Improving individual customer relationship management at the joint stock commercial bank for investment and development of viet nam– dong do branch

According to a Harvard study: “The cost of creating a new customer is usually 5 to 10 times greater than the cost of maintaining an existing customer; Some companies get 100% profit from

BANKING ACADEMY BANKING FACULTY

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GRADUATION THESIS

“ IMPROVING INDIVIDUAL CUSTOMER RELATIONSHIP MANAGEMENT AT THE JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT

OF VIETNAM – DONG DO BRANCH”

Student name : PHAM MAI HONG

Class : K20CLCA

Course : Finance - Banking

Student code : 20A4010250

Supervisor : PhD Nguyen Thi Quynh Huong

Ha Noi, May 2021

DECLARATION

I declare this graduation thesis named “Improving Individual Customer Relationship Management at The Joint Stock Commercial Bank for Investment and Development of Viet Nam – Dong Do Branch” is the product of my own research

and under the guidance of Ms Nguyen Thi Quynh Huong Of these data and results stated, all are truthful and derived from the internship unit's actual circumstances, which is Dong Do Branch

If any fraud is detected, I take full responsibility for the content of my thesis

Ha Noi, May 2021

Student

Pham Mai Hong

In addition, I would like to thank the Board of Directors of Bank for Investment and Development of Viet Nam (BIDV) – Dong Do Branch, for creating favourable opportunities for me to practice here In particular, I would like to extend my sincere thanks to all the coworkers at Individual Customer I Department for being extremely keen on answering and helping me during the internship

Last but not least, I would like to express my warm appreciation to my family and my friends for always being on my side, caring, supporting and motivating me throughout my studies and graduation

Due to limited self – knowledge, in the process of contributing and completing the graduation essay, it is hard to avoid any shortcomings I look forward to receiving guidance and suggestions from the teachers as well as the Bank, in order for me to improve myself and serve practical work in the future

Thank you sincerely

TABLE OF CONTENT

DECLARATION I ACKNOWLEDGEMENTS II TABLE OF CONTENT III LIST OF ABBREVIATIONS VI LIST OF FIGURES VII LIST OF TABLES VIII ABSTRACT IX

CHAPTER I:

THEORETICAL BASIS ON CUSTOMER RELATIONSHIP

MANAGEMENT IN BANK 1

1.1 OVERVIEWOFCUSTOMERRELATIONSHIPMANAGEMENT 1

1.1.1.1 Customer and customer classification 1

1.1.2.1 Definition of customer relationship management – CRM 4

1.3 FACTORSAFFECTINGONCUSTOMERRELATIONSHIP

THE CURRENT SITUATION OF CUSTOMER RELATIONSHIP

MANAGEMENT AT BIDV – DONG DO BRANCH 28

2.1 INTRODUCTIONABOUTBIDV– DONGDOBRANCH 28

2.1.1 The establishment and development of BIDV – Dong Do Branch 28

2.1.3 Business performances of BIDV – Dong Do Branch 31

2.2 THECURRENTSITUATIONOFCUSTOMERRELATIONSHIP

2.3 ASSESSMENTOFTHECURRENTSITUATIONCUSTOMER

RELATIONSHIPMANAGEMENTATBIDV–DONGDOBRANCH 55

SOLUTIONS TO IMPROVE THE INDIVIDUAL CUSTOMER

RELATIONSHIP MANAGEMENT AT BIDV – DONG DO BRANCH 65

3.1 FOUNDATIONSFORSOLUTIONSTOIMPROVEINDIVIDUAL

CUSTOMERRELATIONSHIPMANAGEMENTATBIDV–DONGDO

3.1.1 The rationale of improving the individual customer relationship

3.1.2 Development orientation of Individual Customer Department at BIDV

3.1.3 Purposes of Individual Customer Department at BIDV – Dong Do

3.2 SOLUTIONSTOIMPROVEINDIVIDUALCUSTOMER

RELATIONSHIPMANAGEMENTATBIDV– DONGDOBRANCH 67

3.3 RECOMMENDATIONSTOIMPROVEINDIVIDUALCUSTOMER

3.3.1 Set up a professional marketing department 74 3.3.2 Improving the quality of recruitment and training for employees, salary mechanism incorporating CRM in banking operations 74

REFERENCES 1

LIST OF ABBREVIATIONS

BIDV Bank for Investment and Development of Viet Nam

LIST OF FIGURES

Figure 2.2 Structure of deposit according to the end of the term in 2018 to

Figure 2.7 The portion of individual customers in groups and contribution

proportion in individual deposit balance at BIDV – Dong Do Branch in

2020

52

LIST OF TABLES

Table 2.1 Capital Mobilisation Scale Results of Dong Do Branch

Table 2.2 Growth Rate of Capital Mobilisation in 2018 – 2020 32

Table 2.3 Lending Activity Scale Results at BIDV Dong Do Branch in

Table 2.4 Growth rate of Outstanding Credit at BIDV Dong Do Branch

Table 2.5 Profit and Loss Statement of BIDV Dong Do Branch in

Table 2.6 Number of individual customers per segment in BIDV – Dong

Table 2.7 Summary of the number of group customers and the

proportion of contributions in the deposit balance from individuals at

BIDV – Dong Do Branch in 2020

52

ABSTRACT

1 Rationale

Customer Relationship Management (CRM) views have become popular since the 90s Still, at that time, most businesses and organisations only focused on serving the request that has been inflated from the customer In general, most businesses and organisations have not genuinely understand customers' needs to discover their hidden requirements So far, CRM has marked a dramatic change in the business model and new advancement in business operations

According to a Harvard study: “The cost of creating a new customer is usually

5 to 10 times greater than the cost of maintaining an existing customer; Some companies get 100% profit from 5% of their customers; Big companies have lost 50% of their customers within five years.”

It can be seen that CRM plays a crucial role for businesses in general and banks in particular as it shows an overall picture of the approach and understanding about the customer, from which, based on efficiency in terms of system management or devising strategies to assess satisfaction and customer loyalty However, to attract new customers and maintain existing partners, it is not only within the scope of the customer marketing department, but broader, it is an association between departments together To illustrate, when entering the bank, a customer needs to be greeted by the security department and the reception department The professional departments such as the transaction department, the accounting department, the sales department, will be in charge of consulting and implementing customers' needs quickly All are managed and regulated as directed

by the above management board In summary, CRM will include the combination

of management, care and close building relationships between customers and the bank, contributing to improving service quality and improving the quality of the bank

Bank for Investment and Development of Vietnam – Dong Do branch has recognised the significant position of the customer Therefore, the customer

relationship management process at Dong Do Branch from the day of its establishment has been continuously built, maintained, and developed to create a sustainable relationship and best meet customers' needs, thereby increasing its profit value On the other hand, under the circumstances of fierce competition among other credit institutions in the area, especially in the field of capital mobilization, Dong Do Branch of Investment and Development Bank has encountered many challenges in business operations as well as in retaining old customers and recruiting new customers Therefore, in order to improve competitiveness, BIDV Dong Do Branch has dynamically promoted customer care, at the same time, intensifies value for customers based on the foundation of the Bank's customer information management system However, in comparison to expectations, the effectiveness brought about has not really created a competitive advantage, and customer relationship management also shows many flaws, such as customer care is not professional enough, the standard to classify customer is not yet reasonable, a part of bank staff and employees are not conscious about the value of customer relationship management

Under the focus and priority task of promoting capital mobilization, more than ever, customer relationship management, especially deposit customers, needs to be centred and enhanced further in order to increase capital mobilisation

Deriving from that fact, I decided to choose the topic “Improving Individual Customer Relationship Management at Joint Stock Commercial Bank for Investment and Development of Vietnam - Dong Do branch” as the research topic

2 Literature review

2.1 Aboard studies

As a matter of fact, CRM activities are no longer strange to developed countries around the world, so studies on this activity are also viral, typically:

According to Peppers and Roger (2004) “Managing Customer Relationships:

A Strategic Framework”, they have shown that CRM is a management decision –

making process with the ultimate goal of improving customer value in order to

develop good relationships with them through customisation pace This study also produced the IDIC model, a standard model reflecting a successful CRM process

However, the customer relationship management for the banking system has not been comprehensively discussed but only mentioned banks in the region Apart from

that, this is a quiet prerequisite study for this research in which using the IDIC model to improve CRM work at BIDV – Dong Do Branch In a similar fashion,

CRM case study: "Optimizing relationships a national Australia bank”, provided

by Kathleen Khirallah also only deliberated around local CRM problems

In books such as “Customer Relationship Management” of Fayerman (2002);

“Marketing Management” of Philip Kotler (2003), also mentions and introduces

customer research methods, customer relationships but has not yet concentrated on exploiting, chiefly on marketing strategies such as pricing strategy, product line

strategy, distribution system, communication, However, this work does not comprehensively analyse customer relationship management and does not provide

a process for implementing customer relationship management

In a 2004 reprint, “CRM at the Speed of Light: Essential customer strategies for the 21st century” by Paul Greenberg, addressed customer relationship management, nevertheless, its content in quite a favour of strategic management more than just improving the relationship management to customer

2.2 Domestic studies

In the point of customer relationship management, there are also many

research works and books published, such as: Truong Dinh Chien (2009), “Quan tri quan he khach hang”, Nguyen Van Dung (2007), “Quan ly quan he khach hang”, Lecture “Quan tri quan he khach hang” by Bui Thanh Huan,…

Topic“Quan tri quan he khach hang tai ngan hang TMCP Ngoai thuong Viet Nam – chi nhanh Quang Nam” by Pham Chi Binh: gave an overview of the bank's

customers and customer relationship management in the banking sector The author analyzed customer relationship management conditions in deposit mobilization activities and analysed the current situation of customer relationship management in Joint Stock Commercial Bank for Foreign Trade of Vietnam – Quang Nam Branch

Since then, the author has provided orientations to build a CRM system, including establishing a marketing function apparatus, overcoming perception views, completing a CRM information system and building a business culture Furthermore, on the basis of IDIC model, the author has designed tools to influence target customers, select target customers and measure the results of CRM program

implementation However, the author only concentrates on researching institutional customers

Topic“Quan tri quan he khach hang ca nhan tai chi nhanh ngan hang TMCP Cong Thuong Da Nang” by author Ho Thi Thanh Thuy: The author has

systematized and developed for more completeness of the theoretical issues The basic theory of customer relationship management confirms that individual customer relationship management plays a vital role in commercial banks The author points out the requirements and premise for success In the strategy of CRM

at commercial banks, the author analyzes the current situation, including advantages, barriers and clarifies the causes for customer relationship management Thereby denoting that not only the group of large corporate customers, the group of small and medium enterprises and individual customers are also the one that Da Nang Industrial and Commercial Joint Stock Bank need to focus its resources on The goal is to maintain and elaborate into a strategic customer when implementing customer relationship management, ensuring sustainable development in the long term, based on scientific and practical foundations to build customer policies for

target customer groups Yet, the author has not mentioned in – depth methods of effective customer communication and integration of technology platforms available at the bank, hence, the customer care assignment has not been concerned

3 Research purposes

- Systematising theories basis on customer relationship management

- Evaluating the current situation of customer relationship management at BIDV Dong Do Branch in the period of 2018 – 2020

- Proposing solutions to improve customer relationship management of BIDV Dong Do Branch in the future

4 Objective and scope of the research

- Objective of the research: Customer relationship management issues of the Bank for Investment and Development of Viet Nam – Dong Do Branch

- Scope of the research:

• About space: BIDV – Dong Do Branch

• About time: In the period of 2018 – 2020

5 Research method

The thesis uses a combination of research methods such as qualitative comparison methods, factor analysis methods, inductive methods, dialectical materialistic methods to raise problems, analyse interpretations and conclude At the same time, the thesis also uses tools such as statistics, analysis and comparison

6 Structure of the research

In addition to acknowledgements, the introduction, lists of tables, conclusions, references and appendices, the thesis includes three chapters:

Chapter I: Theoretical basis on Customer Relationship Management in Bank; Chapter II: The current situation of Customer Relationship Management of BIDV – Dong Do Branch;

Chapter III: Solutions to improve the Individual Customer Relationship Management at BIDV – Dong Do Branch

CHAPTER I THEORETICAL BASIS ON CUSTOMER RELATIONSHIP

MANAGEMENT IN BANK

1.1 OVERVIEW OF CUSTOMER RELATIONSHIP MANAGEMENT 1.1.1 Customer and customer value

1.1.1.1 Customer and customer classification

An organisation's customer is a collection of individuals, groups of people,

businesses, who need to use the company's products and satisfy that demand

(Trinh Quoc Trung (2010), “Marketing Ngan hang”)

Based on customers' buying behaviour, customers are classified into two categories: institutional customers and individual customers

- Institutional customers: Institutional customers often have more complex buying decisions Acquisitions often involve sizable sums of money, often complex techno – economic considerations and interactions between people

at multiple levels of the organisation, which can take a long time to come up with the decision The organisation's buying process tends to be more formal than that of the individual

- Individual customers: Purchase decisions of individual customers are often less complicated than institutional customers, strongly influenced by cultural, social, personal and psychological factors

Based on the purpose, customers are divided into three main groups of customers:

- Depositing customers: are organisations or individuals that deposit money into the bank for payment, savings, escrow, etc This is the source of capital (input) that the bank uses to give loan (output)

- Loan customers: are organisations or individuals in need of capital for production, business, consumption, etc

- Customers related to financial and monetary services, bank assets, including two groups of customers, which are:

+ Personal consumption market: The people play a key and decisive role in the family Therefore, they have an essential part in the purchase of banking services They buy banking services to serve their own life and living

+ Institutional market: are customers who buy services to do business So they are much concerned about profit, cost, price, or the ability to satisfy the needs of their jobs

1.1.1.2 Customer value

According to a Customer Motivation Research Organization (USA) senior expert, 80% of business profits usually only make 20% of the number of customers bring This shows that having a small group of clients will return to the business Thus, the goal of companies is to keep the customer group profitable for as long as possible In the process of collecting and processing customer information, enterprises must identify regular, loyal and valuable customers in order to build a suitable program system

Thus, customer value is understood as a function of profit that customers can

return to the business in the future In other words, customer value is the sum of future profits that customers return to the company through transactions (Russell

S.Winer (2001), “Customer Relationship Management: A Framework, Research Directions, and the Future, Haas School of Business”)

For example, a company has two customers Customer A brings in a profit of

1 billion per month for the past two years, while customer B brings in 500 million per month in the same period Which customer is more valuable? Of course, we will claim to be customer A But not sure! If customer A generates a profit of 1 billion in all the following months and customer B still brings in 500 million, it can be concluded that customer A is worth twice as much as customer B But suppose it is predicted that customer A will change suppliers while customer B maintains a stable transaction level in the future In that case, we can confirm that customer B is more valuable than customer A

Calculating the accurate value of customers allows the business to determine the investment value for each customer, which affects the ability to make a profit for the company in the future, rather than just concentrating and lines of products or services that customers have purchased in the past

With the above valuation of customers, we can apply it to identify a potential customer as well as a loyal customer of the bank

- The potential customer of the bank:

Potential customers of a bank are those with high – profit potential for the

bank in the future with which the bank can establish a relationship with them (Trinh

Quoc Trung (2010), “Marketing Ngan hang”) At the same time, they are capable,

intentional and willing to transact with the bank if needed With this group of customers, banks can enjoy the following benefits:

+ Increase the bank's profit in the future

+ Expand the banking market

+ To become loyal customers of the bank if the bank's products and services satisfy their needs to the maximum

+ The bank's products and services are sold more

This group of customers will establish a relationship with the bank if: The products and services that the bank brings to customers are of the highest value They always desire to have maximum value within their budget with limited knowledge, motivation and income They will set an expectation of value and based

on that action Then, they find out if the bank's products and services meet their expectations for value This will affect their satisfaction and the probability that they will buy it next time In short, customers will choose the bank that offers the highest value for them

- The loyal customer of the bank:

Loyal customers of a bank are those who immediately think about the banking

services when they need it, and they invariably disseminate good information about

the bank (Trinh Quoc Trung (2010), “Marketing Ngan hang”) Benefits when the

bank has loyal customers:

+ It is much easier for a bank to respond to their needs for loyal customers appropriately than a new customer

+ The more loyal customers, the more often they use the bank's products and services, the more it helps the bank reduce marketing costs and reduce the risk of losing customers to competitors

+ Loyal customers are considered a very active ‘word of mouth’ advertising force for the bank New business opportunities will come through the introduction, thus reducing promotional costs

Therefore, the bank's mission is to create, nurture and develop relationships with existing customers to turn them into loyal customers

1.1.2 Customer relationship management

1.1.2.1 Definition of customer relationship management – CRM

Currently, there are many different definitions about CRM Still, based on the

textbook of Truong Dinh Chien (2009), “Quan tri quan he khach hang”, in general,

the concepts are defined according to three points of view: (1) emphasis the technology, (2) emphasis on a business or sales process, and (3) consider CRM as a business strategy

The notion of considering CRM as a technology solution to help manage

customer – related issues is a fairly common one According to this point of view, CRM has been regarded as an information system collected from many different sources along with analytical methods to produce reports and tables to help businesses have an overall picture of customers, goods, market and other matters of

concern in the business Mei Lin Fung said: “CRM is a superset of modern business models, methods and technologies with mutual interrelationship designed to maintain and develop good relationships with others most potential customers” In

the age of information technology, CRM can also be considered a software

program: “A CRM system is a software package that can adjust parameters to

integrate and manage all aspects of customer interaction in the team organise and improve an organisation's ability to handle customer service, sales, marketing, online transactions and ordering” (Green and Ridings, 2002) For example,

businesses can build a database system about customers, containing complete details about customers and business relationships between sales staff or service providers with customers, to ensure customer satisfaction according to product plans, service provision, other customer care policies, etc

The second point of view is that CRM is the enterprise's ability to access and/or exchange with customers by building and implementing sales processes

From this point of view, CRM is understood as a sales process that is part of the ISO 9000 quality management system For commercial enterprises, this is the central process of the entire management system Implementing a CRM system in the enterprise will focus on several departments to contact customers, such as

marketing, sales, planning, etc According to David Sims: “CRM is a process that businesses use effectively utilise the deep knowledge of customers accumulated over time to formulate and execute their business strategy to meet the specific needs of each target customer ” So here, CRM is a process or method that businesses use to

learn about the needs and behaviour of customers in the purchasing process, in order to develop a closer relationship with them Many technological elements make up a CRM program, but CRM is not just customer relationship management software programs CRM is understood as a process to help businesses get more information about customers and feedback from customers

The third point of view is to consider CRM as the most comprehensive business strategy In this view, CRM is a business strategy aimed at optimising

profits, sales and customer satisfaction (Gartner's definition); it is an integrated strategy with customer orientation to improve the competitiveness of businesses in the market With this point of view, CRM is often concerned by the top

management of enterprises Specifically defined as: “CRM is a set of strategic activities to select, establish, maintain and develop excellent and long-term relationships between businesses and customers based on interests customer and enterprise benefit processes” Here, CRM is a management model in which the

customer is at the centre of all activities and all operations that the business performs Use modern technology, integrated strategy planning, unique marketing techniques, and organisational development tools to build internal and external relationships, increase profitable revenue, as well as CRM includes principles, strategies, solutions, applications, systems, software, and ideas for effective customer relationship management

In addition, there are many different notions of customer relationship management, depending on each perspective, industry, and different businesses

such as: Considering CRM as data storage and analysis (Kumar and Reinartz, 2006), Considering CRM as cultural change in the organisation (Anton and Petouhoff, 2002), Seeing CRM as a management activity that focuses on relationships, not transactions (Swift, 2001), However, it is necessary to properly

understand the nature of customer relationship management that is oriented management to build and develop a long – term and close relationship between customers – business and CRM cannot be just customer service or software engineering for pure customer record management This approach helps companies establish collaborative relationships between companies and customers, which is considered the central factor determining the business's success Customer relationship management must bring benefits to both parties: companies and customers on the basis of adapting the process of creating benefits for customers, thereby creating benefits for businesses Therefore, customer relationship management for businesses in general and the bank should link all marketing, sales, and customer service activities to customer satisfaction row

the proper awareness of customer relationship management For all business members to correctly apprehend, the managers need to grasp the employees' psychology, and convey the importance of customers to the business based on considering customers as the source Only provide profits for the company and the customers themselves ensure the survival and development of the business On that basis, customer relationship management ensures everyone is aware of the importance of customers and is committed to providing customers with the business's best product and service values

In addition, customer relationship management shows art through all external customer relations, through customer care before, during and after – sales The process of customer care with the direct contact between businesses and customers, requires customer care staff to be equipped with skills and art in providing services

to customers, based on keep firm with information about companies, products/services and customers The effectiveness of the customer relationship process is directly dependent on the salespeople's ability to take care of the customer

Customer relationship management is scientific, presented in the organisation process, planning to collect customer information, setting up a strategy to build, maintain and develop relationships CRM can be thought of as a process that includes:

- Identify the inputs of the customer relationship management system

- Identify the elements that make up the customer relationship management system

- Identify features and definitions that create the basis for CRM with organisations and customers of the business

- The ability to improve and develop the CRM system over time

CRM strategies and activities focus on building long – term relationships with customers At the core of a CRM activity centred on any business is developing core competencies, and general method for creating long-term and lasting customer relationships

Customer relationship management is a technology, reflected in customer information management software The CRM software itself has supported a lot for the above purpose and is an effective tool for businesses Today, customer information management systems are built by many organisations to be associated with software technology that many people think that CRM is a term referring to customer information management software However, CRM is not simply an information technology, but CRM is a way of thinking and solving problems related

to establishing long – term relationships with customers Technology and applications are only tools to implement, maintain and develop relationships between businesses and customers Therefore, CRM requires a long-term, customer-oriented business mindset and culture

1.1.2.3 Scope of CRM

Customer relationship management has an unrestricted scope in the phrase

"customer relationship" which is the relationship between the system working directly with customers, particularly sales and marketing department or supply department service level But by extension, it requires all business members to have

a correct understanding of the importance of the customer to conduct activities to build, maintain, and develop customer relationships Building, maintaining, and promoting relationships with customers is not a task of any individual, department,

or department Still, it must be a common mission, a strategic mission of all members

Effective customer relationship management is not only the contribution of customer contact departments but also other departments Other departments will support and bring values to help the sales and marketing department communicate more effectively When customers are satisfied with what they have, the people in the business themselves feel satisfied with what they have done This means that the quality of supportive care given to all employees in the business is proportional to the business customers' rate Thus, customer relationship management also directs managers to find new ways to support at work and ensure the interests of employees

in all departments of the business

1.1.2.4 Components of CRM

CRM can be divided into three parts:

- Operational CRM: includes a system of communication activities with customers such as marketing, sales and customer service The first is marketing automation programs: analysing detailed information about each customer, managing customer calls, managing customer lists, using tools to evaluate marketing effectiveness The second is the automatic sales management program: sales cycle analysis, providing sales volume analysis reports, sales management, order tracking,etc Customer support and care: the system automatically answers customer complaints, monitors additional services, etc

- Analytical CRM: including customer analysis systems, analysing the effectiveness of each marketing activity with each customer: managing and analysing advertising campaigns, managing relationships in distribution channels, analysis to optimise pricing policy, analysing financial aspects for construction activities and maintaining relationships with customers

- Collaborative CRM: including all tools used to influence customers such as personal contact, mail, fax, phone, internet, etc to provide direct services to customers, find out effective ways of interacting with customers

et al (2004), the fundamental goals of CRM are:

- Customer identification

- Differentiate customers

- Exchange and interaction with customers

- Customise customers

The above four constituents are the principles of applying the "marketing one

to one" philosophy in the customer relationship management process (detailed in content 1.2.2.3.) Enterprises apply to convey information about products, services, promotions, and customer care to each individual customer according to each of their needs In general, as long as the goal of the business is implementing an effective CRM strategy, the business can afford customers with better services, improve the efficiency of the customer support centre, assist employees, simplify the sales process, discover new customers, boost the loyalty of existing customers, develop a competitive position and achieve the ultimate purpose of enhancing sales and profits from customers

1.2 OVERVIEW OF CUSTOMER RELATIONSHIP MANAGEMENT IN

BANKS

1.2.1 Definition of CRM in banks

According to Parvatiyar and Sheth (2001): "Customer relationship management is a business strategy directed at finding, selecting and maintaining relationships with the most valuable customers" Indeeed, CRM in bank focuses on

marketing, sales and service processes and producing products according to customer needs to serve customers in the best way

In a nutshell, CRM is a system that detecting potential subjects, turning them into customers, and then keeping them with the bank Hence, CRM is a combination

of many techniques from marketing to managing two – way information with customers, as well as a lot of analytical tools about the behaviour of each market segment to the shopping behaviour of each customer To summarize, we can visualize the aspects of CRM in bank (based on three points of views that listed in 1.1.2.1.) as follows:

- Functional aspect: concentrate on technology

+ Salesforce automation

+ Marketing campaign management

- Customer interaction aspect: concentrate on customer experience

+ Build a unique view of customers through contact channels

+ Distribute customer insights towards all customer – interacting functions

- Strategic aspect: concentrate on customer satisfaction

+ Voluntary CRM from a technical background

+ Describe CRM as a customer – centric process

+ Customer insights affect the entire organization

1.2.2 Basic characteristics of CRM in banks

On the basis of awareness of the business environment, plan and control resources and activities and make the bank adapt to the business environment, satisfy customer needs and bring profits to the bank row, CRM in banks has five distinct characteristics:

- CRM of the service industry: The process of producing and consuming banking services takes place simultaneously with three factors: capital, equipment and customers Service quality is either a goal or an operational result of a banking CRM, in which combines utilities and advantages that banks bring to customers

- Business objects of banks are financial assets, financial and monetary services Money is a raw material for both inputs and outputs Money is also affected by many objective determinants such as economic, political, social, etc Therefore, it is necessary to determine and forecast the influence of each factor on money

- Banking business takes place in a very diverse and complex relationship Therefore, banking marketing activities are also diverse and complex, especially in coping with the relationship between banks and customers A customer can be either a supplier of starting materials (savings deposits) or a consumer of that material (borrowing money, as example)

- A bank is a business entity in the financial market Banks operate chiefly by borrowing to lend, thus, banking business bears many risks CRM activities must have measures to control the situation to limit threats

- Banks functions in a separate financial market compared to other economic sectors Banking activities are subject to regulations on the management of a special commodity, which is money Banks (especially commercial banks) are subject to state management Therefore, CRM in the bank must pay attention to legal factors

to assure sufficient business operations

1.2.3 Role of CRM to the bank

Similar to other businesses, customers also play a crucial role, directly affecting the success or failure of a bank in the context of increasingly fierce competition in the financial and monetary market In particular, a customer participates in providing inputs such as savings deposit, buying promissory notes, etc At the same time, it is also an output consumer when borrowing money from the bank The relationship between a bank and a customer is a two – way relationship that facilitates mutual coexistence and development The success or failure of the customer is the decisive factor for the existence and development of the bank In contrast, the bank's innovation in product and service quality creates the conditions for success in the bank – the customer's business

As a business field where the differences in products and services are not much, prices and interest rates are also close to the same, banks can only attract customers by quality of service, by raising high product value for customers, with preferential policies, brand reputation, efforts to build and develop excellent and long-term relationships with our customers

Therefore, it can be said that the level of internal competition in the banking market is very fierce, especially when the participation of foreign credit institutions

is no longer strictly bound by the Government and the State as before The level of intense competition will eliminate banks from the market that are not actively adapting to that competitive environment

Consequently, CRM is an effective solution to overcome these problems, is an effective tool for the business activities of Vietnamese banks in:

- Determine correctly and promptly the needs and wants of the market and customers

- Determining how to meet those needs and desires more effectively than competitors, improving the quality of banking services

- Helping the bank improve its competitiveness in the process of international economic integration

1.2.4 CRM operation model in banks

Competent customer relationship management to bring profit is the final destination of businesses in general and banks in particular To be able to manage customers, many researchers and managers have examined and come up with solutions They propose and elaborate many CRM models to support customer relationship management These CRM models are also effective in better understanding the definition and adapting the modern concept of CRM Here are three typical CRM models to impulse the CRM process:

- Competitive Quality Index (QCI) Model

- CRM Value Chain Model

- CRM Model IDIC

Regarding as Competitive Quality Index Model, which is constructed by Hewson and partner (2002), it focuses on three main activities: acquisition, maintenance, and penetration Therefore, instead of discussing about the

relationship to customers, it is defined a customer management model In addition,

its activities are remotely towards the operating model of enterprises or fully private banks Meanwhile, in the current position of the BIDV system in general, acquisition, maintenance and penetration are not necessary Therefore, the QCI model does not support the CRM work at BIDV

The CRM Value Chain Model is a high – standard model developed by Francis Buttle (2004), which identifies the processes that businesses employ to generate products or services for customers The ultimate aim of the CRM value chain process is to assure that the company creates long – term valuable

relationships with strategically significant customers This CRM model perceives

all the steps and activities required to build customer relationships, in which activities are divided into two stages: prime stage and supporting stage However,

retail activities at BIDV Dong Do Branch not only concentrate on customers who create the most value for the company, but also pay great attention to new customers, customers with large amounts of deposits from low to medium, as well

as potential customers, etc By virtue of that, the CRM Value Chain Model is also inappropriate to BIDV Dong Do Branch

Meanwhile, the IDIC model, which is established by Peppers and Rogers Group (2004), is viewed as a general blueprint for implementing CRM in many different scenarios IDIC stands for four stages of CRM implementation: identify, differentiate, interact, and customise Therefore, the IDIC model is the most reasonable choice to complete the CRM work in general bank based on the criteria

of the IDIC model

Many support the view that customer relationship creation and management may fail without these four stages, which was designed on the uniqueness, the individuality of the customer, and the repeating characteristics of the relationship

Image 1.1 CRM Operations Model (IDIC Model)

Source: CRM.Viet

1.2.4.1 Identify

To create a relationship with any customer, a business first needs to know the customer's identity, which is to recognise a customer when they return, or over the phone, online Furthermore, companies need to know each customer in as much detail as possible – including their unique habits, preferences and characteristics However, in many businesses, customer data is often "shredded" and distributed in different storage systems, so they are less likely to produce a customer panorama This not only affects marketing, increases service costs, but also reduces efficiency in customer relationship management The solution to this problem is to gather all customer data in one place according to a unified data model The customer database system needs to be flexibly connected between departments and centralised control system at the enterprise to facilitate searching and update information about customer interaction history Thereby, meeting customers' needs

in the best way

Identification activities include:

- Identify: Decide current customer identification information (name, address,

phone number, account number, household information) For example, customers can use many different names, be it surname, middle name, or nickname, so the problem is identifying a unique username

- Collection: Mechanism of collecting possible identities through frequent

customer codes, credit card data, single word, web interactions, questionnaires,

- Linking: Linking identity of customers with all transactions, with customer

interactions performed at all contact points in different units and parts of the business

- Integration: Customer identification not only needs to be associated with all

interactions and transactions, but also must be integrated into the enterprise information system used to run the business For example, the frequent flyer features of an airline need to be united into the reservation data system

- Recognition: When a customer returns to a transaction, they must be

identified at every touchpoint For example, customers "walk" on the Website, go to the store, call the customer service centre and at different times need to be identified

as the same person, not as separate events or individuals

- Storage: Information identifying each customer must be stored and

maintained in one or more electronic databases

- Update: All customer data, including identification data, is subject to regular

moderation, update, completion or review

- Analysis: The customer identification characteristics must be the main factor

to analyse the differences between individual customers Based on that information

to identify the needs and behaviour of customers in the future

- Make availability: Data on customer identification features on the database

must be available to employees and functional departments in the enterprise when they need access Especially in service organisations, the personally identifiable information available to the frontline department is vital Technology will help businesses encode, gather, filter and classify customer information Storing identifiable information in an accessible form is crucial to success

- Security: Customer information is very sensitive, competitive, and affects

customers' privacy, so it should be strictly protected to prevent unauthorised use

1.2.4.2 Differentiate

The fact proves that no business can perform CRM well for all of its customers due to the limited resources and capabilities of the business, while the customer needs are extensive Thus, customer categorisation is grouping customers into the same category based on individual values It is an indispensable step in the CRM process to help businesses identify types of customers The goal is to focus resources on which customers bring the most value, devise specific customer – specific strategies, complete to satisfy customers' different needs and drive all business activities about the target customer groups that the business has selected Distinguishing customers has two forms: Classification of customers according to value and classifying customers according to needs

a Distinguishing customer according to value:

According to a Customer Motivation Research Organization (USA) senior expert, 80% of business profits are usually brought about by only 20% of customers This shows that only a small group of customers will bring realistic profits for the business Thus, the goal of companies is to keep the above group of profitable customers as long as possible In the process of collecting and processing information about customers, businesses must determine which customers are regular, loyal and valuable, from which to create appropriate relationship programs Customer value for the business is considered an asset, a variable for the future Customer value is the total present value of each future transaction contributed by each customer or segment

Every customer today has a business relationship process that each performance has a financial impact on the business (purchasing power, service payments, product exchanges or upgrades, warranty claims, introduced to other customers, etc.) Each performance takes place at a specific time in the future and has a measurable financial impact at that time That future value can be converted to present by calculating the time value of the currency at an appropriate discount However, in reality, it is challenging for a business to predict which future contributions will be tangible, and if we want to make a decision, we must estimate the future – oriented numbers The more authentic factors predicting a customer's future behaviour, the easier it is for a business to make an accurate estimate As a result, a database based on a suitable technology foundation will be a great helper for businesses to do that Customer databases can be: repeat purchases by customers, profit from each customer in each transaction, customer profile, transaction record, cost of service, indirect profit from customers (descriptions), etc

On the other hand, since determining customer value is challenging and expensive, some other businesses find some alternative variables An alternate variable is a number that can be used to rank customers instead of predicting future customer values This alternative variable must be easy to measure, but of course, it will be highly inaccurate when quantifying the real customer value

For instance, an airline may use the total distance travelled by one regular customer as an alternative variable to distinguish one customer from another Total mileage will be a good measure of customer value Still, it will not be completely accurate because it does not tell the airline whether the customer often flies in a luxury seat or usually flies buy cheap tickets or not, whether typically go on a Saturday or not, An influential substitution variable represents the value of the customer to the business and is a vital tool to help businesses rank customer

b Distinguishing customer according to needs

Demand – based differentiation will apply to customers who are not interested

in their value to the business but only want their needs to be addressed In fact, the needs of customers are endless, and the resources of the company are limited, so businesses must classify customers into groups of customers with similar needs in order to provide these customers individualised products and services according to each appropriate group

1.2.4.3 Interact

(1) One – to – one marketing philosophy:

Instead of selling a product at a time to as many customers as possible in a given period, one – to – one marketing people use customer database and media interactions to sell to a single customer as many specific products and services as possible This strategy requires managing individual customers rather than managing products, distribution channels, and individual programs

Most successful businesses don't mean they have the most customers, but they have the most information and knowledge about their customers' unique needs The goal is to retain customers for longer, increase customer interactions and thus continuously improve customer value In the requirement to truly compete with customers, businesses following the one – to – one philosophy need to integrate business functions that satisfy a variety of unique needs for each customer, building activities customer-oriented activities such as marketing, customer service, sales, and management information technology into production At the same time, more application of the achievements of information technology in production is aimed at

creating a unified customer database for valuable management, from which to build relationship program Besides, to achieve the goal of further maintaining customer loyalty to the business

(2) Interactions with costumer:

Interaction is a partnership in which the business and the customer act together

to create a transaction plan that is most beneficial for both parties and subsequent transactions Effective interaction can make businesses thoroughly understand customers, thereby offering a particular service method for each customer, and at the same time helping businesses make a difference between the business and their competitors Today, with the development of science and technology, the introduction of CRM software has created many interactive channels for businesses such as Website, Mail, Vending Points, Call Center, etc In terms of functionality, the CRM system has three primary benefits:

- Improved customer service thanks to timely available data

- Better organisation of information by combining multiple data in one location

- Cost savings in customer information research and management, meaning that low – value customer transactions must be done in low – cost channels because channels of interaction with customers are valuable Low is simpler and less expensive than a high-value customer

by providing standardised products and services but providing different complementary services that make customers receive personalised attention and

then customers product purchases with the mentality of being in their favour

Personalisation of customers gives customers a special feeling, to be appreciated, to be “the only customer”, thereby motivating customers to return to buy, consume more and introduce products and services of the business to friends and relatives

So to bring that feeling to customers, businesses must take the following steps:

- Satisfying customer needs: Satisfaction is the comparison between the actual perceived benefit of the customer and the expectation If the tangible benefits are not as expected, customers will be disappointed and vice versa, if the expectations are met from the actual benefits, the customers will be satisfied, happy and excited Therefore, it can be said that the direction towards customer satisfaction is towards customer value Ways to meet customers' needs:

+ Ensuring the interests of customers

+ Reputation and reliability guarantee

+ Create different selling points

+ Coordinate supplementary service teams

+ Build a brand for the consumer

- Increasing customer loyalty: Loyal customers are customers with long-term and traditional relationships with the business Many businesses consider building a team of loyal customers as their competitive advantage They believe that if they want to survive in the marketplace, they must make two excellent qualities: Quality management and meeting demand, marketing hospitality of customers According

to Philip Kolter, the cost of maintaining an old customer is much smaller than the cost of developing a new customer, and less than the cost of restoring an old customer who left off after being unsatisfied with their needs Therefore, maintaining and maximising existing customers, generating close relationships, sharing with them, and developing them into loyal customers is a top priority

In order to increase customer loyalty, businesses must create personalised services, which means finding a way to communicate with each customer in a unique

way to give them a sense of offering high and respect Depending on the situation of each different business, meeting the individual needs of customers is also different Still, in general, the CRM process can be organised into three functional parts with mutual relationships These are: marketing, sales and customer service

1.2.5 CRM process at Commercial Bank

Similar to businesses, the CRM system enables banks to effortlessly exchange information with their customers in many different ways The information the bank collects from its customers is focused on the database generated by the CRM These databases will be analysed, evaluated, gathered at an executive processing centre, and with the support of the marketing department, will help identify and classify the importance of Customer type is more precise and quicker The CRM system will assist identify tools and CRM programs that satisfy customers, especially targeted customers All these results will be aggregated back into the customer database, helping to capture better and satisfy customer needs This process takes place not only once with a customer, but is repeated over and over, taking place constantly, updating changes in customer needs Thus, we can see that: the success of a CRM system is difficult or easy to achieve depends on how information is exchanged between the customer and the bank, which means that customers can exchange information incorrectly anytime, through any communication channel and in any language Through the CRM system's interactive media, customers will have the feeling of communicating with a single entity and receiving personalised care Based on the content of CRM shown through the IDIC model, the customer relationship management of a commercial bank also undergoes analytical and operational activities and includes the following steps:

Figure 1.1 Process of CRM at Commercial Bank

Source: Russell S.Winer (2001),“Managing Customer Relationships: A Strategic

Build customer database

customer data, thanks to information technology, they can make customer relationship management easier, exploit and use these data effectively

Through technology, businesses capture information such as:

- Determine the needs of a particular customer

- Provide the business's perspective to customers

- Determine the maximum profit the business can achieve from a particular customer

- To take care of customers effectively and accurately

- Get to know the most hazardous guests

Information technology also helps businesses organise customer contact points

to meet customers' needs immediately as well as update product information for customers such as the website of organisations, teams sales, For example, a business can set up CRM tools to send reminders about new products, existing customer services, and can do direct marketing, cataloguing Online customer profiles and purchase history to provide further services tailored to each customer's individual preferences The technology applied to CRM activities can be seen through: Auto switchboard, Automated marketing, Internet Banking, Website, etc

A customer is always expecting to talk to someone who already knows it's all about them, so a website or an autoresponder will respond to their needs at any time with the click of a button

In simpler terms, technology can develop customer relationships through automated customer support services, thereby increasing satisfaction, enhancing loyalty, and expanding customer value

However, many businesses while implementing their CRM activities, they depend too much on technology, regardless of whether their processes and operations are suitable for that technology or not Enterprises believe that simply buying the latest and most modern CRM software will help strengthen the relationship between businesses and customers, improve business efficiency, and require their employees to change how to work in accordance with this new

technology However, this job is only costly because it is difficult to promptly alter the employee's working habits, habits and working culture Therefore, businesses can instead set up a workflow for employees, helping them familiarise themselves with applying CRM technology that is most suitable for their business The more employees can adapt, the better the likelihood of success when implementing a CRM

1.3.1.2 Human resources:

In terms of organisational structure, very few businesses change their

organisational structure just because of their CRM activities Still, their organisational structure plays a considerable role in CRM activities in substance Customer relationship management will become better if supported by several parts and functions at different levels of the organisation A suitable organisational structure will promote high cooperation between functional departments, improve communication efficiency between customers and the organisation and other parts

of the organisation Hence, the organisational structure needs to be flexible and responsive to customers’ needs, with functional cooperation that facilitates business operations

The human factor in CRM is decisive in CRM operations, in which the

manager plays the role of the first significant link connecting the chain in customer relationship management, and the employee is the person Directly meeting customers, directly receiving information from customers, is a bridge to bridge the gap between businesses and customers So the key to the success of a CRM strategy depends on the employees, who are the face of the business The more employees leave a good impression on customers, the more customers will trust the company

A CRM strategy should be propagated, instilled in the thoughts and actions of each employee in the enterprise In addition, businesses also need to have an open and flexible human resource management policy, and at the same time, constantly encourage and reward the most effective customer – care staffs

1.3.1.3 Customer service culture:

Customer service culture is the culture of "Customer – centricity" For

individuals in the business to bring customers the best service, they must understand the corporate culture, service culture, imbued with the values, typical features and relevant standards related to customer service So a good customer service culture will create enduring customer relationships For this reason, businesses have to spend a lot of effort and time to build their service culture, but the results it brings are absolutely worth it

1.3.1.4 Budget:

The implementation of a CRM system requires a particular expense Therefore, building a budget for CRM activities depends a lot on business strategy, competitive situation in the market, the financial status of the business, the characteristics of the customer,

1.3.2 External factors

1.3.2.1 Customer’s respond:

Customer response is an external manifestation of their assessment of their relationship and the business The customer response includes two states: dissatisfied and satisfied Dissatisfaction is reflected in customer complaints On the contrary, satisfaction is measured by customer's satisfaction The initial customer response is:

- Valuable feedback helps businesses control the quality of products and services and solve outstanding problems

- Show concern from customers to the business, especially complaints Customers complain, criticise, means that they are still interested in the firm, still loyal to the business And they will continue to be dedicated to the business if their complaints are adequately addressed

- The customer's reaction is the business's competitive advantage, so businesses need to respect either the contributions, criticisms, or compliments and encouragement of the customers, thereby strengthening the relationship durability between the business and its customers

1.3.2.2 Customer relationship management strategy of competitors:

Competitors constitute a significant barrier to business on the way to success They also have the same goals as the business: to optimise profits and build, maintain, and develop close relationships with customers And in the competition for customer retention, companies need to learn about competitors' CRM to build and develop a differentiated CRM strategy