TABLE OF CONTENTS

About ABN AMRO Bank in India 2

Mission
History
ABN AMRO in India
Main Achievements

THE PROBLEM 5
Why preferred banking?
Differential benefits for the customers of the two classifications
Financial analysis
The problem
Feasibility of a pyramid relationship

THE APPROACH – RETENTION MARKETING 9

Goals of Relationship Marketing
Benefits to an Organization
Retention Strategies
Recovery – Retaining Customers When Things Go Wrong
Strategies for Recovery

THE SOLUTION 11
Proposed pyramid structure
Advantages of the new system

APPENDIX 13
Bibliography

1
 Web References

ABOUT ABN AMRO BANK

With assets over US $504 billion and an AA credit rating, ABN AMRO Bank ranks
among the top 10 banks in the world in size and strength. The bank’s international
network comprises 3,568 branches and offices in over 320 cities and 76 countries
and territories, with over 100,000 highly qualified staff. As a global bank, it handles
the most complicated cross-border transactions, yet understanding the subtleties of
local markets

Mission
"ABN AMRO's mission is to create maximum economic value for our shareholders
through a constant relationship focus on the financial services needs of our chosen
client segments and a strict adherence to our financial targets. We are operating in
three principal customer segments, whereby the objective is to maximise the value
of each of these businesses as well as the synergies between them. Excellence of
service to our clients and leadership in our chosen markets are of paramount
importance to our long-term success. The Bank's corporate values play an integral
role in the fulfilment of our mission."

History
On 29 March 1824 King Willem-I issued a royal decree creating the Nederlandsche
Handel-Maatschappij with the aim of reviving trade between the Netherlands and
the Dutch East Indies. In 1964, NHM merged with De Twentsche Bank to form
Algemene Bank Nederland (ABN), while Amsterdamsche Bank and Rotterdamsche
Bank joined to become Amsterdam-Rotterdam (Amro) Bank. In 1991, these two
banks merged as ABN AMRO Bank. Today, ABN AMRO Bank has a powerful
presence in world markets, building on a tradition of stimulating international trade.

ABN AMRO in India

ABN AMRO Bank (India) has an 81 year long experience of the Indian business
scenario. Traditionally known as a strong "diamond financing bank", it has turned
into a bank providing a comprehensive range of services with a difference.

ABN AMRO (India) has had a long-standing presence in India since 1920, in
Kolkata and Mumbai. At that time, the bank mainly worked for diamond clients.
The bank took off in a big way in 1991, after the merger of ABN and AMRO
worldwide. The Delhi branch was functional in the very same year. ABN AMRO
was launched in other cities throughout India between 1994 and 1999. They were
Chennai in 1994, Pune in 1997 and Baroda in 1999, while the Hyderabad and
Bangalore branches were opened in 2001. The bank acquired the retail business of
the Bank of America in 1999. The year 2002 saw the opening of the Noida office.
AA Securities [I] Pvt. Ltd. formed in September 1998.

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ABN AMRO (India) has branches in Mumbai, Delhi, Chennai, Kolkata, Pune,
Baroda, Hyderabad, Bangalore and Noida with each branch servicing multi-product
relationships.

Consumer Banking offers a suite of products for personal financial needs offered
through various channels including ATMs, Doorstep Banking and NetBanking.

ABN AMRO Bank in India enjoys a strong image as a corporate bank with
comprehensive Global Transaction Services. Its investment banking services are
delivered through ABN AMRO (India) Corporate Finance and the Global Financial
Market Teams which strive to maintain the permanent position that has been built in
the marketplace.

ABN AMRO Bank has launched its Private Banking Services in India offering a
comprehensive range of high quality Portfolio Advisory Services along with a
comprehensive transaction execution platform, complemented by personalised
Banking and custodial services.

Main Achievements

• "Best at Cash Management Award in September 2001" - The Banker

• Corporate Finance India : Ranked Second in M&A in the Investment
Banking arena in 2001 - Economic Times.
• ABN AMRO Securities India : Best Foreign Bond House; No 1 Arranger in
Private Sector: Euromoney 2000.
• Top Bank on "Management Quality" parameter: Business India 'Best Banks
Survey 2000'.
• 7th Most Admired Commercial Bank in the World: Fortune Magazine, 2000.
• Top Foreign Bank in India: Economic Times - CMIE survey 1999.
• Second overall in Banking Industry: Financial Express - BRIS survey 1999.

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THE PROBLEM

Why preferred banking?

The company is not very new in services in the consumer banking space. As of now
the accounts of the company a divided into two basic classifications for the purpose
of relationship and customerization. This division along with the contributions to the
total deposits as a percentage is given in the following diagram:

Existing account structure

27.25% Customers

“Other” Customers
72.75%

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Differential benefits for the customers of the two classifications

The two segments are given differential benefits for the relationship. While the
benefits for the basic account services are absolutely basic, the VAN GOGH
customers are entitled to extremely high value privileges

Differential relationship benefits

Account balance Average

Averagerange
range10k
10k––20k
20k
Average
Average300000
300000pm
pm permonth *
permonth *

Conventional-
Conventional-mail,
mail,phone,
phone,
Personal
Personalrelationship
relationship
Contact points manager
branch
branch
manager

Teller
TellerCounter,
Counter,Preferred
Preferred Basic
Basicbenefits
benefitslike
like
Addl. benefits Lounges,
Lounges,swifter
swifterturnaround
turnaround anywhere
anywherecash
cash

Bank
Banktimings
timings88AM
AMtoto88
Anywhere,
Anywhere,anytime
anytime
Timings Relationship
PM
PM
RelationshipManager
Manager

Parties,
Parties,Dinners
Dinnersatat55Star
Star None!
None!
Recreation Hotels
Hotels

Basic:
Basic:like
likeinsurance
insuranceand
andmore
more
Holiday
Holidaypackages,
packages,airline
airlinetickets
Offers concessional
tickets banking
bankingservices
services
concessional

* Depending on account type

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Financial analysis

The company was not forthcoming on financial information and performance

evaluation of Return on Investment (ROI) on the two categories. The company has
an apprehension that this could be market sensitive information. But the company
officials at the Hauz Khas Branch claim that the company loses money on the VAN
GOGH preferred banking accounts. And that loss is met with the “other” customers.

The company is cross subsidizing premium services from the customary banking
services.
We have been cross subsidizing the VAN GOGH customers from the
customary banking customers. Ideally it should have been the
opposite !

Lalit Lal
Manager (Sales & Liabilities)
Delhi and NCR

Contribution
Contribution toto Retention
Retention rates
rates
The problem total
total deposits
deposits

The company is running the most elite scheme for the premium customers with the
following retention
VAN rates
VAN GOGH
27.25%* GOGH
Retention rates at27.25%*
CUSTOMERS
CUSTOMERS ABN AMRO 72%*

CUSTOMARY
CUSTOMARY
72.75%*
BANKING
27.25%*
BANKING 72.75%* 36%**
CUSTOMERS
CUSTOMERS
Higher retention
rates of
unprofitable
* Approximate data as revealed by the company
72.75%*
** Including less than required deposits
customers! 6

Lower for
profitable ones !
Feasibility of a pyramid relationship

Now that we have outlined the key problem. The relationship that we have built are
giving us retention value but not returns. The returns are provided by some
customers in the VAN GOGH segment as well as by some customers in the
customary banking space.

We found the double classification for the accounts inadequate and

suggested a pyramid relationship model

The company does not have systems in place to determine who are the customers
who are the most profitable ones and are cross subsidizing others. The company is
running Finacle which is the core banking solution by INFISYS
TECHNOLOGIES, a Bangalore based software company. The company website
confirms that Finacle has a CRM module the company has not implemented this
CRM module. The line of reasoning of the company officials is that the market is
not that mature that we can successfully classify customers in 5-6 different grades
for the purpose of a differential relationship.

We believe time has come now to implement the CRM module of

Finacle as we cant afford to make the rich richer by making the
poor poorer.
Hitesh Gulati
Asst Vice President
Delhi and NCR

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THE APPROACH – RETENTION MARKETING

Relationship marketing is philosophy of doing business.It focuses on keeping and

improving current customers, rather than acquiring new ones.This philosophy
assumes that customers prefer to have an ongoing relationship with one organization
than looking for another.The focus is on existing customers to make them
continually satisfied makes more economic sense than trying to attract new
customers and neglecting old customers. In other words, the strategy should be to
satisfy existing customers before moving on to attracting new customers.

Goals of Relationship Marketing

1. To build and maintain a base of committed customers who are profitable for
the organization.
2. To accomplish this goal, the service firm should focus on attraction, retention,
and enhancement of customer relationships.
3. The process of segmentation will help to identify customers most likely to
become long-term relationship customers.
4. Once these customers are attracted to begin the relationship with the company,
customers will be more likely to stay in the relationship when they consistently
provide quality service.
5. Finally, the goal of customer enhancement suggests that loyal customers can be
even better customers if they buy more products and services from that
company over time.

Benefits to an Organization
1. Increasing purchases tend to follow long term satisfied customers. As the
consumer is increasing satisfied and comfortable with his/her service provider,
they tend to reward the business with more purchases.

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2. Lower costs are associated with maintaining existing customer base, than with
attracting new customers through increased advertising and promotion costs.
3. Maintenance costs are also reduced with long term relationships. Long term
customers will have fewer questions about their service and will be less likely
to encounter new problems.
4. Word of mouth communication is likely to take place between a satisfied
customers and potential customers.
5. When the service is complex and difficult to evaluate, there is risk involved.
Consumers often look to other consumers for advice. Satisfied customers can
provide strong word of mouth communication.
6. Employee retention is a benefit also. If customer base is stable there will less
of a need for continuing adjustment to the size of the work force.

.
Basically, relationship marketing is dependent upon an organization learning and
defining who the organization wants to do business with.Organization must use
market segmentation to aggregate customers into groups with similar wants, needs,
preferences, and buying behavior.Market targeting must take place after
segmentation, so as to evaluate the attractiveness of each homogeneous segments in
terms of profit, resources, needs, etc.

Retention Strategies
1. Monitor Relationships – in order to begin to learn how to retain your present
customer base, the company must start to continually monitor and evaluate
their present relationship with its customers.
2. Three levels of retention strategies have been proposed:
a. Level One -- try to retain your customer through financial incentives.
Basically the idea is the more business you do with us, the lower the price
of the service (frequent flyer miles, buy nine sandwiches and get the tenth
one free). This would be the first step in retaining the customer. This
strategy is generally easy for your competitors to imitate.
b. Level Two – start to combine financial incentives with increased social
bonding (the restaurant where the waiter remembers your name, asks how
you are doing, the dentist who carries on a conversation with you about
football, knowing you are a big football fan). Basically, treating the
customer like a person rather than a face. This activity increase the ties
between customer and company and makes it more difficult for customer
to switch.
It also makes it more difficult for the competitor to duplicate.
c. Level Three – Like use of structural bonds in addition to financial and
social bonds. Structural bonds are created by providing services to the
client that are highly customized and frequently designed right into the
service delivery system for that client. (Federal Express and their tracking
system, the war between Federal Express and UPS providing free
computers that help the customer monitoring its shipping on its own).

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 Recovery – Retaining Customers When Things Go Wrong
1. First, doing it right the first time is the best way to retain customers.
2. However, when things to go wrong respond quickly to solve the problem.
3. Studies show that dissatisfied customers tend to engage in negative WOM
communications to at least 9-16 people.
4. Satisfied customers engage in positive WOM to at least 4-5 people.

Strategies for Recovery

1. Track and Anticipate Problems – a system must be in place that encourages
the customer to complain when dissatisfied.
2. Take care of customer problems on the front lines – service provider
acknowledges a Proposed
problem before customer
account points it out, when a proactive
structure
response is not possible, react quickly by offering solutions up front for the
problem (steak cooked wrong – its free).
3. Solve problems quickly
4. Empower employees to solve problems The top two levels responsible for 20% of deposits.
Note that profitability is not just a function of
the deposit size but the quality of the client
THE SOLUTION

Contribution Average
to deposits balances

VAN GOGH Level 1

5% 300k

VAN GOGH Level 2

15% 100k – 200k

Preferred customer Level 2

20% 50k – 100k

Most existing
profitable
customers
Preferred customer Level 1

40% 20k – 50k

Divorcee Customers
20% <10k

Cash withdrawal is the most common transaction for these. We can

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decrease free transactions to ease them out of the system by making
their transactions unviable
Advantages of the new system

The company has to make a choice between the implementation of the software and
the loss of revenue to the existing customers. The following are the advantages of
the proposed pyramid structure:

1. Clear definition for cross sell and upsell opportunities

2. Application of the GARM Model to all the classifications

3. Increase in ROI with 20% reduction in the number of customers

4. Reduction in the number of customers would obviate the need to upgrade

systems and increase contact personnel

5. The company can use the STEPS as sequential carrots to graduate the
customer to capture the maximum share of the wallet of the customer.

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APPENDIX

Bibliography

1. A Business Guide to Customer Relationship Management

by Jill Dyché (Author) (Paperback)

2. CRM in Financial Services: A Practical Guide to Making Customer

Relationship Management Work
by Merlin Stone

3. Monitoring, Measuring and Managing Customer Service

By Gary S. Goodman
Jossey-Bass Publishers (2000)

4. A Practical Guide to CRM

by Janice Reynolds

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5. Capitalizing on Customers: An ROI-Based Approach to CRM
Implementation and Management
by Patrick O'Halloran

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