Customer Relationship Management as a Tool for Developing Financial Services

By Christian Velez, B.A., M.S., M.S. May 2001

CRM as a Tool for Developing Financial Services

Table of Contents
Page 1.0 Abstract ...................................................................................................... 2.0 Introduction ................................................................................................ 3.0 Literature Review .................................................................................. 3.1 Key Factors Driving CRM ................................................................ 3.2 CRM Choices for Management ......................................................... 3.3 Goals of CRM in the Financial Services Industry.............................. 3.4 Strategies for CRM ........................................................................ 3.5 Key Factors of Successful CRM Applications .................................. 3.6 CRM Examples .................................................................................. 3.7 Benefits of CRM ................................................................................ 3.8 Obstacles of CRM Implementations .................................................. 4.0 Design of Study ............................................................................................. 4.1 Procedures for collecting data ............................................................ 4.2 Methods for constructing the survey .................................................. 4.3 Methods for analyzing data ................................................................ 4.4 Design of Pilot Study ......................................................................... 4.5 Outcome and Findings of Pilot Study ................................................ 4.6 Anticipated Findings of the Complete Study ..................................... 5.0 Discussion ...................................................................................................... 6.0 References ..................................................................................................... 7.0 Appendix IRelated Documents ............................................................... 7.1 Diagram of CRM Value Chain .......................................................... 3 3 6 7 10 12 12 14 16 17 18 19 20 21 21 21 21 22 24 25 27 27

CRM as a Tool for Developing Financial Services

1.0 Abstract
Corporations have been forced to evaluate their business strategies in order to remain competitive in today's rapidly changing business environments. The emergence of new industry structures and a drastic increase in competitors play critical roles in determining how companies effectively maintain current business and, more importantly, design new products and services. Advancements in information technology are at the root of these changes. Networking technologies and the World Wide Web in particular have had a leveling effect on most industries and have enabled organizations to create new market services and compete with traditional market leaders. These same forces have also affected customer behavior emphasizing individualization in conjunction with more complex demands and decreasing loyalty. To combat these changes, management has turned to focusing business activities explicitly on customer behaviors. By recognizing the need to offer differentiating value, companies have started using the customer relationship as a basis for experimenting with various combinations of service and price, in an attempt to retain existing customers and capture new customers. This paper is intended to explore how a new digital economy has effected the financial services industries and how customer relationship management is used as a strategic tool for developing new products and increasing market share. Keywords: customer relationship management; CRM; customer analysis; business development; service strategy

2.0 Introduction
Our society exists in an information age where technology is constantly evolving and giving birth to new forms of communication; innovative methods of gathering information and applying it to core business practices are continuously emerging. Electronic information technologies when combined with avant-garde business strategies are rapidly altering traditional business models, relationship management, and approaches to developing new products. New forms of communication have radically altered the way organizations perceive and manage information assets. This is mostly due to advancements in information systems, particularly computerized information management. An integral component of these advancements is the soaring power and declining cost of the computer technology that is at the core of information systems. "Computing power has been doubling every 18 months, so that the performance of microprocessors has improved 25,000 times since their invention 25 years ago" (Laudon, 1997). The cost of processing power has declined exponentially, which has made storing large databases economical. This reduction in cost has encouraged organizations to expand electronic information services and new competitors to enter existing markets. Other factors contributing to the expansion of information industries are the rapid proliferation of personal computers and competition in the telecommunications market.

CRM as a Tool for Developing Financial Services

This competition has reduced the cost of creating and operating computer networks. Moreover, advances in modem speeds and the introduction of fiber optics have reduced the expenses associated with distributing large amounts of information electronically (Elwell, 1993). Customer relationship management (CRM) is a large and growing field that encompasses an assorted range of activities and software applications. In a key paper produced by IBM, the authors define CRM as, "... a technology-enabled business strategy whereby companies leverage increased customer knowledge to build profitable relationships, based on optimizing value delivered to and realized from their customers" (Morin, 2001). CRM focuses on the creation, development and enhancement of the relationships of carefully targeted customers and customer groups, with emphasis on maximizing their total customer life-time value (Payne, 2000). Examples of CRM software applications include: Customer-facing applications, such as interactive web sites and sales force automation tools; Collaborative applications which facilitate interaction with suppliers, vendors and business partners; Analytical tools that mine information from data warehouses to understand, predict and shape customer behavior (Lamont, 2001).

The first question that this study attempts to answer is 'can financial organizations effectively utilize CRM-based information technologies and business practices to improve customer acquisition and retention strategies?' The second question is 'can traditional off-line business practices be transformed into new, on-line web services (internal and external) through the use of CRM as a guide and customer information as a basis?' CRM as a business methodology is a fairly new concept resulting from the technological advancements of the past decade. Hence, there is a shortage of academic works that substantially cover CRM as practiced today. Study of customer management from earlier times (1960-1990), while helpful, does not adequately reveal relevant material that defines, measures, or explores the current process of CRM. The practical value of this research paper is the consolidation and synthesis of published material on current CRM theory and application. This study explores general CRM topics, and centers on CRM practice in the financial services industry, which includes investment firms, credit unions, mutual fund companies, community banks, and commercial banks. A basic requirement of CRM is the ability to gather and process customer data. Organizations that can easily collect data, transform it into knowledge, and make sound business decisions will most likely benefit from CRM programs. An analysis of the following diagram reveals that the financial industry, when compared to other industries, ranks high in providing client value, and ability to gather and process customer data.

CRM as a Tool for Developing Financial Services

Analysts and industry professionals declare that the financial industry is the largest purchaser of CRM products, rivaled only by the telecommunications industry (Waltner, 2001).

Source: http://www/crm-forum.com/library/cas/cas-001/cas-001.htm The remainder of this paper is organized as follows. In section 3, the literature on customer relationship management is reviewed. In section 4, the design of our study is outlined and anticipated findings are presented. Section 5 completes this study with a discussion centered on ongoing developments in CRM and the financial services industries and the practical value of future research.

3.0 Literature Review

The purpose of this literature review is to present an overview of the common themes present in works based on customer relationship management and to inclusively illustrate the potential of further study in this area. The use of CRM has developed into a fundamental corporate strategy for many industries. This is particularly true for businesses operating in fiercely competitive markets. "CRM systems are [attractive to financial institutions] that want to increase revenues and pull ahead of the competition in terms of customer retention and satisfaction, new business development and profitability" (Why, 2001). Customer relationships can become more effective and efficient if the entire organization can share and leverage the same customer information. In this light, CRM has evolved into a business requirement and not an optional tool for achieving competitive advantage (Why, 2001). 3.1 Key Factors Driving CRM Advancements in information technologies have clearly effected businesses and the economic system as a whole. Along with these changes comes the need to manage the respective relationships between suppliers, customers and business partners. Examination of this process reveals two major tends driving CRM suppliers using information

CRM as a Tool for Developing Financial Services

technology to create and offer new services supporting core business goals and changing customer behavior resulting from use of information technology (Korner & Zimmerman, 2000). Moreover, the World Wide Web has significantly decreased the costs of reaching target markets, simplified access to products and services, and eliminated some of the barriers of entering traditional markets. These factors combined with foreign competitors encroaching upon U.S. financial markets have increased competition and amplified the importance of customer relationship management. Regulatory changes have also contributed to increasing competition. "After decades of debate, the financial services laws [have been] modernized to repeal Depression-era restrictions that prohibited broad affiliations among the banking, securities and insurance industries. The historic Gramm-Leach-Bliley Financial Services Modernization Act of 1999 provides opportunities for all financial services providers to restructure and refocus their business strategies" (Gramm, 2001b). While enabling financial services companies to compete in markets that were formally off-limits, this legislation introduced new state regulatory issues and restrictions that have to be considered when developing new product offerings and conducting everyday business. As a result of this Act, companies are increasingly turning to customer relationship management for maintaining competitive advantage by developing valuable financial services in new markets. Another key driver of CRM is the rapid development and improvements in communication technologies. These technologies enable organizations to easily collect and store customer information. Moreover, they are used to provide customers with many options for designing their own customized service and extend traditional face-to-face banking. Some examples include remote banking via ATMs, telephone banking, and personal computers; all of these channels have affected customer behaviors (Forsyth, 2001). The Role of the Customer in Today's Economy Some of the dominant forces shaping the digital economy are rapidly changing customer demands, and their readiness to break-up existing business relationships. Hence, the goals of management of customer relationships have shifted towards achieving higher purchase volumes, increasing purchase frequency, cross-selling possibilities, cost savings due to more effective customer service and the additional possibility of higher prices resulting from decreasing price elasticity (Korner & Zimmerman, 2000). The various changes in customers' behavior are fundamental drivers of new business development in the financial services industry. Some of the current trends include a demand for ubiquitous availability of information and services, provision of individualized information (including personalized consulting and problem solutions specific to individual financial issues), and the availability of various high-quality communication channels (e.g. mobile banking, Internet services, call centers, etc.) (Korner & Zimmerman, 2000).

CRM as a Tool for Developing Financial Services

From a business perspective, customer satisfaction occupies a central position in marketing thought and practice, and CRM implementation. "Satisfaction is important to the individual consumer because it reflects a positive outcome from the outlay of scarce resources and/or the fulfillment of unmet needs" (Bearden & Teal, 1998). Strategies should foster high levels of customer service while maintaining and increasing profits. Horovitz and Jurgens-Panak (1992) identify three enduring ingredients that still contribute to successful customer service strategies: redefining the business to think in terms of customer benefits; identifying service dimensions to position the company as a leader; and reducing costs while increasing service and segmenting according to service. While these three concepts remain at the core of CRM, customer segmentation stands out as the most significant and will be visited again later on in this study. A recent CRM study by Francis Buttle (2000), of the Manchester Business School, identifies four strategically significant customer types: high life-time value (LTV), benchmarks, inspirations, and cost magnets. The focus of retention efforts should be on the LTV customers. Life-time value refers to the current value of future profit margins that might be earned. Buttle points out that not all high-volume customers have high LTV. This may result from high maintenance costs or other economic factors. "We know of one company that applied activity-based costing disciplines in order to trace process costs to its customer base. They found that 2 of their 3 biggest customers were in fact unprofitable. As a consequence the company re-engineered its manufacturing and logistics processes, and salespeople negotiated price increases" (Buttle, 2000). The second group of customers is called 'benchmarks' because of their ability to influence other customers to behave and purchase as they do. The third group 'inspirations' refers to customers who inspire change in the supplier through new ideas for products, improvements or cost reductions. The final group 'cost magnets' are customers who absorb a disproportionate high volume of fixed costs which enable smaller, lowprofit customers to become profitable (Buttle, 2000). 3.2 CRM Choices for Management An important decision for today's executives is to determine how they will create marketing programs. Traditionally, financial organizations have implemented productbased marketing strategies with a limited product range. Today, competitive companies are moving from segment marketing with a larger range of products to customerbased programs that deal with customers as individuals and provide "tailor-made" solutions to meet their financial services needs (Forsyth, 2001). "The adoption of CRM is being fuelled by a recognition that long-term relationships with customers are one of the most important assets of an organization and that information-enabled systems must be developed that will give them 'customer ownership'. Successful customer ownership will create competitive advantage and result in improved customer retention and profitability for the company" (Payne, 2000). When financial organizations strive to create new digital markets they are faced with a greater number of planning, operational, and strategic issues that relate to

CRM as a Tool for Developing Financial Services

positioning a business for entry into the digital economy. The following list includes focus areas of current CRM strategies for new businesses: Leverage individual expertise and relationships; Find creative ways to attract initial buyers and sellers; Select a revenue model that is fair to both buyers and sellers; Invest capital up front to acquire market base; Be first to market (Costello, 2000).

In a recent study on the value of CRM capabilities, Accenture identifies the five capabilities which have the greatest impact of financial return: customer service, motivating and rewarding people, turning customer information into business insight, attracting and retaining people, and building selling and service skills (Accenture 2000). These capabilities become useful when managerial teams have to choose the direction of their CRM efforts. According to Accenture, managers should initially focus on customer service due to its distinct relation to improved financial performance and retaining customers. By empowering front-line employees with quick and easy access to insightful information, companies can maintain fast, effective customer service. Information about customer purchases, contact history, demographics, and product inquiries can be leveraged at customer "touch" points and also be used strategically by executive management (Accenture, 2000 & Sircar, 2001). 3.3 Goals of CRM in the Financial Services Industry Evolving information technology incorporated with novel business strategies creates an immense, if not limitless, number of potential goals for CRM implementation. CRM is a creative process that is only limited by the ingenuity of the human mind applied to software and business-process engineering. However, our study did reveal many common avenues of current CRM practice. The following six goals stand out as the most relevant to corporate strategy. Identify key information, such as profitable customer segments, and transform this information into competitive knowledge; Create rich, investing experiences for each customer; Provide customers with the help, tools, and advice to make informed investing decisions; Lower the costs of managing customer relationships;

CRM as a Tool for Developing Financial Services

Use customer information in inventory analysis to identify additional products to offer customers; Bring revolutionary efficiencies to selling processes and increase profit for each customer (Cave, 2001 & Waltner, 2001).

3.4. Strategies for CRM A basic theme underlying most CRM strategies is to utilize different management practices for various customer types. By combining CRM data analysis and data mining techniques, firms can easily identify high-profit customers and low-profit customers, and can effectively direct appropriate management methods. For example, banks can incorporate highly personal management techniques for business customers and highvalue customers, and automated relationship management for lower-margin mass-market customer segments (Forsyth, 2001). This strategy will enable them to lower the transaction costs of non-profitable customers and redirect the savings to drive the profitable segments of the business. A more severe version of this strategy would be to use CRM-generated information to identify and eliminate low-profit customers in order to free up capital to invest in programs, marketing, and more efficient and profit-oriented systems. The benefits of this process become clearly evident when financial companies may have greater than 2,000,000 customer accounts with a large percentage consisting of low-profit segments. Another significant customer-focused strategy is to build systems that support customer decision-making processes and extend web-based marketing to include greater levels of interactivity. This type of strategy is clearly enabled by networking technology of the World Wide Web. In a case study prepared by McEachern and O'Keefe (1998), they detail how firms can build web sites that cater to concise customer issues and provide means for high levels of interactivity between customers and the firm. Buttle (2000) identifies five primary stages that underlie CRM strategies: customer portfolio analysis, customer intimacy, network development, value proposition development, and relationship management. Each stage combines various software applications, processes, and business rules. Portfolio analysis is used to identify customers to target with different value propositions. This step leads to building customer intimacy with individuals or customer segments and creating a database that is accessible to all employees whose decisions or activities impact upon customer attitudes and behaviors. The third stage involves building a network of relationships with employees, suppliers, partners and investors who understand the requirements of the selected customers. The fourth stage focuses on developing propositions that will create value for the customer and business, and comply with established network guidelines. The final stage involves managing the customer relationship while focusing on both structure and business processes (Buttle, 2000).

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3.5 Key Factors of Successful CRM Applications In evaluating how to implement CRM capabilities within an organization, management must consider numerous factors that will aid in selecting an appropriate project focus. Aside from determining if the business is adequately prepared to invest in a particular CRM strategy, managers should ensure that the business focus of the project fits in with key business objectives and priorities, as well as be practical from a CRM perspective (Forsyth, 2001). A recent study of a financial group based in South America identifies three key factors that led to its success. The first factor was starting with a specific business problem with a limited scope and a small number of business objectives. By limiting the scope of their project, the group allowed user efforts to be concentrated on achieving benefits in selected areas with short time-scales. This strategy maintained low-risk and aided staff in building the skills and confidence to move onto larger CRM projects (Forsyth, 2001). When companies are initially exposed to CRM it is difficult for them to determine all of the requirements and effects of a full-scale implementation because of a lack of experience. This effect is related to the second factor, which was to build understanding through analyses. "Walk before you can run. Start with simple analyses, implement simple campaigns" (Forsyth, 2001). Finally, implement actions based on the increased understanding. "Reaping maximum benefit requires increasing risk tolerance. Learn through test campaigns before rolling out across the whole enterprise" (Forsyth, 2001). Many companies encounter obstacles when trying to gather, consolidate, analyze, and deliver customer information to users. Disparate systems and/or dissimilar conceptual models usually fragment this information. For example, the process, meaning, and methods of gathering customer data in an accounting department might vary from similar processes in marketing. The consolidation of customer data from multiple communication channels into a single, comprehensive customer view is the first step in turning data into competitive knowledge. Additionally, successful integration of all software systems is also a critical part of collecting data and transforming it into knowledge. The result will introduce a powerful perspective that enables organizations to get the greatest benefits from sales, marketing, customer service, and business development efforts. Moreover, this position will enable management to identify needs and create new financial products and services. Today's current trends include providing stock quotes, charts and other information, asset allocation models and customized views of customer profiles or market data. Advanced CRM systems support the assessment of customer portfolios, watch lists, transactions and investment positions to email timely information that the customer can use (Cave, 2001). This process introduces a valuable customer-oriented business concept: intelligent email communications. By sending valuable information to customers, firms can enhance customers' perceptions and increase the value of brand names.

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3.6 CRM Examples In 1998, Merrill Lynch implemented a complex information system to enhance the tools used by their financial consultants. After identifying its success, they adopted a strategy of sharing versions of this internal system with their clients via World Wide Web. Merrill Lynch quickly discovered the benefits associated with informed customers. Their initial goals were to sign up 200,000 customers within the first year, an average of about 550 people a day. Instead, 700 to 800 people signed up on a daily basis, and Merrill Lynch hit its target in only seven months (Gates, 1999). By moving customers onto the web, Merrill Lynch strengthened its ability to collect and process customer information a key element of CRM practice for executing detailed acquisition, retention, cross-sell, up-sell and other campaigns. An example of CRM applied to direct marketing can be found in a case study published by Sophron Partners Limited a specialist management consulting firm based in the United Kingdom (Forsyth, 2001). The case study focuses of Banco Central Hispano (BCH) and their application of CRM to improve the effectiveness of their marketing campaigns and customer relationships through cross-selling and up-selling. The core element of their system is a comprehensive marketing database which stores transactional information from all of their branches. One of the key benefits is derived from the use of behavioral data (obtained from transactions) and statistical techniques to identify significant patterns of customer behavior. This type of analysis is used to segment customers into similar groups, help predict the future behavior of customers, and identify events that trigger specific behavior patterns. Stone (2001) acknowledges that customers have different propensities to respond to events, in terms of returning value. "Segmentation analyses of customers of specific products have identified segments of high value previously unidentified by [BCH], allowing the bank to devise products and campaigns [for specific customer segments]" (Forsyth, 2001). Although the complete results of this CRM application are not published due to their commercial significance, it is noted that BCH has successfully achieved improvements in their marketing campaigns by using propensity models to drive branchbased sales activities. However, it should be noted that the 'customer relationship' per se is one of many elements in a marketing campaign. There are situations where traditional elements such as leadership through product, price, brand or retail location are more critical requirements for marketing success (Stone, 2001). 3.6 Benefits of CRM Business Business benefits obtained from CRM practice include the ability to allocate costs appropriately as a result of analyzing customer data; customer insight for guidance in developing needed services; and significant increases in customer profitability. This is mostly due to improvements in the processes of customer

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acquisition, cross-selling and up-selling, credit & risk and debt recovery and customer retention (Forsyth, 2001). Another key benefit of adopting CRM is found in the improvements of traditional marketing programs. By using the enhanced customer data, marketing staff can efficiently identify profitable customer segments, prepare high-value programs that effectively target services to customers and increase customer loyalty. Customer Customers receive better service and are provided with adequate information to make sound investing decisions. Due to recent changes in legislation and the deregulation of financial services industries (See section 3.1) American investors and consumers have benefited by receiving a wider choice of financial products and services, with savings estimated by the Department of Treasury of $15 billion over the next three years (Statements, 1999). 3.7 Obstacles of CRM Implementations In a research project conducted at Cranfield University, it states that one of the primary causes of failed CRM projects stems from a limited understanding of customer behavior and the impact of customer retention. "Research shows that a 5% increase in customer retention yields a profit, in net present value terms, of between 20% and 125%. Although many managers are now familiar with these findings, our research show that few managers know the profit impact of retention in their own business. Some managers may know their customer retention rate but they struggle to understand how changes in this impact their profitability" (Payne, 2000). This often leads to a failure to adopt appropriate retention and acquisition strategies when needed, and mangers will typically strive to implement CRM in areas more clearly related to profit. As a result, these particular CRM applications fail to generate a return on investment when a focus on customer retention or acquisition might have succeeded. In summary, limited understanding of CRM in today's economy can be an evasive obstacle. Other obstacles include technical problems associated with legacy systems and disparate infrastructures and strategic issues resulting from misdirected focus. Management tend to focus is on defined short-term gains rather than uncertain long-term results due to possible risks and failure (Forsyth, 2001). Therefore, this shortage of vision may hinder proper strategic development and return on investment. 4.0 Design of Study From the discussions of literature above, we were able to identify additional questions that would be of greater value to readers of this study. They include: can improved data management methods enable accurate, timely analysis of large amounts of information gathered from disparate communication channels? Can increased knowledge of customer needs aid in the identification of needed services? Will CRM reduce the cost of sales to existing customers and cost of acquiring new customers? Our anticipated findings are detailed in section 4.6.

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The methodology on this research is based on the survey method. This method will be used to verify key points found in the literature. The survey will consist of telephone interviewing and a web-based questionnaire. The target population consists of 41 financial institutions based in the northeastern section of the U.S.A. This area includes the following ten states: New York, Massachusetts, Connecticut, Rhode Island, Pennsylvania, Vermont, New Jersey, New Hampshire, Maryland, and Maine. These states were chosen due to their proximity to the country's leading financial center, which is located in the City of New York. The individual institutions were chosen on a random basis. The main purpose of the survey is to obtain information about the defined target population. Some limitations on this study should be noted in order to assess its validity and reliability. In the case of the expert interviews the size of data collected has been limited by the time available to the interviewer and the difficulties associated with contacting the various institutions. In order to conduct the pilot study for this research, a sub-set of the population has been selected which is fully representative of the research topic of using customer relationship management to develop new financial services. The random sample was created by counting down the list of financial organizations (See Appendix I) of the target population and selecting every sixth company on the list. 4.1 Procedure for Collecting Data The primary method of collecting data for this study will be expert interviews of one or more staff members from each of the selected institutions. Specific positions targeted are business development managers, business analysts, marketing managers, strategic vice-presidents, and managers of information and operational systems. The secondary method of collecting data for this study is a web-based CRM survey, which will be sent to individual companies for them to fill out and submit responses. Data will be stored in a relational database and will be presented by reporting software such as Crystal Reports or Microsoft Excel. This data will be combined with data generated from the expert telephone interviews. 4.2 Methods of Constructing the Survey The first section of questions center on data management and the firm's current position on CRM. The last two questions concern the firm's financial investment in CRM, if any, and what particular type of CRM applications are currently in use. 4.3 Methods of Analyzing Data 'Customer Relationship Management as a Tool for Developing Financial Services' is a research project conducted by Christian Velez. A total of 41 U.S. financial

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institutions will be surveyed either by telephone interviewing, direct mail, and web-based email communications. Qualitative data will be summarized with the most significant elements highlighted. Quantitative data will be graphed in multiple forms. 4.4 Design of Pilot Study Expert telephone interviewing this process consists of calling the selected financial institutions, greeting the staff, and asking to speak with a staff member who has free time to contribute to academic research on customer relationship management. There are 10 interview questions that have been chosen due to their relevance to the financial services and CRM industries. They are the same questions from the complete study described in section 4.0 (See Appendix I). 4.5 Outcome and Findings of the Pilot Study Sample of financial institutions selected for pilot study: Columbia Bancorp Incorporated Commerce Bancorp Incorporated First Financial Corporation Omega Financial Corporation Sun Bancorp Incorporated Yardville National Bank (410) 465-4800 (856) 751-9000 (401) 421-3600 (814) 231-7680 (856) 691-7700 (609) 585-5100

This study generated poor results, which could have been enhanced by a greater amount of time and access to a web server. A web server would have enabled our group to circulate the web survey (See Appendix I) to a greater number of organizations, which would have increased the chances of obtaining survey data. Additionally, most executives refrain from sharing critical business information and are typically engrossed in other activities. Typical responses included: "I can't answer any questions right now, I'm on the phone with another customer" (Yardville National Bank), "Please leave your name and number and we will get back to you" (Omega Financial Corporation), and "I'm sorry. There is no one around right now that could answer your questions" (Sun Bancorp Inc.). In our opinion, our customer queries were directed to a customer service department where the possibility of finding someone that can answer high-level, strategic questions was almost nil. This would explain the poor results of our pilot study. 4.6 Anticipated Findings of the Complete Study While advancements in e-commerce applications have an increasing influence on corporate investment strategies, our study finds customer relationship management commanding a comparable share of business interest. Furthermore, we believe that CRM will eventually dominate corporate business strategies once e-commerce applications are in place. The anticipated findings of this study support CRM implementation in the following areas:

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Using CRM to Develop Financial Services: To retain existing customers To reduce cost of sales to existing customers To increase knowledge of customer needs to effectively identify needed services To gain new customers by creating new financial services To cross/up sell financial products and services To improve customer service by developing new financial services Using CRM to Create: New services that will efficiently process customer orders New services to reduce credit risks New services to handle customer queries New services to handle customer complaints New services that will efficiently handle billing systems Using CRM to Reduce Cost of Sales: Co-ordination of customer communication channels via financial services Reducing the cost of servicing the customer by enhancing financial services Reducing marketing costs by improving the customer identification process Using of CRM to Support Business Processes: Customer profiling and segmentation Understanding customer profitability Assessing campaign effectiveness The anticipated findings of this study identify the following as obstacles to successful CRM implementation: Obstacles of Customer Relationship Management: Lack of CRM understanding Lack of CRM skills (business/technical) Software problems (legacy, database systems, platform, etc.) Financial problems (budgets) Poor consulting services Difficulties implementing organizational change / Company politics

5.0 Discussion
Advancements in CRM processes and software applications have an increasing influence on corporate investment strategies and will continue to develop as CRM matures. As e-commerce applications grow in usage and stabilize industry markets,

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companies will turn to CRM for gaining competitive advantages and growing market share. This research paper falls neatly in line with current strategic theory and future directions. It can serve as a basis for future academic study in CRM and related applications, or influence application development in corporate environments. The anticipated findings discussed in section 4.6 can be used a guide for further validation or help managers clarify the direction of relationship management processes. Software development teams can also benefit from these findings by using them to foster understanding in CRM and spark creative ideas for new business applications. Future researches may be conducted in two areas. The first area concerns information technology used to implement CRM systems. As this paper only briefly mentions this topic, further study will create a more comprehensive view of what is required to effectively utilize CRM systems. Secondly, this study can be extended to include a broader range of industries and can be executed on a larger scale.

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6.0 References
Accenture. (2000). How much are Customer Relationship Management capabilities really worth? What every CEO should know. Available from: http://www.accenture.com/xd/xd.asp?it=enWeb&xd=services/crm/crm_thought1.xml. Accessed: 09 February 2001 Bearden, W.O., & Teel, J., (1983). "Selected Determinants of Consumers Satisfaction and Complaint Reports". Journal of Marketing Research (XX), 21-28 Buttle, F., (2001). The CRM Value Chain. Manchester Business School. Available from: http://www.crmforum.com. Accessed: 09 April 2001 Carter, T. (2001). Banking on Fear. [On-line] Journal of the American Banking Association. Available from: http://www.abanet.org/journal/jul99/07ffdic.html. Accessed: 10 April 2001 Cave, C., (2001). Direct Marketing in the Financial Services Arena: The Bottom Line on CRM. Available from: http://www.crm-forum.com. Accessed: 09 April 2001 Costello, K. (2000, Fall). Digital Market Success: 10 essentials. ARIBA: The magazine for business-tobusiness eCommerce, 1 (2), 79-83 Dion, T., (2000, July/August). Taking a 360 Degree Customer View. EAI Journal, 62-65 Elwell, C. (1993). Information Publishing: Business/Professional Markets & Media 1993-94. Wilton, CT: Simba Communication Trends Flor, N., & Maglio, P. (1997). A Case Study of Representational Activity at a Customer-Centered Business. Proceedings of the 18th International Conference on Information Systems, ACM, Atlanta, GA, USA, 383398 Forsyth, R., (2001). Implementing Customer Relationship Management In Retail Financial Services. Available from: http://www.crm-forum.com/library/cas/cas-001/cas-001.htm. Accessed: 10 April 2001 Gates, B., (1999). Business @ The Speed of Thought. New York, NY: Warner Books Gordon, I., (2001, January). CRM in the Financial Services Sector. Case study published by Convergence Management Consultants Ltd., New York, NY Gramm-Leach-Bliley Financial Services Modernization Act. Acquiring an Insurance Company, Strategies and Challenges. (2001a) Available: http://www.us.deloitte.com/PUB/GLBFSMA/Default.htm. Accessed: 19 March 2001 Gramm-Leach-Bliley Financial Services Modernization Act. New opportunities, New Challenges, New Risks. (2001b) Available: http://www.us.deloitte.com/PUB/GLBFSMA/Default.htm. Accessed: 19 March 2001 Horovitz, J., & Jurgens-Panak, M. (1992). Total Customer Satisfaction: Lessons from 50 companies with top quality customer service. London, England: Pitman Publishing. Ho, C., & Wen-Hsiung, W. (1999). Antecedents of Customer Satisfaction on the Internet: An Empirical Study of Online Shopping. Proceedings from the 32nd Hawaii International Conference on System Sciences, IEEE, Hawaii, USA, 1-10

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Korner, V., & Zimmerman, H. (2000). Management of Customer Relationships in Business Media: The Case of the Financial Industry. Proceedings of the 33rd Hawaii International Conference on System Sciences, IEEE, Hawaii, USA, 1-10 Lamont, J., (2001, February). Analytical CRM: capturing data to cater to customers. KMWorld, 10, 16-17, 30 Laudon, K., & Laudon, J., (1997). Essentials of Management Information Systems. Upper Saddle River, NJ: Prentice Hall McEachern, T., & O'Keefe, R. (1998, March). Web-based Customer Decision Support Systems. Communications of the ACM, 41 (3), 71-78 Morin, P., & Sue, P. (2001). A Strategic Framework for CRM. Available from: http://www.crmforum.com/library/art/art-100/art-100.html. Accessed: 03 March 2001 New Landmark Study in Retail Financial Services Measures Importance of Customer Relationship Management in Retaining and Growing Profitable Customers. (2001). Roper Starch Worldwide, Peppers and Rogers Group. Available from: http://www.roper.com/news/content/news229.htm. Accessed: 27 March 2001 Payne, A., (2001). Customer Relationship Management. Cranfield University. Available from: http://www.crm-forum. Accessed: 10 April 2001 Put the CRM Puzzle Together: An Effective Business Strategy for Community Banks. (2001). Available from: http://www.fmsinc.org/crm-puzzle.htm. Accessed: 27 March 2001 Ramneesh, M., & Shainesh, G., (2001). Status of Customer Relationship Management in India. Management Development Institute. Gurgaon, India. Available from: http://www.crm-forum.com. Accessed: 01 April 2001 Sicar, D., (2001, April). Separating CRM Myths From Reality. EAI Journal, 39-41 Statements in Support of H.R. 10/S.900: The Financial Services Modernization Act. (1999). Available from: http://hillsource.house.gov/IssueFocus/TalkingPoints/TP106/19991101finance.htm. Accessed: 20 March 2001 Stone, M., (2001). Paradigms in Customer Management. Surrey European Management School, University of Surrey, Guildford, England. Available from: http://www.crm-forum.com. Accessed: 10 April 2001 Sweat, J., (2001). Focus On Customer Service Fuels CRM Boom. Available from: http://www.informationweek.com/773/vacrm.htm Accessed: 27 March 2001 Waltner, C., (2001). New CRM Tools Help Financial Institutions Diversify. Available from: http://www.informationweek.com. Accessed: 06 March 2001 Wetterau, J., (1998). CTI in the Corporate Enterprise. International Journal of Network Management. (8), 235-243 Why does CRM fail? (2001). Briefing published by CSC Financial Services. Available from: http://www.cscreasearchservices.com. Accessed: 09 April 2001

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7.0 Appendix I Related Documents

7.1 Diagram of CRM Value Chain

Source: http://www.crm-forum.com/library/aca/aca-006/brandframe.html