Customer Satisfaction and the Banking Industry - Essay Example

Satisfaction and the Banking Industry By Devangini Mahapatra Chauhan satisfaction in today's world has come to occupy a place of vital importance. The phrase, "customer is king", is not just a phrase anymore. It is symbolic of the changing times where consumer courts are waiting to help citizens assert their rights. In this context, a traditional industry like banking has followed the trend and pulled up its socks. The characteristic laid back attitude of the banking industry has been long replaced by almost paperless transactions and phone support systems. This essay deals with the emerging trends in customer satisfaction and the customer support services to identify the degree to which these trends have affected the banking industry. In order to carry out qualitative research into the issue, the essay will follow an investigative mode. In this regard, the paper will be based on the case study of ICICI which is a leading bank in Asia, with a strong focus on enhancing its international base as well. It started to operate under the name ICICI in 1994 and has gone on to become the second largest bank in India. (www.icici.com) My choice for this bank came from the fact that globalization is a major trend that has put various countries on the map in terms of trends and customer satisfaction. With a bank like ICICI, it will be easier to study progress from the perspective of a developing bank in terms if it model of customer support systems. In this regard, the literature I have made use of is exhaustive. To begin with, there are texts on customer satisfaction like A Chakrabarty's paper titled Barking up the wrong tree - Factors influencing customer satisfaction in retail banking in UK. This paper has important methodologies that are imperative for the measurement of customer satisfaction. Further, the Cruickshank Report is another important work by Don Cruickshank, which was published in March 2000, for the HM Treasury. This paper is important to the basic structure in terms of its notes on customer satisfaction and rising competition in this sector. In this regard, Morris' paper on the same theme is both a criticism as well as a summation of this paper which further helped evolve the conception and strategies for customer satisfaction in the banking industry. Other important reports include those by P Carrol and F Reichheld, titled The Fallacy of Customer Retention, as well as the paper by M S Krishnan et al, titled Customer Satisfaction for Financial Services: The Role of Products, Services and Information Technology. These papers have important notes on not just acquiring customers but also retaining them - which is where customer satisfaction comes into play. This paper is based on the case study of ICICI Bank in India. Therefore, the information found on its website was used as well. In this case it is important to note that most of the texts used are journal articles are this is a very topical theme and it requires special classification which most books are not able to offer. With a variety of other papers that revolve around the theme of customer satisfaction and banking services, it is imperative to mention that there is still a lot of scope for research in terms of finding niche markets and catering to customers from these areas with a focus on need specific programs. Customer Satisfaction - Conception and Implications Customer satisfaction may be defined as that sphere within an organisation's operational area where the transmission of information and services with a focus on time and quality takes place. Customer satisfaction is an important tool with which it is easy to harness the potential of expanding one's customer base manifold. In the banking sector, this theory has special importance owing to growing competition and the fact that it is a service based industry where there is maximum human interface. The tools for measuring customer satisfaction include surveys as well as applying statistical analysis like the customer satisfaction index to which essentially measures market share and profitability. This will help provide an empirical base for any hypothesis on the basis of which models and programs may be formulated. (Chakrabarty, 2001)1 Emerging Trends According to the article titled Barking up the Wrong Tree - Factors influencing customer satisfaction in Retail Banking in UK, author Anita Chakrabarty has pointed out how the last two decades have been seeing an increase in competitiveness in the retail banking sector in UK. This has a strong connection with the various activities that have been triggered in the banking industry all over the world. ICIC is a bank that has taken this conception one step forward by applying it in the context of the loyalty business model. Thus, one will find that the banks are now in a race towards consolidation of their positions and mergers. In this regard, they have realized that the primary focus of their activities must be on the optimum satisfaction of the customers who are the one's who will actually consolidate the bank's standing and reputation. (Chakrabarty, 2001) Cruikshank Report For starters, it is imperative to study the case of ICICI and the loyalty business model in terms of global projections. In context of relelvant findings for the banking sector, Don Cruickshank's report which was published on 20th March, 2000 is an important one. This is due to the fact that it has important discussions on competition and the factors that will facilitate the process of gaining a foothold as far as competitive advantage in the banking industry is concerned. This report makes use of various elements like innovation, competition as well as efficiency, all of which have a strong context towards customer satisfaction and support, for the purpose of examination of facts. The findings of this report have a strong connection with the setting of inertnational standards. (Morris, 2000)2 The Cruickshank Report has important findings and discussions on emerging policy frameworks, apart from special economic features that banks are now offering. Apart from this, it reveals the basis for comparison on an international basis as far as fees, risk factors, money transmission and market failures are concerned. (Cruickshank, 2000)3 The Cruickshank Report of 2000 demonstrated the fact that the banking industry had hit an all time low as far as customer support and satisfaction was concerned. (Cruickshank, 2000) Thus, this report demonstrated the factors that had affected the degree of the low quality of service in the banking industry as well as the factors that could help revive the customer service segment of this industry. There was special emphasis on the latter due to the fact that the banking sector essentially revolves around its customers and the attention paid to the same. This shows that the loyalty business model is a suitable one for most banks in terms of building a healthy and sizable client base. Without its customers, the banks are nothing. In this regard, the report laid down its research and studies as well as the subsequent conclusions with a special focus on the theories and models propounded by various scholars and economists in this area. These theories were made use of in order to find the elements that will have a positive effect on the behavioral patterns of the customers and the responses of the banking officials they deal with. This was acknowledged by report and its findings. (Cruickshank, 2000) Loyalty Business Model and ICICI Having sprung from strategic management, the loyalty business model fits best into those spheres which require a substantial contribution of its customers besides being service based. (Cruickshank, 2000) The loyalty business model depends on the optimum utilisation of the resources of an organisation to ensure that these resources work towards promoting optimum satisfaction of the customers and investors by building trust and loyalty from both ends. In order to make sure that it enjoys its customers exclusively without sharing the same with other banks, ICICI has taken to this model by moving towards universal banking as its foremost alternative in terms of corporate restructuring. (www.icici.com) Also, it has taken to the service quality model, which is an element of the loyalty business model. The service quality model has been proposed by Kay Storbacka, Tore Strandvik, and Christian Gronroos in 1994, to study the outcome of the most recent experiences or brushes that a customer or potential customer has had with the organisation and its products. (Storbacka, 1994) This model depends on the assessment and evaulation of the varying degrees of satisfaction by arriving at an aggregate result base which will speak of the general climate in terms of customer support and organisation of the skills in this department. (Parasuramn et al, 1985) In this regard, ICICI has taken to this model in terms of its commitment to customers as well as the constant study and research as far as customer satisfaction is concerned. These models are suited for the banking industry in liue of the emerging trends as the banking industry, especially ICICI, needs to be studied in accordance with its emerging role as a provider of all major financial services uner one roof. Therefore, it is imperative to have a quality control theory guiding its assessment in terms of customer handling, which is a part and parcel of such widespread commercialisation. (Buchanan et al, 1990) These models also support the widespread use of technology, which is discussed below. Technology and Customer Satisfaction There has now been widespread use of technology in the arena of customer servicing and support within banks. ICICI has followed suit by transforming itself from a mere financial institution to an organization that has various products and services aimed at the economic and commercial sector. (Cruickshank, 2000) This has led to the introduction of an expanded product range to include mutual funds, stocks and shares and other such add ons in the banking industry as the prime area of study as to why these have triggered customer support trends. This has shown that the very advent of these services in most companies - i.e., the concept of providing these varied services under one roof, is proof of the fact that the banks want to facilitate the customer's journey when he or she is in search of varied investment, loaning and other options. (Carrol et al, 1992) This has further demonstrated a strong nexus between the quality of the bank through its various departments and the synchronisation of customer needs through varied coordinated means and methods like phone and online activities. While there is a strong connection between services provided and the customer, the banking industry being a primarily customer based service industry, there has been a renewed emphasis on providing these services to customer - anywhere and anytime. (Moloney, 2006) Through this focus on streamlining activities, it is now easier to track the colossal paperwork at banks and one does not even need to wait in lines. Further, with the click of the mouse, one can have all the information possible for the relevant banking service required. (Dawkins, 1990) This has a strong connection with the standardisation of banking activities in context of the tough competition. The banks have therefore taken the customers as vital capital. As an example of streamlining, let us consider a diagram of the work flow in the International Banking division of ICICI Bank in terms of its customer support system: (Source: ICICI Bank - Online NRI Services)4 ICICI has been one of the biggest banks in India with branches and tie ups in UK, USA, Australia and Canada. It has adopted thus methodology to deal with its customers with promise of a call attendance within three rings. This shows their commitment towards customer satisfaction. The figure demonstrates quality control models in each of the steps followed in the customer support technology used within the bank. In this regard, quality control can be further evolved by using measurement tools like surveys and the customer satisfaction index. These can be embedded into the loyalty model to find the market share and profitability patterns that the bank has acquired in the long term. These findings may further be applied to operational areas like competition, money transmission processes as well as market failures where equity is concerned. This will help provide valuable insight into the gaps in the various departs of the bank which in turn will help develop a fool proof system of customer satisfaction where every issue will be departmentalized further and dealt with accordingly in a more centralized and unified fashion owing to the fact that similar tools will be applied to the analysis of all areas. In this regard, JSTOR has presented an article by M.S Krishnan, Venkatram Ramaswamy, Paul Damien and Mary C Meyer, titled Customer Satisfaction for Financial Services: The Role of Products, Services and Information Technology. This article talks of how customer satisfaction for financial services is achieved. This article operates on the mechanism of a full Bayesian analysis that has been used for data collection and analysis from customers of a leading financial institution. (Krishnan et al, 1999) Through this approach, the authors have shown that competition is the main factor driving a bank to enter the arena of regulated services which will provide complete customer satisfaction. On this basis, they have discussed how the advent of mutual fund and other brokerage companies have managed to shift the focus to this arena where customer is king. The approach used by the authors in this context, demonstrates the scope to fill in the missing pieces where information regarding customer support practices is concerned as well carrying out a quantitative assessment of the factors that drive customer satisfaction in this regard. (Moloney, 2006) Elements of Service Quality In lieu of the above discussion regarding the role of technology in the service quality model, it is imperative to take note of the various elements that is symbolized by this model. (Cruickshank, 2000) The advent of technology as seen in the above chapter has sparked an interest among various parties thus giving rise to a brand of competitiveness within the banking industry, which has so far been conservative and an industry that has opposed any form of deregulation. (Reichheld, 1996) But now, it has taken to these measures big time and the results are a more keen focus on customer satisfaction. In this regard, there are various elements of customer satisfaction in this industry, which have been discussed in the following chapters. Psychological Factors The MORI report by First Direct (1994) has shown empirical investigation which reveals that more and more people are actually ready to take action against unsatisfactory services in banks. This has a strong connection with the psychological bearing that money has on a person's motives when dealing with officials in the banking industry. This has prompted banks the world over to sit up and take notice and further, to do something substantial about it. Therefore, banks like Barclays, Halifax, and HSBC among others have devised standards for the measurement of these services and the satisfaction rendered by the same. (McLean, 1994)5 Potential Avenues of Business It has also been shown by the MORI report that the banks have almost lost 25% of their potential customers due to unsatisfactory service when it comes to queries. In this regard, the banks need to make sure that their basic aims are long term assistance to customers for long term associations, as well as the creation of ample scope through existing customers to convert potential customers into real ones. This shows that a bad experience will always far outweigh a good one where the cost of acquiring a new customer and retaining an existing one is concerned. (McLean, 1994) Therefore, ICICI needs to use the loyalty angle by first giving the customers something that will bring them back to the bank again and again. Customer satisfaction through an effective support system is the best place to start as the queries come mostly via telephone or email which decides whether or not the caller becomes a customer. This needs to be followed up by various practices and calls. (Moloney, 2006) Quality Assessment Tools The quality of service depends on the study of behavioral patterns which will help determine what the customer really wants. (Parasuraman et al, 1985) According to Chakrabarty, service quality has a special place in the banking industry owing to the fact that this industry offers the maximum scope for personal interface. This dictates the kind of clientele and following that a bank will enjoy for all times to come. Further, the quality of service depends largely on the knowledge management and supply chain management system analysis according to which the resources, i.e., the customer support executives, must be mobilized in the most cost effective way depending on their emotional and intelligence quotient. (Chakrabarty, 2000) Conclusion To cut a long story short, we can conclude by saying that superior services in any industry today are a must. But this is of special significance in an industry like banking which is a person oriented. The image of a bank is always connected with its ability to give satisfaction to its customers. (Schlesinger et al, 1994) The banking industry needs to follow the oath of sustainable development through a special focus on the streamlining of various activities and peripherals through which a customer has to pass in order to reach ultimate satisfaction. This must be followed up with relevant surveys and other measures to learn what the recommendations for future improvements are. (Strobacka et al, 1994) Thus, it has been found that ICICI is on the right track in terms of globalization of its services and the provision of widespread product base which is handled effectively by its various theoretical practices in terms of customer satisfaction. In this case, ICICI has been able to effectively manage its customers for the generation of accentuated profits. Also, in this regard, there is a wider scope to carry out research to find a model that help harness the technological aspects of the models and combine it with the behavioral patterns of the customers so as to evolve a generic model that will carter specifically to the banking industry and various other financial institutions. (Cruickshank, 2000) References: 1. Chakrabarty, A; 2001. 'Barking up the Wrong Tree - Factors influencing customer satisfaction in Retail Banking in UK.' International Journal of Applied Marketing. Vol 1. 2. Morris, J; 2000. 'The Criuckshank Report: Competition in the Banking Industry Under Scrutiny.' Practical Law Company. 3. ICICI Bank - Online NRI Services. Available: www.icicibank.com (Accessed on: 11th of March, 2007) 4. McLean, J. MORI Report. Available: www.firstdirect.com (Accessed on: 9th of March, 2007) 5. Buchanan, R. and Gilles, C.; 1990. 'Value managed relationship: The key to customer retention and profitability.' European Management Journal. Vol 8, no 4. 6. Carrol, P. and Reichheld, F; 1992. 'The fallacy of customer retention.' Journal of Retail Banking. Vol 13, no 4. 7. Reichheld, F; 1996. The Loyalty Effect. Harvard Business School Press, Boston. 8. Schlesinger, L. and Heskett, J; 1991. 'Breaking the cycle of failure in service.' Sloan Management Review. Pp. 17-28. Spring, 1991 9. Storbacka, K. Strandvik, T. and Gronroos, C; 1994. 'Managing customer relationships for profit.' International Journal of Service Industry Management. Vol 5, no 5, 1994, pp 21-28. 10. Moloney, Chris X.; 2006. 'Winning Your Customer's Loyalty: The Best Tools, Techniques and Practices.' AMA Workshop Event(s). San Diego. 11. Dawkins, P. and Reichheld, F.; 1990. 'Customer retention as a competitive weapon.' Directors and Boards. Vol 14, no 4. 12. Parasuraman, A; Zeithaml, V A; Berry, L L (1985) 'A Conceptual Model of Service Quality and its Implications for the Future.' Journal of Marketing. Vol 49, No. 4. 13. Krishnan, M S; Ramaswamy, V; Damien, P; and Meyer, M C; Sep 1999. 'Customer Satisfaction for Financial Services: The Role of Products, Services and Information Technology.' Management Science. Vol 45, No. 9. Pp 1194 - 1209. 14. Cruickshank, D (March, 2000). 'Competition in UK Banking - A Report to the Chancellor of the Exchequer.' Review in Banking Services in UK - HM Treasury. Read More