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Research on the Application of Customer Relationship Management in Chinese Banking


Mar.2005,Volume 4, No.3 (Serial No.21)

China-USA Business Review, ISSN 1537-1514, USA

Research on the Application of Customer Relationship Management in Chinese Banking
Guangshi Wang* Ning Ma** Beijing Jiaotong University Abstract: Customer Relationship Management (CRM) can help banks in China facing the challenge of intensive market competition to enhance their core competence. With the application of CRM, Chinese banking will provide high quality financial services to customers, thus strengthen market status of banks in China. Key words: Customer Relationship Management (CRM) Chinese banking core competence

1. Introduction
With the global economy’ development and China’ entry into WTO, banks in China are facing increasingly s s fierce competition. To meet the challenge of intensive market competition and provide financial services of high quality and high efficiency to customers, it is necessary for banks in China to apply Customer Relationship Management (CRM) to keep to the strategy of sustainable development and strengthen their core-competence in the market. In preliminary financial market, commercial banks in China began to pay attention to sales promotion, customer service, etc. Customers are considered as the most importance resource. It is the main concern to commercial banks in China to establish, maintain and cultivate fine relationship with customers. At present, banks in China are endeavoring to establish a long-term and stable relationship with customers in a scientific management mode, thus deeply excavate benefits from customer resources.

2. CRM Is Needed in Chinese Banking
Financial industry is the market with the most dense and unsymmetrical information. It is said that ones who win customers will win the market. However, as the increasingly fierce competition, losing customers is becoming familiar. Hence, it is necessary for banks in China to solve three basic problems as follows: (1) How to get customers; (2) How to retain the customers; (3) How to maximize customer values. To implement CRM is an effective way to solve the problems above. In the connection with customers, banks in China collect the customer information as much as possible. However, the most important task is to distinguish the difference among customers and respond to their demands quickly in changing market. Authority statistics show that:
*

Guangshi Wang, male, Ph.D. candidate of School of Economics and Management, Beijing Jiaotong University; Address: 5th Floor, Building of Shenzhen Development Bank, No.5047, Shennandong Road, Shenzhen, Postcode: 518001; Tel: 13312956289; E-mail: wgs18@vip.sina.com. ** Ning Ma, male, Ph.D. candidate of School of Economics and Management, Beijing Jiaotong University; Address: Mailbox No.503, Beijing Jiaotong University, Beijing, China, Postcode: 100044; Tel: 010-51681842; E-mail: maningmailbox@yahoo.com.cn. 65

Research on the Application of Customer Relationship Management in Chinese Banking

(1) To increase rate of 5% in retaining old customers would raise revenues from 25% to 75%; (2) Costs of getting new customers are at least 5 times those of retaining old customers; (3) 20% customers create more than 80% revenues and 90% profits; (4) 5% to 10% common customers could rise to key accounts once they get the total satisfaction; (5) 2% to 3% common customers rising to key accounts would generate 10% revolving funds and even 50-100% profits increase. Recently, some authorized financial consultation institutions encounter an interesting phenomenon: Half of customers with only current deposit might leave within one year; for those with both current and fixed deposit, one third might be lost; whereas, for those with three kinds of financial service products or above, only 10% might leave. It is obvious that CRM, which will not only increase sales in short time but also retain customers in a long run, is needed in Chinese banking.

3. The Application of CRM in Chinese Banking
The application of CRM will improve the quality of financial service in Chinese banking greatly. CRM will help banks in China to grasp customer demands deeply, thus provide exact financial service products to customers. For instance, the key point to CRM is to collect dynamic information of customers through different channels, such as communicating with customers directly, sending questionnaire to customers, phoning customers, etc. Usually, the functions of CRM are as follows: (1) Introducing advanced strategy and philosophy that focus on customer; (2) Optimizing the framework of bank organizations; (3) Forming a high-efficient administration system and communication system; (4) Improving banks’ abilities on developing and marketing new financial products; (5) Increasing staff work performance. CRM can be divided into four parts: Decision Support System, Intelligence Business Operation, Customer Relationship Marketing and Risk Control and Performance Appraisal. In the current competition market, banks in China are aiming at two types of customers: One type of customers expect to handle business in one bank, and at the same time they expect to search for better service providers; the other type of customers are quite independent, who try to find Category Killer and know how to choose the best investment packages through products combination. In the application of CRM, banks in China will discard the method that classifies customers simply by savings and distinguishes key customers through comprehensive evaluation or schema analysis, and they will be able to identify key customers from common ones through the customer performance analysis upon profit comparisons. In customer evaluation, two points ought to be taken into consideration: potential developing customer and customer stabilization. Future business cannot increase unless customers with potential development are in the majority. For those who have been regarded as VIP customers, banks in China need regularly check their status in case of customers’ losing. Knowing customer quality is a strategic sense. It not only involves enterprise profit but also concerns strategic partners and sales channel’ establishment. Currently, banks in China use account-exchanging mode to s excavate demands of customers. In such mode, decision-makers are unable to examine all exchanges in one time.

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Research on the Application of Customer Relationship Management in Chinese Banking

However, CRM, which realizes the conversion from account-exchange to customer-exchange, may solve this problem. Just by name customer, decision-makers could see every detail on it and its exchanges. Additionally, banks in China need analyze behaviors of companies or individuals via their exchanging records, thus research the revolving rate of funds, investment bias, risk endurable limit etc. Furthermore, banks in China need further know about the development trend and demands on working capital. Upon the collection of customer information, CRM will be helpful to banks in China to get along well with their customers greatly. For instance, there are always two or above two decision-makers in an undergoing key project, which calls for banks to get total understanding on each aspect of the project. It is necessary to know as much as possible about the family background and hobbies of each key contact, and even such information as whether playing golf or climbing is the most effective method to approach customers. In order to consolidate relationship with customers, banks should introduce appropriate ways adapted to different grade of customers, VIP customers and common customers. To VIP customers, including enterprises and individuals, bank leaders need pay a regular visit for keeping continuous relationships with them. It will play an important role to have supervisors know clearly about key customers and follow-up projects. To common customers, regular visit by phone is an economical way to keep connections. As for the least important customers, automatic system such as Internet or ATM is encouraged, which is advantageous on cost reduction upon customer with low profits. If lending rate falls, CRM system could select customers with large loan under the given terms. Bank sales may take advantage on this integrated customer service center to contact with and deliver special strategic policy to customers through Internet, E-mail, telephone, fax, and SMS etc. For instance, let the customers be aware that lending rate would be counted based on the current relatively low ratio, thus suggest the customers to pay off one installment in one time. Otherwise, if saving rate falls, CRM system would automatically select those customers with spare savings, which can meet some investment criteria. Bank sales would remind them of investing some profitable insurances or funds, by which the customer may get the sense of concern; hence the bank’ benefits s may be increased with the increasing customer satisfaction.

4. Conclusion
In a word, CRM system will help commercial banks in China integrate financial resources. A completing CRM system could be a key connector in resource distribution. CRM may extend connecting channels with customers and establish dynamic bank services by combining telephone bank, self-service facilities, local offices, and web bank services etc. On the other hand, Management Information System (MIS) based on the spirit of CRM, together with Decision Support System (DSS) and Enterprise Resource Planning (ERP), will penetrate into departments of administration, products, finance and human resource etc., and reach information share and automatic operation and staff performance improvement, achieving high efficiency on bank businesses. CRM system is helpful to optimize market value chain. It will enable commercial banks in China to timely catch up with market demands, and attract new customers on the basis of retaining old ones by continuously improving customers’ satisfaction and loyalty. CRM system, timely offering the most updated products, will help expand business scope and increase bank marketing share and benefits. Otherwise, CRM system brings staff on services, marketing and administration into a customer-oriented team cooperating with the core of market, thus

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Research on the Application of Customer Relationship Management in Chinese Banking

offers a communication platform for business departments, which is effective on running costs reduction and risks evasion.
References: 1. Alexandris N. etc.. Secure Linking of Customers, Merchants and Banks in Electronic Commerce. Future Generation Computer Systems, 2000, Vol.16: 393-401 2. Mihelis G. etc.. Customer Satisfaction Measurement in the Private Bank Sector, European Journal of Operational Research, 2001, Vol.130: 347-360 3. Narayanan R. P., Rangan N. K., Sundaram S.. Relaxing Glass-Steagall Provisions: Wealth and Risk Effects on Foreign Banks and Their Domestic Corporate Customers, Journal of Multinational Financial Management, 2003, Vol.13: 465-482 4. Hsieh N. C.. An Integrated Data Mining and Behavioral Scoring Model for Analyzing Bank Customers, Expert Systems with Application, 2004, Vol.27: 623-633

(Edited by Royaig, Ann and Joy Zhou)

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