The Customer Value Proposition Essay
To narrow down the definition of CRM and relate it to the objectives of this study, succeeding descriptions of this concept and practice will focus on its relevance to financial institutions. The importance of CRM in financial institutions is palpable in the industry’s value chain. Figure 1 below shows the general model of value chains for financial institutions. From Figure 1, the value of the customer to financial institutions is palpable. The needs, preferences, and conditions of customers are taken into consideration in every level of decision-making that yields highly significant results for organizations.
Furthermore, establishing desirable relationships between the organization and the customers is a priority, which raises the importance of adapting practices within the context of CRM. “CRM is a business strategy aiming to understand and to anticipate the needs of existing customers and to seek new ones who might potentially be interested in products or services offered by the bank” (Rajola 2003: 25). Furthermore, the thrust of CRM, within an organization’s value chain, is to accomplish Customer Profitability.
Within this context, financial institutions will ensure that majority, if not all of the organizations’ profits are generated from their relationships with customers. Thus, the products and services of these institutions
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For instance, “Increased competition and shrinking margins have forced them to deploy CRM strategies and technologies in order to respond to the needs of shareholders and clients. More recently, investment banks have begun to realize the intrinsic value of CRM. The principles of CRM hold true for this sector. Just because investment banking is a business-to-business application does not take away the fact that recognition of the client is still key for CRM success” (Foss & Stone 2002: 210). More specifically, the problems or concerns faced by financial institutions at present time are directly related to the global economic depression.
Within this context, CRM is seen by financial institutions as a strategy in turning around the industry by maintaining customer loyalty and attracting new customers to stabilize the present condition of these institutions. “Therefore, CRM may be regarded as a set of technological and organizational mechanisms intended to buffer market instability through better knowledge of environmental variables, particularly market variables, in order to anticipate customers’ needs, rendering production activities more stable and programmable” (Rajola 2003: 25).
By and large, CRM in financial institutions is not merely a standard practice but a necessity in order to maintain continuous operations and attempt to increase organizational productivity. In addition, CRM is a function that is integrated within all areas and levels within the organization in order to address issues, problems, and situations that hinder organizational growth. The practice of CRM in financial institutions is generally expected to yield the following results:
1. Cost reductions and efficiencies in services delivered; 2. Better control and transparency resulting in accountability for delivering results; 3. Greater convenience in having to deal with fewer banks; 4. Banks knowing the needs of clients intimately, so that the latter are offered the right products, at the right time and the right price, with appropriate associated service. Source: Foss & Stone 2002: 214