Documente Academic
Documente Profesional
Documente Cultură
PROJECT REPORT
ON
SUBMITTED BY
SANDEEP KUMAR
MBO6042
(2006-2008)
Mr.
FACULTY
IMS DEHRADUN
DEHRADUN
1
DECLARATION
I hereby certify that the work which is being presented in the project report
own work and was carried out under the guidance of Miss. Chitra
SANDEEP KUMAR
2
ACKNOWLEDGEMENT
who provided me all the guidance, support and cooperation that was
required for the successful completion of this project. I express own deep
sense of indebtedness to him for his keen interest in the subject and
encouragement.
who provided me with the time, support and inspiration needed to complete
the project.
SANDEEP KUMAR
3
Table of Contents
HSBC India
CRMS at HSBC
Recommendations
Constraints
Feasibility
Learning
Bibliography
4
OBJECTIVE
5
RESEARCH METHODOLOGY
section or steps necessary to carry out research effectively and the desired
6
MEANING OF RESEARCH
knowledge”.
knowledge and the method, which man employs for obtaining the
RESEARCH APPROACH
The research approach for the purpose was secondary to collect the
7
RESEARCH INSRUMENT
instrument.
RESEARCH DESIGN
In this project, I used exploratory research design and for data collection-
SAMPLING
sample.
SAMPLE DESIGN
population.
8
Sample design may as well lay down the number of items to be included
i. Type of universe
The first step in developing any sample design is to clearly define the
connection.
the society.
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STEPS IN SAMPLING
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AREA OF RESEARCH
DEHRADUN
SOURCES OF DATA
RESEARCH DATA
Data collection is the key activity of marketing research. The design of the
• Primary data
• Secondary data
PRIMARY DATA:
Primary data are gathered for the specific purpose or for a specific research
objective.
When the data are required for the particular study it is necessary to collect
original data.
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Primary data can be collected in four ways;
1) Observation
2) Focus
3) Survey
4) Experiment
SECONDARY DATA:
Secondary data are the data which already exists somewhere. Secondary data
provide starting point for research and serves the advantage of low cost and
• Internal data
• External data
When the data researcher uses the data that has already been collected by
other data are called secondary data. Secondary data can be obtained from
12
Internal data are reports and memos generated within an organization to
facilitate its operations. External data are those especially produced for
outside consumption.
Sources from which I have taken the secondary data are as under:
• Direct observation
• Websites
• Books
13
WEALTH MANAGEMENT
A progression from the aggressive retail banking focus of most large banks
across the world, wealth management is a reflection of the emerging trend of
an altogether new set of clients, a subset of “individual” or “retail” clients,
but with the potential to amass significantly higher levels of wealth.
Naturally, such clientele require a higher level of personalization, both in
terms of relationship management as well as product offering. To the banks,
it means a big opportunity in terms of quantum of assets managed as well as
ongoing fee income potential.
As was the case in retail banking, the initial wealth management offering
was largely undifferentiated and commoditized, with some cosmetic changes
by way of stratifying higher-end retail customers as ‘Gold’, ‘Preferred’,
‘Platinum’ etc., often based on very simple criteria like account balances,
deposit/asset values etc. Apart from preferential interest rates or fees and
some degree of personalized service .e.g. tagging a ‘Relationship Manager’
to a set of clients, there was no significant value added from the client’s
point of view.
What most banks were clearly missing was the concept of understanding the
customer’s current financial position, ongoing financial needs, funds flow
14
requirements, risk appetite levels and providing a basket of investment
options and value-added advisory services. The thrust was more on
safeguarding the customer’s wealth, resulting in mismatched offerings at
sub-optimal returns.
Banks have acted swiftly in spotting and leveraging this opportunity to tap
this rapidly growing and extremely promising segment and augment their
revenues. The result: an intensely competitive environment with financial
services providers outdoing each other in terms of promised returns, risk
management, personalization of services as well as customer experience.
Banks have also leveraged their distribution capabilities and captive
customer base effectively to market a wide spectrum of ‘wealth
management’ offerings to enable their clients accumulate, grow and preserve
their wealth, tailored to customer-specific needs on cash flows, returns and
risk appetite.
These days bank provides its customers and clients with the facility of
financial planning.
15
This particular service is synonymous with the concept of wealth
management.
It is the integration of asset, debt, and risk management strategies into one
seamless financial solution .it involves certain critical issues like asset
allocation, estate and trust planning, retirement planning etc. It can be
defined as a series of logical financial transitions
• Accumulation of wealth
• Protection of wealth
• Tax advantaged distribution of wealth during life
• Tax advantaged distribution of wealth at death
Such financial transitions depend upon the stage of life an individual is in
and the personal goals for transfer of assets.
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NEED FOR WEALTH MANGEMENT
Investors today face bewildering choices about what to do with their money.
As market conditions change and new financial products appear and
disappear, making sense of information and innuendo about effective ways
to manage wealth can be extraordinarily difficult. Making decisions about
investments and portfolios is no easy task. Individuals are bombarded with a
dizzying array of investment options. Information abounds, advice comes
from all quarters, recommendations often contradict one another, and new
products and asset classes are invented at breakneck speed. How should
investors make sense of the chaos of information and innuendo that exists
about wealth management?
How should they create a portfolio of investments that will provide
sufficient money to see them through life and help them achieve their goals?
While these questions may seem daunting, they are necessary. Indeed, the
need to save and invest money for the future is one of life's certainties, along
with death and taxes (and not unrelated to them).
17
advisors to understand not just their clients’ risk disposition, wealth base and
funds flow requirements, but also the banking & investment milieu, and
arrive at a structured investment plan tailored to the client needs. This
domain is still in a nascent stage and growing rapidly. This growth has
primarily been driven by demographic and economic shifts, increased
customer expectations and demands for sophisticated offerings, coupled with
real-time information, personalized service, and most importantly, full
control over their investment portfolio.
Apart from growing the net worth, the financial service providers need to
address unique challenges in dealing with High Net worth Individuals.
Managing such a relationship requires a different orientation & positioning
from standard retail banking: one that is primarily driven by personalization,
readiness of information and based on a long-term relationship with the
customer and her immediate circle (family, friends, social circle etc.), whilst
continuing to preserve very high degree of confidentiality in the client
relationship. The relationship is essentially based on trust the customer
reposes in her financial advisor. The advisor is expected to not just control
and grow the assets but continuously aim to increase the rates of return and
minimize risk and eventuality of loss. Typically, an advisor works with the
customer in developing an investment strategy to achieve her financial goals.
The appropriate mix of investment products like equities, fixed-income
securities, mutual funds etc. are purchased and monitored in keeping with
customer’s strategy for principal growth, income and liquidity.
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A key factor contributing to the growth of private banking services is the
advent of advanced tools that help to better understand & profile customers,
recommend, plan & forecast possible outcomes arising out of various
investment options (what-ifs) etc., which financial advisors have been able
to leverage strongly to give greater comfort to their investor clients.
But change is in the air and both domestic banks and international players
alike are now gearing up to meet the needs of the wealthy. The natural
evolution of the wealth management market can only be helped along by
continued economic growth that will do much to stimulate demand.
So with such an abundance of wealth then how can banks, both domestic
and international, best meet demand? The wealth management industry at
present is immature compared with offerings by private banks and wealth
19
managers in the West. There is no doubt however than the Indian market is
in the early stages of development.
HSBC
INTRODUCTION
With listings on the London, Hong Kong, New York, Paris and Bermuda
stock exchanges, shares in HSBC Holdings plc are held by around 200,000
shareholders in over 100 countries and territories. The shares are traded on
the New York Stock Exchange in the form of American Depositary
Receipts.
20
BUSINESS PRINCIPLES AND VALUES
21
• fair and objective employer;
• a diverse team underpinned by a meritocratic approach to
recruitment/selection/promotion;
• a commitment to complying with the spirit and letter of all laws and
regulations wherever we conduct business;
22
GROUP STRUCURE
The entities which form the HSBC Group provide a comprehensive range of
financial services to personal, commercial, corporate, institutional and
investment, and private banking clients. To more easily promote the Group
as a whole, HSBC was established as a uniform, international brand name in
1999. In 2002, HSBC launched a campaign to differentiate its brand from
those of its competitors by describing the unique characteristics which
distinguish HSBC, summarized by the words 'The world's local bank'.
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HSBC Bank- India
The antecedents of the HSBC Group in India can be traced back to October
1853 when the Mercantile Bank of India, London and China was founded in
Bombay (now Mumbai). Starting with an authorized capital of Rs 5 million,
the Mercantile Bank soon opened offices in London, Madras(Chennai),
Colombo and Kandy, followed by Calcutta(Kolkata), Singapore, Hong
Kong, Canton(Guangchow) and Shanghai by 1855. The following hundred
years were in many ways propitious for the Mercantile Bank. In 1950 it
moved into its new head office building in Mumbai.at Flora Fountain.
After the Mercantile Bank was acquired by The Hongkong and Shanghai
Banking Corporation, the Flora Fountain building became and remains to
this day, the Head Office of the HSBC Group in India.
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Through the 1990s, HSBC has vigorously developed its role as one of the
leading banking and financial services organizations in the world. Its
strategy of 'managing for value' emphasizes the Group's unique balance of
business and earnings between older, mature economies and faster-growing
emerging markets.
There has been major business growth in India. 2001 saw the opening of the
only branch in the HSBC network that is open 365 days a year in Pune,
western India, and, in the same year, HSBC was able to enter the insurance
market in India for the first time. The Group has also pioneered the use of
25
global resourcing centres to achieve a competitive advantage. Situated in
Bangalore and Hyderabad these centres have allowed HSBC to utilize its
worldwide reach and to improve services by conducting back office
functions on an international basis.
1.Commercial Banking
Personal Banking
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Non Resident Indian Banking
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Corporate Banking
The Investment Banking and Markets division brings together the advisory
and financing, equity securities, asset management, treasury and capital
markets, and private equity activities of the Group to complete the CIBM
structure and provide a complete range of financial products to our clients.
Increasingly, ECA financing is being considered by customers and HSBC
28
works closely with project export finance teams, both onshore and offshore,
to provide structured solutions.
Clients are serviced by sector based client service teams that combine
relationship managers, product specialists and industry specialists to develop
customized financial solutions. These form the relationship team along with
the Investment Banking & Advisory division. Each team supports the
client's worldwide operations, ensuring a full understanding of the
company's business and financial needs. Based on our client's requirement,
HSBC also assigns Global Relationship Management teams to provide
structured solutions.
The Corporate Bank in India was ranked 2nd overall in the 2004 Greenwich
Survey and is aiming at achieving the top rank in the 2005 survey. Currently
CIB manages approx. 365 CIB relationships with total advances of approx.
USD 1.1 Bn as at 31 May 2005. This portfolio is largely spread within 9
sector teams divided as under :
• Consumer Brands
• Industrials
• Energy and Utilities
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• Telecommunications
• Automotive
• Healthcare
• Transport and Logistics
• Metals and Mining
• Media
Business Banking
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domestic and international accounts, from anywhere in the world, 24
hours a day.
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Institutional Banking
Working closely with Group offices in India and overseas, trade services,
payments and cash management, treasury and capital markets, custody
and clearing, and correspondent and electronic banking activities are
offered to banks, financial institutions, securities houses, insurance
companies, asset management companies and other non-banking
companies, non-government and development organisations operating in
India.
Backed by the HSBC Group and a network of some of the world's most
experienced professionals, HSBC is one of the leaders in foreign exchange,
new bond issues, syndicated loan financing and derivative solutions.
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In India, they have a large corporate clientele, with whom they have
partnered in creating long-term relationships. HSBC attributes this to their
ability to provide quick and innovative solutions with an underlying
customer focus.
The aim is to put HSBC in its entirety to work for each of our clients. From
the provision of credit to the delivery of top quality banking services, they
coordinate our activities closely around the client's global needs, taking
advantage of HSBC's presence in 80 countries and territories.
HSBC has extensive derivative trading and sales networks in four hubs
globally, with additional regional centres that maintain an active presence.
The dealing hub in Mumbai services clients in other cities including New
Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Kochi, Pune, Vizag, etc.
They are dominant participants in the foreign exchange, money, government
and corporate debt, and over-the-counter off-balance sheet product markets.
33
The Bank Aims to Provide:
The leading custodian in Asia, HSBC's custody and clearing services are
available in 28 markets in Asia-Pacific and the Middle East. With
experienced staff and the latest technology, HSBC is the premier provider of
sub-custodian and clearing services to foreign institutional investors (FIIs) in
India. HSBC clients include the domestic fund management sector in both
the retail and institutional segments. Institutional Fund Services launched by
the bank offers a comprehensive suite of products to domestic mutual funds
and insurance companies ranging from custody, fund administration
services, unit distribution and Cash Management Services.
2. Technology
The HSBC Group develops and applies advanced technology to the efficient
and convenient delivery of banking and related financial services. In India,
the Group provides:
34
• Trade and Corporate Banking services with real-time access to a
centralised information database
• Instantaneous inter-city transactions through online connections
between all branches
• A state-of-the-art treasury dealing system
• A sophisticated card system supporting debit and credit cards,
domestic and international VISA, MasterCard, and co-branded cards
• A dedicated acquiring system for both MasterCard and Visa
transactions
• online@hsbc, HSBC's internet banking service, provides customers
with an integrated and secure platform to access their accounts.
• Internet Payment Gateway handles credit card transactions on the
internet
3.Asset Management
4.Global resourcing
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5.Insurance
6.Data processing
7.Private equity
8.Audit service
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9.Investment Banking
HSBC Securities and Capital Markets (India) Private Limited has two
main business lines. Its Institutional and proprietary broking business is
based in Mumbai and, has seats on two of India's premier stock exchanges,
the Bombay Stock Exchange and the National Stock Exchange. It deals in
Indian securities for both Indian and international institutions and for select
retail clients and is backed by an extensive research team. The Corporate
Finance and Advisory business, with offices in Mumbai and New Delhi,
offers a full range of integrated investment banking services in India and
internationally.
10.Software development
37
WEALTH MANAGEMENT AT HSBC
In India, the Finance Ministry through the Reserve Bank of India (RBI),
Security & Exchange Board of India (SEBI), Insurance Regulatory &
Development Authority (IRDA), Association of Mutual Funds in India
(AMFI), Company Law Board,Department of Company Affairs and
Registrar of Companies oversee the various segments of the financial
services industry.
In addition there are other entities, as well as various legislation, which may
affect the business of the financial planners. Anyone engaging in the
profession of financial planning advice and/or services must ensure that he
or she is legally capable to render such advice and is properly licensed to
transact business with regard to various financial products.
Financial Planning Services is a part of the PERSONAL FINANCIAL
SERVICES (PFS) thrust of the Bank. It is the primary wealth management
for delivering Investment & Insurance products to the bank’s customers in
India and other areas.
Investment & Insurance Services is a part of the Wealth Management thrust
of the Bank.
The various Investment & Insurance products made available to customers
include mutual funds, fixed income securities (bonds), direct equities and
insurance products – the former three are made available both under
38
advisory as well as non-advisory basis while insurance products are
available only on a non-advisory basis.
HSBC PowerVantage
Mutual Funds
The first step to this is creating a risk profile for the individual. This
questionnaire helps the bank understand customers attitude towards
investment risk and therefore offer the customer investment products that
39
match a particular risk profile from a range of carefully selected funds.
40
CUSTOMER RELATION MANAGEMENT SYSTEMS
CRM relies heavily upon the integration of many technologies for success.
And yet CRM is not wholly and solely reliant upon these technologies—
properly trained employees and precisely aligned business processes play an
equally important role in CRM. To gain the full value of any investment in a
CRM-related technology, banks must place proper emphasis upon training
41
the people who will be interacting with customers and upon the reevaluation
of existing business processes to assure conformance with CRM.
42
products and services to customers but also could ensure that the customers’
interactions are customized based on the individual’s current and potential
value as a client.
The four perspective of their CRM is: the Customer Value perspective that
measures the financial benefits gained from customers, the Customer
Satisfaction perspective that measures the level of satisfaction achieved by
products and services, the Customer Interaction perspective that measures
the operational excellence of internal processes and multi-channel
management and the Customer Knowledge perspective that measures the
quality of customer knowledge and data analysis.
43
A major classification not found in the CRMS and crucial to judging the
performance of a CRMS and for making judgment about a customer is not
located within the CRMS. This refers to the Customer Lifetime Value
concept.
44
enough to help implement such a tool and what can be the uses if such
a tool can be implemented.
2. How market responsive and employee centric is the CRMS. This has
been done by conducting two surveys.
(a) Group of employees are surveyed to establish the relative
importance of items shown in the CRMS.
(b) Clients are interviewed to understand the importance of the
information they give to banks and the extent to which this
information changes service quality.
45
the role of customer knowledge reveals a different picture. HSBC scarcely
measure the perspective of “Customer Knowledge”. Their systematic
gathering and storage of customer data in information systems do, in fact,
improve the availability of customer knowledge for employees in branches
and call centers. However, when it comes to the systematic analysis of
customer data, quality problems, especially with soft customer information,
prevail. Soft facts about customers are often incomplete or obsolete and thus
scarcely useful for automatic data analysis, as the quality of the results
cannot be guarantied.
46
CRMS AT HSBC
As the largest domestic bank in Hong Kong, HSBC adopted the Customer
Relationship Management system in order to maximize customer
convenience and provide anytime, anywhere and anyhow banking. The
customer acquiring process involves six stages and the CRMS is an integral
tool used at all of these six stages. At HSBC CRM serves two purposes.
CRM was viewed as integral to the marketing of products and services
within the bank, but it was also seen as a discipline for managing customer
interactions. The quality of customer interactions was believed to be integral
to the customers’ expectations and loyalty with the bank. CRM was soon
viewed as a discipline that not only could help the bank offer the most
appropriate products and services to customers but also could ensure that the
customers’ interactions are customized based on the individual’s current and
value as a client. Here we find that the potential value as a metric is not
considered.
It is important to understand that the Indian banking environment is unique
and reflects the nuances of the larger social fabric. Social norms dictate the
value of all banking activities. In banking, this translates into a sense that all
customers are important to the bank and that product and services should be
designed and priced accordingly.
47
If a customer relationship is viewed as unprofitable, popular belief is that the
fault lies with the bank rather than the customer. HSBC embodies this
philosophy and strives to tailor its products and services accordingly.
48
interest in being recognized by bank personnel when they contact the
institution—for these customers low price or speed of service are the
dominant properties of the relationship. For other customers, highly
personalized interactions are the most important aspect of their relationship
with the bank.
The critical challenge for HSBC is to recognize that it must act in
accordance with the wishes of its customers while still trying to achieve its
own strategic objectives. If customers do not emphatically make known their
expectations of the organization, the bank attempts to predict what the
customers’ expectations are based upon prior observed behavior. This
complex effort is essential to managing the customer experience effectively.
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Information items covered in CRMS currently employed at HSBC under
different subheadings.
Overview
1. Name
2. Preferred name
3. Address
4. Home Phone
5. Written Language
6. ID Type/Number
7. Nationality
8. Package Since
9. RM Branch
10.RM Code
11.Customer No.
12.Classification
13.Date of Birth
14.Spoken Language
15.Gender
16.Country Of Residence
17.Customer since
18.RM Name
19.RM Pone
Identification
1. Classification/Market Sector
2. RM Branch/Name
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Personal Details
1. Title
2. First Name
3. Initials
4. Last Name
5. Preferred Name
6. Gender
7. ID Type/No.
8. DOB
9. Nationality
10.Country of Residence
11.How introduced to bank
12.Name of Parent and natural guardian
13.Statement Dispatch Address
Demographics
1. Employment
2. Employer
3. With this employer since
4. Nature of business
5. Previous Employee
6. How long in previous work?
7. Years Months
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Income
1. Salary
2. Other income
3. Household income
4. Monthly personal income
Personal details
1. Home address ID
2. Work address ID
3. Educational level
4. Car ownership
5. Marital Status
6. No. of Dependents
7. No. of other banks used
8. Name of major bank
9. Existing Credit card used
(Bank name, Card type)
Contact Preferences
1. Preferred name
2. Lang preference Written Spoken
3. Contact details:
Home
Business
Phone
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Fax
Email
Cell/mobile
Meeting Preferences
1. Day
2. Time
3. Location
4. Preference channels
Family
1. Partners Name
2. No. of children
3. Details
4. Name
5. DOB
6. Customer No.
Lifestyle Data
1. Hobbies
Contact History
Address
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1. Add detail
P1-Residential
P2-Local
P3-Overseas
D1-Business
2. Name
3. Address
4. Postal Code
5. Dispatch
6. Home Ownership Status
7. Designation
8. At this office since
54
SEGMENTATION BASED ON CRMS AT HSBC
The customer pyramid model is one of the helpful tools for performing
customer segmentation. It is the foundation of the 3C method. Below is the
typical Customer pyramid which contains customer groups of Top, Big,
Medium, Small, Inactive, Prospects and Suspects.
55
HSBC Personal Banking categorized customers by their "Total Relationship
Balance". To make it simple, it is the total amount of money flowing
between the bank and the customer, including money deposits, investments,
insurance, etc.
As part of the project we try and develop such categorizations for a single
branch (Noida) on the basis of total amount of money flow between
customer and bank over a certain period of time.
56
From the above Customer Pyramid, the customer categories of HSBC
Personal Banking are as follow:
1. Top - this is the customer segment the customers of which are those who
have a total relationship balance of over one billion Hong Kong Dollars.
They are HSBC's Premier Customers, and are the top 5% of highly valuable
customers of HSBC Personal Banking.
2. Big - this is the customer segment of those who have a total relationship
balance of over one million Hong Kong Dollars. They are HSBC's Premier
Customers as well and are in the next 15% of highly valuable customers
57
been in operation for a long period of time, say 2 years. Accounts with a
closed status are those that have been formally closed by the customers.
6. Prospects - those customers who are using HSBC products other than
Personal Banking, such as Corporate Banking. The bank has some data
about them, and has already established communications with him/her
through their use of that product.
7. Suspects - the customers of other banks. HSBC has collected some data
about them, but has not yet established communications with them.
As is the case in this fast changing and dynamic financial world, changes
will occur due both to local and global factors, and the above figure of
"Total Relationship Balance" in defining the customer segments should be
changed accordingly.
The flowchart below tries to show how data inputs into the CRMS help in
creating customer clusters.
58
From the above diagram we can easily see that customer segmentation can
be done on the basis of information contained in the CRMS. During this
project we will try and develop a better understanding of this procedure by
conducting an analysis of accounts held with the bank. As of now the
customers are divided into three major personal segments.
1. Mass market customers
2. Power Vantage customers
3. Premier clients
59
profitability so that HSBC will try its best to cross sell and up sell for its
customers to buy more. On the other hand, money deposits are one of the
low profit products.
. Relationship over time - Relationship over time can show the levels of
customer loyalty. The longer a customer stays with HSBC, the higher the
level of customer loyalty that can be attributed to them.
1. High profitability customers - they are the customers in the Top and Big
categories. They use the high profitability, multi-product packages. They
have a high transaction amount per transaction. They have a long
relationship over time with HSBC. They have plenty of referral records.
60
2. Sustainable profitability customers - they are the customers in the
Medium category. They use the medium profitability, multi-product
packages. They have the medium transaction amount per transaction. They
have a relationship over time with HSBC but not for very long. They have
some referral records.
Here is the CEM critical moment spreadsheet which lists the critical
moments of HSBC Personal Banking customers in their customer process
cycle of Pre-Purchase, At-Purchase and Post-Purchase.
61
In the Pre-purchase Phase, there are eight customer touch-points, which
include:
. Events – Exhibition
62
. Outbound Email - e-Marketing
63
. Portal - e-Banking
64
Due to the different needs of customers in their Pre-purchase, At-purchase
and Post-purchase, customer critical moment will be different in every
customer process cycle. For HSBC Personal Banking, the critical customer
moments are Financial Analysis for Pre-purchase, Making Transaction for
At-purchase and Customer Enquires for Post-purchase.
PRE-Purchase
AT-Purchase
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making a transaction is always the most critical service from the point of
view of the customers. Customers expect that they can make and complete
their transactions within a short period of time and in a convenient way. This
can be done in the following ways.
POST-Purchase
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enquiries are considered the critical service moment for customers in the
Post-purchase customer process.
67
Customer lifetime value (CLV) is a key-metric within CRM. In the banking
industry customer behavior is rather complex, because customers can
purchase more than one service, and these purchases are often not
independent from each other.
In that case, customers might receive special treatments (e.g. being invited
for an event for most profitable customers) based on their expected value,
while they are actually far less profitable. Again, marketing budgets are
wasted by targeting the wrong customers. Let us put into perspective where
we can place Customer Lifetime Value.
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MARKETING METRICS FINANCIAL
METRICS
Customers Earnings
Cost of Acquisition DCF/NPV
LTV EVA
Thus when we talk of using CLV we are moving away from a product
orientation to a customer orientation. This has become important because of
the following trends.
Thus CLV though a financial measure finds its place in the marketing
matrix. CLV is the expected NPV of the cash flows from a customer
relationship.
69
USING CLV TO CREATE CLIENT CLUSTERS
70
Fee-based revenue growth derived from assets under management (AUM)
continues to act as the principal driver for the wealth management and
private banking expansion at HSBC. HSBC continues to reap the rewards
derived from private banking revenue diversification and improving
financial markets, making significant progress in diversifying revenues
through an increase of fee-based and recurring revenue sources as well as
rapidly changing demographics. As quality of service and specialization of
financial advisors continue to rank as leading criteria for selecting a wealth
management practice or private client service, client segmentation is
emerging as a critical competitive weapon.
71
ANALYSIS OF CRMS
MARKETING ORIENTATION
Employee Feedback
HSBC (Noida) customers are serviced through four main channels: ATMs,
bank tellers, banking consultants and the contact centre. The ATMs can
perform quite complex transactions but customers tend to use them for
simple transactions. They are used mainly for simple transactions such as
cash withdrawals or deposits, balance queries, and fund transfers between
personal accounts. This channel is available twenty-four hours a day, seven
days a week. It benefits both customers and the bank, being a convenience to
customer while reducing the workload for branches, especially for tellers
and banking consultants.
Tellers provide all the services offered by ATMs plus customer account
maintenance such as change of name or addresses, set up of automatic
payment, and changes of Personal Identification Number (PIN) on credit
cards and ATM access card. Customers seeking advice on financial products
or specialized services such as loans are referred to a banking consultant.
From the bank’s perspective, the primary function of a banking consultant is
to sell bank services and products. Banking consultants typically come to
know many of their customers well, and become proactive in suggesting
financial services to meet customers’ circumstances and changing needs.
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METHOD
For the purpose of this study, the population of interest can be divided into
two groups:
• Bank Consultants, who work in branches with face-to-face customer
contact, and
• Services and Sales Representatives who work in the call centre with
telephone contact.
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(c) Eliciting Information Requirements
A three-part questionnaire was designed for the first survey. In part one,
respondents were asked to list the ten most common tasks they performed in
their dealings with customers. This section was designed to focus the
respondents on their role as Bank Consultants or Services and Sales
Representatives. In part two, they were asked to list the information they
used in their dealings with customers. This section was designed to capture
the information that first came to their mind. Part three contained a list of
information items compiled from HSBC’s existing front-end system and
proprietary applications used in analyzing the customer base. This section
served two objectives: first to probe for further information required in
managing customer relationships, and second to test if respondents would
select analytical information, such as customer contribution and profitability
score and, if so, which they would select.
For stage one four Bank Consultants and four Services and Sales
Representatives were selected. Those selected were the highest sales
performers in each job category in the previous three months as shown in
performance reports. In selecting the ‘best’, it was assumed that higher sales
performers would be better at selecting and using information to understand
customers' needs. Participation was voluntary and no incentives were used.
A two-part questionnaire was designed for the second survey. Part one
contained a cleaned list of information requirements from the first
questionnaire. By ‘cleaned’ we mean that duplicated items were removed
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and, where necessary, standard bank terminology was substituted for some
terms.
Respondents were asked to rate the resulting 10 of the 51 information items
on a 5-point Likert scale anchored by polar adjectives of “not at all
important” to “very important.
For stage two, 5 Bank Consultants and 5 Services and Sales Representatives
were selected. All respondents were based in the greater National Capital
Region (NCR) region. Participation was again voluntary and no incentives
were used.
Given the exploratory nature of the study and the small sample size, only
descriptive statistics were calculated pending future research. Stage one was
an item identification task and no analysis was conducted beyond
identification and clarification. In stage two, the average importance ratings
of 10 identified items were calculated for the entire sample, for each
respondent group (Bank Consultants and Services and Sales
Representatives).The outcome was lists of information items ordered by
importance ratings overall.
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This exercise was carried out to map the output of the in house survey with
the perception of the customer.
METHOD
For the purpose of this study, the population of interest is customers who fall
into high the Power Vantage segment at HSBC. This is primarily done as
these customers have a tendency to have more number of transactions and
thus more interaction with the consultants. Thus it was felt that these
customers’ responses would better help us in identifying information content
and requirements of the CRMS and help to map it with output of the
previous survey.
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relationship manager should have. A secondary objective was to check
whether the customer and the manager agree on the importance of some
major information items and the contribution of these items in building a
long term relationship.
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Given the exploratory nature of the study and the small sample size, only
descriptive statistics were calculated pending future research. The outcome
was lists of information items ordered by importance ratings overall.
Independent bank 16
78
Foreign bank 46
Public bank 11
11%
Electronic banking 20
Ambience
46%
4
79
Better services 28
Safety of funds 6
Speedier operations 20
Convenient location 12
Efficient staff 10
11% 22% 1
13% 2
4% 3
4
5
7%
6
12% 7
31%
Error in transactions 26
Delayed processing 40
80
Non cooperating staff 24
Others 4
6% 4%
26%
24% 1
2
3
4
5
40%
YES 62
NO 38
81
NO
38%
YES
NO
YES
62%
YES 80
82
NO 20
NO
20%
YES
NO
YES
80%
YES 85
NO 15
83
NO
15%
YES
NO
YES
85%
YES 75
84
NO 25
NO
25%
YES
NO
YES
75%
YES 24
85
NO 76
YES
24%
YES
NO
NO
76%
Recommendations
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1. The bank needs to control input of information at acquisition stage as
discrepancies arising later on can lead to below standard customer
service and makes it difficult to analyze customer trends and
behaviour.
2. Financial output of the CRMS is not provided at branch level to front
end sales team. This project tried to implement a CLV at the branch
level but such inputs need to be provided as it will help financial
managers better understand customers.
3. Certain information items contained in the CRMS can be better
utilized. These information items need to be updated more frequently.
4. Customer orientation towards Information content should be
considered by the bank more prudently.
5. Financial basing of the CRMS is needed as right now only customer
soft points are looked at. A financial grounding will help bank create
better profitability groupings within its customers.
Constraints
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(a) The CLV model which was put in place for calculating future
value of the customer could not be implemented because of
lack of transactional data for an extended period.
(b) Customer Segmentation could not be carried out on the basis of
the CLV as final customer values could not be arrived at.
(c) Some of the data inputs at the time of customer acquisition
turned out to be erroneous.
2. For the in house survey the sample size of the FPM’s may be too
small to pass judgment on CRMS.
Feasibility
The CLV model did not come out to be sustainable because it the kind of
data requirement for such a model is not available at the branch level. The
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crucial factors needed to implement such a model cannot be calculated
without these data elements.The survey carried out offers the bank more
sustainable insight into the information items required for the CRMS.
Profitability elements like CLV can only be integrated into the CRMS at a
higher level in the organization. The model for CLV holds good only till the
stage we are forecasting purchase frequency.
Learnings
Academic
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The internship gave me an opportunity gave me an insight
that all the academic learnings are of no use if they are not
used with prudence and common sense. Many times, we
wanted to use extra tools and techniques for using our
knowledge base but our guide helped us understand that
what is important is who is going to use our output. Thus,
based on our target audience we need to modify our
methodology.
Business Environment
One not only needs to respect what other functions do, but
one also needs to
have a basic knowledge about all of them. This is required
because to have a proper understanding of the business one
needs to have a comprehensive and not isolated view. We
had to interact with marketing, HR, and administration
teams to help develop a model which is realistic and
practical. Also in everyday running of the business all
functions need to be understood.
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Bibliography
1. www.hsbc.com
2. www.hsbc.co.in
3. HSBC customer segmentation and processes handbook
4. HSBC CRMS presentations
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