CHAPTER – I:

INTRODUCTION

Relationship with the customers has existed since the advent of trade and business. In the

past, before the Customer Relationship Management (CRM), emerged marketers used to follow

and focus on traditional methods of marketing i.e. segmenting the market and targeting a few

segments to grow their business. These tools were useful in the era of less competition and mass

marketing. But at present, heavy competition is prevailing in almost all business domains. With

the proliferation of internet usage, many previously unknown small companies are crating heavy

competition to the traditional players. Now, it has become extremely important for these

businesses to adopt new ways to acquire and retain customers. Retaining customers and

developing long lasting relationships with them has become critical for the survival of any

organisation. Customer relationship management has become a strategic initiative in modern

business organisations because of the growth of the service sector, affordable advances of digital

technology and shift among corporate business organisations from market share to share of

wallet.

For retaining customers, an organisation should strive to create customers with enough

loyalty necessitated to emerge the concept of CRM i.e. Customer Relationship Management

which focusing on developing and retaining customers. To face the competition, all types of

businesses organisations especially service business organisations have invested heavily in

CRM. The emergence of CRM is a strategic business tool which completely changed the

business operations. With the introduction of CRM, a paradigm shift in business has also taken

place. The focus thus, has changed from transactional marketing to relationship marketing.
 CRM as a management concept has started gaining importance from 1990s. Since then,

CRM has become a core business and marketing activity for many service businesses. Basically

CRM is about acquiring and retaining customers and maintaining mutually beneficial

relationships with them for the purpose of achieving profits and long term business growth. It is

concerned with strengthening relationships with customers and at the same time enhancing

productivity, profitability and efficiency. On the other hand, CRM is perceived as a management

tool and strategy to foster relationships with customers to increase sales, profitability, customer

retention, loyalty and satisfaction. It can be found as a system of managing profitable relations

with customers for they are the most valuable assets of an organisation. For the survival and

growth of a company, it has to satisfy and retain existing customers and acquire new customers

also. CRM entails involvement and empowerment of company’s employees and usage of

appropriate technology to achieve organisational objectives.

CRM helps the organisation in knowing customers’ needs and wants and predicting their

behaviour. At the same time, it also helps the organisation in improving profitability and

productivity. CRM makes an attempt to sell the goods by focusing on psychological aspects

rather than economic benefits. CRM is usage of technology for the purpose of augmenting

relationships with the company’s existing and future customers. It analyses the customers’ data

for the purpose of increasing bonding with them to achieve corporate productivity and

profitability.

CRM involves implementation of many management strategies, tools and techniques for

maintaining win-win relationships with customers. CRM is an integrated process of acquiring,

servicing, managing and retaining customers. It is concerned to identifying valuable customers

and dealing with them in a profitable manner to delight them. CRM is related to wholehearted
involvement of employees, empowerment of employees and proper usage of technology to offer

services. It is the process of managing and coordinating various customer touch points across

different channels to maximize the value to both customer and company. CRM is a process of

creating, servicing, managing and retaining present and potential customer in order to achieve

organisational objectives.

CRM is about creating a competitive advantage by being the best understanding,

communicating, delivering and developing existing customers’ relationships, in addition to

creating and maintaining new customers. CRM helps businesses use technology and human

resources to gain insight into the behaviour of customers and the value of these customers. CRM

is a business strategy that aims to understand, appreciate, manage and personalise the needs of an

organisations convenient and potential customers. It is a technique of applying right treatment to

the right customer segment at the right time to produce right result. CRM is the establishment,

development, maintenance and optimisation of a long –term mutually valuable relationship

between customer and organisation. Successful CRM focuses on understanding the needs and

desires of the consumer and is achieved by placing these at heart of the business by integrating

them with the organisations strategy, people, technology and business process.

1.1 Types of CRM

The CRM can be classified into three types based on level of process automation, data

analysis and customer interaction. They are Operational CRM, Analytical CRM and

Collaborative CRM.

1.1.1 Operational CRM:

 It is related to day to day activities of the organisation. It deals with managing customer

touch points. It helps the organisation in sales, marketing and customer service activities. The

primary objective of this type of CRM is to generate leads, convert them into sales, collect

customer details and service them. This also collects the customers’ data related to purchases,

tastes, preferences, behaviour and stores it.

This CRM involves streamlining of front end operations with the help of sales

automation, marketing automation and service automation. In sales automation, lead and contact

management, product and price configuration, proposing quotations, account management are

automated with the help of suitable software. In marketing automation, market segmentation,

targeting, communication, campaigning, promotion and event management are taken care of.

Further in service automation, managing service, resolving customer complaints and

communicating with customers will be done.

• Analytical CRM: It is related to back end operations and decision making processes of

the organisation. It involves an in-depth analysis of customers’ information and

behaviour. In this, the customers’ data will be collected, sorted, analysed, interpreted,

processed and stored for the purpose of decision making. Data analysis will have a major

role in this type of CRM. It helps the organisation in getting useful insights about the

customers. It assists top management in decision making, marketing people in

interpreting the effectiveness of promotion programs, sales executives in improving sales.

Further, the organisation can provide timely solutions for its customers,

• Collaborative CRM: This type of CRM is useful in sharing customer information across

multiple channels. It is the process of synchronisation and integration of customer

interactions with company’s communication channels. In this, the customer information

 is shared to different units of business such as marketing department, sales department,

customer support team, sales support team, technical support team etc. Collaborative

CRM helps the organisation in coordinating different teams to work in a united manner to

achieve customer satisfaction and loyalty and increase sales. It is also called strategic

CRM.

1.2 CRM Models

The major objective of CRM is to nurture relationships of cooperation and collaboration

between company and its customers. Another facet of CRM is customer selectivity i.e. realizing

the fact that all customers are not equally profitable to the firm1. In this perspective, a company

has to choose its customers wisely. CRM is a comprehensive strategy adopted by organisation to

improve marketing productivity. The CRM involves designing the strategies to acquire valuable

customers and retain them with the organisation. It also involves nourishing a partnership with

them for offering the best service and value2. An effective CRM leads to business development

and partnership development with valuable customers. For smooth functioning and

implementation of CRM strategies, CRM models are developed important which are briefly

presented.

1.2.1 The Identifying, Differentiate, Interact and Customise (IDIC) Model:

The IDIC model of CRM is created by Peppers and Rogers in 2004 as a basic model for

implementing CRM in various organisations. In this, the acronym IDIC stands for identify,

differentiate, interact, and customize stages of CRM implementation. As per this model, an

organisation has to take four actions to develop relationships with its customers.3 The four

actions are:
 ➢ Identifying Customers: It is related to knowing as much as possible about the company’s

customers and have an in depth knowledge about them.

➢ Differentiating: It is related to classifying customers based on their expectations and the

value they provide to the company. It helps the company design proper strategies.

➢ Interacting: It is related to interacting with customers to understand their expectations

and their relationship with competing products and brands4. This needs and value based

interaction with customers provides the company with valuable feedback and opinions.

➢ Customizing: It is related to developing the product and communication to match the

unique needs of the customer. To meet the requirements of the customer, the company

has to adopt itself.5

Figure – 1.1:

The IDIC Methodology

1.2.2 CRM Value Chain Model

The value chain model is developed by Michael Porter. It is intended to identify the

business processes used to develop and deliver a product to the end user. The purpose of the
value chain analysis is to identify and prioritise the most valuable activities of the entire business

process and focus on them to create superior value.

The CRM value chain model is developed by applying the same Value concept to

relationships. It is developed by Buttle in 2004. According to him, there are strategically

significant and insignificant customers for organisations. Strategically insignificant customers

are expensive to company as they buy very little, pay late or may default and demand more.

Hence, the company should focus on strategically significant customers. He argues that the

company should strive to develop and maintain long term profitable relationships with

strategically significant customers.

Figure – 1.2:
The CRM Value Chain

An organisation follows the stages of this model in developing CRM strategies. There are

five primary stages in this model. They are: customer portfolio analysis (CPA), customer

intimacy, network development, value proposition development and managing the relationship.

The company has to manage its customers through each of these cycles. Further there are five
supporting conditions required to be managed by the organisation for effective implementation

of CRM. They are: Culture and leadership, Procurement processes, Human resource

management processes, IT/Data management processes and Organization design.6

1.2.3 Payne’s Five Forces Model

This model of CRM is developed in by Adrian Payne in 2006. It comprises five important

CRM processes. They are; strategy development process, the value creation process, the

multichannel integration process, the performance assessment process and the information

management process.

Figure – 1.3:

The Strategic Model for CRM

 In this model, strategy development consists of developing strategies for interacting and

choosing customers. Value creation is connected with identifying the value a customer can create

for the firm and the value created by the firm to him. Multichannel integration is related to the

process of combining all virtual and physical communication to create a uniform customer

experience. The Information management process is related to managing data repository IT

systems, back and front office applications and analytical tools. Finally, performance

management is connected to standardising and monitoring the performance7. The above

mentioned CRM models are useful to companies in developing and implementing effective CRM

strategies.

1.4 Significance of CRM in Banking Sector

The Indian service industry has been developing rapidly with a contribution of more than

half to the GDP. There has been a heavy competition within every sector of service industry. Due

to Indian economic reforms, many industries at present have many national and international

players battling for the customer pie. Banking sector is also no exception which growing rapidly

and facing heavy competition from both internal and external players.

Under these circumstances, almost all the banks have realized the importance of retaining

customers by offering better value to them. They have recognised the need for communicating

properly with customers for serving them better. Further, banking being a service requires very

few or no intermediaries as the banking services are generally produced and delivered at the

same place. This disintermediation provides a great opportunity for bankers to create an

emotional bond with customers to sustain long term profitability. In view of this, CRM becomes

an integral part of a banks’ business service strategy.

 Implementation of CRM in banking is related with delivering superior value to the

customers. CRM has become a very important business tool in banking industry. With effective

CRM, a bank can deliver more personalised service to customers.

At present, banks are operating in multi channels to serve its customers. Some of them

include branch banking, online banking, mobile banking, payment cards, ATMs, cash deposit

kiosks etc. They are communicating with their customers through many communication channels

such as field calls, call centres, web sites and social media. They are offering interactive voice

response systems through virtual assistants. Further, all banks are offering different services such

as insurance, mutual funds, stock broking, factoring and many others apart from basic banking

services. In fact, banks have a hub of all financial activities.

Thus, it has become imperative for today’s banks to offer a seamless experience to their

customers across multiple channels of business and communication. Further, they have to

provide convenience to the customers in terms of various services to attract them. Therefore, the

CRM strategy and its implementation become very crucial for banks.

CRM will help banks in building long term mutually beneficial relationships with their

valued customers. It will also assist the banks in identifying the customers’ needs and properly

responding to them through multiple channels. Proper implementation of CRM will help banks

in delivery of superior value and creating loyalty in customers. In a bank, CRM as a business

strategy aligns people (employees and customers), processes and technology to create long

lasting relations with customers. It also results in increased revenues, enhanced profitability and

reduced costs. In simple words, knowing the customers’ needs and fulfilling them in a better
method is the crux of CRM strategy and a proper CRM strategy creates value addition and

competitive advantage.

CRM as a business tool helps a bank for identifying opportunities of selling, cross and up

selling, designing effective marketing campaigns, offering better customer service, responding to

customers in a proper manner, efficient systems and procedures, effective grievance handling

mechanism, communication with customers in a timely and right manner, knowing their needs in

advance, predicting their behaviour and offering suitable services, integration of multiple

channels etc.

1.5 Review of Literature

CRM is an essential part of a bank’s marketing activities. For ensuring customer

satisfaction, management of relationship with customers is very important for banks. Effective

CRM helps in better understanding of the customers’ needs, wants and paves the way for

designing new services or serving them in a better manner. Hence, an attempt is made to briefly

review the findings of some important studies related to CRM in the form of Research Articles,

Doctoral Research Works within India and abroad. There are several Research Articles have

been published, Doctoral Research Works have also been conducted in the recent past and vast

literature is available in this area and some of important research works closely related to this

study include:

N.R. Jadhav (2018)8 conducted a study on, CRM practices in public and private sector

banks in Maharashtra state’ found that the processes of PNB have been rated as most customer-

centric as compared to those of SBI, HDFC, ICICI and BOM by customers.

 Jasmine Kaur (2018)9 revealed that CRM is the back bone of the banking industry.

CRM will be negatively impacted if attention is not paid for developing strong CRM practices in

banks. The data analysis found that SBI bank customers of Patna are satisfied with its CRM

practices. Further, they are looking for more personalised treatment and employees help. It is

found that these measures will certainly help in increasing customer satisfaction.

Shailja Pal (2018)10 observed that the fair, honesty and reliability are important factors in

attracting customers in banking sector. The key drivers to customer loyalty are found to be

efficient complaints resolution, superior quality service and positive staff attitude.

Tahmeem Siddiqi, Kabir Ahmed Khan & Sugandha Mobin Sharma (2018)11

conducted study on the influence of technology adoption, customer trust and complaint handling

on customer loyalty in the competitive banking industry of Bangladesh.

Abbas Tanveer and Hafeez Sana (2017)12 found that the employees’ attitude towards

clients, their knowledge and skills and efficiency are the most influencing factors determining

the quality of CRM practices. This study helped bank managers in realising the importance of

employees’ performance and attitude in increasing the service quality of their work.

Chawla & Joshi (2017)13 concluded that the better CRM strategies are definitely

dependent on the adoption of mobile channel by greater number of customers. Therefore,

perceptions, attitudes and intentions of mobile users are important determinants of relationship

development facet of CRM.

In their study, Kamma Chawla & Aditya Sharma (2017)14 on customer relationship

management best practices followed by Indian Retail Banking Sector found that key to attract

and retain customers is to create, manage and develop relations with customers. It will also result

in maximizing total customers’ lifetime value.

 Basman Al Dalayeen (2017)15 observed that successful implementation of customer

relationship management leads to customer loyalty and long run profitability. Therefore, banks

should focus on maintaining harmonious relationships with their customers. The study also

studied the impact of customer relationship management practices on customer’s satisfaction in

two banks namely Jordan Ahil Bank India and Bank Al Ethihad. It was concluded that

significant variation exists in the perception of customers.

Pedron, et al., (2016)16 found that successful CRM system adoption is determined by

three fundamental and three main objectives. The three fundamental objectives are:

maximization of CRM organizational culture; ensuring of an effective relationship with CRM

providers; and minimization of CRM adaptation risks, while the three main objectives are:

maximization of CRM usage, maximization of relational marketing capabilities and

maximization of CRM orientation.

Bhat and Darzi (2016)17 provided an empirical evidence that the customer knowledge is

the CRM dimension that has the most positive effect on the development of customer loyalty and

competitive advantage of the bank.

Suhail Ahmad Bhat & Dr. Mushtaq Ahmad Darzi (2016)18 observed that the customer

knowledge and orientation has a significantly positive impact on customer retention and it is

most considerable factor in customer relationship management in banks.

Dalayeen B. and Khan A. (2016)19 conducted an empirical research in select Indian

private sector banks namely HDFC, ICICI, AXIS and YES banks to examine the differences in

the perceptions of customers on them. The study has taken empathy, responsiveness, reliability

and customer relations as important variables of CRM. It concluded that significant variation

exists in the perception of customers on select banks.

 Manoj Xavier & Andrews T. (2016)20 conducted a study on customer relationship

management practices in State Bank of India in Mallappally Taluk. It was found that the new

customers are increasing every year by implementing CRM practices.

Kaushik & Rahman (2015)21 revealed that bank customers are mostly familiar with the

use of online banking as their daily routines and consider it as the main link with their bank.

Their attitudes to online services, as well as the trend of "self-service" in banking are generally

positive.

Shaon & S.M. (2015)22 said that CRM is known to be a process which increases

customer satisfaction. Customer satisfaction is the major factor to consider for all companies to

survive in today’s competitive world.

Marko Laketa et al.,(2015)23 explained that the customer relationship management

provides advantages which bank uses while communicating with various target groups. It results

in higher performance products and services which can meet customer needs. It also identifies

factors to build log-term business relationship.

Thirumoorthi P. & Manjula V. (2015)24 explained that the customer relationship

management is a holistic approach that involves multiple, interlocking disciplines, including

market knowledge, strategic planning, business process improvement, customer retention and

sales management and training.

R.C.S Rajpurohit & Swati Surana (2014)25 concluded that the banks will need to think

proactively, innovatively, creatively and differently as financial business environment of

tomorrow will be unique. It is changing to meet the changing customers’ financial and

investment needs. They found that the CRM strategies will be most important tools to achieve

competitive advantage as banks today are facing the heat of competition like never before.
 Dahlstrom et al. (2014)26 showed that trust is an element of crucial importance in

banking industry since establishment of relationships between customers and banks appeared to

be a double-sided problem, as both parties can appear differently depending on the level of trust

they have in other party.

Ravi Kumar B. (2014)27 concluded that in some rural areas, few public sector banks are

lagging in attracting and retaining customers. It was observed that it is a still a long way to go in

implementing customer relationship management by these banks.

The research findings of Awasthi & Sangle (2013)28 indicate that greater adoption is

crucially influenced by: perspective of benefits, perceived value, usefulness and context, while

also being significantly influenced by perceived security assurance, perceived trust, perceived

cost and perceived risk on perceived value and perceived usefulness.

Tang and Ai (2013)29 revealed that the customer relationship management also can

contribute to the reduction of many negative notions and reduce the possibilities of suspicious

transactions, false reporting rates and many other malpractices.

Mehmet and Omur (2013)30 in their study they conducted that the effect of

implementation stages namely identification, differentiation, interaction and customisation on

management strategies of CRM in banks.

Anu Putney & Puney M.M. (2013)31 in their study examined the role and importance of

customer relationship management in Indian banking sector. The inference of the study is that

the interaction with customers can give an opportunity to build long-life relationship and it is

very much needed in present competitive business world.

Sanjay Kanti Das (2012)32 opined that CRM is one of the important tools of marketing

strategy for banking sector in present competitive environment. The study revealed that CRM
practices adopted by SBI and other Nationalised banks are similar. But the reach of CRM to

customers depends on their banks profile, capability and the strategy of CRM.

Dr. Shirmila Stanley (2012)33 made it clear that the CRM has become a new mantra in

services management. It is based on both relationship and information intensity. The banks also

need to differentiate themselves in offering various services to customers and to build long-term

relationships with their customers.

Vegholm (2011)34 in his study explained that the significance of trust as a basic factor for

the development of long-term customer and bank relationships. These relationships are highly

influenced by the “ability of bankers to understand and meet the specific needs” of customers,

which, in return affects the overall customers’ perceptions and attitudes towards banks.

Yao and Khong (2011)35 in their study, made it clear that banks intend to develop and

manage stronger interaction with their customers with an aim of maximising the customer equity.

It builds strong customer relationship to raise customer satisfaction.

Chopra P. K. & Mishra P.K. (2010)36 highlighted on marketing function in baking

sector and how it shifted from products to customers and focused and narrowed down to

customer relationship management. The study concluded that the marketing department has a

continuous challenge of handling customer relationship in the banks.

Wang F. Hu F. and Yu L. (2010)37 emphasised that the purpose of CRM is to improve

customer satisfaction and to analyse of customers’ detailed information in order to improve the

corporate competitive ability.

Ozdemir, S. & Trott (2009)38 their study examined the impact of internet banking and

identified that time saving, fast service, cost saving, fast access and low opportunity cost are the

most important factors to attract more and more customers.

 Tanveer Ahmed (2009)39 observed that the usage of e-CRM is mostly for mass

customisation, customer profiling, self-service, one to one interaction. It ultimately resulted in

lower operational costs, increased customer loyalty and more profits. He also suggested that the

staff training and customer feedback are considered as backbone for successful implementation

of E-CRM strategy.

Rootman C., Tail M., & Bosch J. (2008)40 explained that there are many research

studies which have been done in various industries regarding profitability but especially

concerned to banking sector mainly focusing on customer oriented services are very few.

Ndubisi, et al., (2007)41 explained that banking industry has faced significant changes in

different business segments during the last two decades, such as: distribution changes (with

greater usage of ATMs, PCs, Internet, mobile banking), reduction of transaction costs, increased

speed of service. At the same time, it is observed that managing of supplier-customer

relationships is still one of the crucial issues in banking industry.

Nguyen T.H., Sherif J.S., & Newby M. (2007)42 explained that the CRM practices have

become significant ingredient of the banks’ business strategy to enhance the profits and satisfy

the customers and to attain customer loyalty.

Lindgreen, Adam & Finn Wynstra (2005)43 found that customer relationship

management supports unique relationship with bank customers by adding more and more value

to banks products and services.

Ngai (2005)44 found that enhanced relationship with bank customers can help banks in

developing greater retention and loyalty as these two are the most required elements in customer

relationship management in banks.

 Varki and Colgate (2005)45 found that bank customers focused on customer oriented

services which play an important role in facilitating mutual relationship between the banks and

their customers.

Boulding W., Staelin R., Ehret M., & Johnston W.J. (2005)46 found that the modern

business has started viewing customer relationship management in banking as an outcome of

business strategy which provides seamless integration of every banking business functions that

touches the expectations of customers.

Thutau T. (2004)47 explained that the customers are ready to return again to banks,

where employees are customer oriented. It is also observed that customers are more influenced

by the service of staff and it reflects on trust.

Day George S. (2003)48 explained the need to classify customers into different groups

with different needs in order to serve them better. It is concluded that successful implementation

of customer relationship management needs supports of top management. It needs to manage the

organisational environment to help employees manage business processes and implement

business relationships with customers.

Verhoef P.C. (2003)49 found that the customer’s desire to extend relationship with the

bank and his reliance on the customer loyalty programs are effected positively on retention and it

effects the growth of customers share.

Newell F. (2003)50 suggested that retaining bank customers requires effective customer

relationship management as it is possible for customers to resort to brand switching in present

competitive environment.
 Gummesson E. (2002)51 explained that the customer relationship management has an

important role in new economy in creating or making long standing relationships with customers

to attain the profits and get the competitive benefits from the market.

Claessens et al (2002)52 found that the customers have choice to opt the service or

product which are offered by the various bank in a competitive environment. It also indicated

that maintaining regular relationship with customers will improve the economics, trust and

efficiency of banks.

Parvatiyar A. & Sheth J.N. (2001)53 argued that financial services industry has been

entering into a new era where personal attention is decreasing as the banks are going to use

technology to replace human contact in many functional areas.

Gray P. & Byun J (2001)54 found that the customer relationship management is an

acronym to maintain relationship with different bank customers for marketing various products

and services of banks.

Dunphy D., (1996)55 in his research, explained that customer loyalty, satisfaction and

profitability of banks in public and private sector mainly depend on the relationship maintained

by the banks with customers.

Parsuraman A., Zeithaml V.A. & Berry L.L. (1985)56 explained that the high quality

of services gives credibility to the field sales and advertising favorable word-of-month

communications to enhance customer perception of value and it boosts the morale and loyalty of

employees and banks’ customers.

1.6 Need for the Study

It is observed that the studies reviewed so far have focused on some important areas of

Customer Relationship Management (CRM) like CRM practices, importance of customer

satisfaction, employee knowledge, skills and attitudes, adoption of online and mobile banking,

customer knowledge and orientation, customers’ perception for CRM, CRM implementation

stages, importance of customer trust, customer retention and customer loyalty programs. No

comprehensive Doctoral Research Works particularly on entire spectrum of CRM strategies and

practices in banking sector was found.

It is also observed that the Doctoral Research Works so far conducted related to public

sector banks or private sector banks exclusively. No attempts have been made to study CRM

practices in private and public sector banks together. It is also observed that very few attempts

have been made specifically on CRM practices with reference to banking sector. In view of this,

the present study on ‘CRM in Banking Sector – A Study of Select Banks’ has been chosen for

this Doctoral Research Work aiming at providing important guidelines to banking officials and

the policy makers for designing right banking services to right customers at right time.

1.7 Objectives of the Study

The objectives of the study are:

1. To study the recent trends emerged in CRM and their importance in marketing area

specially in banking services.

2. To examine CRM practices of select banks in both public and private sector.

3. To analyse the perceptions of bank customers towards various banking channels of select

banks

4. To examine the various determinants of CRM in banking sector

5. To evaluate customer satisfaction towards CRM practices of select banks, and
 6. To draw conclusion and offer suggestions for implementing CRM strategies and practices

effectively in banking sector specially in case of select banks aiming to enhance their

performance.

1.8 Hypotheses

The broad hypotheses of the study are that there are no differences in opinions of public

and private sector bank customers with regard to various CRM determinants of select banks.

Supporting the broad hypotheses, chapter wise hypotheses are also framed.

A. H0 1: There is no statistically significant difference between the opinions of public and

private sector bank customers on CRM determinants.

B. H1 1: There is a statistically significant difference between the opinions of public and

private sector bank customers on CRM determinants.

C. H0 2: There is no statistically significant difference between the opinions of public and

private sector bank customers on various banking channels.

D. H1 2: There is a statistically significant difference between the opinions of public and

private sector bank customers on various banking channels.

E. H0 3: There is no statistically significant difference between the satisfaction levels of

public and private sector bank customers with regard to CRM practices in select banks.

F. H1 3: There is a statistically significant difference between the satisfaction levels of

public and private sector bank customers with regard to CRM practices in select banks.

1.9 Scope of the Study

The present study mainly focuses on bank customers’ opinions and perceptions towards

CRM practices of select banks. Most of the opinions are based on their personal experiences

relating to CRM practices adopted by selected sample banks. It is confined to Warangal Urban
District in Telangana state. The study restricts itself to analysing perceptions and satisfaction

levels of customers of sample banks selected.

1.10 Sources of Data

The present study is based on both primary and secondary data. The primary data sources

include the information from bank customers on CRM and factors influencing loyalty,

satisfaction level etc collected through structured questionnaire. In addition, personal interviews

and discussions were held with the managers and executives of select banks to collect the

required information. Secondary data was also collected from several published sources

including internet records, websites of concerned banks apart from periodic Reserve Bank of

India Bulletins.

1.11 Sample Selection

The present study covers the bank customers of Tri-cities of Warangal District. It is the

second largest city in the Telangana State in terms of education, business and road-railway

connectivity. The Tri-cities of Warangal Urban District are Kazipet, Hanamkonda and Warangal.

Health University, Medical College, National Institute of Technology (NIT), Kakatiya

University which are serving the educational needs of Warangal Urban and Rural people. Several

government offices, private education institutions, rice mills, shopping malls, multiplex malls,

private corporate hospitals, recreation centres, hand loom centres, railway stations and small to

business medium enterprises are locating in tri-cities only. This indicates the income sources of

tri-cities people. The tri-cities also consist of public, private, foreign sector banks and number of

insurance company branches apart from biggest grain market. The Warangal District has huge
potentiality and growth in service sector. Because of these unique features of tri-cities of

Warangal District and the banks and the bank customers from this area are selected for the study

to assessing that they have adequate banking habits.

The study is confined to banking customers of tri-city people of Warangal Urban District.

In tri-cities, the public sector banks are leading in rendering services and it flowered by private

and foreign sector banks. For the study, two public (State Bank of India and Canara Bank) and

two private sector banks (Housing Development Finance Corporation Bank, and Industrial Credit

and Investment Corporation of India Bank) are selected. State Bank of India (SBI) is the oldest

bank in Warangal tri-cities with thirteen bank branches serving more than six thousand

customers. Canara Bank (Can Bank) with six bank branches, located in tri-cities of Warangal to

service the Government officials and business people with various services. HDFC Bank is

second private sector bank in tri-cities with four branches. ICICI Bank is first private sector

banks in tri-cities with five branches. These four banks are leading in banking business in tri-

cities offering various services to their customers.

The study covers the opinions and perceptions of bank customers on CRM practices of

both public sector and private sector banks. For ensuring uniformity and comparison, two public

sector banks and two private sector banks have been selected for the study. The public sector

banks chosen for the study are State Bank of India (SBI) and Canara bank. The private sector

banks chosen include ICICI bank and HDFC bank. Further, the branches of all four select banks

are chosen from Tri-Cities of Warangal Urban District in Telangana state. In order to analyse the

opinions on CRM practices of the select banks, 600 bank customers 300 from public sector and

300 from private sector are selected at random by using convenient sampling method.
Precautions are taken in a way that at least 100 female bank customers should be contacted for

data collection pertaining to public and private sector banks.

Thus, the questionnaire was administered on these customers. A total of 524 properly

filled in questionnaires (262 from each sector) were received and finalised for the present study

by maintaining equal ratio of male and female customers in public and private sector banks

avoiding bias in data interpretation.

1.12 Sample Size

For this study, opinions of bank customers from both public and private sector banks are

collected. For this purpose, a suitable sample size of customers is carefully designed. In this

process, alpha level a priori at .05, has been set which plans to use a proportional variable,

setting the level of acceptable error at 5%, and has estimated the standard deviation of scale as .5.

William Cochran’s (1977) sample size formula for categorical data used to find out the

appropriate sample size for the study.

(t)2 ∗ (p)(q)
n0 =
(d)2
(1.96)2 (. 5)(. 5)
n0 =
(.05)2
Where t = value for selected alpha level of .25 in each tail = 1.96. (The alpha level of .05

indicates the level of risk the researcher is willing to take that true margin of error may exceed

the acceptable margin of error).

Where (p) (q) = estimate of variance = .25 (Maximum possible proportion (.5) *1-

maximum possible proportion (.5) produces maximum possible sample size).

 Where d+ acceptable margin of error for proportion being estimated = .05

(error researcher is willing to except).

The minimum required sample size is determined as 384 but, 524 bank customers have

been selected for the study which is more than the minimum sample required.

1.13 Tools for Data Analysis

Thus, the data collected from the bank customers is tabulated, analysed by using

statistical techniques like rank correlation, chi-square test, simple and weighted averages.

Thereby interpretations were made.

1.14 Validity and Reliability of the Questionnaire

Cronbach’s alpha is a measure used to assess the reliability of any given measurement

refers to the extent to which it is a consistent measure of concept, and Cronbach’s alpha is one

way of measuring the strength of that consistency. It is computed by correlating the score for

each scale item with then total score for each observation (usually individual survey customers or

test takers), and then comparing that to the variance for all individual item scores:

Where:
▪ kk refers to the number of scale items
▪ σ2yi σyi2 refers to the variable associated with i
▪ σ2x σx2 refers to the variance associated with the observed total scores

Cronbach’s alpha is thus a function of the number of items in a test, the average

covariance between pairs of item, and the variance of the total score. The resulting α coefficient
of reliability ranges from 0 to 1 in providing this overall assessment of a measure’s reliability. If

all of the scale items are entirely independent form one another, then α = 0 and, if all of the items

have high covariance, then α will approach 1 as the number of items in the scale approaches

infinity. In other words, the higher the coefficient, the more items have shared covariance and

probably measure the same underlying concept. Although the standards for what makes a “good”

α coefficient are entirely arbitrary and depend on the theoretical knowledge of the scale in

question, many methodologists recommend a minimum α coefficient between 0.65 and 0.8 (or

higher in many cases); α coefficient that are less than 0.5 are usually unacceptable, especially for

scale purporting to be one-dimensional. The Table 1.1 presents the details.

The present study is conducted by using sample of 524 sample customers. The sample

size is ascertained by using Cronbach’s Alpha. The value calculated shows higher consistency

with 0.983 which is more than 0.7 (α=.9017), which implies that the questionnaire and scale used

are acceptable and reliable.

1.15 Chapterisation Scheme: This study is organized into six chapters:

Chapter I: Introduction presents the theoretical aspects of Customer Relationship

Management (CRM), review of literature, need for the study, objectives, hypotheses, scope of
the study, sources of data, sample selection, sample size, tools for data analysis and

chapterisation Scheme.

Chapter II: CRM Practices of Select Banks consisting three sections. The First section

presents an overview of CRM practices adopted by the select banks. Second section presents the

demographic profile of select customers. The last section presents the banking profile of select

customers.

Chapter III: Customer Perception towards Various Banking Channels focuses on

analysis of customers’ perception on various banking channels offered viz., telebanking, internet

banking, payment cards, mobile banking, ATM services and branch banking.

Chapter IV: Customer Perception towards CRM Determinants covers with the

analysis of customers’ perception on determinants of CRM in banking sector. The determinants

taken for the study are Trust building, Customer Retention and Loyalty Building.

Chapter V: Satisfaction Level towards CRM Practices of Select Banks measures the

satisfaction levels of customers with regard to the CRM practices adopted by their banks.

Chapter VI: Conclusion & Suggestions presents the conclusion emerged from the study

and suggestions for ensuring better CRM practices.

Bibliography

Annexure