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Customer Relationship Management and Practices of Banks in the United Kingdom Essay Sample

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Customer Relationship Management and Practices of Banks in the United Kingdom Essay Sample

 

Executive Summary

Customer Relationship Management (CRM) is one of the key factors for strong client retention and eventually creating a loyal customer base.  CRM is a concept which is closely related to Relationship Marketing (RM) which concerns mainly about organizing client information in order to create appropriate and thoughtful communication and action that could strengthen the bond between a particular company and its clients.  CRM is important to UK banks because it allows the aforementioned to be more customer-centered in terms of their strategic plans to management.  In addition with this, the act of documenting patterns of behavior of customers could be converted to a customer knowledge base that will serve for the purpose of analyzing or creating company rules and policies that would directly affect the customer.

Foremost CRM processes that are used in the UK banking industry more particularly of those in Barclays and Lloyds TSB are the adoption of CRM softwares which enables the aforementioned to offer service upgrades, cross-sell or just be extra sympathetic to their customers.  ERP systems are also used in order to integrate all of its customer data coming from various departments such as human resources, sales and transaction processing systems, financials, inventory, purchasing, and marketing system.  Distribution channels like mail, e-mail, website, telephone, personal call are used by both Barclays and Lloyds as well as this allows them to implement a multi-channel coverage strategy to sell products and services, negotiate, administer and retain customers.  Individualized marketing and repricing are also done that in the manner in which customers will feel that they are being rewarded due to their loyalty.  Finally, a CRM strategy would not work if the people behind it such as the human resource factor of the bank are not being taken into close account.  A very effective human resource will make sure that the implementation of the CRM strategy of the organization will always be at is best.

Chapter I

Introduction and Objectives

1.1 Introduction

            This section of the research discusses the background of the research problem, the significance of the study, the research question, the research objectives and the structure that the study will undertake.

1.2 Background of the Problem

            The UK banking environment is highly characterized by strict competition among various organizations.  Due to the latter, offering almost homogenous services and products, consumers often find it easy to switch among banks.  In today’s highly dynamic and competitive environment of the banking industry, financial services and products together with increasing customer demands have led to a revolution of customer related processes. The conventional product-oriented bank has slowly becoming more customer-oriented due to giving more focus on customer loyalty as their main goal (Beerli, 2004). The UK banking sector is a very diverse and competitive due to its specialist and non-bank service providers offering a range of service such as credit cards, mortgages, insurance, and loans. The high competition in the industry has forced some financial service providers to adopt price-dominated strategies to attract new customers, albeit such was not really able to improve existing customer loyalty (Farquhar and Panther, 2007; cited by Jones, 2007). According to Jones (2007), if banks wanted to build customer loyalty through customer satisfaction, the aforementioned need to make sure that all points of contact customers are satisfactory whether they are personal or remote; because often times, customer complains give opportunities to the bank rectify their mistake in such a way that would lead to the increase of customer satisfaction and eventually customer loyalty.

            The UK Banking Industry is characterized by three major economic services: money transmissions, holding deposits and issuing credit; while most consumer products rely on these three: current accounts, credit cards and personal loans and mortgages.   Current accounts primarily provide the main access to money transmissions.  It serves as a saving vehicle and could be used to get credit through an overdraft.  On the other hand, credit cards and personal loans are used by consumers for unsecured credit.  Such provides a restricted way for money transmissions.  Finally, mortgages are used for a more secured lending.  It is often used in buying properties and investing in houses (Cruickshank, 2000).

            According to the study of Cruickshank (2000) majority of the consumers find it hard to compare financial products, hence, implying that most of them are not adequately informed.  More importantly his study revealed that majority of bank costumers does not have an accurate idea of the terms and conditions of their bank accounts; at the same time they also admitted that their banks do not always provide them an effective choice among the products and services provided; hence a signal that most UK banks do not really spend so much effort in terms of adequately informing their clients.

However, when asked if they wanted to shift banks, majority of the consumers said that even though there are numerous credit cards available, they still don’t necessarily have the confidence that one of them would perfectly cater to their needs.  Similar to the disposition of credit card consumers, savings accounts consumers also lamented that they are unaware not only of the terms and conditions of their credit cards but also of the processes that involves it.   Notable differences are however apparent in terms of mortgage consumers as 69% of them said that they are well aware of the various mortgages available while only 22% of them said they do not.  This result is quite expected as knowledge in terms of mortgages is very vital since it is in this service that a customer will be able to pursue their residential loans.  However this ratio of lack of consumer knowledge and awareness of credit card customers, savings account customers and mortgage customers is an evidence that there is indeed a failure among banks to adequately inform their clients and in a bigger scale helping them acquire services and programs that might suit their needs, gain their loyalty and eventually pave the way for more bank profitability (Cruickshank, 2000).

            Given the aforementioned scenario among UK banks, it has been revealed by the study of Cruickshank (2000) that since consumers failed to see any notable differences among banks; it has been become quite easier for them to switch between the aforementioned.  One significant example could be credit card clients wherein most of them can easily switch between providers without exerting any costs from themselves as balance transfers and account cancellation could be done in just one phone call.   Bank customers who have current accounts however have to consider their standing orders, direct debits and salary payments when deciding to switch banks.  Albeit even if this is the case, the study of Cruickshank (2000) still revealed that only 14% of those who decided to switch experienced various degrees of difficulty.  On the case of mortgage and loan clients, penalties that could incur from redemption could primarily affect their decision to switch.  In addition with this, certain factors like up front costs on remortgaging such as property valuation and legal fees could also affect client decisions. 

1.3 Significance of the Study

The principle of Customer Relationship Management (CRM) and Relationship Marketing (RM) is very vital in terms of building competitive advantages among UK banks, because it seeks to satisfy and retain customers and eventually bring profit for the company.  This modern interest in maintaining customers is creating a revolution in marketing due to establishing a specific emphasis on value creation and building relationships. The acceptance of RM is based on empirical research, which shows how customer retention leads to increased profitability. It is with this respect that CRM is viewed as encouraging companies to treat their customer as assets (Gilbert. and Choi, 2003). As such it is with this respect that U.K. banks can make use of RM in terms of gaining competitive advantage through building and maintaining good relationships with customers, which cannot be replicated by its competitors.

CRM has been put forward as a method for organisations to develop mutually beneficial and valuable long-term relationship with customers (Ravald and Gronroos, 1996). It is believed that CRM works more successfully when customers are highly engaged in the product, there is an element of personal interaction, and customers are willing to involve themselves in building relationship (O’Malley and Tynan, 2000). Customer oriented CRM programmes increase the flow of information between the bank and customers, which increase customers’ positive feelings towards their bank, therefore also increasing satisfaction and relationship strength (Barnes, and Howlett, 1998).  Past studies have given some information and evidence regarding the nature and significance of banking relationship from customer, business and both. Still few questions are unanswered e.g., to what extent CRM programmes have succeeded in strengthening and improving relationships with customers of different segments.

In today’s highly competitive business environment, customers’ bargain power is very high. Given the similar products such as insurances, mortgages, credit cards with almost the same interest rates; and offerings by banks, customers are less likely to be amazed by the core product attributes when all or most of the banks are providing similar products and offerings (Branes, and Howlett, 1998). Therefore, there must be a drive among conventional product-oriented banks to become more customer-oriented, in order to align with the fundamentals of relationship marketing, which emphasises on customer satisfaction and loyalty as their key goal. In this context, Gilmore  (1997) cited by Beerli et al., (2004) suggested that continuous customer-oriented attitude is necessary for improving the quality in services marketing.

Banks are now realizing the fact more than any other industry that long-term growth, longer customer lifetime value (CLV) and profitability are dependent on their ability to attract and retain loyal customers (Wisskirchen et al., 2006). Retaining the customers is becoming difficult in the present competitive business environment due to the fact that other financial institutions also specialise in offering higher value services and prices to customers. Since, investment across all customer segments will not give up the same returns (Zeithaml et al, 2001), most of the time RM is directed only for most profitable segments (Abratt and Russell, 1999).  As such this study is vital not only in terms of presenting RM principles that are most beneficial to UK banks but also provide some specific strategies in terms of how to deal with RM in a more cost effective and profitable manner.   

1.4 Research Question

            For the purpose of this research, the study wanted to answer the question: How effective is CRM in terms of increasing customer retention in the UK Banking Industry?

1.5 Research Objectives

            Specifically, the research wanted to know:

  1. To identify key factors and alternative factors in determining customer retention.
  2. To identify the extent up to which CRM processes achieve customer loyalty or mutual benefit for both the organisation and the customer.
  3. To identify the barriers in terms of implementing CRM programmes in the banking industry.
  4. To identify components of the CRM process that is often used in the banking industry.
  5. To provide recommendations on how banking sectors could improve their CRM practices to reach higher customer retention. 

1.5 Research Structure

The first chapter of the research discusses the background of the UK banking industry in relation to the highly competitive environment.  This is elaborated through the background of the problem, the significance of the study, the research question and its specific objectives.  Consequently, the review of related literature on the second chapter presents secondary data taken from library or desk research from various books, academic journals, magazines and trusted websites.  These literatures focused on the customer relationship management (CRM), relationship marketing (RM), customer satisfaction and customer loyalty.

The third chapter discusses the type of tradition that the research had adopted in addition to the justification of the selected approach and the validity of the data that were derived.  Consequently the research looked forward to discuss and analyze the secondary data in relation with the research question and its objectives, on the fourth chapter.  Finally, the research focused on the main points of the study together with the analyses that will came about from the fourth chapter in the final chapter. Recommendations will also be given in order to address gaps and shortcomings of the approach that the industry had taken

Chapter II

Literature Review

2.1 Introduction

            The literature review of the dissertation focused on:  Relationship Marketing, Factors Influencing Customer Loyalty and Retention, Customer Relationship Management (CRM) in relation to Customer Retention, Service Quality and Customer Retention, Commitment and Customer Retention, Customer Loyalty and Customer Retention, Implementing Barriers of CRM Programmes, and Banks in the United Kingdom and their CRM Practices 

2.2 Relationship Marketing

            Relation Marketing (RM) can be understood and defined as a marketing philosophy designed to maintain and strengthen relation with current customers or clients, rather than developing and acquiring new customers (Gronroos, 991; cited by Guenzi and Pelloni,  2004). It is with this respect that it could be implied that the basic goal of RM approach is gaining and fostering customer loyalty (Gremler and Brown, S.W., 1999; cited by Guenzi. and Pelloni, 2004).   The notion of RM became known in 1980s as an alternative way of marketing as a series of transactions, due to the notion that many exchanges, mainly in the service industry, were relational by nature (Berry, 1995).  In the context of retail banking, Walsh, S. et al 2004 define RM as “the activities carried out by banks in order to attract, interact with, and retain more profitable or high net-worth customers” (p.468).

The main aim of RM is to increase customer profitability while providing better services for customers. Several studies have provided evidence that there is a positive relationship between RM and business performance (Palmatier and Gopalakrishna, 2005).   In context to banking, Keltner (1995) found that German banks as compared to American banks, able to maintain a constant market position during 1980s and early 1990s because of relationship oriented banking strategies.

RM is a way forward to establish a continuing relationship with the organisation’s customers and it is based on the idea that it increases cost-effectiveness to satisfy and retain customers (Day, 2000; cited by Ehigie, 2006). RM is based on understanding and satisfying customers needs. One of the practices of RM is customer care, which is adopted by most of major financial services providers (Jones and Farquhar, 2003; cited by Ehigie, 2006). The idea is based on the understanding that long term relationship with customer decrease defection rates, costs and increase revenues (Harrison, 2003a; cited by Ehigie, 2006).

            It should be noted however that RM will not automatically create stronger customer relationship rather customer will show different stage of relationship closeness and strength (Berry, 1995). To be more attractive, RM strategies should be able to increase customers’ perceived benefits and values of involving in the relationship (O’Malley and Tynan, 2000). However, not all customers like to engage themselves into close relationship; and studies often show that close customer relationship is very rare in the banking industry. The role of technology in terms of further weakening the relationship of banks and consumers is presented by O’Loughlin, et al., in 2004.  According to him, relationship among banks and their clients further weakens by the use of self-service technologies. However, Sweeney, A. and Morrison, M. (2004) pointed out that new technologies should be used to create a strategic advantage by using the aforementioned as a relationship facilitator and eventually improving customer relationship management (Payne, and Frow, 2005).

RM is considered to be customer oriented. The selling orientation-customer orientation (SOCO) scale which was developed by Saxe, and Weitz,, 1982 was based on the principle that customer oriented sales persons try hard to enhance customers long term satisfaction. Sales oriented people achieve the current sale at the cost of customers needs. Research has shown that customer orientation has an effect on the organisation’s relationship with its customers (Clark, 1997). In a research work of financial services, Bejou, (1998), found that customer oriented people had a positive impact and increase customers relationship and satisfaction whereas sales oriented people had negative impact on relationship and satisfaction. 

2.3 Factors Influencing Customer Loyalty and Retention

            According to Pelsmacker and Kitchen (2004), there are four major factors influencing customer retention in the area of RM, these are: trust, commitment, communication and conflict handling. 

2.3.1 Trust

            Trust is one of the most relevant components of good quality relationships with clients.  It is very important that customers first trust a particular brand before being loyal to them.  It could be significantly noted that there is a huge difference between repeat purchases and trust or loyalty.  The notion of trust that is something that is deeply rooted on customer satisfaction and the latter is based on goods, services and employees doing the exact thing that the brand promises.  Whenever brands and companies made certain claims that is beyond what they can give customer satisfaction and eventually trust also diminishes (Pelsmacker and Kitchen, 2004).  

2.3.2 Commitment

Relationship marketing evolves ties between the organisation and its customers to improve feedback and develop customer loyalty. Customers are open to the pressures of competitive promotions and may readily switch brands or store. A firm needs to establish a much stronger relationship with customers. Relationship marketing tries to get customers to actively support the firm and its products and to encourage others to do the same. The aim of relationship marketing is to find ways of enhancing the mutual benefits derived from the relationship. Successful relationship marketing involves the targeting of customers of sufficient value to justify the investment in creating a relationship with them. Relationship-building resources can be directed to those customer groups where this is mutually advantageous. The strongest relationships are based on the establishment of mutual trust and respect between organisations concerned (Pelsmacker and Kitchen, 2004).

Getting employee commitment to the relationship-building and maintaining process is important since its success is in the hands of those who implement it. Everyone needs to understand their role in the relationship building, be committed to it and be motivated to ensure that it succeeds (Pelsmacker and Kitchen, 2004).

2.3.3 Communication

            Second most important factor in building trust with customers is through the facilitation of interactivity.  As such, it is very important that customers can request information with ease, make complaints and ask questions whenever they want.  In response with this, banks should be able to respond in a timely manner and also attend to customers’ concerns in the most efficient way possible (Pelsmacker and Kitchen, 2004).

Although a customer may only have contact with a marketer through a website or a direct mailing, he or she may feel close to the brand anyway. However, personal contact is critical for long-lasting high-quality relationships. High-tech will never make the need for high-touch obsolete. Physical proximity is as important as statistical or technical relationships. For instance, in a hotel the guests can fill out a customer satisfaction questionnaire, and the hotel management may or may not take the responses into account. Despite the physical proximity between the customer and the management, communication is strictly technical and statistical, and the quality of the contact is low-touch. However, hotels could also organise customer complaint or ‘critical incident’ conversations with their customers, making the contact more personal, interactive, and high-touch. Relationships quickly deteriorate when the romance and excitement has gone. Relationship marketing aims at customer delight and excitement, rather than just frequent routine contacts. High quality contacts imply regular value added, not only for the marketer, but also for the customer (Pelsmacker and Kitchen, 2004).

2.3.4 Conflict Handling

            Conflict resolution focuses on “reduction, elimination, or termination of conflict” (Rahim, 2001, p. 75).  Studies on negotiation, bargaining, meditation and arbitration fall into these category.  It is very important for contemporary organizations to not necessarily resolve conflict but effectively manage them.  The notion of conflict management does not capitalize in the notion of avoidance, reduction or termination of conflict.  Rather an effective conflict management approach requires identification of ways to minimize the emergence of conflicts and enhance learning and effectiveness in the organization.

2.4 Customer Relationship Management (CRM)

The importance of customer relationship and customer assets has led banks to focus not only strictly in terms of enhancing their brand image but also its customer base.  Major reasons of banks in terms of the implementation of their CRM approaches could be traced on the need to acquire new clients while at the same time keeping the old ones.  In addition with this, the need to maximize their lifetime value is also one of the main motivating factors (Onut, Erdem and Hosver,).  As such, it is with this respect that most banks now tend to work more on customer-centered approaches in terms of their strategic approaches to management (Mithas, Krishnan and Fornell 2005).

The CRM approach is implemented primarily for banks to identify consumers and other prospects who provide most profits to the bank and eventually invest more time and attention in order to improve the aforementioned’s relationship to them (Onut, Erdem and Hosver, 2002).  This could be achieved through “individualized marketing, repricing, discretionary decision making, and customized service-all delivered through the various sales channels”  (Onut, Erdem and Hosver, 2002).

According to Onut, Erdem and Hosver (2002),CRM objectives in the bank sector primarily lean towards the use of various technology in order to easily identify and eventually interpret the behaviors of their customers and eventually deduce the value that they could provide in the organization.  In addition with this, the role of effective human resource that would play a major role in terms of management of CRM softwares and eventually the interpretation of the data that could be hoisted out from it is also very vital.  Foremost implication of this CRM strategic plan is the efficiency of services provided to customers and eventually creating banks’ contact centers more effective.  In addition with this, the possibility of performing efficient products cross selling is also expected; it is with this respect that bank employees that are assigned on sales and marketing would be able to close bank deals with customers in a relatively short amount of time, hence creating a more cost effective marketing and sales process.  The adoption of a robust CRM strategy is also expected to bring new customers and eventually create a positive outcome in terms of the bank’s financial aspects.  It should be pointed out that the goal of an effective CRM strategy must be beyond the adoption of expensive CRM software.  The focus on which type of information to get, to what group of customers and eventually what strategies to take after the aforementioned is accomplished should also be taken into consideration (Onut, Erdem and Hosver, 2002).

Customer Relationship Management (CRM) concerns primarily on organizing client information in order to create appropriate and thoughtful communication and action that could strengthen the bond between a particular company and its clients (Hayes, 2006).  The figure below presents a CRM implementation model.

Figure 1: CRM Implementation Model

Source:  Chen and Popovich (2003, p.676).

            The figure above shows how CRM is implemented.  The role of the people in the organization, the processes involved and the technology being used plays a lot in terms of creating a robust customer data profile necessary for effective customer relationships, retention and eventually loyalty. The people, process and technology factors are also primarily influences by business processes which specifically focus on customers, strategies that are enterprise-wide, processes that are driven by technology and finally cross-functional integrations (Chen and Popivich, 2003). The above figure implies that CRM primarily involves sophisticated mining of consumer data hence creating a comprehensive system full of customer profiles and their purchasing patterns.  Through effective CRM systems, companies are able to customize the services that they give to consumers, predict patterns of behaviors, entice them to adopt special offers or services and eventually assess the economic advantage that they have with each customer (Chen and Popivich, 2003, p.676).

There are a number of ways in which a company could develop its CRM practices and one of it is the adoption if software packages in order to effectively manage one’s CRM program.  Softwares that are often used are normally hosted by a third party, an in-house division, or a standalone package.  There are even softwares that would enable a company to offer service upgrades, cross-sell or just be extra sympathetic (Hayes, 2006).   In this area, the role of data warehouse technology and enterprise resource planning (ERP) systems play a great role (Chen and Popivich, 2003).  The use of data warehouse technology is gives the most utility to managers by allowing the aforementioned to collect “islands of customer data” within various segments n the organization and eventually combining various databases coming from “human resources, sales and transaction processing systems, financials, inventory, purchasing, and marketing systems” (p.678).

Through the use of data warehouse technology companies become more capable of identifying or reporting services despite its location, channel, group and customer.  It is with this respect that even though a huge organization such as UK banks has varying locations, provide different services and transact with various clients from all walks of life, every one of them can have a general overview of consumer profile, preferences and other significant factors necessary in implementing a strategic plan (Chen and Popivich, 2003).  In addition with this, data warehouses also provide cost effectiveness because instead of conducting marketing researches such as surveys and focus groups, companies can only look into their own customer profile and deduce from there the aforementioned’s needs.  In relation with this, the use of enterprise resource planning (ERP) systems includes the process of linking all areas of the organization such as “order management, manufacturing, human resources, financial systems and distribution with external suppliers and customers” (Chen, 2001 as cited from Chen and Popivich, 2003, p.678-679).  The figure below presents the ERP process in CRM.    

Figure 2: An Overview of the ERP Process

Source: Chen and Popivich (2003, p. 680).

Through the process of forming alliances through ERP, organizations will be capable of creating a strong foundation in terms of integrating office functions and eventually be effective in terms of creating and maintaining healthy relationships among consumers.  In adopting such a type of approach, banks will be able to integrate functional areas of the business with suppliers and customers and at the same time, optimize profitability and consumer satisfaction.  In addition with this, when ERP systems become web enabled it allows all organizations’ stakeholders to have a significant share of information necessary to conduct one’s business (Chen and Popivich, 2003).

The CRM process could also be effective if the staff would be able to update client data every time account information is opened like for instance in exchanging emails and conversing.  Common desktop features of an effective CRM software includes the capacity to track received and sent emails, phone calls and other related contact information.  In addition with it, one could also track date-stamped notes, schedule tasks and calendar reminders; and create customized fields within the company’s database.  In order to create a good CRM-based culture, it is necessary for companies to view their clients as assets and be able to keep track and manage their current disposition in order to keep track of them (Hayes, 2006).

Foremost of the benefit of customer retention is higher profitability. The keys to customer retention are customer satisfaction and high switching barriers. Customers can be kept satisfied by delivering the goods and services they expect, or they can be prevented from running to the competitors by keeping switching barriers high (for instance making them lose loyal-customer discounts). Three retention-building approaches can be distinguished (Lowenstein, 1997).  The first approach includes the act of adding financial benefits wherein for instance, frequency programs reward repeat buyers and loyal customers. Club membership programs create a closer bond between the customer and the company or the brand and result in extra financial benefits.  Consequently, the second approach focuses on the need to add social benefits wherein companies should have individual and professional contacts with their customers to turn them into real clients (Lowenstein, 1997).  Finally, the necessity of adding structural ties is very vital as it is not always realistic to count on customers being truly loyal. A firm tendency to repurchase is often the best a company can hope for. Therefore, adding structural ties (or increasing the barrier to switch) is often a useful component of CRM. The company can tie its customers to the organization by creating long-term contracts, by giving quantity discounts, and by engaging in long-term servicing relationships instead of selling products. For instance, a company could supply its customers with special equipment or access to the company’s technology that enable them to order products and ask for assistance and service more easily (Lowenstein, 1997).

            The strategic implications of CRM are significant. CRM often implies a functional integration in the whole company. From the point of view of the customer, the company will appear seamless: all customer contacts will be consistently managed.

The figure below provides an overall conceptual framework of the CRM strategy.

Figure 3: Conceptual Framework for CRM Strategy

Source: Payne and Frow (2005, p.171)

            The figure above shows that the overall CRM strategy process involves an interplay of various factors starting from strategy development process which is normally anchored on the vision of the company and its competencies.  From there, a strategy in terms of customer relations is implemented. Through the company’s strategy development and its customer relations plan, a value creation process is formulated which could be attained through both new client acquisitions and eventually its retention but.  After the strategy and the value creation is structured, it is then eventually applied within the operational dimension of the banks which, which could be achieved through sales, use of retail outlets, use of phones, use of direct marketing, use of electronic marketing and use of mobile commerce.  Eventually, the organization must be able to analyze and assess if their overall CRM strategy is effective.  It should be significantly noted as well that all of these processes are done side-by-side with the information technology systems of the banks, its analysis and office tools and finally its bank office applications.

It is with this respect that it could be said that a modern and efficiently organized CRM also creates the opportunity for reducing cost of sales and communications substantially. For instance, traditional sales persons cost approximately double the amount of money they earn (the rest is spent on offices, travel, accommodation). Only 6% of their time is spent in front of a customer (Freedman, 1994). Any alternative customer contact method is bound to be more cost-efficient. CRM can give rise to a multi-channel coverage strategy: lead generation, reselling, negotiation, administration, closing the deal, can all be covered through different CCM channels (mail, e-mail, website, telephone, personal call) on the basis of their cost-efficiency. CRM also offers the customer and the company the opportunity of more flexible two-way communications, thereby extending the choice over the means of contact and improving customer service. Last but not least, good CRM is technology-driven: digital communications, networked computer systems, web technology, call centers, and database technology should be integrated to make day-to-day CRM work. Relationship marketing should be based on a database that is well-designed and well-managed.

2.4.1 CRM and Customer Knowledge

Through CRM the patterns of behavior of customers could be easily tracked.  For instance, usual transactions of customers could be recorded and be converted to a customer knowledge base that will serve for the purpose of analyzing or creating company rules and policies that would directly affect the customer.  In relation with this, customer knowledge that is carefully documented, can also serve as a strong framework in terms of better assisting customers in their future transactions, hence allowing services given to them in a more customized manner (Mithas, Krishnan and Fornell 2005). The use of efficient CRM practices can also be used in terms of better profiling customers so that their usual needs could be identified and be significantly used in terms of deducing usual consumer behaviors, is vital in terms of creating customer loyalty; albeit its benefits can even be maximized when analyzed in relation to other customer profiles.  In addition with this, customer profiles can also be used by companies in terms of providing customers with certain service features that would directly cater to their needs (Mithas, Krishnan and Fornell 2005). 

2.4.1 CRM and Customer Retention

            Most European banks have already established their own CRM systems for the purpose of effectively monitoring the profiles of its most valuable consumers and at the same time improve their customer understanding and improve their customer service levels (European Banker, 2006).  The importance of customer retention among banks is very vital due to the most recent studies that the cost of implementing marketing and sales activities in order to attain new clients is higher than the cost of retaining the aforementioned.  According to European Banker (2006), one of the most effective ways of customer retention is through rewarding costumers for their loyalty with the bank (p.12).

The act of providing favorable pricing, offer products and services that could cater to clients’ needs, and offer other more personalized services would allow customers who have stayed for the company for such a long period of time in addition to the continuous profit and other benefits that they provide to the organization be given a more favorable relationship hence allowing companies to prevent their customers to switch banks even when given a better offer (European Banker, 2006).  This form of rewarding most valuable consumers could be achieved through the establishment of a robust CRM strategy.  Albeit, according to European Banker, most European banks are not able to maximize the benefits of the huge pool of customer information that is available to them.  In effect of this, most of the products that they offer and the strategies that they implement often end up inaccurate, hence leading to the lost of various opportunities, lowering of the margins and lower customer satisfaction (European Banker, 2006).

            In order to solve this problem, European Banker proposed the implementation of a Relationship-based pricing strategy in which CRM could be used as a way for an implementation of an effective customer retention program.  CRM strategies that are often employed by banks which allowed them to get valuable consumer information could be used in terms of creating models that are more customer centric hence enabling consumer loyalty and eventually increased profits and revenues.   It is very vital that the bank should be able to understand the customer together with the value that she is currently providing and could further give to the bank.  In order to do this, banks must be able to divide their customer base into certain segments hence allowing the implementation of strategies that is unique to every one of them (European Banker, 2006).  For customers who have been loyal for a significant number of years, rewards could be given in terms of priority responses such as personal greetings, waiver of some fees, or access to a loyal bonus point schemes that would provide them discounts on various service charges or products.  The importance of creating a good customer service and offering products that would entice customers to stay with the bank and through creating a total customer experience, banks would be able to decrease their turnover rates and eventually retain their most profitable consumers (European Banker, 2006).

            For banks which have undergone mergers and acquisitions (M&As), demands in terms of customer retention are high hence the need to focus on the use of more robust technology that would automate their sales, marketing and other channel processes.  The use of cross-functional approaches in terms of providing customer support, increase of web hits and effectively dealing with customer calls would pave the way for an increased and deeper understanding of individual customers (European Banker, 2006).

In pan-European customer CRM strategies, banks must be able to formulate local strategies that are unique for the particular country in which their specific branch is located hence allowing them to increase their competitive advantage of local and regional players.  The role of globalization in terms of the strategies of banks in customer retention is significantly affected by two major international trends such as business diversification and customers’ use of sophisticated banking channels.   In effect of this, bank customers has learned to use and more often chose banks offering a wide array of distribution channels such as mobile phones, personal digital assistants, ATMs and the internet.  In order to deal with this, the need to implement enterprise- wide CRM strategies is very vital in order for them to cater to the demands of the customers in relation to strategic pricing, product offering and banking channel distribution offers (European Banker, 2006).  This could be done through  moving towards the creation of “financial supermarkets” (p.16) that would enable banks to cross-sell and up-sell more products to their consumers hence allowing the aforementioned to experience products that would not only cater to their local needs but also to the needs of a more globalized market economy.

2.5 Service Quality and Customer Retention

            Service quality focuses on “the customer’s appraisal of the service core, the provider or the entire service organization” (Duffy and Ketchand, 1998, p. 240).      Service quality is normally perceived as the result of the service delivery system which is closely linked to customer satisfaction.  Although Anderson and Fornell (1994); Reidenbach and Sandifer-Smallwood (1990) and Woodside et al. (1989) said that there has been no clear consensus within the research community of the direct relationship of quality and satisfaction, there is still an underlying notion that a superior service quality leads to the more satisfied customers.  For instance, if a particular client is just about to leave a bank and was asked how the service that he or she has experienced was and the latter answers negatively, the one could assume that the service that was experienced by the customer is indeed poor.  However it could be significantly noted that customer’s perception on service quality could also be clouded by a number of factors such as for instance having a bad mood prior to coming in the bank.  As such it could be implied that the notion of service quality is not solely dependent alone on the service provided by a particular establishment but could also be affected by the customer themselves (Duffy and Ketchand, 1998).  However, it could be noted that service quality could be enhanced through an effective CRM approach and system.

Customer satisfaction is difficult to understand and is often defined in different ways. Many researchers argued that there is a difference between customer satisfaction which is gained from tangible products and consequently customer satisfaction from intangible services such as those coming from banks. The major difference among the aforementioned is rooted on the intangibility of some services and the failure to separate production and consumption. As such it is with this respect that customer satisfaction from services and goods may come from and influenced by different factors, therefore should be considered separately and differently (Veloutsou, C. et al, 2005). Two issues should be considered when looking in customer satisfaction in services and identifying whether it is conceptualised or transaction specific or cumulative (Hoest, V. and Knie-Andersen, M., 2004).  In the banking sector, there is always a strong relationship established between service quality and satisfaction (Jamal, A. and Naser, K., 2002). However, both service quality and satisfaction are highly interrelated with each other and sometimes it gets difficult to separate it in specific transaction interactions (Bitner, M.J. and Hubbert, A.R., 1994).

            According to Mithas, Krishnan and Fornell (2005), the degrees of customer satisfaction is very important in terms of the financial performances of certain firms.  For instance, most banks which are able to minimize customer complaints were able to eventually create a loyal customer base.  When a particular consumer became loyal to a certain bank, his or her usage levels are perceived to increase through out time.  In addition with this, such us also believed to secure future revenues for the company and eventually do away with the possibility of customer defection.  In addition with this, satisfaction of consumers is also believed to reduce the incidence of various services related costs.    In addition with this, Motley (2005) said that since the relationship of customer satisfaction and the purchase of other bank products and services is established on certain banks, the need to standardize perceptions of customer satisfaction must be implemented.  For instance, the use of periodic customer satisfaction surveys, the need for implementing a feedback survey response form that would measure degrees of customer loyalty; and finally implementation of episodic surveys are most useful (p.46).

2.6 Commitment and Customer Retention

Relationship commitment is also considered as one of the outcomes of effective CRM that eventually leads to customer loyalty.  According to Meyer and Allen (1997 as cited from Gustaffon, Johnson and Roos, 2005, p.211) commitment is defined as a “desire to maintain a relationship, a pledge of continuity between parties, the sacrifice or potential sacrifice if a relationship ends and the absence of competitive offerings” (Moorman,Deshpandé, and Zaltman 1993; Morgan and Hunt 1994; Dwyer,Schurr, and Oh 1987; Anderson and Weitz 1992; Gundlach, Achrol, and Mentzer 1995 as cited from Gustaffon, Johnson and Roos, 2005, p.211).  When a particular bank is able to attain this level of commitment with their consumers, it is most likely that it would pave the way for the creation of a loyal customer base.

Commitments of customers to companies have two major dimensions: affective and calculative or continuance (Fullerton 2003; Hansen, Sandvik, and Selnes 2003; Johnson et al. 2001 as cited from Gustaffon, Johnson and Roos, 2005, p.211). Calculative commitments normally happen when consumers depended on a particular company due to the lack of choice to switch to other companies providing the same services.  On the other hand, affective commitment is a more personal relationship as customers often choose to stay to the company because of their level of involvement hence eliciting trust and commitment.  The most vital difference between customer satisfaction and customer commitment is that the former tend to be looking towards the past in recollection of course of various services that a particular bank has provided them.  On the other hand, customer commitment is more looking towards the future as a customer believes that it is worthy to stay with a particular bank due to the utility that it provides to him or her (Gustaffon, Johnson and Roos, 2005).

Menon and O’Connor (2007) introduced the notion of affective commitment and its role in terms of “moments of truths” or instances of interpersonal interactions between customers and the banks (p.157).  In this respect the need to implement certain levels of communication behaviours such as assertiveness and/or affiliation to customers’ disposition should be established.  The role of high-end CRM softwares in addition to a strong CRM strategy could pave the way in the manner in which bankers can effectively transact with consumers hence improving longevity and profitability (Menon and O’Connor, 2007).

2.7 Customer Loyalty and Customer Retention

Customer satisfaction has been perceived as not the sole determining factor for a loyal customer base (Griffin and Herres, 2002).   During the 1980s and the 1990s, the notion of customer satisfaction which is weighed in terms of providing quality customer service and excellence has been perceived as providing good financial results and repeat purchase.  A study conducted by Forum Corporation (Stum and Thiry, 1991) claimed that 40% of the customers who participated in the study claimed to be satisfied with a particular product, found it easy to shift banks without any hesitation.  As such, it has been perceived by Griffin and Herres (2002) that the true measurement that should be used in repeated business is Customer Loyalty.

Customer loyalty focuses more on consumer behaviour than attitude.  When a particular client is loyal to a bank, such a person is more particular in conducting purchase behaviours that is relatively more non random.  A client who is loyal to a particular bank has developed a particular justified belief on which and what to buy from whom.  More importantly, the notion of loyalty implies a purchase that occurs for a particular duration, which does not occur less than twice. Also, it could be significantly noted that the decision to purchase could be made by one or two or more individuals.  As such, it could be the case that the decision making to buy a particular product could be a compromise, hence explaining one of the key reasons for one’s loyalty for a particular unit (Griffin and Herres, 2002).  As such it is with this respect that Al-Hawari (2006) said that the longer a particular customer stays with the bank, the greater is the chance that the aforementioned will benefit from him or her as loyal bank customers are more likely to purchase other products, refer their friends, relatives and peers.

              There are two important factors that are closely associated with brand loyalty and these are customer retention and total share of customer.  The former describes the duration in which a particular company has the business of a client.  The rate of customer share on the other hand is equivalent to the percentage of a customer’s budget that is spent with the firm.  For instance, a company is said to have 100% share of a customer’s budget if the latter spends his or her entire budget with a particular firm.  As such it could be said that customer retention and percentage of customer’s budget is very important; however, there might be instances wherein a customer is prevented by certain laws to purchase just from one vendor such as government accounts (Griffin and Herres, 2000).

Gustafsson and Johnson (2000) presented a model which would effectively measure customer satisfaction.  Satisfaction in terms of the model is perceived as “customer’s overall evaluation of the purchase and consumption experience with a product, service or provider”.  The model presented by Gustafsson and Johnson (2000) appears to be different from transaction-specific portrayals of customer satisfaction that normally leads to repurchase.   The model focused instead on the importance of the Customer Lens or the perspective of a customer on a particular brand, most especially how it benefits them. According to Gustafsson and Johnson (2000), the aforementioned will allow the organization to take a view of their product as it appears on the market place and not really how their organization perceives it (Gustafsson and Johnson, 2000).

It has been argued by Gustafsson and Johnson (2000) as well that customers’ decisions to repurchase a particular product are deeply influenced by their overall purchase and consumption from a particular company or brand.  In addition, customer satisfaction could pave the way for an enhanced reputation and an increase of brand equity for a particular organization.  Such in turn could further attract customers that could have further increase the market share of a particular brand. The figure below also represents the total satisfaction and loyalty of customers which is in their nature are abstract concepts; but indeed could be measured in specifics.  An effective customer satisfaction scale is the one that measures product or services in contrast with customer expectations and performance.  Such could then be contrasted to an ideal product or service in the said industry.     

Figure 4:  Building the Lens of a Customer

Source: Gustafsson A. and Johnson M. (2000).

2.6 Banks in the United Kingdom and their CRM Practices

            Barclays Group is considered as one of the largest financial groups in UK and has been referred as “Big Four” of the UK Banking industry.  The asset of the organization amounts to £1,020billion by the end of the fiscal year in December 2006.  It has banking operations over 150,000 businesses and holds 11.5 million current accounts (Datamonitor, 2007).  Barclays has been focusing a lot on the notion of corporate responsibility which aims on a fair, integrity-based, and ethical banking. Part of this is their utmost focus on the principles of good customer relationships (Barclays, 2007).

Barclays has been working under its “Ten Customer Fairly Principles” which are: (1) Strategic Change (2) Identification of Target Market (3) Product Design and Governance (4) Marketing and Promotion (5) Provider-Distributor Interface (6) Sales and Advice Processes (7) Remuneration (8) After-Sales Information (9) Conflict Handling and (10) Management Information (Barclays a, 2007) .

Whenever Barclays has decided to undergo internal or external strategic changes, they always assure that it is in accordance to the over-all good of its clients.  The products and services that are being offered by the bank are made sure to be reasonable and focus exactly on the expectations of its clients (Barclays a, 2007).    The bank also seeks to identify the products and services that are generally appropriate to all of its customers.  Barclays also focuses on collecting and assessing customer information that is relevant in order to make sure that the former is being offered products and services that are in accordance with their needs.  This also then makes sure that quality customer services are being given. In relation with this, the bank also makes sure that remuneration arrangements are effectively organized in order to provide “quality assurance and ongoing customer service” (Barclays a, 2007).  Whenever Barclays are conducting marketing campaigns and distributing literatures, they assure that it is objective on top of providing clear-cut messages and useful to the exact needs of its customers.  This would then allow the latter to make decisions that are primarily informed and makes them know the exact features of the said products and services and also fees and other charges that could affect them.

            After-Sales Information is always assured to be updated so that the bank could monitor how well the product or services that has been provided with their clients work.  In relation with this, the information that were gathered from such are made sure to be translated into something that the customer is expecting to acquire from a particular product or service. Barclays also has an effective management information in the sense that they continuously “analyse and use information” regarding their “customer service and product sales”.  Such an act enables the organization to improve the type of service that they provide.  The information that were gathered from its clients were assured to be forwarded to the senior management in order to assure that such things that concerns its clients are made known to the top of organizational hierarchy  (Barclays a, 2007) .

            Barclays assure that all of their business units are acting in accordance with the values of the organization, and any act that diverts from such would be immediately and properly addressed.  Complaints that are raised by Barclays customers are assured to be handle by the organization with “sensitivity and dispatch and with due regard for the needs and understanding of each complainant”.  In effect of this, Barclays make sure that they would not only resolve the issue but know the root of the complaint in order to further improve the service and avoid any further recurrence (Barclays a, 2007).

Lloyds TSB Group (Lloyds TSB) on the other hand is another leading UK based financial services group which primarily focuses on reduction of business risks and providing a huge range of growth options among its clients (Datamonitor b, 2007, p. 5).  Lloyd TSB has a strong asset base of £ 343.6 billion and has over 2,000 branches all over England, Scotland and Wales.

Lloyds TSB’s ways to secure the accounts of their clients are centered on the effectiveness of the security of their systems.  Lloyds TSB provided five ways in which accounts could be seen as secured and these are by the use of: (1) Using three random characters (2) padlock (3) Checking the time (3) Automatic log off and (4) Temporary denial of access.  These safety factors are primarily employed by Lloyds TSB more specifically to their on-line transactions (Lloyds TSB c, 2007).

CRM strategies of Lloyds TSB centers on the use of Smart Investigate for Payments Solution which is primarily used to be able to provide a more “scalable and flexible infrastructure” that would enable the company to provide quality service to all of its clients.  A Customer Relationship Management system provided by Pegasystems enables Lloyds TSB to “to rapidly deploy and easily manage process-centric solutions” and also “helps narrow the gap between business goals and execution for Lloyds TSB and other large financial services organisations”.  In relation with this, Lloyds TSB on 2007 has introduced its first banking “superstore” which caters to its international clients.

This is part of Lloyds’ commitment to its customers to provide hassle free banking service (Lloyds TSB a, 2007, p. 1).  The new program of Lloyds is expected to provide its clients “tailored services” more specifically to its Polish clients.  One noteworthy step for Lloyds TSB is providing native Polish speakers to their stores.  On relation with this, in order to make bank applications for new clients relatively easy, Lloyds has “simplified its identification requirements” to its new clients (Lloyds TSB a, 2007, p. 1).  Such a policy change only require new customers to present one form of photo identification in order to open a new account.  Such a policy change for Lloyds makes it easy for foreign customers who only have a single form of identification (Lloyds TSB a, 2007, p. 1).  Also closely related to the pursuit of Lloyds to commitment is its endeavor to further improve its on-line banking services in order to cater to the increasing population of clients who do on-line banking.  On a study that was conducted by Lloyds on January 2007, more than half of the respondents who participated in the study (i.e. 75%) said that they have been using Internet Banking more than they used to during the current year rather than in comparison in 2006 (Lloyds TSB b, 2007, p. 1).

Communication strategies of Lloyds TSB focused more than a typical customer base.  One of the programs being employed by Lloyd TSB is its “Louder than Words” which aims on focusing on the needs of not only of its deaf customers but also deaf staffs.  Such a program allowed Lloyds TSB to easily cater to the needs of these people.  The organization has been providing leaflets to its customers saying the new services that are now made available to the deaf. These are written in plain English and provide a clear overview of the programme.  In relation with this, there has also been numerous television advertisements that were made and also letters that were send out to its specific clients (Lloyds TSB f, 2007).

            The complaint handling mechanism of Lloyds TSB allows clients to communicate their issues to one of Lloyds; Business managers.  The promise that is claimed by Lloyds is a problem resolution that is quick and effective (Lloyds TSB d, 2007).  It is with this respect that Lloyds is capable to further improve its service quality, hence eventually creating more satisfied consumers and a more loyal customer base. 

2.9 Barriers in Implementing CRM

            Foremost of the reason why banks are hindered to adopt retention and CRM programs is due to the notion that the adoption of retention strategies would cost the company too much (Clapp, 2006).   Some banks have the idea that the capability to reduce customer attrition and creating a full customer retention strategy is logical, albeit most of them believe that the process could be too complicated that such could eventually cause financial drawbacks (Clapp, 2006). Also, idea that CRM softwares cost too much is also one of the major factors in terms of banks’ rejection of adopting a full CRM strategy.  In addition with this, some banks have an idea that budget in terms of customer relationships should be spent more on developing campaigns that would bring in new clients (Clapp, 2006).

Chapter III

Research Methodology and Methods 

3.1 Introduction

            This section of the research focus on providing an overview of the research approach adopted by the paper, the  process of secondary and primary data collection and its justification, and finally the methods in which the researcher would interpret the research data.  

3.2 Research Question

For the purpose of this research, the study wanted to answer the question: How effective is CRM in terms of increasing customer retention in the UK Banking Industry? 

3.3 Research Objectives

Specifically, the research wanted to know:

  1. To identify key factors and alternative factors in determining customer retention.
  2. To identify the extent up to which CRM processes achieve customer loyalty or mutual benefit for both the organisation and the customer.
  3. To identify the barriers in terms of implementing CRM programmes in the banking industry.
  4. To identify components of the CRM process that is often used in the banking industry.
  5. To provide recommendations on how banking sectors could improve their CRM practices to reach higher customer retention.

3.4 Research Tradition

            For the purpose of this research, the author adopted the Qualitative Research Tradition.  Qualitative Research focused primarily on words rather than numbers.  The main research instrument for such a type of tradition is the process of involvement of the researcher to the people whom he or she studies (Dyamon and Holloway, 2002). In relation with this, the viewpoints of the participants are also taken into much account.  The Qualitative research tradition focuses on small-scale studies wherein deep explorations are being conducted in order to provide a detailed and holistic description and explanation of a specific subject matter.  Rather than focusing on a single or two isolated variables, the aforementioned takes into account interconnected activities, experiences, beliefs and values of people, hence adopting a multiple dimension for study.

This tradition of research is also flexible in a sense that certain factors are being explored due to not necessarily adhering to a strict method of data gathering.  It also captures certain processes wherein changes in sequence of events, behaviors and transformation among cultures are closely taken into consideration.  More importantly, a qualitative research is normally carried out in venues that are within a respondent’s natural environment such as schools, offices, homes, etc.  This allowed participants to be more at ease and be able to express their ideas freely (Dyamon and Holloway, 2002).

Finally, the Qualitative research tradition is said to be inductive in nature in a sense that it starts by collecting and analyzing data and then coming to a particular conclusion. These data are then related to the literatures that were initially collected so that an analysis could be made, hence a deductive approach.  Theories then that are formulated that result due to Qualitative research is made due to the result of the data collected and not really from the theories that were studied in the literature review (Daymon and Holloway, 2002). 

3.5 Research Approach

According to Daymon and Holloway (2002), focus group discussion is an in-depth interviewing approach that is normally done in order to achieve substantial insights from participants for a particular issue or strategy.  Within focus group discussions, the ideas that are usually discussed does not exclusively come from the researcher herself or from a single participant; rather there is an interplay of questions and answers among members themselves hence paving the way for the exchange of more information.  According to Holloway (2002), the following are the advantages of focus group discussions:

“• they provide evidence from many voices on the same topic.

  • they are interactive.
  • they provide a supportive forum for expressing suppressed views.
  • they allow you to collect a large amount of data fairly quickly.” (p.186).

            Focus group discussions are primarily done so that various participant perspectives in a particular subject area could be taken to account hence providing multiple sources of evidences.  It is with this respect that Daymon and Holloway (2002) said that this type of approach often allow people to express their selves more hence paving the way for the research to truly know their perceptions, judgments and experiences in a particular issue. More importantly, Daymon and Holloway (2002) said that this type of approach is most useful especially on “understanding behaviour and attitudes; exploring strategic policies and strategies; developing and understanding brands, products and services; and investigating organizational and industry issues” (p188). 

3.6 Primary Data Collection

For the primary data collection, the researcher had focused on getting the data that were exactly needed for the research. With prior consideration on the objectives and the literature that were collected by the researcher, guide questions were created in order to serve as a starting point for the focus group discussions.  Through the use of the guide questions, participants will be given a general idea of what the topic is all about, hence allowing them to frame their mind to answer the said questions.  In relation with this, guide questions also allow for a freer discussion because such does not limit the data gathering to mere closed-ended questions, hence paving the way for the participants to express their ideas and raise other questions that they think are vital in the topic at hand (Daymon and Holloway, 2002). 

3.7 Secondary Data Collection

The researcher collected data based on secondary research methods. Dyamon and Holloway (2002) emphasized the importance of secondary data collection most especially through desk or library research. The review of related literature provided a scholarly perspective on the subject matter and at the same time made the researcher aware of both previous and contemporary research on the subject matter. The data collection for secondary sources were lifted from Questia Media America, an on-line Research Library; JSTOR a database which provides a whole array of financial journals catering to the UK baking industry; ProQuest an exclusive academic research database catering various journals industry magazines and news; and EBSCO Host with a special emphasis on literatures from the UK banking industry.  

3.8 Sampling

The study employed purposive sampling methods.  In purposive sampling, the researcher has specific criteria that he or she has to look upon in order to have a particular individual participate in the study (Daymon and Holloway, 2002, p. 159).

For the purpose of this study, the participants who were chosen are based on the criteria of

            The participants of the study could be labeled as homogenous in the sense that they belong to a single subculture and have the same characteristics.  All of the participants are of the same ethnic background, same educational attainment, belongs to an age group that is more or less the same and has the same length of experience in terms of their experience with CRM in UK banks and their effect on customer retention. 

3.9 Instrument Design

The instrument used by the research in order to identify the effectiveness of CRM practices of UK banks in terms of customer retention were made in a manner in which would make them express their ideas in terms of customer relationship management practices and eventually its relationship to customer retention.

3.10 Reliability and Validity

Reliability primarily focuses on the internal consistency and the repeatability of the variables within the research. On the other hand, validity centers on the correctness and appropriateness of the question that one intends to measure (Ghauri et al, 1995). According to Chisnall (1997), validity is generally considered and established through the relationship of the instrument to the content, criterion or construct that it attempts to measure. A lack of validity can lead to incorrect conclusion.

            For the purpose of this study, the research used an instrument which aimed to identify certain factors that would cause a particular UK bank customer to stay with their bank or in some cases leave them for a better one. 

3.11 Analysis of Data

            For the purpose of this research, the secondary data which was lifted from two major UK banks: HSBC and Lloyds were analyzed in relation to the principles, theories and best practices approach of CRM and customer retention in the UK banking industry.  The secondary data gathered from HSBC and Lloyds based from their official websites, were cross referenced to the CRM and customer retention paradigm in the banking industry.  In addition with this, results of the primary data collection from focused group discussions were also analyzed and interpreted based from the principles of CRM, effective customer retention and UK bank’s best practices.  From the results of the analysis recommendations were formulated by the researcher.

Chapter IV

Research Results and Analysis of Findings 

  • Introduction

This section of the research specifically focuses in terms of analyzing the secondary data focusing on two major UK banks: Barclays, and Lloyds, TSB in relation to the principles of relationship marketing, customer relationship management and customer retention.

  • Barclays

Both the RM and CRM practices of Barclays are summarized on the two tables

below.  The information presented is based on the secondary data gathered by the researcher based on the official website of the bank in addition to other official websites of its affiliates. The first table presents the RM strategy of Barclays in which four key factors relative to the theory of RM are juxtaposed to the actual practices being conducted by the company.

Table 1: Relationship Marketing Strategy of Barclays

and Customer Retention

Relationship Marketing Strategy

of Barclays

Trust

 

– Internal or external strategic changes relative to the over-all good of its clients (Barclays a, 2007).

– Price of products and services offered are within the expectations of its clients (Barclays a, 2007).

– Security of account information (Barclays a, 2007). 

Commitment

 

Find ways for customers to make decisions that are primarily informed (Barclays a, 2007).

– Find ways for customers to know the exact features of their products, services, fees and other charges (Barclays a, 2007).

 

Communication

 

– Providing quality customer services (Barclays a, 2007).

– Find ways to improve type of customer service provided to clients (Barclays a, 2007).

– Information that are gathered from its clients are assured to be forwarded to the senior management in order to assure that things that concerns its clients are made known to the top of organizational hierarchy (Barclays a, 2007).

 

Conflict Handling – Complaints that are raised by customers are assured to be handled by the organization with “sensitivity and dispatch and with due regard for the needs and understanding of each complainant”(Barclays a, 2007)..

Know the root of the complaint in order to further improve the service and avoid any further recurrence (Barclays a, 2007).

It could be seen from the table above that Barclays possess a strong RM strategy as based on its capability to adhere to the basic RM principles of trust, commitment, communication and conflict handling (Barclays a, 2007).  As such, having the above data presented it could be deduced that in virtue of RM best practices, Barclays is capable of keeping its customers and eventually make them loyal to the bank.   The principle of trust (Barclays a, 2007) together with the capability to adjust both internal and external changes of the strategic plan of the bank can make customers feel that they are deeply valued.  In addition with this, commitment which is evident in terms of Barclay’s aim to increase customer knowledge in terms of the offerings of the bank that could further allow the aforementioned to create their own informed decision is also one of the major determining factors that could make one stay to them.  If clients are well informed not only they would feel that the bank puts immense emphasis on the retention of their business with them but also such would pave the way for increased purchases of products and other services, hence higher revenue.

The role of communication (Barclays a, 2007)  in terms of providing quality customer service most especially in the bank’s call centers and eventually using the information that they derived from the aforementioned creates a sense of value on the end of customers and eventually a key factor for the success of CRM strategies of Barclays.

Conflict handing (Barclays a, 2007)  most especially the capability of the bank to be sensitive to key issues affecting the client such as personal conflicts or tragedies that could have affect their credit rating with the bank is also very important.  In this manner, Barclays is not only reducing their customers based on numerical information reflecting on their credit profiles, rather seeks to understand better the cause of their problems and how they could be effectively solved.

            The second table presents the CRM practices of Barclays and its relation to customer retention.

Table 2: Customer Relationship Management Strategy

of Barclays and Customer Retention

Customer Relationship Management

Strategy of Barclays

CRM Softwares – Chordiant Software (SAP, 2003).

– Collecting and assessing customer information (SAP, 2003).

– After-Sales Information is always assured to be updated (SAP, 2003).

– Monitor how well products or services that have been provided with their clients work (SAP, 2003).

– Information gathered from costumers are made sure to be translated into something that the customer is expecting to acquire from a particular product or service (SAP, 2003).

– Analyse and use information regarding their customer service and product sales (SAP, 2003).

ERP Systems -Value-Based Management (VBM) strategy through the use of the ERP system provided by Systeme, Anwendungen und Produkte in der Datenverarbeitung (SAP) (SAP, 2003).

–  Has led to the integration of Barclaycard, Consumer Lending, Barclays Life and Barclays Insurance Services  (SAP, 2003).

– Detailed financial reporting demands placed upon to the company by the financial market and legislators (SAP, 2003).

– Provided consolidated global reporting (SAP, 2003).

– Customer Competence Centre (CCC) accreditation through SAP (SAP, 2003).

Distribution Channels – Provide consumers access to their accounts through various bank branches, ATM machines and secured on-line banking (Barclays a, 2007)
Individualized Marketing – Remuneration arrangements are effectively organized (Barclays, 2007).

– Marketing campaigns and distributing literatures, are assured to provide clear-cut messages and useful to the exact needs of its customers (Barclays, 2007)

Repricing – Barclays credit card holders can enjoy a reduced Annual Percentage Rate (APR) relative to the type of card and reduced to almost 0% interest rates for Balanced Transfers relative as well on the type of credit card (Barclays d, 2008)
Customized Service – Mortgage loans relative to customer’s annual income, bank deposit, and amount wanted to borrow, number of years desired to pay the debt and manner in which the customer wants to pay the debt (Barclays a, 2008).

– Unique services offered to small scale businesses (Barclays b, 2008).

– ISA allowance investment relative to the amount in which interest rates of starting from 6.50% AER/6.31% (Barclays c, 2008).

People – Assure that employees are acting in accordance with the values of the organization, and any act that diverts from such would be immediately and properly addressed (Barclays a, 2007).

– Centralization of the HR department through VBM (Barclays a, 2007).

            The CRM practices of Barclays together with its RM strategic framework have a significant effect in terms of its customer retention.  Foremost of the determining factor in terms of creating a robust CRM strategic plan is the adoption of a CRM software that would directly cater to effective profile management and eventually creating a huge pool of consumer behavior database (SAP, 2003).   According to Hayes (2006) the use of CRM softwares are very important because the aforementioned enables a bank to offer service upgrades, cross-sell or just be extra sympathetic to their customers.  The adoption of Barclays of the Chordiant Software (SAP, 2003) allowed the company to gather information about all of their clients in which is the corner stone for the success of any CRM endeavor.  In addition with this, information about the sales information of the aforementioned is also taken into consideration which is most important in order to document buying behaviors (SAP, 2003).  The products that were sold to the customers are also tracked in terms of feedbacks being solicited in a regular basis in order to assure that the expected utility of the company are synonymous to those of its clients.

The information gathered from these are transformed into strategic practices and eventually used in order to improve customer service and improve product sales.  It is with this respect that customer retention would be easier since all of the information necessary in order to retain a client is made available most specially on bank employees who are in the front line of customer related processes.  The CRM softwares allow banks to have a summary of useful information that are readily made available most specially in times when a customer decided to shift banks due to services, products or any other related details that they found their current bank is lacking of. (SAP, 2003).

            According to Chen and Popivich (2003) the use of ERP systems is very important because it allows the organization to integrate all of its customer data coming from various departments such as “human resources, sales and transaction processing systems, financials, inventory, purchasing, and marketing systems” (p.678).  It is with this respect that the organization will be capable of consolidating its client information in addition to its human resource capability hence further enhancing their strategic advantage.  The ERP systems of Barclays which uses Value-Based Management (VBM) strategy through Systeme, Anwendungen und Produkte in der Datenverarbeitung (SAP) has enabled the company to consolidate consumer information from all sectors of their business such as Barclaycard, Consumer Lending, Barclays Life and Barclays Insurance Services.  As such it is with this respect that the ERP system can provide valuable information in terms of the trends of consumer preferences most especially in a global framework wherein there is a relatively more intense competition among banks and the need to a strong customer retention program is necessary.

            Distribution channels like mail, e-mail, website, telephone, personal call are criteria for implementing a cost-effective CRM (Barclays a, 2007).  The multi-channel coverage strategy of CRM on this respect can create a larger customer base not to mention ease in selling products and services, negotiation, administration and customer retention (Freedman, 1994).  This area for an effective CRM is dealt at by Barclays through the use of automated teller machines and secured on-line banking.  When consumers find it easy to access their banks, such factors can significantly contribute in terms of capitalizing on it as a major reason as well for retaining valuable customers.

            Individualized marketing and repricing which is done by Barclays primarily through campaigns, various arrangements and offering APRs and Balanced Transfer rates that are relatively competitive are also major factors in terms of retaining clients (Barclays, 2007; Barclays d, 2008, Barclays a, 2008, Barclays c, 2008; Barclays b, 2008).

            The act of specifically creating programs that would make customers feel that they are being rewarded due to their loyalty by tailoring specific services that would cater to their needs often times make clients think twice before deciding to consider another competitor (European Banker, 2006).   In the same manner, customized service of Barclays such as mortgage loans, loans for small scale businesses and other lower interest rates are certainly valuable for every bank client and any manner in which the bank can offer them a reduced interest rate would most likely make them stay (European Banker, 2006).

            Finally, a CRM strategy would not work if the people behind it such as the human resource factor of the bank are not being taken into close account.  Onut, Erdem and Hosver (2002) said that a very effective human resource will make sure that the implementation of the CRM strategy of the organization will always be at is best.  In this are, the role of ERP of Barclays such as the use of VBM allows the organization to regularly check all the human resource offices in terms of human resource development in terms of the knowledge and skills necessary depending on employees’ key functions.  In addition with this, the organization also assures that every employee acts in accordance with the culture of the organization, hence emphasizing the strict upholding of its value.  A strong human resource system is very vital so that the CRM strategy could be effectively implemented hence leading to strong customer retention.  In addition with this, employees who act in accordance with the goals and values of the organization is very vital as it creates an overall positive impression of the bank’s image to all of its clients, hence enticing a good brand and eventually strong customer retention.

             The figure below presents the profit of Barclays as of 2007 which could be an indirect evidence of the effectiveness in terms of their customer relationship management approach. 

Figure 5: Global Retail Banking of Barclays

Source: Barclays (2007, p.3)

It could be seen from the figure above that as of 2007, Barclays boasts a profit of £1.4 Billion on Barclays commercial bank which contributes to 18% of the total organizational profit; followed by £1.3 Billion on UK retail banking sector which contributes to 17% of the total profit of the bank (Barclays, 2007).  The international banking sector on the other hand ranks third in terms of profitability as it was able to create   £935 Million hence making up 13% of the aggregate revenue of Barclays; finally the Barclaycard ranks fourth with the revenue of £540 Million which are revenues primarily taken from UK cards and loans, Barclaycard businesses and Barclays international (Barclays, 2007).

The figure below then presents the customer share of the bank within the United Kingdom. 

Figure 6: Customer Share of Barclays

Source: Barclays (2007, p.4)

            It could be seen based on the customer share of Barclays as presented on their 2007 annual report that the current UK Banking accounts of the company is already amounting to 11.3 million in addition to 724, 000 business customers.  This figure also presents the number of Barclaycards consumers both in the UK an abroad as well as other international distribution points (Barclays, 2007).

  • Lloyds TSB

In analyzing both the RM and CRM strategy of Lloyds TSB, the same principles

used in terms of studying Barclays were also considered.  In this respect, it could be seen that both the four basic principles of RM are also significantly dealt at by the bank.

Table 3: Relationship Marketing Strategy of Lloyds

TSB and Customer Retention

Relationship Marketing

Strategy of Lloyds TSB

Trust

 

Lloyds TSB’s ways to secure the accounts of their clients are centered on the effectiveness of the security of their systems.  Lloyds TSB provided five ways in which accounts could be seen as secured and these are by the use of: (1) Using three random characters (2) padlock (3) Checking the time (3) Automatic log off and (4) Temporary denial of access (Lloyds TSB c, 2007).
Commitment

 

Introduced its first banking “superstore” which caters to its international clients (Lloyds TSB a, 2007)

– Provide hassle free banking service (Lloyds TSB a, 2007).

“Louder than Words” focuses on the needs of its deaf customers (Lloyds TSB a, 2007).

Communication

 

There are numerous television advertisements that were made catering to specific clients and also letters that were sent out to its most loyal customers  (Lloyds TSB a, 2007).
Conflict Handling Allows clients to communicate their issues to one of Lloyds; Business managers (Lloyds TSB e, 2007).

 

The table shows that efforts of Lloyds to maintain the trust of their clients are primarily centered on their capability to make sure that transactions of their customers most specially through the use of on-line banking is secured (Lloyds TSB c, 2007) .  Commitment on the other hand is shown through the introduction of baking superstores which directly caters to international clients and other local clients who are in need of international banking services (Lloyds TSB a, 2007).  In addition with this, customer commitment is also being shown by the organization through the act of the establishment of the baking superstore which caters to the needs of international clients and also UK clients who have international transactions.  In addition with this, the implementation of the campaign “Louder than Words” takes into account the disposition of less fortunate customers who have hearing impairments (Lloyds TSB a, 2007).  .  Communications among customers are primarily centered in terms of advertisements and other marketing campaigns that are relevant in order to further foster customer loyalty (Lloyds TSB a, 2007).   Finally, conflict handling approaches are also taken into close consideration most specially by Lloyds managers. These approaches in terms of Lloyd’s RM creates a strategic advantage in terms of retaining clients due to creating a notion of the company valuing the its clients despite any circumstance (Lloyds TSB e, 2007).

            On the other hand, the table below shows the CRM strategy of Lloyds in relation to the theories of CRM.

Table 4: Customer Relationship Management Strategy of Lloyds TSB and Customer Retention

Customer Relationship Management

Strategy of Lloyds TSB

CRM Softwares – Smart Investigate for Payments Solution (Citrix, 2002).

– Provide a more “scalable and flexible infrastructure” that would enable the company to provide quality service to all of its clients (Citrix, 2002).

– Rapidly deploy and easily manage process-centric solutions (Citrix, 2002).

– Helps narrow the gap between business goals and execution for the company and other large financial services organizations(Citrix, 2002).

ERP Systems – Citrix Software

– Securities and Mutual Funds System, Tax Return Entry System, inquiry systems for customer information, and Microsoft Office Suite (Citrix, 2002).

– Improvements in desktop management, monitoring and troubleshooting.

– Provide technical support to bank branches remotely (Citrix, 2002).

– Enable faster deployment of business-critical applications (Citrix, 2002).

– Testing of application upgrades done immediately together with the results of the modifications given the next day (Citrix, 2002).

Distribution Channels – Further improve its on-line banking services in order to cater to the increasing population of clients who uses the aforementioned (Lloyds TSB c, 2007).
Individualized Marketing – Direct mail campaigns for prospective consumers.

– Use of customer Intelligence Platform, based on the SAND Analytic Server allowed the company to collect data from various data suppliers and select a number of prospects for the marketing endeavor (Lloyds TSB b, 2008)

Repricing – Repricing strategies include offering up to 15.9% APR relative to the credit rating of the client and they type of credit card owned (Lloyds TSB a, 2008)

– Low rates on certain purchases depending on the amount on Advance MasterCard holders (Lloyds TSB a, 2008)

– Low rates on balance transfers depending on the amount on Platinum MasterCard holders (Lloyds TSB a, 2008)

– Rates and charges are also dependent on the type of account owned by the client (Lloyds TSB a, 2008).

Customized Service – Provide its clients “tailored services” (Lloyds TSB b 2008)

– Has “simplified its identification requirements” to its new clients (Lloyds TSB b 2008).

People – “Louder than Words” focuses on the needs of its deaf staffs (Lloyds TSB f , 2007).

– Allow staffs in their call centers to have more flexible schedules and assure that they are contented with their job and the place in which they work at is conducive to working (Lloyds TSB f , 2007).

Lloyds just like Barclays has been using a CRM software called “Smart Investigate for Payments Solution” (Citrix, 2002) that is designed to make the services provided to its clients easier to disseminate through proper managing of its client database.  In addition with this, the focus on problem resolution most especially in certain areas that requires the company to be very efficient.  It is with this respect that the CRM software adopted by Lloyds is expected to narrow down the gap between business goals and the execution of various strategies for the sake of the overall management of the financial services provided by the organization to its clients (Citrix, 2002).  Similar to the effects of the use of the CRM management of Barclays, if implemented properly and maximized in its fullest potentials, the Smart Investigate for Payments Solution would pave the way for an easy method of monitoring client behavior and preferences hence being able to offer products and services catering to client needs hence creating a more diverse portfolio and a stronger loyal customer base. This is evident on the figure below.

Figure 7: Lloyds TSB Retail Banking Results

Source: Lloyds TSB (2007, p. 15).

            It is evident from the figure above that customer deposits for Lloyds has increased by 8%, group mortgages balances by 7% and new customers by 16% all in 2007 which is a signal of the success of their CRM strategy (Lloyds TSB, 2007).

            Lloyds TSB has also been implementing ERP systems using Citrix Software which allowed the aforementioned to take into close account the management of Mutual Funds System, Tax Return Entry System, inquiry systems for customer information, and Microsoft Office Suite (Citrix, 2002).  Other functions which the Citrix software serves for the purpose of assuring efficiency of technical aspects of the system such as desktop management monitoring and troubleshooting; in the same manner, technical supports to other retail banks were also given to them. It is with this respect that the ERP system of Lloyds is expected to provide relatively faster transactions in the organization most importantly to their critical operations (Citrix, 2002).  In addition with this, since existing and impending system problems are known relatively faster, such enables the company to deal relatively faster to certain factors that might affect customer satisfaction that eventually would entice them to shift between banks (Citrix, 2002).  Similar as well on the case of Barclays, the ERP system of Lloyds is expected to give them a significant advantage in terms of integrate all of its customer data from various offices hence creating a more diverse customer database.

            Distribution channels for Lloyds have been heavily concentrated on their on-line security campaigns as evident on their focus on their 2007 annual report.  The importance of e-commerce that is further backed up by a strong CRM and ERP system has paved the way for Lloyds to create a competitive advantage most especially in international transactions (Lloyds TSB c, 2007).  The use of internet marketing is one of the most successful distributing channels of the company and was able to give the company £ 1.4 million as revenue in 2007.  However it should be noted that this figure is relatively lower in comparison with 2006 which amounts to £1.6 million (Lloyds TSB, 2007). 

Table 5: International Banking Profits of Lloyds TSB

Source: Lloyds TSB (2007, p. 20)

            Individualized marketing, repricing and customer service which is very vital in terms of achieving customer satisfaction has also been given a huge consideration of Lloyds TSB.  It could be seen from the figure below that the customer service index of Lloyds has increased by .8% in the same way as its employee engagement index.  On the other hand, it could be noted that there is a slight drop in terms of its total service quality by .11% in comparison with 2006 (Lloyds TSB, 2007).

Figure 8: Key Performance Indicators of Lloyds

in 2007 (Non-Financial Group)

Source: Lloyds TSB (2007, p. iii).

Individualized marketing for the company is done through the use of customer Intelligence Platform, based on the SAND Analytic Server which allows the company to integrate various customer data not only from its own database but also from other suppliers (Citrix, 2002).  In the same manner, repricing of its services and products are also done in terms of customer’s APR, varying purchasing rates and depending on the type of card owned; and finally providing their clients with “tailored services” not only to those who are loyal to them but also to new ones (Lloyds TSB b, 2008; Lloyds TSB a, 2008; Lloyds TSB b 2008).  As such it is with this respect that it could be seen that on 2007 alone Lloyds TSB.  It is with this respect that it could be seen that as of 2007, the existing business profit of the company amounts to £370 million in comparison with 2006 which is only £339 million.  This could be seen on the table presented below.  

Table 6: Lloyds TSB Business Profit in 2007

Source: Lloyds TSB (2007, p. 20)

            Finally, the people factor which is also vital for the success of Lloyds.  This is done by being open to the needs of a diverse and equal opportunity workplace most especially for the disabled.  In addition with this, considerations for call center agents who is the forefront in terms of providing customer service to Barclays clients all over the world are allowed to choose flexible schedules, hence not coerced to work beyond what they are not comfortable of (Lloyds TSB f, 2007).

Chapter V

Conclusion and Recommendations

5.1 Introduction

            This section of the research focuses on the conclusion of the main points of the study in relation to the research question and objectives; and the recommendations of the researcher based on the secondary data and its analysis and interpretation.

5.2 Conclusion

            The conclusion of the study is explained in accordance with the objectives of the study as presented in the first chapter. 

5.2.1 The Key Factors and Alternative Factors in Customer Retention

Relation Marketing (RM) focused on the need to strengthen relation with current customers or clients.  RM provides four major determining factors that could influence customer retention and customer loyalty: trust, commitment, communication and conflict handling.  The concept of CRM which is closely related to RM, on the other hand concerns primarily on organizing client information in order to create appropriate and thoughtful communication and action that could strengthen the bond between a particular company and its clients (Hayes, 2006).

Service quality which eventually leads to customer satisfaction is one of the outputs of a robust CRM framework.  A favorable service quality, allows banks to minimize customer complaints and eventually improve customer usage levels (Mithas, Krishnan and Fornell, 2005).  Relationship commitment is also considered as one of the outcomes of effective CRM that eventually leads to customer loyalty (Gustaffon, Johnson and Roos, 2005).  The importance of customer loyalty that a robust CRM is capable of eliciting mainly focused on the notion of not only longer customer retention but purchasing of other bank products and word of mouth promotion of the bank to his or her friends, relatives and peers.  

5.2.2 The Extent up to which CRM Processes Achieve Customer Loyalty or Mutual Benefit for both the Organisation and the Customer

CRM is very vital for banks because such allows the aforementioned to work more on customer-centered approaches in terms of their strategic plans to management (Mithas, Krishnan and Fornell 2005).   Through CRM the patterns of behavior of customers could be easily tracked; for instance, usual transactions of customers could be recorded and be converted to a customer knowledge base that will serve for the purpose of analyzing or creating company rules and policies that would directly affect the customer.  In relation with this CRM also allows the creation of a robust customer database which could allow banks to further improve their customer understanding and improve their customer service levels, hence enticing retention and a loyal customer base (European Banker, 2006).

5.2.3 The barriers in Terms of Implementing CRM Programmes

Even if the benefits of CRM have already been widely accepted in the industry, various issues in terms of its adoption are still evident.  For instance, some banks believe that retention strategies would cost the company too much and the adoption of CRM softwares is also expensive.  As such, some banks often opt to focus more on having new clients through advertisements than retaining old ones.

5.2.4 The Components of the CRM Process that is Often Used in the Banking Industry

The CRM processes that are often used in the UK banking industry are comprised of the use of CRM softwares such as Chordiant Software for Barclays and Smart Investigate for Payments Solution for Lloyds TSB.  In relation with this, both banks also use ERP systems which are Value-Based Management (VBM) strategy through the use of the ERP system provided by Systeme, Anwendungen und Produkte in der Datenverarbeitung (SAP) and Citrix Software in Lloyds TSB is also implemented.  Both companies use distribution channels such as ATM machines and the use of on-line banking.  Individualized marketing is also used wherein campaigns and literature distribution and letters are given to target clients.

Both banks also use repricing strategies most especially in terms of APR and Balanced Transfer rates in terms of Barclays while Low rates and charges relative to the account and also a lower APR for Lloyds TSB.  Customized services are also given by Barclays in terms of mortgage loans, small scale businesses loans and interest rates on ISA allowances.  On the other hand, tailored services are also given by Lloyds TSB in addition to special treatments given to new clients.  Finally the role of the company’s human resource is also taken into utmost consideration by both companies.  On the case of Barclays they always make it a point that employees act in accordance with the company’s organizational culture and the act of HR centralization through the use of their ERP systems is also taken into much account.  In relation with this, Lloyds TSB focuses instead in terms of promoting diversity in the workplace through promoting the welfare of its disabled employees and by allowing its staff most specially in its contact centers to chose their own schedules in order to somewhat reduce the stress brought about by the nature of their work.

5.3 Recommendations

            It could be seen on the case of Barclays that most of the profit earned by the company is with regard to their Commercial Bank (18%) followed by UK Retail Banking (17%).  As such it is with this respect that since Barclays has been implementing a strong CRM and ERP system, there must be more focus in terms of improving their customer relations in these two sectors.  In relation with this, since commercial banks are a major source of income for Barclays, retention in terms of large and small scale business accounts must be given utmost attention.  As such, the research suggests that there must be a specific program implemented that would somehow create a protocol in which how to deal with commercial bank clients who wanted to cancel their accounts; and what are repricing strategies and personalized relations that could be given to them.

On the other hand, Lloyds TSB must also take into close focus its total service quality index as it could be seen based on their 2007 annual report that their service quality fell down by from 4.30 in 2006 to 4.19 in 2007.  As such, it could be implied that although Lloyds TSB has been very positive in terms of their CRM and ERP processes, satisfaction of customers are still declining, hence this matter must be taken into close focus as service quality is one of the major determining factors for a loyal customer base.

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