Relationship Marketing Orientation of HSBC Bank - Case Study Example

Relationship Marketing Orientation of HSBC Bank Table of Content Task A 4 About the company 4 Products offered 4 Relationship Marketing Management 5 Relationship Marketing Objective in banking sector 6 Factors affecting business model for banking sector 6 Model Design for relationship management at HSBC bank 7 Relationship Management Process 8 Current activities by HSBC bank to maintain relationship 9 Ways to improve relation with customer 12 Cost and Benefit 14 Task B 16 Stakeholder theory 16 Brand Equity Theory 17 Customer Equity 17 Commitment Trust Theory 18 References 20 Task One About the company HSBC Bank is a major bank. It operates worldwide. It has more assets than liabilities. It has its origin in UK. They have a very high loan deposit ratio. This makes is preferred among customers. The ratio is as high as 90%. It has a good presence in Asia. This bank is also listed on many exchanges. Some are London, New York City, Hong Kong and many more. It provides banking services. People use their service because of quality. They maintain good relation. They work on the policy of satisfaction. They provide varied services. As this is a service sector so it is important. The success here is defined by the ability to retain customers. Building reputation is offered. It has been because of service that it is highly ranked. Products Offered HSBC provides varied services. It can be split in the following Personal Finance Services: It provides services to millions. Here they provide banking services. “The range is current account, savings account, mortgage loans, car financing, insurance, credit cards, loans, pensions and investments”. Thus it covers all areas. In personal finance services they have lots to offer. This makes them preferred by people. Commercial Banking: They provide services to all type of groups. This has made them have over 2.5 million customers. In this field they provide service to “sole proprietorship, partnership, clubs and associations, incorporated business and publicly quoted companies”. This covers all business. It includes the small, medium and middle size. Thus catering to such a huge lot benefits. This has been due to quality. Global Banking and Market: They also provide service in this field. They deal in foreign currency. They have network nearly everywhere. This makes easy transfer of funds. People find it easy as they get many things under the same umbrella. Private Banking: In this they provide service to high worth individual. They have been successful in it. This is due to their presence. They have 93 locations in 42 countries where they provide this. People take services of them. They provide investment opportunities. They also guide in the way funds to be used. The variety offered by HSBC bank has created a good name. People want to be associated with it. Even employees are content. They feel satisfied. This makes them perform their duties well. Relationship Marketing Management Many definitions have been provided. Some deal with technology and some relationship. The aim is the same. It is to provide better service. This will help to maintain customers. Relationship marketing from marketing background is defined as “a combination of business process and technology that seeks to understand a company’s customers from the perspective of who they are, what they do, and what they are like”. (Couldwell, 1998) This looks into technology. This helps to gain customer. From technology aspect it is defined as “the market place of the future is undergoing a technology-driven metamorphosis”. (Peppers & Rogers, 1995) To be effective both work together. IT and marketing department work in tandem in banks. This helps them to achieve success. Here the main issues are culture, communication, and cross functional working. Relationship Marketing Objective in Banking Sector The objective is to retain customer. The aim is to gain more customers. This can be done by providing good service. The idea is that “it helps businesses use technology and human resources gain insight into the behaviour of customers and the value of those customers”. (Ibrahim & Bora, 2003) This will help to “provide better customer service, make call centres more efficient, cross sell products more effectively, help sales staff close deals faster, simplify marketing and sales processes, discover new customers, and increase customer revenues”. (Ibrahim & Bora, 2003) This is something HSBC bank has done. It has worked on it. This has resulted in developing a system which is strong. Even the culture prevalent is good. The atmosphere is conducive. Factors affecting business model for banking industry There are a lot of factors which helps to decide the way banks perform. Management looks into a number of factors. This helps them come with relationship strategies. It helps them to decide the course of action. Some of the factors which helped HSBC determine the relationship strategies are Current Value: “This helps the bank to determine how valuable the customer is for the organization”. (Redding & Hubbell, 2003) It helps them to make retention strategy on this basis. Share of customer: It helps to gauge the intent. HSBC bank identifies “the customer has how much financial service with the bank as in relation to the turnover, the minimum balance and so on”. (Redding & Hubbell, 2003) This help to decide the way they will tackle them. Future Value: Here they determine how much the customer will add to the future. This helps to decide the money invested for them. Best Next Product: This is the most important. It helps to identify “the alternatives customer have and the reason for switching as the switching cost for banks is high and customers have lot of choices as products are homogenous”. (Redding & Hubbell, 2003) This requires special attention. Attrition rate: It helps to find the number of customer leaving. Strategies need to be developed to combat it. On the basis of this the model has been developed. This helps to use relationship strategies to garner fruit for the future. Model Design for Relationship Management at HSBC Bank HSBC bank has been able to grow due to technology. This made them develop strategies. This has helped to develop “a strategic decision to re-engineer their core business process in order to enhance the bank’s performance by developing strategic lines”. (Ibrahim & Bora, 2003) This model proved beneficial. It allowed meeting the customer demands. With various products all lined using this strategy helped. It has also allowed room for improvement in other departments. This has helped to “reduce the burden in the branches and centralized as much as possible in order to leave a larger room to marketing and sales”. (Ibrahim & Bora, 2003) This has allowed more integration. Due to this relationship improved. Customer problems were solved. This model effectively. It allowed HSBC to integrate all functions. They were able to use strategies well. This model allowed and gave space for other development. It has resulted in more growth. Relationship Management Process HSBC bank has ensured a process to develop. “They have a process to improve their relation. This is because the system has been effective”. The process to improve the process is shown in the diagram below (Ibrahim & Bora, 2003) Figure 1 Process of Relationship Marketing Here we see that the process is continuous. The plans implemented are developed. The plan contains all important information which has been provided above. It is then implemented. The results are evaluated. Then according to importance steps are taken. This has helped to build good rapport. Customer retention has risen. More customers want to be associated with them. It is making HSBC grow. After this has been implemented the process continues. The results presented above needs to be worked upon. HSBC then divides the result on the following Demographic Bank products and services owner Product usage Profits, risk, assets and liabilities Relationship This helps to build relationship depending upon the importance. It then looks as the follows Figure 2 Marketing Campaign at HSBC This helps to develop the campaign. It helps to build relationship. Maintaining this relationship and material required is evaluated on this basis. It thus helps to build the steps. HSBC on this basis has done good business. Their customer relation has grown. Current Activities by HSBC bank to maintain relationship HSBC has taken various activities. This has helped it to grow. It has made customers loyal. They are satisfied. It has resulted in building good rapport. Some of the activities which has helped to improve are Customer Interaction Centre: HSBC has developed this system. “It has helped customer problems to be solved easily and at the same time provide banks with the different problems they face so that steps can be taken to tackle them in the future”. (Martin, 2009) It has made banks come with ready products. This has helped to meet all the needs. Even banks due to this have been able to come with a variety. It has ensured more development. Privacy & Trust Issues: HSBC has ensured that information is safe. Every data collected of customers are preserved. They have ensured that “companies articulate both their intention and the value to the customer from permission-based information, and then privacy and trust issues are no longer barriers to customer insight, now or in the future”. (Redding & Hubbell, 2003) It has resulted in transfer of correct information. Customer confidence has grown as a result. They know that they are in safe hands. This has build relation. Integrated Delivery System: HSBC has integrated technology. This is helping for example due to this “customers get consistent balances regardless of the customer's location because of the consistent architecture”. (Jim, 2009) This is because everything uses the same process. This has made banking pleasure. Customers know that they are given preference. This results in building relation. Better service and sales predictability: Banks have been able to predict the demand. This has resulted in better matching. It has resulted in “marketing and product line managers benefiting greatly from a relatively plentiful source of analytics systems in the market”. (Jim, 2009) “Bankers are getting better at knowing how to calculate customer profitability, predict propensity to buy, and even recognize attrition behaviours thanks to the segmentation and focus of solution providers in the analytics markets”. (Jim, 2009) This has ensured that the demand pattern is understood easily. Predictability has become better. This has ensured better services and relation with the customer. Focus on organic growth: This has ensured to have good relation. Banks used this to work on the fundamentals. This has resulted in “building stronger customer loyalty, improved customer knowledge to develop products and deliver services targeted at specific market segments resulting in more directed marketing, sales and service tactics”. (Russ, 2006) This has ensured customer retention. As a result HSBC bank has been able to sustain. Insights into customer preference: Today it has become important that individuality is given importance. Customers need to be identified. This will ensure service according to the needs. “A one-size-fits-all customer strategy no longer works and banks need to serve the rapidly diverging needs of all markets: aging baby-boomers, time-stressed mid-lifers and younger technophiles (i.e., Gen-X and Gen-Y)”. (Russ, 2006) For this HSBC has integrated. They have considered individual needs. They provide service as per requirement. This has build relationship Revitalized Offering: Banks are offering newer products. They have come into insurance shows it. Banks are coming with more variety. This has ensured customer gets everything together. This is helping bind customers. This has made HSBC grow. It has every product in the bouquet. This is helping to maintain relation Improved distribution and channel distribution: HSBC has improved their channel. This has improved distribution. Their branches are increasing. This shows wide acceptability. This is helping “firstly to improved and more consistent service based on a full customer view, increased revenue through adoption of new products and improved profitability through lower product development and service costs”. (Russ, 2006) Thus, we see that these steps have helped HSBC. It has improved the relation. Still, the company can improve. It needs to work on competencies. This will increase its base. More people will be a part of it. Ways to improve relation with customers Improving is a continuous process. HSBC bank can achieve better retention if they develop more methods. This will help business to grow. Some of the ways which can help HSBC bank improve relationship is Improving Human Touch: HSBC bank deals with customers. Customers have different needs. HSBC needs to identify those. “Although the range of channels will grow, as will interoperability between them for sales and servicing purposes, face-to-face contact is still very important so human interaction is more effective in changing a lead into a real customer and more so for financial services products”. (Joseph, 2008) This makes it more important. With stiff competition it is the need of the hour. Competent sales force will help. HSBC needs to focus on it. This will help in long lasting relationship. Integrating front and back office support: This simplifies work. Integration of both helps “to define new products, target the customers most suitable for those products, and support those products with superior service”. (James, 2008) It helps to see from every angle. The management can make use it. It will help to improve experience. Customers will feet contend. A single system will help them. This will help improve distribution. Customer satisfaction will be high. It will build better relation. This is because customers get what they want. This will ensure high demand. Customer will be able to generate interest. This will help HSBC. Improved Marketing: Better marketing will help HSBC. They need to be quicker. They need to visit clients often. It will help to understand their want. It will also help design products. This will improve marketing. Sales force can work on other areas. This will help to satisfy the want. It will thus build relation. This will give high return. Thus HSBC bank will grow. Positive Staff Attitude: HSBC needs to motivate employees. This will create satisfaction. Having high morale will help. It will help to create a good environment. The attitude will be good. It will lead to good service. As it is a service industry it will work. Customers will be contending. This will improve performance. Relation as a result will grow. Emotional Aspect: Creating an emotional feel with customer helps. It helps to understand them better. Even a study has shown that “if someone can create positive customer emotion and the impact is demonstrated to staff then it can impact the way staff works and it will help to create good relation with the customer”. (Foss, 2002) This works. It will help to touch the human aspect. It will help better understanding. It will ensure good rapport. This will help HSBC bank to grow. Customer Centric Process: This will help to identify individual needs. “It will be a case where departmental issues take a back seat and focus is on customer through a well defined corporate process”. (Reynolds, 2002) This will help HSBC to concentrate more. It will help to build their direction towards customer. Even having specific department for this will help. Improved focus: HSBC needs to improve focus. They need to realize the importance. Customers are valuable. The sales force needs to understand it. “They should have a feedback process as it will help to understand customers better and thus making them more focussed towards the task”. (Rahman, 2006) This will help to build relations. HSBC can work towards it. Thus HSBC bank can improve its relation. This will help in long run. HSBC needs to complete the following steps fully. This will help the bank. It will be able to face competition better. It is shown below (Puccinelli, 1999) Figure 3 HSBC Performance Steps Thus, we see that following all the steps will help. This will make the process complete. It will help them to build a good base. Thus it will help in customer development. Cost and benefit involved We see that benefit exceeds cost. This is because human are vital. With competition around it is getting tougher. Maintaining customers has become the need. Getting new customers is tough. There are people looking to lure them away. The benefits are more for HSBC. Some of the benefits are Increased profits: HSBC can earn more profits. “Retaining customers’ help as it add to the earning power and thus creates more opportunity of growth”. (Chaudhary, 2004) This is useful. It helps HSBC Creates value: It creates value in long run. Thus it helps. HSBC bank can use it as a long strategy. “Building relation helps to come with newer product as we are better able to understand the customer requirements”. (Griffin, Jill, Michael & Lowestein, 2001) It helps in better segmentation. It helps to understand all the marketing theories. The matrix would look as follows Figure 4: Customer Profitability Matrix Thus we see that it helps both HSBC and customers. Working and building this help HSBC. It will also ensure that costs are under control. Since, the benefits they get are over this are more HSBC needs to make more use of it. This will help to build rapport. Task B There are many marketing theories. These theories help organization. Using these theories companies develop they prepare strategy on it. These theories are integrated with the business model. These theories have been tested. So, companies know the benefits of it. This helps them to prepare and decide. Nearly every organization knowingly or unknowingly makes use of it. Some of the theories used above are Stakeholder Theory This theory has been used by HSBC. Here HSBC bank “considers the business as a coalition of stake holders and the strategies are based on it as it lays emphasis on collaboration beyond market transactions”. (Knox & Gruar, 2007) This makes integration of it. It considers things beyond the market so it covers a lot of things. Here, we see that HSBC bank is looking into emotional aspect. It is also considering things which are normally not looked into. Here, we see that it covers different aspects. This makes integration better. The advantages of using this theory are firstly, “it considers all the factors together and since it also look into employees, society, government so integration becomes better”. (Knox & Gruar, 2007) Secondly, “it looks into various factors so integrating them all together in a common way helps to achieve better results”. (Knox & Gruar, 2007) This, theory has been used extensively. It has resulted in building better relations. This theory helps to get good result. This is used by many companies. This has made functions better and easy. Brand equity Theory This theory helps to build rapport. We have seen that people prefer certain things. They are ready to pay more for it. This is because of reputation. This comes with time. HSBC bank has been able to do it. It has resulted in more customers. This is because of the service. People are satisfied. This spreads word of mouth. More people want to join. This is increasing customers. “It is the sum of the intangible assets of a brand and factors that contribute to this are: name awareness, perceived quality, and brand loyalty, the associations consumers have towards the brand, trademarks, packaging, and marketing channel presence”. (Aaker 1991) This is what HBC has done. The advantages are firstly, “it has created additional brand value and customers are willing to spend a bit more to be part of it”. (Aaker 1991) Secondly, “this theory helps to earn additional revenues as the perceived value customers get are more”. (Aaker 1991) This theory is used by all. This is because of goodwill. This results in people getting inclined to it. It makes way for future. It results in building rapport. Customer Equity This theory is also used. It helps to find the benefit for customer. It also identifies the benefit firms get due to this. “It considers value equity, brand equity and retention equity”. (Rust, Zeithaml & Lemon, 2000) It thus gauges all aspect. This considers things from all aspect. Value equity is “the customer’s objective assessment of the utility of a brand and this assessment are driven by the product’s quality, price and convenience”. (Rust, Zeithaml & Lemon, 2000) It thus looks into benefits. It sees the additional advantage they get. This is because of service. Brand Equity is “customer’s subjective and intangible assessment of the brand built through image and meaning and this assessment is influenced by brand awareness, consumer’s attitude toward the brand, and the firm’s corporate citizenship”. (Rust, Zeithaml & Lemon, 2000) Thus is looks into customer views. It considers things from their angle. This helps organization to build strategies. This can be diverted towards customers. Retention Equity is “the tendency of the customer to stick with a brand above and beyond the objective and subjective assessments”. (Rust, Zeithaml & Lemon, 2000) This helps to retain customer. Customers feel a part of the company. They are contending. This results in good reputation. Word of mouth spreads. The advantages are firstly “it reduces cost for the organization as getting new customers is costly”. (Rust, Zeithaml & Lemon, 2000) Secondly, it helps in designing products as per the customer requirements Commitment Trust Theory This theory is also used widely. It helps to find the relation. It develops an understanding. Customer and sales people who interact use it. This helps them to understand. It results in more commitment. It helps to gain insights into customer. People come to know more about the needs. This presents better understanding. The customers are able to get what they want. The management is able to draft strategies. This helps to build an understanding. The commitment and trust is high. The advantages of this theory are that it helps marketers to “work at preserving relationship investment by cooperating with partners, attractive short term alternatives in terms of expected long term benefits of staying with existing customers and high risk of losing customers been diluted because of the belief and understanding developed that customers will not act opportunistically”. (Morgan & Hunt, 1994) The way in which it benefits all is shown below (Morgan & Hunt, 1994) Figure 5: The Rationale Exchange Thus, we see that these are some theories. It has helped HSBC. It has made them dwell their strategies on it. This has resulted in better understanding. It has created bright results. Other marketing theories are also used. These are the major ones. It is a service provider so this all works. This theories help. It helps to identify ways to suffice. Customers are satisfied. It looks into ways of fulfilling their wish. This all has helped HSBC. It has developed. It is still working for improvement. Better applicability will help to get better results. 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