Performance Measurement of Crm in Financial Services

Customer Relationship Management (CRM), a management philosophy that focuses on the nurturing of customer relationships, emerged as a response to decreasing customer loyalty and increasing competition. Implementing CRM is expensive, as it demands high investment in organizational change activities and information technology (IT) and companies thus expect visible, measurable results. But companies not only have trouble assessing the results of their CRM initiatives but also with managing the performance of their CRM initiatives. The majority of financial services companies in Germany and Switzerland have, with varying success, conducted customer relationship management implementation projects. In this paper we analyze several case studies on CRM in Swiss and German banks with regards to performance measurement and related challenges. We aim to reveal the reasons for and consequences of common practices and shortcomings regarding CRM implementation. 1 Customer Relationship Management and Performance Measurement 1.1 CRM: strategy, processes and systems CRM is a management philosophy focusing on customer orientation. It emerged as an answer to decreasing customer loyalty in competitive markets, and was enabled by new technologies. Shaw and Reed (Shaw/Reed 1999, p.4) provide a comprehensive definition of CRM that captures its multiple aspects as well as deftly describing what CRM is about. Our work is in line with their definition of CRM as an 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. Processes and information systems help to implement the strategic objectives of CRM. We therefore provide a brief overview of CRM processes and systems. CRM architecture (Geib et al. 2004) is comprised of CRM processes which have been identified through a comprehensive analysis of research literature from the areas of Relationship Marketing (e.g. Gummesson 1999), process-oriented CRM (e.g. Shaw/Reed 1999), and technology-oriented CRM (e.g. Swift 2000). We distinguish between different