Introduction to CRM and its benefits to an organization
Customer relationship management (CRM) is a business strategy that is designed to facilitate the company’s interactions with its clientele and potential customers. The strategy is intended to increase profitability by maximizing on customer satisfaction, loyalty, and advocacy.
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CRM has outlived the perception that people had of it before, that it was simply a software, and has evolved into a customer centered philosophy that is used in the whole organization. A successful CRM is dependent on a people, a company’s business process, and appropriate CRM technology.
For a CRM strategy to be successful, everybody within the company must support it (Burrows, 2001, para. 3). Bolstering of a company’s CRM calls for reengineering of business processes where questions related to how the process can better serve the customer are asked.
Companies must come up with the right technology that can help drive the improved process. Nevertheless, employees must be provided with the best data. If any of the listed foundations is not properly anchored into a company’s strategy, chances are that the entire CRM will crumble.
CRM has myriad benefits including its capability in helping concerned business departments to learn more about its customers’ needs and behaviors. With this information, a company can develop a very strong relationship with its customers. This enhances the success of the business.
CRM uses people, processes, and technology to get to know people’s behavior and value. This insight helps in enhancing service delivery, call center efficiency, and improved customer profiling. This helps in increasing the profitability of a business. Other benefits of CRM include helping in developing better communication channels within a company.
With CRM, data containing customer information and order histories can be collected and this information can help in enhancing customer satisfaction hence profitability. The data can also be used in creating the profile of each and every customer (Burrows, 2001, para.3).
The profile can touch on the preferences of customers. With a CRM strategy, a company can easily access customer history, such as the purchases they make, on a regular basis. New selling opportunities can also be identified through the use of CRM.
Brief background of Royal Bank of Canada and Link to CRM
This report will illuminate the Royal Bank of Canada’s (RBC) application of a CRM strategy. Royal Bank of Canada is the largest bank in Canada with assets worth CAN$294 billion. The bank has a massive 1300 retail branches with more than 4800 ATMs.
Its personal and commercial banking customers are more than 11 million. Despite the fact that it operates point of sales terminals, it also undertakes telephone and internet banking.
Its services include credit bank service provision, personal and commercial banking, wealth management services, insurance, corporate and investment banking, and global transaction processing (Tower group, 2001, para. 4).
RBC capitalizes on leveraging of economic value of customer information. The bank uses customer data to enhance its business performance and serve their clients better. The bank has since realized the importance of data warehousing and has implemented data warehousing solution.
The data warehouse captures client transaction information and this enables the bank to carry out client segmentation. RBC has since come up with myriad ways to assess and manage customer relationships albeit at individual client level (RBC, 2004,).
RBC’s CRM emphasizes on the need for deeper understanding of customers. The bank anticipates the needs of its customers and discourages mass marketing to huge customer segments. The above-mentioned issues form the backbone of RBC’s objectives (Burrows, 2001, para. 2).
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The vision of the bank is to be their clients’ first choice bank. Its goals are to be a leading North American Bank known for provision of integrated financial services in Canada, personal and business financial services in the United States, and a renowned provider of selected global financial services.
The bank’s strategic priorities include superior client experience, strong fundamentals, North American expansion, and cross enterprise leverage while its values include provision of excellent services to its clients, working together for attainment of success, personal responsibility for high performance, diversity for growth and innovation, and trust through integrity in everything they undertake to do (Burrows, 2001, para.4).
Why RBC implemented CRM
RBC undertook to implement CRM to improve its customers’ experiences and their involvement with the bank. This was made possible by development of new metrics and analytical techniques that enhanced one to one service delivery.
Because the company had initiated collection of customer data way back in late 70’s, the initiation of one to one to one marketing in 1992 did not prove problematic.
The bank formulated a CRM strategy that had several drivers. The initiated CRM was responsive and customer focused. The bank appreciates that for it to carry out differentiation, it has to realize its CRM and build a unique tie with individual clients (Burrows, 2001, para.4).
Customer Service and Sales service
Analysis of RBCs customer service aspect of its CRM
RBCs customers were first segmented in terms of profitability in 1992. This was intended to align sales and service staff and on a wider scale improve customer retention. In the process of analyzing the profitability of each client, clients were assigned average product values, and customer bases segmented into three.
These segments were named A, B, and C. Sales were aligned with customer variables. Segmentation was largely used by marketing, credit, and branch-based staff. New metrics were used to monitor the number of high value segment customers the bank acquired and the low value segments.
Client profitability had initially been used by marketing, product management, finance, costing, risk, treasury, service delivery, and those who managed the network. It was however noted that the system was not the best for relationship pricing. Besides, the system did not provide a measure of potential value.
Despite the fact that the bank’s customers had a high positive view of the bank regarding their capability to multiple access channels, it was clear from a study conducted in 1997 that its CRM was not delivering on the customers needs.
Consequently, a new CRM had to be initiated that treated customers as individuals, their needs anticipated, and the value of their business reflected. In the first system, profitability measures integrated aspects of aggregation of customer transactions into general ledger, followed by apportioning of profits to various customer segments, products, and organizations.
Sample profitability prototype using spread sheets had to be made to come up with a clear picture of what was needed. Other new measures included adoption of integrated tests and a learning culture that was largely driven by RBC’s data warehouse.
This ensured issues touching on marketing, account decisions, credit management, customer retention, and debt recovery were robust as to satisfy the demands of the customer. This proved very useful for future planning. Much of attention was paid on marketing and to the six life stage segments. This was undertaken through direct mailing and telemarketing.
Other than the above mentioned methods through which marketing to six life stage segments was done, testing and learning were also used. Direct marketing budget was first established. This was focused on the customers as opposed to being assigned to individual product lines. The budget was managed by holding regular meetings of representatives of different channels and product groups.
These meetings were supposed to decide common goals and effective ways of deploying the budget. The management process had to be changed to achieve this. The results that were achieved from direct marketing campaigns were run through the system to come up with the goals and objectives of the coming month.
Having moved closer to initiating client value modeling, RBC’s major preoccupation was now how to evolve further. This called for initiation of behavioral based solutions that focused on customers and accounts.
However, the process had to be very flexible as to allow profitability to be aggregated to user defined levels like product and product group, customer segment, geography, and channel (Teradata, 2004, para. 3).
How RBC collects data from its customers
RBC began collecting data from its customers as early as 1978. This has enabled them to come up with a data warehouse. RBC implemented a software application, Value Analyzer, to enhance its customer value management (CVM). With this software, RBC assessed their client value on monthly basis and this enabled them to calculate the annual total value.
The software uses transactional data to produce a value metric for each account. This characteristic allows the measure to be used both at individual customer level and at every level of enterprise. One can easily aggregate to product or channel level. However, consistency has to be maintained across the bank as individual identifiers are often attached to each account or set of events used in generating base value metric.
Other than the customer based profitability, the software has product related profitability. The software has also boosted RBC’s risk management efforts. RBC has since begun using a three dimensional profit metric that looks at client profitability at both transaction and account level.
The three dimensional profit metric also illuminates its customer dynamics. A three dimensional metric delivers financial statements on assets, liabilities, and equity; income and expenditure; contingencies; and inter-company transfers at organizational levels.
Value Analyzer did help in examination of individual transactional and event records. With the value analyzer, improved activity based cost drivers have been developed and assigned to individuals and events. Using the software, data could be obtained by examining individual transactions and event records (Burrows, 2001, para. 2).
How RBC uses customer development techniques like cross selling and upselling to create value in relationship with customers
Cross selling and up selling can build customer profitability but can at the same time impact negatively on customer satisfaction. RBC uses full suite Ernex packaged LDH that handles data management, web application, and analytical reporting services.
Through upselling and cross selling, its call center staff, and channels, partners are capable of logging into their web application portal where they can access vital information on cardholders. Orders can also be entered through the web application integrated with RBC systems.
RBC’s technology options used to support CRM processes
RBC had the option of using CRM technologies geared towards either driving strategy or enable CRM execution. Instead, the bank chose to implement both the CRM technologies. Initial RBC’s efforts were geared towards direct mail, call centers, and branches.
Because of the rise in the number of customers, the bank introduced actionable uniform customer information at touch points. Technologies that drive CRM at RBC involve gathering and mining of customer data. With this data, strategies can be executed at customer interface. Under customer interaction, one can undertake direct marketing at a call center at the branch level.
The technology used at customer interaction level allows remote banking, and use of ATM. Technology that enhances customer interaction at RBC allows for segment mailing and proactive sales and services.
At customer knowledge level, the CRM technology enhances campaign management, customer profile repository, customer information system, product servicing, CRM customer decisioning, third party data mining, decision support, and profitability measurement.
The RBC uses both parametric and non parametric modeling techniques in analyzing data. Some of the parametric models used include genetic algorithms, neural networks, factor analysis, cluster analysis, statistical regression, and logistic regression in data analysis.
Some of the software applications used by RBC include Value Analyzer which is a foundation application. One of the latest technological advancements which has been used by the bank is the three-dimensional profit metric that helps in delivering financial statements (Tower Group, 2001, para 5).
RBCs CRM and the people
The Royal Bank of Canada is fully committed to training its workforce and staff. The bank has undertaken to do this because it has realized that the onus of successful implementation of its CRM lies on a trained workforce and that CRM implementation of CRM calls for constant reinforcement.
The bank has since realized that there is more in embracing a CRM business strategy than just relying on or coming up with a mission statement.
Embracing a CRM strategy calls upon the employees to acknowledge it, believe it, and develop a deeper understanding of how the strategy will transform the way they do their work. Employees are therefore constantly trained to deliver a customer focused business strategy.
Impact of CRM on RBC customer service
With the CRM technologies that RBC adopted it managed to satisfy its customer’s requirements that are varied. The bank has managed to do this by recognizing that a balance has to be struck between people, technology and business processes. The technology has allowed the bank to create meaningful and appropriate sales and service strategy.
The well-trained personnel that the bank boasts of plus its CRM centered business process have enabled it to have a very large client base not only in Canada but also in the United States. These, together with the banks willingness to allocate resources accordingly, have separated the bank from the rest of the pack.
With the CRM, the bank’s interaction with customers has been enhanced hence consistency across all delivery channels. With data warehousing enabled by CRM technologies adopted, the bank has collected data that it has used to improve its service delivery.
Some other benefits of CRM include being a premier provider of selected global services, provider of personal and business financial services, and a leading provider of integrated financial services in Canada.
Some of the challenges that RBC has faced in implementing its CRM has been the large amount of data that it has (Cappel and Huang, 2007, p.118; Desbarats, 1995, p.5). This has denied users the ability of using the system to its full potential (Høegh, 2008, p.302; Høegh and Janne, 2008, p.308).
The data warehouse has large complex data that takes many hours to sort out (Pennington, 2007, p.63). The interface is also difficult to navigate and understand (Ka-Ping, 2002). This has limited users to areas of system that they are conversant with. Fragmented implementation can have far-reaching effects (Roy, Dewit, and Aubert, 2001, pp.389).
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