Relationship Manager: -

This is the person who will be representing contact center or focal point for the IDBI
Bank. This person will be top authority for the Relationship Department, which we are
trying to form in the IDBI Bank. He will be the person whose main task will be to
identify, recognize and then meet the needs and wants of the customer keeping in mind
the offers that IDBI can serve. It means keeping in mind the product and services, which
IDBI can offer he has to match that with needs and wants of the customer. Also he has to
make a relationship, which brings profit in terms of both tangible and intangible. The




Indian Institute of Information Technology, Allahabad                                  - 78 -
skill level and qualifications of the person, which will be heading this department, will be
demanding, so we need to carefully select the person.

Definition of Relationship Manager: -

The person who is responsible for
    Managing a portfolio of corporate customers
    Developing and maintaining proactive relationships with new and existing
       customers to provide them with quality business solutions
    Maximizing income for the banks through retention, growth and targeted
       acquisition of clients

Role of Relationship Manager: -
The desired role of the relationship manager is that of a problem-solving professional and
company champion. Full service banks that best master this more sophisticated way of
doing business will theoretically have the competitive edge

Given below are the major activities and responsibilities of a Relationship Manager

Customers
      Develop an in-depth understanding of customers and financial needs within the
       corporate marketplace
      Tailor customer solutions by utilizing and adapting the full range of bank products
       and expertise

Business Development
      Develop and execute a long-term plan of visits to existing and potential
       customers, building strong relationships with key business influencers to generate
       new needs.
      Work closely with the corporate business development team and other bank
       business partners to create a marketing strategy for each relationships
      Use a structured prospecting approach with a view to pursuing new relationships
       and growing the customer portfolio
      Build and develop a high profile in the corporate marketplace

Credit
      Gather and analyze financial information to present sometimes complex properly
       structured credit applications to be sanctioned, ensuring that ongoing credit
       processes and information requirements are met
      Ensure debt-structuring balances customer need with the risk




Indian Institute of Information Technology, Allahabad                                 - 79 -
Income Generation
      Negotiate interest rates, fees and commissions with customers to maximize
       profitability

Team Working
      Ensure excellent after sales care is delivered through close liaison with service
       providers and product specialists
      Coach and develop support staff to perform their role and provide excellent
       customer service
      Work with the team to maximize business performance


Basic Skills for Relationship Manager: -
Given below are the basic skills of a relationship manager.

Planning Monitoring and Control
          o Strategic Business and Market Planning
          o Project Management
          o Set the goals and identify the team‘s objective
          o Organize the team around its two critical tasks which are
                a) Creating an in-depth understanding of the customer and
                b) Managing customer development plans
          o Establish criteria to measure team performance
          o Develop information analysis techniques and reporting procedure
          o Generate options for business-winning action

Resource Management
          o           Performance management planning and assessment
          o           Techniques of motivation
          o           Recruitment and Selection
          o           Leadership
          o           Coaching
          o           Training
          o           Understanding of team dynamics
          o           Higher level interpersonal skills
          o           Good communication skills
          o           Change Management

Conceptual Skills
          o              Managing innovation and creativity
          o              Problem Solving




Indian Institute of Information Technology, Allahabad                             - 80 -
4.4) Different Units of Relationship Department: -
Banks generally have two types of customer, one the public consumer and the other
Corporate giants. Keeping in this mind that we are both a Development Bank and Retail
Bank, we need to set relationship department in such a way that both the entities should
be well served. Also being a government owned entity, we also need some unit handling
all the possible conversations with them.

So, the first basic question arises how to handle this relationship/conversations. What we
need is a fully separated department whose only purpose of existence is to serve the
customers. This department should have qualified persons that know how to recognize
the customer needs and fulfill them. It should have enough power that it can take
decisions that serve the whole purpose of shifting from traditional banking to relationship
banking.

The Relationship Department would be a separate entity. It will consist of three units,
which are recognized by the banks products and services and also from the customers
they are serving. These three units will essentially the main crux of the relationship
department. These three units are as follows

              1. The Industries Unit.
              2. The Government Unit.
              3. The Consumer Unit.


                                     Relationship
                                     Department




       Industries Unit                   Customer Unit                         Government Unit


We have to go in steps first having a different department and then slowly integrating it
with other departments.


4.4.1) Industries Unit Department: -

The basic purpose of this unit is to identify the customers, recognize their needs and
wants and then has meaningful conversations with them. The customer here represents
Companies from the different Industry .The main task is to find which are the existing


Indian Institute of Information Technology, Allahabad                                - 81 -
clients of the IDBI and who can be the future client of the IDBI and then take this
relationship from unknown customer to loyal and faithful customer.

Today there is lot of competition in the banks got getting higher percentage of industry
customers. Since the industries are growing at a larger rate and being an developing
country with foreign players are also investing in India, which is resulting in introduction
of several large projects being handled by various industries So we need to tap these
opportunity .We need to devise a strategy so that we can efficiently tap this market. The
basic step will be first recognize the clients from various industries, Recognize the
various emerging industry and also what are the existing industries that IDBI is serving.
Keeping in mind the existing industries IDBI is serving and the prospect of new
industries, what the need of hour is to group the similar industries together and then serve
them. By grouping means keeping the industries, which are close to each other, clubbing
them together will make the task easy of handling them rather than handling them
separately. All these groups will represents sub-units, which in themselves represents a
separate entity. These sub-units will hold conversations their respective clients and will
develop a relationship with them with the aim of making these customers as their loyal
customers.

Given below are the sub-units, which are clubbed together on the basis of their closeness
or degree of similarity, or we can say integrating it on the basis of value chain.
For Industries unit, the structure of Industries to target it as follows:

   1. Logistics & Infrastructure Industry, which Includes
      Roads
      Electricity Generation
      Port
      Airports
      Civil Aviation
      Large Transport Operators/Urban Transport
      Shipping


   2. Computer, Electronics Related Industries, which includes
      Computer (Hardware/Software) Industry
      Electronics Industry
      Telecomm Services
      IT –Enabled Services
      Electrical Machinery Industry

   3. Chemical & Allied Industries, which includes
      Petrochemicals
      Fertilizers
      Basic Industrial Chemicals
      Refineries
      Oil Exploration


Indian Institute of Information Technology, Allahabad                                 - 82 -
   4. Manufacturing Industry, which includes
      Iron Industry
      Steel Industry
      Cement Industry
      Non Ferrous Metal Industry
      Coal Industry
      Paper & Paper Related Industry
      Diamond Industry
      Others

   5. Automobile & Auto Components Industry, which Includes
    Car Industry
    Truck Industry
    Motorcycle Industry

   6. Services, which Includes
      Financial Services
      Medical and Health care Industry
      Education Industry
      Hotels
      Construction Industry
      Civil/Mining Contractors
      Entertainment Industry
      Retail Industry

   7. Apparel & Clothing Industry, which Includes
      Cotton Industry
      Textile Industry
      Apparel Industry
      Man Made Fibers

   8. Food –Processing Industry, which Includes
      Agro Processing Industry
      Sugar Industry
      Beverages and Drinks Industry
      Liquor Industry

On the basis of the above demarcation, we need to have different person heading each
related industry so the specific persons are there for specific industries

Department Structure to Follow: -

After deciding on the basic department classification the next thing we need to decide on
the issue of how to carry out or in other words organize the working of this department.


Indian Institute of Information Technology, Allahabad                              - 83 -
Who will have the power of making decisions, how to carry out the working within the
department's etc.

Various considerations need to be taken in care while deciding on the structure. The
structure should follow the basic thinking of keeping the customers and their needs as
first priority. Also there should be a focal point called as contact center where all the
contacts are started or initiated.

As explained earlier, we need to choose among four different type of Department
Structure. Each of them is good, but choosing the one depends upon various factors. Like
the Mission of bank, top management choice, suitability within the organization and the
ease of implementation.


The Four Different ways in which we can structure our relationship department are

      The Super-Banker
      The Coordinator
      The Tandem System
      The Functional Model

For the Industries unit, we have so far identified the basic sub units. Since now we have
to take into consideration the earlier structures, which has been explained earlier.
This will be the structure, which we will try to follow in general. So we will need for
every sub unit of Industries department a team which will consists of Top level
Relationship manager which will head the unit plus a team of product specialists. The
definition and general role and responsibilities have been discussed earlier

But another issue arises which how to pass information within the Head Office where this
central team will be located and also to the Branch offices and zonal offices.

The solution to this problem will be to have two tiers of Relationship Manager. One who
will be at the helm of all the matters and who will take all major decisions taking place at
the Head office and also at the zonal offices. But at the Branch offices, we can‘t have our
entire team working there. It will be too costly and also is not feasible. So what we will
do is to have a second tier of relationship manager there. He will be kind of secondary
image of the top-level manager but with less authority. But we will have to be careful
about the information flow between the team working at the Head office and the
Relationship manager at the Branch office




Indian Institute of Information Technology, Allahabad                                 - 84 -
           Prospective Customer




                    R.M 1
                                                                  R.M 2




                                           P.S

             P.S


Here, R.M 1 represents Relationship Manager at the HEAD Office or Zonal Office
      R.M 2 represents Relationship Manager at the BRANCH Office
      P.S represents Product Specialists

The above structure represents the general flow of information between the two levels of
relationship managers representing at the Head Office and at the Branch Office.


Nature and Roles of Two kinds of Relationship Managers: -

The problem of different type of working at head offices and branch offices can be solved
by the introduction of two types of relationship managers. One who will be at the Head
office, while other at the Branch Office. We can say that they both will be carbon copies
of each other. But there will be vast difference in the roles and responsibilities of these
two Managers


.



Indian Institute of Information Technology, Allahabad                                - 85 -
Role of Relationship Manager (Top-Level): -

He will be the person whom we will be calling The SUPREMO. He will head this
Industries unit of the Relationship Department. He will have all the powers vested in him.
He will he head the team working at the head office. He will take all the decisions like
whom to pursue, when to pursue and how to pursue. In short he will be the person who
will be the person called PURSUER. He will make sure that the customers are
approached in right manner, and see to it that their needs and wants are being well served
or not.

Also, he needs to make sure that the any information or conversation being held in a
branch office should be reported back to Head office so that the customer characteristics
profile can be updated. A well-informed profile results in well handling of customers and
therefore, high efficiency and profits.

Role of Relationship Manager (Branch Office): -
He is the person, which can be called the secondary image of top-level Relationship
Manager at the Head Office. But the main role of this kind of manager represents a bit of
both -Relationship Manager and Product Specialists. He is the one who has to represents
the team at the head office. He will be kind of Supporter who will support the team
working at the Head Office.

His other main task will be to report back to the Top authority in case of any
information/conversation being held with a prospective customer.


4.4.2) Government Unit Department: -
The Government unit department will be the department, which will handle all the
conversations or relationship with the ruling government. This department will be the
central theme of the whole Relationship Department as being an government owned bank
if we will efficiently and consistently provide good support to government policies, it will
help the bank to grow more. We need to handle this department very carefully as the
other department Industries unit department will partly be dependent on the information
being provided by this department. This unit is being designed to carry out conversations
with the government, nurture its already existing relationship with the government so that
all the projects and plans, which the government has in near future, will be supported by
the IDBI Bank Ltd.

So, the main goal of the department to have cordial relationships with government lobby
to further enhance the existing relationship with the government

But how to structure this unit, this is the main question we have to answer. Like we did in
the Industries Department, we had to have a proper structure to carry out this department



Indian Institute of Information Technology, Allahabad                                 - 86 -
Like Industries, even in government there are several ministries, which we have to target
like there is Power Ministry, IT Ministry. We have to target this individual Ministry to
carry out the working of bank. So our task is now to find what are the various ministries
that exist in the ruling government and then work to have better and meaningful
relationship with them

Below are the existing Ministries that are there in present government.

   Human Resource Development
   Agriculture Department
   Food and Civil Supplies
   Consumer Affairs & Public Distribution
   Railways
   Chemicals & Fertilizers
   Steel
   Urban Development
   Information & Broadcasting
   Finance
   Small Scale & Rural Industries
   Road Transport & Highways
   Shipping
   Textiles
   Commerce & Industries
   Power
   Rural Development
   Water Resources
   Petroleum & Natural Gas
   Youth & Sports Affair
   Mines
   Communications & Information Technology
   Health
   Coal

Now, what we have to do is to efficiently tap these ministries like we did it in the
Industries Unit. Like the clubbing we have done in the Industries unit we will similarly
club the similar kind of ministries together and then approach them

   Sub Unit 1, which include
       1.Finance

   Sub Unit 2, which include
       1.Communication & Information Technology
       2.Information & Broadcasting




Indian Institute of Information Technology, Allahabad                              - 87 -
   Sub Unit 3, which include
       1.Coal
       2.Mines
       3.Petroleum & Natural Gas
       4.Water resources
       5.Chemicals & Fertilizers
       6.Power

   Sub Unit 4, which include
       1. Sports Affair
       2.Consumer Affairs & Public Distribution
       3. Food & Civil Supplies
       4. Health
       5. HRD

   Sub Unit 5, which include
       4.Road Transport & Highways
       5.Shipping
       6.Railways

   Sub Unit 6, which include
       1.Steel
       2.Textiles
       3.Cotton
       4.Urban Development
       5.Small Scale & Rural Industries
       6.Rural Development
       7.Agriculture

On the basis of above demarcation, we have to target the ministries.


Department Structure to Follow:                    -
After deciding on the basic department classification the next thing we need to decide on
the issue of how to carry out or in other words organize the working of this department

As explained earlier, we need to choose among four different type of Department
Structure. The Four Different ways in which we can structure our relationship department
are

   The Super-Banker
   The Coordinator
   The Tandem System
   The Functional Model



Indian Institute of Information Technology, Allahabad                              - 88 -
For the Government unit, we have so far identified the basic sub units. Since now we
have to take into consideration the earlier structures, which has been explained earlier.

This will be the structure, which we will try to follow in general. So we will need for
every sub unit of Government Department a team which will consists of Top level
Relationship manager which will head the unit plus a team of product specialists.

There is one difference in the structure, which we are going to follow in the Industries
Department and the one, which is going to be used in the Government Department. The
Industries Unit will have a big role of Product Specialists. But in the case of Government
Unit, they are going to have a limited role. As more and more of conversations and
relationship with the ministries will be informal. So Relationship Manager are going to
have a much wider role to play here. The amount of informal meetings will too exist in
Industries Unit but here it will play a much bigger role. So the relationship manager here
needs to play a role of Products Specialists too. Ministers don‘t have enough time to go
through a formal presentation; they will rather have an informal chat .So relationship
manager need to have broader skills in order to succeed here.

Also the issue of Branch office and Head Office is not so of importance here, because we
have limited the number of people we have to contact. So, by dedicating a Relationship
Manager to each identified Sub unit we have taken into account all the ministries in the
government. So, the issue of having a representative at the branch office is not required
here.

Role of Relationship Manager: -
In this department, Relationship Manager has more responsibility and lot of more work as
compared to other departments. Because getting near to government is a whole new
chapter. And having relationship with them is also very difficult. The major problem with
the government is its flickering nature. You may never know when the government will
fall and who will be the next person who is going to be head of the ministry. The same
problem is also with the Industry but there the time lag for the change in power is long.

So, here Relationship Manager needs to be ready for power change. Also, government
officials in India don't get impressed very easily. So, one need to have high contacts in
order to get a plan or project. Relationship Manager here is more like a salesperson here.
He doesn't have to be highly technical but it should have high selling power. Lot of
informal meetings is the right recipe for this department.

Information Flow between these Two Department: -

The two departments Industries Unit and Government Unit need to work together to carry
out successful information flow between each other. Both have to transfer the
information whatever is important to each other so that there should not be any
information lag. Both departments require proper transfer of information and therefore
need a dedicated channel through which information can be shared.


Indian Institute of Information Technology, Allahabad                               - 89 -
But first of all we have to address, why there is need to have the information flow
between these two departments. As we all know it is the government that is the main
reason behind any project or plan. If in any case there is a government projects or plan
that is coming in near future and if the relationship manager in the government unit have
information they can easily share it with the concerned relationship manager in the
industries unit. For example, there is an upcoming project lets say in IT sector and the
government is keen to have some participation of private IT companies. So, if the
Relationship Manager has information about this upcoming project then it can inform the
Relationship Manager of the IT sub unit of Industries Department. With the help of this
pre-hand information the Relationship Manager can talk to its clients about this project. It
can help the bank in two ways. First, it will help the company to have more trust and
understanding the bank and thus will help in strengthening the existing relationship
between these two players. Secondly, by having information pre-hand it will help the
bank in gaining another project and thus will help the bank financially also. So, there
should be a proper channel where relevant information can be shared between these two
departments.




          Relationship Manager                           Relationship Manager
          of Industries Unit                             of the Government
                                                         Unit
                               Proper Flow of Information is required
                               Between these two Departments


4.4.3) Customer Unit Department: -
This department will handle the daily consumers of the bank. The day to day consumers
is the one about which nothing can be predicted. They are the highly unpredictable
customers as they keep on changing banks and never can be your faithful and trustful
customers. So the question that we have to address here is how to retain them or make
them extra faithful towards our bank. It is simple only if we provide better after sales
service and better customer care. These customers will notice the bank only if the bank is
different from others. Since the products provided by all the banks is almost the same, so
we need to be different from other so that the customers notice. We have to give them
better services and it should look to them that they are the main focus persons and we are
there to serve them and fulfill their wish and requirements.

We have to better at the sales means that our salespersons should know that the
customers are placed at the top of all, only then the customers will be satisfied. There
cannot be a proper structure as suggested in the other departments. What we can do is to
differentiate customers which are high net worth and which are not. Using the previous
information about the customers and the newly build customer characteristic profile we


Indian Institute of Information Technology, Allahabad                                 - 90 -
can get the desired information. So the main focus of the bank here should be to give
better attention the high net worth customers and know what are their requirements and
give them error free services.

So, the whole task of this department is to "chaff out the wheat from the grain". We have
to find the individuals who are profitable to the banks and have faith in the bank.


Department Structure to Follow: -

After deciding on the basic department classification the next thing we need to decide on
the issue of how to carry out or in other words organize the working of this department.
Various considerations need to be taken in care while deciding on the structure. The
structure should follow the basic thinking of keeping the customers and their needs as
first priority. Also there should be a focal point called as contact center where all the
contacts are started or initiated.

As explained earlier, we need to choose among four different type of Department
Structure.
The Four Different ways in which we can structure our relationship department are

   The Super-Banker
   The Coordinator
   The Tandem System
   The Functional Model

After deciding on the department structure, we need to decide on how to decide what type
of relationship should be there with a particular customer. As a particular customer is
different from another customer, therefore its needs and wants will also differ from
another. Hence for each particular customer we need to decide upon the relationship
styles.

Therefore, we need to decide upon relationship styles, which have been explained earlier.
These relationship styles are as follows

   Price Centered Relationship
   Product Centered Relationship
   Need Centered Relationship
   Value Centered Relationship

The Bank has the flexibility to use any and all of the relationship styles depending upon
the nature of conversations required by both the parties: Bank and the customers


The whole task of this department is to entertain the requests of daily customers. Keeping
in this mind, we have to organize this department so that it should match our objective.
Here, the earlier proposed structures i.e. (The Tandem structure, The Banker structure


Indian Institute of Information Technology, Allahabad                               - 91 -
etc.) can be implied. Here, both Product Specialists and respective Relationship Manager
has to play a more enhanced role. They need to cater the needs and requirements of daily
customers and thus create a trust-based relationship with them. Also lies here is the issue
of Head office and Branch Offices. What we need here is a dedicated relationship
manager, which can play the role of sales person also. As the daily customers come in
large numbers so we need more than one person handling all the requests. But, we can't
have everybody has relationship manager. So this issue is also to be deal with.

Role of Relationship Manager (Head Office): -

This person will be the main head of the department. He will be the one which will
decided various issues concerning this department. The major issue is to make the
employees working under him to get to know how to make customers feels satisfied with
the Bank. He needs to organize various programs and methods so the staff under him
approaches to customer as his friend rather than just a stranger.

Also, he needs to make a dedicated channel with the Branch offices managers and see
that they are following the prescribed methods or not.

Role of Relationship Manager (Branch Offices): -
The Branch Office Manager will be the person who will be heading the branch offices
Relationship Department. Just like the Industries unit manager he will be the one who
will respond to the problems and queries of the customer and will make sure that the
customer has satisfied experience with the bank. Also he will make sure that proper
transfer of information is there between the Head Office Relationship Manager and him.
Also proper meeting of guidelines as prescribed by the Head office is also to be ensured
by him.




Indian Institute of Information Technology, Allahabad                                - 92 -
4.5) “Service- Quality Gap Model”-Avoiding Common Mistakes: -

Below is a service quality gap model, which describes the general service gaps, which
results in lower quality and lower faith and trust level of customers.




            Word-Of –Mouth           Personal                     Past
            Communication            Needs                        Experience

       Customers
                                   Expected
                             Gap 5 Service

                                     Perceived
                                     Service
          Gap 1

                                                        Gap 4
       Company
                                    Service Delivery            Communication
                                    Pre and Post                to Customers
                            Gap 3
                               Translation of
                               Perceptions into
                               service quality
                               specifications
                            Gap 2
                               Management
                               Perceptions of
                               Customer
                               Expectations




Indian Institute of Information Technology, Allahabad                           - 93 -
Gap 1: -
This exists because there is a difference between the levels of service that the customer
expects to receive and management‘s interpretation of the customer‘s expectations.
Market research, feedback from frontline staff and customer complaints are useful
indicators here.

Gap 2: -
This may result from management being unsuccessful in translating the customer‘s
requirements of service quality into service quality standards for the bank and the staff to
follow

Gap 3: -
This exists because the actual service delivery, before or after the event, has failed to
meet the define standards

Gap 4: -
This arises if the levels of service are not properly communicated or understood by the
customer

Gap 5: -
This gap is external to the bank. This exists if the customer perception of the service that
is being provided falls short of what was hoped for. An example might be the relationship
anger failing to adequately provide information on a particular service that the customer
had alluded to at the last meeting.

In reality, some gaps are inevitable – the challenge is not to make them transparent to
customers. There is also risk if managing and minimizing these gaps is not addressed that
this may result in internal turf wars and also tension and stress within employees

As a Bank engineers its service quality it needs to pay attention to the risk of performance
gaps merging in the definition of and execution of service standards. These frequently
arise from the differing perceptions and expectations of customers, mangers and those
staff that are actually involved in delivering the service-either directly face-to-face –or as
a supporting or back-office function to those that deal directly with customers.
Gaps may emerge because of misunderstanding, misinterpretation, and mismanagement.
They may also emerge because activities are not aligned or focused in a way that puts the
customer first- many companies find it difficult to be customer-centric in all their
activities.




Indian Institute of Information Technology, Allahabad                                   - 94 -
4.6) Questionnaire: -

We also need to develop a common questionnaire, from which we can know what our
customers feel of our Bank and our customer service. We can have a general set of
questions, which can be filled by any kind of customers.

The information gathered by the questionnaire can be the starting point of all the
strategies that we are going to follow. By knowing the response from a wide range of
customers we can get to know where are we are failing and what are our weak points and
thus we can work on removing hat aspect from our customer service


Questionnaire Format: -

Q1. In thinking about your most recent experience with IDBI Ltd., How
was the quality of customer service you received:

  Very Poor    Somewhat Unsatisfactory               About Satisfactory
   Very Satisfactory   Superior

Q2. If you indicated that the customer service was unsatisfactory, would
you please describe what happened?




Q3.Does the website of the Bank provide all the relevant information or
not?

  Strongly Disagree     Somewhat Disagree                 Neutral        Somewhat
Agree    Strongly Agree

Q4.What is the periodicity of your visit to the Bank Branch /ATMs

   Within a Week          2-3 week        1 Month       2-3 Month
   Don't Know

Q5. How long did you have to wait before a salesperson attended to you?

   0-2 minutes   3-5 minutes            6-10 minutes         10-15 minutes
   more than 15 minutes




Indian Institute of Information Technology, Allahabad                           - 95 -
Q6. What behavior of the customer service representative irked you?

  Not Patient      Not Enthusiastic    Didn't Listen Carefully
  Unfriendly       Unresponsive     Other    No Qualities Irked me

Q7 The Salespeople accurately presented the product information.

 Strongly Disagree      Somewhat Disagree         Neutral       Somewhat Agree
 Strongly Agree


Q8.The Manager/Relationship Manager attentive to all of your issues.

 Strongly Disagree      Somewhat Disagree         Neutral       Somewhat Agree
 Strongly Agree

Q9. Can you suggest any other thing where you want our service to
improve?




Your Name and Address                                       (               )

                                                                Signature




Indian Institute of Information Technology, Allahabad                           - 96 -
                                 Chapter 5


                              Suggestions




Indian Institute of Information Technology, Allahabad   - 97 -
Various Suggestions which are relevant to IDBI: -
                                               This section will depict the various
suggestions, which can be, prove useful for the Bank in its pursuance in becoming a
relationship driven entity.

   1. Punch Line: -
                              The mission statement of any company presents a large
picture of mindset of the company. It shows what actually company is all about and how
it wants to picture itself in the mind of its customers. Various other banks have opted
some kind of mission statement or punch line, which tells the customers that they are
concerned for their being and are there for them. Like ICICI Bank has been using the
punch line ―We are there for Help‖. This kind of promotion help the bank in telling the
customers that they are thinking about them and in some form or another also places
some kind of faith in the mind of customers.

For IDBI bank to be a relationship based entity, it needs to adopt a punch line, which
shows clearly that they are thinking about the customers and will take care of their needs
and wants.

    2. Use of good and reliable Technology: -
                                          To provide comprehensive support and help to
customers, IT tools will play a large part in helping the bank to achieve this. Various
steps need to be taken in this regard which can increase the efficiency and effectiveness
of employees. These steps are as follows

        The computers should be fast enough to ensure a speedy programming of a
       request.
        They should have enough space and right kind of software to ensure its proper
       storage requirements and working.
        Also the technical staff should be trained enough to make speedy recovery.
       They should be trained to tackle Troubleshooting problems.
        Latest technology should be provided to desk staff so that they can do work fast
       enough to make the work easy for them and for customers too.

3. IT Tools for CRM: -
                          To be a relationship based entity, IDBI bank need to employ
CRM Software, which will help them in making a sound and reliable profile of their
customers and also help in demarcating different types of customers. This software
should fulfill the needs of bank and also help in transferring the required information to
various departments, which has been proposed in the report. Hence, this software will
play a dual role in the bank.



Indian Institute of Information Technology, Allahabad                               - 98 -
   3. Opening more Branches/ATMs: -
                                           To increase its network and reach, IDBI Bank
should open more branches as to reach more customers. They need to find new areas,
which are yet to be explored by other banks. Out of my personal knowledge about the
state Haryana where I hail from, I would suggest opening of branches/ATMs in the state

Existing Branches of IDBI Bank in Haryana: -

City Name                             Population

Panipat                               8, 33,000.
Faridabad                            14, 77,000.
Panchkula                               319398.
Gurgaon                               11,46,000.

Possible Locations for IDBI Branches and ATMs in Haryana: -

The other main cities, which have yet to be covered by IDBI, are

Ambala                                           Rohtak
Karnal                                           Hissar
Kurukshetra
All these cities are the possible new locations where the bank can open both its Branches
and ATMs

a) Population of these cities are

       City Name                          Population

       Ambala                              10, 13,660.
       Kurukshetra                          9, 99,000.
       Rohtak                               7, 79,900.
       Karnal                               8, 85,500.
       Hissar                              14,45,000.

b) Reasons for Opening Branches at Ambala, Karnal, Kurukshetra: -

      Connected by same Road: -

            1. Since IDBI have already branches at Panchkula, Chandigarh, Mohali,
               Panipat, and New Delhi, therefore opening branches at Karnal, Ambala,
               Kurukshetra will be beneficial for the bank because the same road G.T
               ROAD also called National Highway 1 connects all these cities. All
               these cities lies on the same road and also the same road connect the 3
               states Himachal Pardesh, Haryana, Punjab and New Delhi. Therefore
               opening branches at the heart of the cities and providing ATMs on the


Indian Institute of Information Technology, Allahabad                              - 99 -
               highway will be beneficial for the bank. ATMs can be provided on the
               petrol pumps, which are very high in number on the highway. Thus
               people of New Delhi who are going to other states will find useful if
               they are provided with ATMs facility at the highway.

           2. Opening ATMs on the highway will serve a dual purpose, firstly it will
               serve the people who are passing through this highway and going to
               other states. Secondly, it will also serve the people of the city where the
               bank will open its branch. Thus, opening ATMs on this highway will
               serve customers from 3 major states and New Delhi and also serve the
               people of the city in which we are opening.


      Home of Famous Engineering Colleges: -
           1. Also these cities have major engineering colleges where students come
               in large number from various cities within Haryana and also from
               adjoining states. Therefore it becomes there need to be able to have
               access to an ATMs where they can go easily and have access to money,
               since they go to their home in the period of 3-4 months. Therefore, we
               can broaden our customer definition by serving these students. We can
               open the ATMs in the colleges or very near to the Premises so the
               students can have access to it and also the local public can also access it.

               City                              No of Engineering Colleges

               Ambala                                1
               Kurukshetra                            2


           2. The college at Kurukshetra is a National Institute of Technology and
               also a university providing many courses. Therefore the students come
               here from all part of country and even from outside the country. Thus, it
               is a good opportunity for the bank.

           3. Also the same G.T Road also have 3 colleges linked through it, places
              like Ambala, Murthal, Panipat which have engineering colleges just few




Indian Institute of Information Technology, Allahabad                               - 100 -
                steps away from the main highway present an excellent opportunity for
                the bank.

      College's names are
             Swami Dayanand University, Choturam State College of Engineering,
                Murthal,
             MM Engineering College, Ambala,
             Hindu College of Engineering, Sonepat

.
c) Reasons for Opening Branches at Hissar and Rohtak: -

                Connected By Same Road: -Also Hissar and Rohtak are two
                other important cities, which are connected to New Delhi by a single
                road. Thus these two big cities, which are rapidly changing and
                modernizing due to its extreme nearness to Delhi, present good
                opportunity for the bank. Reasons for this are due to the fact that a single
                road connects them and hence connect 4 cities, which are Rohtak,
                Hissar, Bahadurgarh.. Thus opening a branch in the heart of the city and
                opening ATMs on this road will provide a better opportunity for the
                bank.



            Home of Various Colleges: -Also another reason for this is due to the fact
               that the road between Rohtak and Delhi is home of three engineering
               colleges and one Medical College. Thus the same road connects 4 cities
               and also has 4 colleges, which are on the roadside. Hence this road also
               provide a new customer set for the bank


d) Another Possible option for IDBI Bank in U.P : -

           Another suggestion to the Bank will be to open the branches in the middle
            of the city and open the ATMs on the highways initially just to have two
            sets of customers one locals and other the passengers who are going from
            one place to another. Also, open the branches and ATMs where there are
            famous colleges because students come from far places there to study and
            therefore they need ATMs, which is either in the institute or very near to the
            institute.




Indian Institute of Information Technology, Allahabad                                - 101 -
           For example take the college Indian Institute of Information Technology,
            Allahabad a central deemed University. It is far from the main city and the
            strength of the students is near 700. In order to access the nearest ATM it
            takes about 10 minutes on auto rickshaw. What the IDBI can do is open the
            branch in the main city and open the ATM in the institute. Opening a branch
            at Allahabad will be logical step because IDBI has branches in the cities
            Lucknow, Varansi and Kanpur, which are very near to the Allahabad.


           Also Allahabad is very near to Amethi, which is very fast, becoming a place
            where industries are coming up and also our institute is opening a branch
            there by next year. So it is very good place to open a branch




Indian Institute of Information Technology, Allahabad                            - 102 -
                        Snapshot of G.T Road
                                                        Grand Truck Road
                    Noida (40 kms)

                                                         Faridabad (25 kms)

                                                              Gurgaon (15 kms)


                                                             New Delhi (0 kms)
                                                              (From ISBT)

                                                           Murthal (15 kms)*


                                                              Panipat (61 kms)




                                                              #Karnal (34 kms)




                                                           #Kurukshetra (31 Kms)*




                                                            #Ambala (50 kms) *


                                                        # - Proposed New Branches
      Way to Chandigarh,
      Panchkula, Mohali.                           *- Denotes the places having
      which is                                       Engineering Colleges
      65 kms away
       From Ambala                               ISBT- Inter State Bus Terminus of
                                                        New Delhi




Indian Institute of Information Technology, Allahabad                          - 103 -
                            Snapshot of New Delhi-Hissar Road




                                                                     New Delhi




                                                          Bahadurgarh (15 kms)
      Engineering College
      (5 kms)




                                                        2 Engineering Colleges +
                                                        1 Medical College (35 kms)


                                                              #Rohtak (5kms)




                                                              #Hissar (60 kms)


#- Proposed New Branches




Indian Institute of Information Technology, Allahabad                        - 104 -
Bibliography: -


 "The Urgent Need to Rethink Relationship Management in
    Wholesale Banking" Article By Kevin Neylan, Partner of KPMG LLP

 "Managing Relationships in Corporate banks" a book, written by
    Chris Farrance.

   "Relationship Based Enterprise" a book written by Ray Mckenzie.

 www.crm2day.com

 www.idbi.com

 www.idbibank.com

 www.google.com




Indian Institute of Information Technology, Allahabad           - 105 -

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:52
posted:6/13/2011
language:English
pages:105