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SUMMER TRAINING

PROJECT REPORT

ON

PERFORMANCE ANALYSIS OFCUSTOMER RELATIONSHIP


MANAGEMENT SYSTEM

HSBC BANK CONNAUGHT PLACE BRANCH


DELHI

IN PARTIAL FULFILLMENT OF THE REQUIREMNT FOR THE


AWARD OF THE DEGREE OF

MASTERS OF BUSINESS ADMINISTRATION

SUBMITTED BY

SANDEEP KUMAR

MBO6042

(2006-2008)

EXTERNAL GUIDANCE INTERNAL GUIDANCE

Mr.

FACULTY

IMS DEHRADUN

INSTITUTE OF MANAGEMENT STUDIES

DEHRADUN

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DECLARATION

I hereby certify that the work which is being presented in the project report

“Performance Analysis of Customer Relationship Management System


” of HSBC Bank, Connaught Place Delhi

for partial fulfillment of the requirements for the degree of “Master of

Business Administration” submitted to Institute of Management Studies,

Dehradun affiliated to Uttarakhand Technical University, is record of my

own work and was carried out under the guidance of Miss. Chitra

SANDEEP KUMAR

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ACKNOWLEDGEMENT

My project bears the imprint of many people. I am highly indebted to Mr.

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.

My thanks also go to the faculty member Mr. ( ) for his sincere

exhortations, constant encouragement and constructive criticism throughout

the preparation of the report.

My overriding debt continues to my parents and my friends

who provided me with the time, support and inspiration needed to complete

the project.

SANDEEP KUMAR

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Table of Contents

Industry Overview-Wealth Management

Company Overview- HSBC

HSBC India

Wealth Management at HSBC

Customer Relation Management System

CRMS at HSBC

Segmentation based on CRMS at HSBC

Customer Net Present Value

Using CLV to create customer clusters

Analysis of CRMS (Survey)

Recommendations

Constraints

Feasibility

Learning

Bibliography

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OBJECTIVE

The primary objective of this research was to explore the information

requirements of front-end sales by surveying representatives of the bank.

Surveys were designed to generate a list of information used by them and

gather an importance rating for each piece of information. The results

showed that while a majority of the information required or considered

important by sales agents is available to them through the system, some

important information such as customer profitability are not available. The

challenge for HSBC is to develop and manage a proactive customer contact

plan incorporating both a data capture procedure and an information sharing

mechanism to deliver the knowledge to sales agents across all channels.

This study found that there are differences in information requirements

between relationship managers and customers and the same need to be

addressed by the bank.

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RESEARCH METHODOLOGY

Research methodology is a systematic way which consists of series of

section or steps necessary to carry out research effectively and the desired

sequencing of the marketing research is a process which involves a number

of inter related activities which overlap and rigidly follow a particular

sequence. It consists of the following steps:

1. Formulating the objective of the study.

2. Designing the method of data collection.

3. Selecting the sample plan.

4. Collecting the data.

5. Processing and analyzing the data.

6. Reporting the findings.

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MEANING OF RESEARCH

Research in common parlance refers to a search for knowledge. One can

also define research as a scientific and systematic search for pertinent

information as a specific topic. In fact, research is an era of scientific

investigation. The advanced learner’s dictionary of current English lays

down the meaning of research as a “careful investigation or enquiry

especially through search for new facts in any branch of knowledge”.

Redman and Mory define research as a “systematized effort to gain new

knowledge”.

Some people consider research as movement, a movement from the

known to unknown. It is actually a voyage of discovery. We all possess

the vital instinct of inquisitiveness makes us probe and attain full

understanding of the unknown. This inquisitiveness is the mother of all

knowledge and the method, which man employs for obtaining the

knowledge of whatever the unknown, can be termed as research.

RESEARCH APPROACH

The research approach for the purpose was secondary to collect the

information on the subject.

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RESEARCH INSRUMENT

I used direct observation, customer data and survey as research

instrument.

RESEARCH DESIGN

In this project, I used exploratory research design and for data collection-

fill up the questionnaires from the customers of mobile, survey of the

market and some information was collected by interview of the users of

the cellular at Dehradun.

SAMPLING

I used random sampling method because from a finite population refer to

that method of sample selection which gives each possible sample of

combination an equal probability of being picked up and each item in the

entire population to have an equal chance of being included in the

sample.

SAMPLE DESIGN

A sample design is a definite plan for obtaining a sample from a given

population.

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Sample design may as well lay down the number of items to be included

in the size of the sample.

i. Type of universe

The first step in developing any sample design is to clearly define the

set of objects, technically called the universe to be studied. The

universe is infinite as the number of customer is unlimited.

ii. Sampling unit

The study to be taken on the suppliers and consumer of mobile

connection.

iii. Size of the samples

As the universe is infinite so the number of consumers will be limited.

Hence sample size is of 50 customers belonging to various sections of

the society.

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STEPS IN SAMPLING

1. Define the universe

2. Select the sample frame

3. specify the sampling units

4. Select the sample design/methods

5. Determine the sample size

6. specify the sampling plan

7. Select the sample

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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

data collecting method is the backbone of the research design.

Data constitute the foundation of statistical analysis and interpretation.

Hence the first step in statistical work is to obtain data.

Data can be obtained from two important sources, namely:

• Primary data

• Secondary data

PRIMARY DATA:

Primary data are gathered for the specific purpose or for a specific research

project, consisting of original information for the fulfillment of the project

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

ready availability. Secondary data can be divided into two types:

• 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

journals i.e. internal sources, reports, government publication and books,

professional bodies etc.

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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

• Survey and customer data and reports

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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

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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.

The wealth creation activity is no longer restricted to advanced markets as


emerging markets are being tightly integrated with the global economy.
New, wealthy investors, in large numbers, are arriving on the scene in an
unprecedented manner. Their expectation: professional guidance from their
financial services provider to grow, protect, and transfer their wealth freely
across borders, to enable them to maximize their wealth as well as diversify
their interests.

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.

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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).

FINANCIAL PLANNING MANAGER

Wealth management is a knowledge business and deals with customers who


have specific short and long-term investment plans and cash flow
requirements. They need to feel valued and unique; unsurpassed investment
performance is one of their key expectations. It is critical for the financial

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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.

WEALTH MANGEMENT IN INDIAN CONTEXT

The Indian wealth management market is ripe for development. Strong


economic growth has created wealth that needs somewhere to go and
consolidated the position of those with old money. Despite the country's
rapid development the market is immature; investment propositions have
traditionally centered on deposit accounts and currency controls limit access
to the international capital markets.

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

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managers in the West. There is no doubt however than the Indian market is
in the early stages of development.

HSBC

INTRODUCTION

Headquartered in London, HSBC is one of the largest banking and financial


services organizations in the world. HSBC's international network comprises
around 10,000 offices in 82 countries and territories in Europe, the Asia-
Pacific region, the Americas, the Middle East and Africa.

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.

Through an international network linked by advanced technology, including


a rapidly growing e-commerce capability, HSBC provides a comprehensive
range of financial services: personal financial services; commercial banking;
corporate, investment banking and markets; private banking; and other
activities. Although the Group’s holding company, HSBC Holdings plc, was
formed as recently as 1991, many of its principal constituent companies
opened for business over a century ago and have long experience in their
home and international markets.

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BUSINESS PRINCIPLES AND VALUES

The HSBC Group is committed to five core business principles:

• outstanding customer service;


• effective and efficient operations;
• strong capital and liquidity;
• prudent lending policy;
• strict expense discipline;

Business principles are supported by loyal and committed employees who


make lasting customer relationships and international teamwork easier to
achieve.

HSBC also operates according to certain key business values:

• the highest personal standards of integrity at all levels;


• commitment to truth and fair dealing;
• hands-on management at all levels;
• commitment to quality and competence;
• a minimum of bureaucracy;
• fast decisions and implementation;
• putting the team’s interests ahead of the individual's;
• the appropriate delegation of authority with accountability;

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• 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;

the exercise of corporate social responsibility through detailed assessments


of lending proposals and investments, the promotion of good environmental
practice and sustainable development, and commitment to the welfare and
development of each local community.

HSBC’s reputation is founded on adherence to these principles and values.


All actions taken by a member of the HSBC Group or staff member on
behalf of a Group company should conform to the principles and values.
Additionally, they have codes of conduct for staff in all operations.

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GROUP STRUCURE

HSBC Holdings is a public limited company incorporated in England and


Wales.

Headquartered in London, the HSBC group operates in five regions: Europe;


Hong Kong; the rest of Asia Pacific; including the Middle East and Africa;
North America; and South America.

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.

The acquisition in 1959 by The Hongkong and Shanghai Banking


Corporation Limited of the Mercantile Bank was a decisive factor in laying
the foundation for today's HSBC Group. Founded in 1865 to serve the needs
of the merchants of the China coast and finance the growing trade between
China, Europe and the United States, HSBC has been an international bank
from its earliest days.

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.

HSBC in India is proud to have retained the Group's pioneering streak by


being an active partner in the development of the Indian banking industry -
even giving India its first ATM way back in 1987. The organization’s
adaptability, resilience and commitment to its customers have further
enabled it to survive through turbulent times and prosper through good times
over the past 150 years.

The Bank offers a comprehensive suite of world-class products and services


to its corporate and commercial banking clients as also to a fast growing
personal banking customer base. It has 33 branches in the cities of
Ahmedabad, Bangalore, Chandigarh, Chennai, Coimbatore, Gurgaon,
Hyderabad, Jaipur, Kolkata, Ludhiana, Mumbai, New Delhi, Noida, Pune,
Trivandrum and Visakhapatnam.

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

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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.

HSBC Group entities in India

1.Commercial Banking

The Hongkong and Shanghai Banking Corporation Limited (HSBC)

Personal Banking

HSBC offers a wide range of personal financial services, including personal


lending and deposit products, through its branch network in Ahmedabad,
Bangalore, Chennai, Chandigarh, Coimbatore, Gurgaon, Hyderabad, Jaipur,
Kochi, Kolkata, Ludhiana, Mumbai, New Delhi, Noida, Pune, Thane,
Trivandrum and Visakhapatnam. Also offered branch-wide are international
Gold and Classic credit cards from VISA and MasterCard and debit cards
from Visa. Customers have access to 24-hour banking services through an
extensive network of automated teller machines (ATMs), an integrated Call
Centre, and internet banking .

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Non Resident Indian Banking

HSBC's Non Resident Indian Banking (NRI) centres located in Asia-Pacific,


the Middle East, Europe and North America, together with HSBC's offices
worldwide, provide the international Indian Diaspora access to a range of
products and services. These include NRI related investment (both
international and domestic), transactional and deposit products, together
with a full range of personal and private banking products in India and
overseas. Internet banking also provides easy access to HSBC's services.

Financial Planning Services

Services include investment and custodian management and access to stock


broking and insurance services, which are offered to resident as well as non-
resident Indians.

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Corporate Banking

HSBC has well-established, long-term corporate banking relationships with


large domestic Indian corporations and foreign multinationals operating in
India. Services include term and working capital finance, trade facilities,
corporate deposits, syndications, payments and cash management services
and factoring.

Corporate Banking represents the wide range of banking and financial


services provided to domestic and international operations of large local
corporates and local operations of multinationals corporations. Services
include access to commercial banking products, including working capital
facilities such as domestic and international trade operations and funding,
channel financing, and overdrafts, as well as domestic and international
payments, INR term loans (including external commercial borrowings in
foreign currency), letters of guarantee etc.

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

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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.

Global Relationship Management teams are tasked with understanding in


depth the sectors in which our clients operate with the aim of adding value
through detailed industry knowledge and structured financial 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

HSBC's Extra Mile Business Banking offers two types of account to


small and medium-sized businesses - The Business Account and the
BusinessVantage Account. Services include Business Phone Banking,
Business Doorstep Banking and Multi Branch Business Banking.

Payments and Cash Management

HSBC provides integrated domestic and regional transaction support to


corporate clients through a sophisticated range of cash management
solutions, including collection and payment services and integration with
customer back-end systems. Operations and client services are ISO 9001
certified. Hexagon, the HSBC Group's dedicated electronic banking
service allows users to perform financial transactions, obtain
international financial markets information, and review details of their

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domestic and international accounts, from anywhere in the world, 24
hours a day.

Services provided are:

• Effective cash flow management


• Minimised costs and reduced operating expenses
• Maximised returns and interest benefits
• Enhanced risk management
• Improved security and audit controls

Trade (international and domestic) and Factoring Services


A wide range of solutions tailored to meet customer's requirements for
both domestic and international businesses is offered. HSBC is also one
of the leading banks involved in the bullion business through its offices
in Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi and
is supported by the Group's global expertise in the precious metal
business. HSBC is the leading provider of trade services in India and its
trade centres are ISO 9002 certified.

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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.

Treasury and Capital Markets

Clients consistently rate HSBC's Treasury business as one of the best in


India. Its dealing room in Mumbai is one of the largest in the country,
serving clients in Mumbai and in the major metropolitan centres across the
country. It provides a comprehensive range of products which include -
foreign exchange, money market and fixed income products and derivatives
in both rupees and major currencies.

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 Global Relationship Management teams are tasked with


understanding in depth the sectors in which our clients operate. Their aim is
to add value through detailed industry knowledge.

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.

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The Bank Aims to Provide:

• The full risk management services to their corporate and institutional


client base
• Suitable investment products to investor client base
• Focus on delivering wealth management applications

Custody and Clearing

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:

• Self-Service Banking with over 150 in-branch and off-branch ATMs


and 24-hour Phone Banking.

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• 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

HSBC Asset Management (India) Private Limited offers mutual funds to


its customers. With the Group's Global Fund Management expertise and
investment capabilities, it is able to deliver quality products to meet
customers' investment objectives.

4.Global resourcing

HSBC Electronic Data Processing (India) Private Limited, through its


offices in Hyderabad, Bangalore and Visakhapatnam provides data
processing / customer service facilities for the HSBC Group's overseas
operations.

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5.Insurance

HSBC Insurance Brokers (India) Private Limited is licensed by the


Insurance Regulatory Development Authority (IRDA) to operate as a
composite insurance broking company, which will function as a direct and a
reinsurance broker.

6.Data processing

HSBC Operations and Processing Enterprise (India) Private Limited,


through two centres in Mumbai and Chennai, provides operational
processing services for HSBC offices in India.

7.Private equity

HSBC Private Equity Management (Mauritius) Limited a subsidiary of


HSBC Private Equity (Asia) Limited in Hong Kong, has a Liaison Office in
Mumbai. The company specialises in the provision of equity capital to
unlisted growth companies in India and Sri Lanka.

8.Audit service

HSBC Professional Services (India) Private Limited provides internal


audit services to the HSBC Group's internal audit units worldwide, with
particular emphasis on the IT, Treasury, Asset Management, Private
Banking and Insurance functions.

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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

HSBC Software Development (India) Private Limitedhas established a


software centre in Pune to develop solutions for HSBC's Group offices
worldwide.

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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

HSBC's PowerVantage Account is an exclusive proposition that offers,


amongst other benefits, a unique feature, called the Personalised Financial
Review (PFR). A trained Financial Planner uses the PFR to help the client
evaluate their finances, identify current and future financial needs and assist
the clients in drawing up a plan to meet them. This sets it apart from any
other banking account.

Financial Planning Services

HSBC's Financial Planning Services offer assistance to secure clients future


needs by planning for contingencies like inflation, falling interest rates and
fluctuating market conditions.

Mutual Funds

HSBC offer investment options in funds that meet customers selection


criteria and fit their requirements, helping create and increase wealth
potential in the long-term scenario.

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.

With the personal attention of a Financial Advisor (FA), leveraging a team


of recognized industry specialists, the bank work continuously with the
clients, so that clients can benefit from banks individual knowledge and
collective professionalism. Leading this team, the Financial Advisor will
seek to:
• Understand client’s personal priorities and needs
• Help clarify goals
• Develop (or refine) financial plan
• Create integrated strategies to help achieve objectives
• Guide the client through the implementation of plan
• Monitor and adjust your plan as your priorities and needs shift
Concept of Wealth Management
At HSBC the Financial advisors are referred to as Financial Planning
Managers (FPM) and Premier Managers.

40
CUSTOMER RELATION MANAGEMENT SYSTEMS

Interactive approach that achieves an optimum balance between corporate


investments and the satisfaction of customer needs to generate maximum
profit.
It entails measuring inputs like marketing, sales, and service costs as well as
outputs in terms of customer revenue and it entails acquiring, continuously
updating and applying knowledge on customers to improve performance.
This demands an integration of marketing, sales, and service activities and
the implementation of appropriate systems to support customer knowledge
acquisition, sharing, and the measurement of CRM effectiveness.
The various types of CRM processes: CRM delivery processes are those
processes with direct customer contact (i.e. campaign management, sales
management, service management, and complaint management). CRM
analysis and support processes are processes that consolidate and analyze
the customer knowledge that has been collected in other CRM processes.
The findings of the analysis are passed on to the CRM delivery processes to
improve the latter’s effectiveness (i.e. customer scoring, lead management,
customer profiling, customer segmentation, feedback management, and
knowledge management).

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.

CRM systems can be classified into the following three sub-categories:


Operational CRM systems improve the efficiency of CRM delivery and
support processes. They entail solutions for marketing, sales and service
automation. Analytical CRM systems store and evaluate knowledge about
customers, e.g. data warehousing and data mining systems. They therefore
support the CRM analysis processes. Collaborative CRM systems manage
and synchronize customer interaction points and communication channels
(e.g. the telephone, email, and the web).

The technologies that can be described as CRM-related fall into two


categories: Gathering and mining customer data and the execution of
strategies at the customer interface.

Although customer interaction technologies are critical to the execution of a


CRM business strategy, it is the customer knowledge capability that enables
the creation of customer specific strategies for sales and service. Simply put,
customer knowledge capability drives the CRM business strategy, and the
customer interaction technologies deliver it.

CRM was viewed as integral to the marketing of products and services


within the bank, but it can also be seen as a discipline for managing
customer interactions. The quality of customer interactions is believed to be
integral to the customers’ expectations and loyalty with the bank. CRM was
soon viewed as a discipline that not only could offer the most appropriate

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.

Customer Data and Information found in the CRMS at HSBC includes


broadly the following:-
1. Contact information: postal and email addresses, fax and telephone
numbers,
2. Household Information: family relationships, household income, and
other associations,
3. Group Information: population segments a customer belongs to based on
interest, profession and other factors,
4. Account Information: customer purchasing, interaction and service
history. In the financial services industry, this information includes account
history, account conduct, account balances, credit limit and any information
pertaining to customer account.

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.

Measuring success of CRMS

Measuring CRM performance is a challenge: it is difficult to define the


causal connections between CRM activities and the company’s economic
results. These difficulties result from the manifold relationships between
functional areas such as marketing, sales and service, and CRM processes
and systems. In addition, many CRM benefits are of a qualitative nature and
it is therefore difficult to prove their influence on financial results.
Performance measurement in CRM can either focus on calculating the
monetary benefit of CRM investments, or on measuring and managing the
success of CRM activities and processes. In order to facilitate strategy
implementation in organizations and to measure and manage performance,
banks can use other types of measurement frameworks. These include
financial and non-financial measures to present a comprehensive picture of
the situation.
In this project we follow the same strategy and analyze the CRMS from two
perspectives:
1. Analytical strength provided by the CRMS. This was done by trying
to integrate the Customer Life Value concept for the CRMS being
used by HSBC (Noida branch). This will help us in understanding
whether the financial information stored in the CRMS is potent

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.

Analytical or Customer Profitability Information

Two things which come forward on analyzing the CRMS are:


(1)Does the company measure the “Customer Knowledge” perspective?
CRM is based on the assumption that better customer knowledge makes for
higher profits.
This is achieved through the gathering, analysis and use of customer data
such as master data, transaction data and soft facts, e.g., interests and
hobbies. The data allow HSBC to customize customer contacts and product
offers, and thus achieve a higher service quality.
Creating additional value for customers also improves customer retention
and loyalty. In turn, improved customer retention leads to higher customer
profitability, since long-lasting relationships have higher customer lifetime
values (CLV). Additionally, retention costs are far lower than the costs of
customer acquisition. In this way the hoped for positive effects of improved
customer knowledge on company profits should be achieved, an assumption
that plays an important role in the CRM philosophy. However, in practice

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.

Does the company measure the “Customer Value” perspective?


Here comes the essential question whether at a branch level keeping in mind
different geodemographic profiles it is possible to calculate the future
oriented “Customer Lifetime Value” and how is it implementing at the ibid
level.
The challenge of measuring customer value is, in general, determining the
costs of customer relationships. Strategic differentiation, e. g., of product
offers or communication channels offered, between customers according to
their monetary value for the company is scarce, with the exception of the
traditional overall classification into retail and private banking. Here again at
a branch level information relating to customer value is not calculated and
provided to the front end staff.

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.

Sales Culture. HSBC is a proponent of proactively selling its products and


services to customers. The bank has developed a sales infrastructure that
includes weekly sales goals, regular sales meetings, and a system of sales
incentive compensation. HSBC sales culture is highly disciplined and
compliant to banking as well as organization norms. The bank finds it
imperative to match the appropriate product and service to the customer.
Selling for the sake of selling is not tolerated. Rather, the bank strives to
ensure that sales discussions are solidly based upon an understanding of the
customer’s financial needs and goals.

Service Culture. Royal Bank’s service orientation is to provide critical


customer information to the points of customer contact. In essence, the bank
is attempting to use technology as a distributed platform for institutional
memory. The key elements that allow customers to receive excellent service
in their home branches are captured and distributed across the touch points.
Customer contact people still deliver “service,” but they do so with an
enhanced knowledge of who the customer is as well as their preferences.

Building Individualized Customer Relationships


It is important to recognize that relationships with customers vary
significantly. Every HSBC customer has a relationship with the bank, but
the nature and definition of the relationship vary according to the needs and
requirements of the customer. As an example, some customers have no

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.

49
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

50
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

52
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

Customer Assets & Liabilities

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

By performing customer segmentation, the company can make resource


planning effectively and efficiently. Precise customer segmentation requires
a huge amount of customer information and sales figures for analysis. To
perform this, the company has to categorize its existing customers into
active or inactive accounts. In addition, company should capture both the
Prospective whom the company's sales team has information on and
communications with and the possible customers with whom the company
does not have direct communications.

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

3. Medium - this is the customer segment of those who have a total


relationship balance of over twenty thousand Hong Kong Dollars. They are
the PowerVantage Customers of HSBC. They are the largest group amongst
the customer segments.

4. Small - this is the customer segment of those who have a total


relationship balance below twenty thousand Hong Kong Dollars. They are
the normal customers of HSBC Personal Banking.

5. Inactives - those customers whose account status is "Dormant" or


"Closed". Accounts with a dormant status are those accounts that have not

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

According to the customer pyramid of HSBC Personal Banking, the


customer groups for Top, Big, Medium and Small have been figured out.
However, in order to find out their profitability, there are some more
customer value parameters that have to be looked into.

. High profitability, multi-product packages usage - There are many personal


banking products at HSBC. Investment and insurance are classified as high

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.

. Transaction amount per transaction - Transaction amount per transaction is


the amount of money involved in every single transaction. If a customer
always has a high transaction amount per transaction, the relative operational
cost for serving that particular customer will be small, which means he or
she is more profitable.

. 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.

We can derive the customer profitability grouping as follow:

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.

3. Negative profitability customers - they are the customers in the Small


category. They seldom use the high profitability, multi-product packages.
They have a small transaction amount per transaction. They have a short
relationship over time with HSBC. They seldom have referral records.

One of the main purposes of implementing a CRM program is to retain the


profitable customers. Customers are only retainable when they are loyal to
the products and services provided, and are satisfied with the features of the
products, and the prices of the products and services offered.

CUSTOMER TOUCH POINTS

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:

. Customer Service Center – Financial Analysis

On-site service – Financial Analysis

. Events – Exhibition

. Inbound Calls - Call for Enquiries

. Outbound Calls - Tele-Marketing

. Inbound Email - Email for Enquiries

62
. Outbound Email - e-Marketing

. Portal - FAQ session

. Advertising - Image Building

In the At-purchase Phase, there are ten customer touch-points, which


include:

. Branch - Make Transaction

. Customer Service Center - Customer Package Upgrading

. On-site service - Contract Signing

. Events - Sales Road Show

. Inbound Calls - Place Order by Phone

. Outbound Calls - Tele-Sales

. Inbound Email - Make Transaction by Email

. Outbound Email - e-Sales

63
. Portal - e-Banking

. Advertising - Invitation to Use the Service

In the Post-purchase Phase, there are nine customer touch-points, which


include:

. Branch - Customer Enquiries

. Customer Service Center - Customer Enquires

. On-site service - Financial Review

. Events - VIP Gathering

. Inbound Calls - Call for Complaints

. Outbound Calls - Follow-up by Phone

. Inbound Email - Email for Complaints

. Outbound Email - e-Follow-up

. Portal - DIY services, e.g. customer information update.

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

Financial analysis in a customer service centre or as an on-site service - The


most important mission in the customer PRE-purchase process is to attract
new customers. In HSBC Personal Banking, financial analysis is an effective
way for asking customers to buy the bank's product. So, it is regarded as the
critical moment for the potential customers, which are still only prospective
ones at this stage.

In order to serve the potential customers, HSBC Personal Banking employs


many professional financial planers. Together with the internal training in
customer service, banking service and investment knowledge, they are all
well equipped in their own position.

AT-Purchase

Making transactions at the branch - Among all of the banking services,

65
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.

1. Dividing customers into customer groups, serving them separately


according to their needs and value to the bank (similar to the customer
segmentation of the previous section).

2. Enhancing the automated channels which include the ATM network,


internet banking service, 24-hour phone banking centre, etc.

POST-Purchase

Customer enquiries to the customer service centre or from inbound calls - It


is understandable that customers need professional advice and assistance in
their banking/financial service. So, at HSBC Personal Banking, customer

66
enquiries are considered the critical service moment for customers in the
Post-purchase customer process.

CUSTOMER NET PRESENT VALUE/ CUSTOMER


LIFETIME VALUE

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.

Customer lifetime value (CLV) has become an important metric within


marketing and CRM.
Usually CLV is defined as the net present value of future earnings or profit
of an individual customer. One key-issue when using CLV is whether the
firm can assess the value of the future earnings of each individual customer.
In this respect the firms should try to predict the lifetime characteristics of a
customer as early as possible and then act accordingly. The latter refers to
the fact that assessment of the future value can be used in determining the
marketing investments (e.g. retention budgets) for each individual customer.
However, in the case of incorrect assessments of the value of individual
customers, there could be a severe mismatch between the assigned customer
budget and the true delivered value of an individual customer. As CLV
predictions are used for segmentation purposes wrong predictions will lead
to customers being assigned to the wrong value segment.

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.

• Valuations rely on growth projections;


• Marketing metrics can be leading indicators of growth;
• Many firms appear and disappear without EVER making a profit;
• Off-balance sheet assets (customers, brands, systems) are
increasingly relevant;
• Marketing metrics are suggesting new ways to manage businesses and
set strategy.

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.

Client segmentation, at its core, represents the increasing complexity of the


environment in which we operate—one size does not fit all. Increasingly,
financial institutions will need to provide tailored offerings for the many
different segments of the affluent from lifecycle stages of pre-retirement
planning well into the retirement age. HSBC will need to become more
distinct in several areas with their customers including generating income,
preserving AUM, managing risks and offering hedges against catastrophes.
Competitively, HSBC will need to secure and protect their installed base of
wealth management customers.
This will entail intimately understanding their segmentation model and key
value propositions, how to service each unique segment optimally over their
distinct lifecycle and how to understand, interpret and best act upon key
trends developing within their key segments. As there was difficulty in
implementing the CLV model we are not able to cluster clients on the basis
of their value.

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ANALYSIS OF CRMS

MARKETING ORIENTATION

Employee Feedback

Customer Touch Points

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

The research uses a survey-based case study in which end-users are


approached to determine their information requirements. This is a common
method of eliciting information requirements in information systems
research.The time frame of the research was around one month but required
data collection from many banking consultants.

(a) Sample and population

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.

(b) Instrumentation and Procedure


The research was conducted in two stages. The main objective of stage one
was to generate a list of information required by Bank Consultants and
Services and Sales Representatives. A secondary objective of stage one was
to detect what analytical information currently available in
marketing/management CRM application would be used by sales agents if it
were made available to them. The objective of stage two was to collect
importance ratings for the information requirements identified in stage one.

73
(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.

(d) Rating Information Requirements

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

74
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.

(e) Data Analysis

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.

CUSTOMER ORIENATION TOWARDS CRMS

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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

The research uses a survey-based case study in which end-customers were


approached to determine what information requirements they think the bank
best utilizes from the data that it takes from the customers. This is a common
method of eliciting information requirements in information systems
research. The time frame of the research was around one month and the
required data was collected from those customers who fell into the Power
Vantage account holder category.

(a) Sample and population

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.

(b) Instrumentation and Procedure


The research was conducted in a single stage and the main objective was to
generate understand what is the perception regarding information handling at
the bank and what are particular traits that the end customer thinks a good

76
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.

(c) Eliciting Information Requirements


A questionnaire was designed for the survey. In question one, respondents
were asked to rate how well the information that they provide to the bank is
utilized by the bank. In the second question they were asked to comment on
to what extent the information held by the relationship manager help in
providing better service. Question three asked the customers to rate
individual qualities desirable in a relationship manager in terms of the
importance they assign to them. Question four listed crucial elements of
information as per the in house survey. These elements were now shown to
the customers and the same were asked to rank them in order of importance
on a 5 point Likert scale. With the help of the last question we were able to
map the differences between information requirements from the view of the
manager and the customer.
For the survey fifty prospective Power Vantage customers were chosen in a
random draw from the CRMS and they were then administered the
questionnaire. Participation was voluntary and no incentives were used.

(d) Rating Information Requirements

The survey required the customer to rate the information items.

(e) Data Analysis

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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.

Q1. WHAT DO YOU THINK OF HSBC BANK?

Schedule pvt bank 27

Independent bank 16

78
Foreign bank 46

Public bank 11

11%

Q2. WHAT INSPIRED YOU TO OPEN ACCOIUNT WITH HSBC


BANK?

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%

Q3. WHAT ARE THE PROBLEMS FACED BY YOU AT THE BANK?

Error in transactions 26

Delayed processing 40

80
Non cooperating staff 24

Insufficient cash in ATM 6

Others 4

6% 4%
26%

24% 1
2
3
4
5

40%

Q4. IF COST OF SERVICES OF HSBC BANK INCREASES, WILL YOU


STILL BE A CUSTOMER OF THE BANK?

YES 62

NO 38

81
NO
38%

YES
NO

YES
62%

Q5. HAVE YOU EVER REFERRED HSBC BANK TO YOUR


FRIENDS/RELATIVES/OTHERS?

YES 80

82
NO 20

NO
20%

YES
NO

YES
80%

Q6. ARE YOU SATISFIED WITH THE CRMS OF THE BANK?

YES 85

NO 15

83
NO
15%

YES
NO

YES
85%

Q7. ARE YOU SATISFIED WITH THE TREATMENT FIVEN TO THE


CUSTOMERS AT HSBC?

YES 75

84
NO 25

NO
25%

YES
NO

YES
75%

Q8. DO YOU ADVICE ANY CHANGES IN THE PRESENT CRMS AT


HSBC?

YES 24

85
NO 76

YES
24%

YES
NO

NO
76%

Recommendations

The following recommendations are brought forth:

86
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

1. The data available at the branch proved to be not comprehensive


enough on the following three counts:

87
(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

88
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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