INSTITUTE OF BANKERS IN MALAWI
DIPLOMA IN BANKING EXAMINATION
SUBJECT: CUSTOMER RELATIONSHIP MANAGEMENT
(IOBM-D215)
Date: ______/______/_2013
Time Allocated: 3 hours (______________)
CORE PAPER
INSTRUCTIONS TO CANDIDATES
1
Read the instructions on the cover of the answer book.
2
This paper consists of TWO Sections, A and B.
3
Section A consists of 4 questions, each question carries 15 marks.
Answer ALL questions.
4
Section B consists of 4 questions, each question carries 20 marks.
Answer ANY TWO questions.
5
You will be allowed 10 minutes to go through the paper before the
start of the examination, when you may write on this paper but not in
the answer book.
6
Please write your examination number on each answer book used.
Answer books without examination number will not be marked
7.
DO NOT open this question paper until instructed to do so.
A Draft qualification exam for the Institute of Bankers in Malawi
1
SECTION A
(60 Marks)
Answer ALL questions from this section.
QUESTION 1
Discuss, with examples, three reasons how CRM is increasingly a critical asset
in achieving success in a bank.
(Total 15
marks)
[Total 15 Marks]
Answers Question 1
No
1
2
3
Critical Assets
 CRM helps marketers take an asset-based view of their customers and thus
make better decisions compared to managers who view their customers as
products, brands or mere transactions
 Today's CRM uses computer technology to make precise customer asset
management possible. CR Managers are able to efficiently obtain and
process customer information and thus make informed decisions
 Changes in marketing are increasingly driven by advances in information
systems, communications and production helping CR Managers to understand
and manage individual customers in a focused manner that mass marketing
cannot do
Scheme/ Script:
Five [5] each asset treated
Number of stages requested
05
x3
[Total Marks 15]
A Draft qualification exam for the Institute of Bankers in Malawi
2
QUESTION 2
Discuss five aspects through which the internet technology has impacted
upon the manner that customer relations management is conducted within
the banking environment?
[Total 15 Marks]
Answers Question 2
No
1
Impact
More information; more control
2
Customer expectations
3
Industrial Capacity
4
Impact on customer-intimacy
equally strong
5
No direct human contact
Discussion
Customers are more informed about almost
every thing including banking products.
Customers are now more in control of their
buying and/or experiences with banks
CR Managers are no longer dealing with passive
recipient or users of banking services
Customer know and expect more from their
banks in terms of quality, speed and
convenience of transactions
Internet technology has created a "level playing
field' in the banking industry rendering many of
the services ordinary and competitive banks
have to put more before the customer in terms of
minimum standards and levels of service
excellence
Internet technology means global operations
across
different
cultures
with
different
expectations that must all be met; making
building global relationships a lot more harder
Internet technology eliminates human contact
between the manager and the customer making
CRM more involving in terms of one's cultural
empathy, language differences and thus
expectations
Scheme/ Script:
Three [1] marks for each benefit treated
Number of benefits requested
[Total Marks
A Draft qualification exam for the Institute of Bankers in Malawi
03
x5
15]
3
QUESTION 3
Transaction marketing, as part of traditional banking, is concerned with the
exchange between a bank and its customers; with emphasis being on satisfying a
customer’s needs. However, through loyalty and relationships, banks are moving
into creating lifetime value for their customers.
Compare and contrast ‘transaction marketing’ to ‘relationship marketing’, giving at
least five aspects.
[Total 15 Marks]
Answers Bonus Question 10
1
2
3
4
5
6
7
Transaction Marketing
Focus on a single sell
Orientation on product features
Short-time scale
Little emphasis on customer service
Limited customer commitment
Moderate customer contact
Quality is the concern of the
production department
Relationship Marketing
Focus on customer retention
Orientation on product benefits
Long-time scale
High emphasis on customer service
High customer commitment
High customer contact
Quality is the concern for all
Scheme/ Script:
Four [4] marks for each aspect properly done on both sides
Number of comparisons/ contrasts requested
04
X5
[Total Marks
20]
QUESTION 4
Briefly describe at least five of the following terms as they related to CRM:
1
2
3
4
5
6
7
Electronic customer relationship management [e-CRM]
Business-to-Business transactions [B2B]
Data mining [DM]
Lifetime value [LTV]
Quality circles [QCs]
Just in time [JIT]
Continuous improvement [CI]
[Total 15 Marks]
Answers Question 4
No
1
CRM Term
Electronic
customer
relationship management
[e-CRM]
Description/ Explanation

This emerges from the Internet and web
technology to facilitate the implementation of
CRM. It focuses on internet- or web-based
interaction between customer and service
provider.
A Draft qualification exam for the Institute of Bankers in Malawi
4

2
Business-to-Business
transactions [B2B]

3
Data mining [DM]




4
Lifetime value [LTV]


5
Quality circles [QCs]


6
Just in time [JIT]
7
Continuous improvement 
[CI]


E-Commerce can simply be defined as
conducting business transactions over the
Electronic Networks by way of linked computer
systems. It allows businesses to be conducted
more speedily, efficiently and economically.
B2B e-commerce is well established and is still a
fast growing area. Examples include Companies
linking to their suppliers to facilitate Just-in-Time
(JIT) stock control.
Data mining is a technique dependent on models
for predicting personal or business behavior
based on patterns and associations that a
computer finds in a customer’s data in such areas
as ‘recency of purchase’.
Data mining looks for unexpected patterns based
on a reasoned hypothesis about how we think a
certain set of customers will behave.
It compares information on a set of customers
whose behavior is already known against that of
groups with similar and different characteristics
Patterns discovered are used to build models that
can be tested against other set of customers to
see if this can predict actual behavior accurately
LTV is the expected net profit a customer will
contribute to your business over the entire time the
customer remains a customer; taking into account
factors such as customer defection rates and
discounted cash flow, which is the current worth of
revenue received in the future (net present value
calculation).
LTV is used to determine the lifetime value for
customers and segments and thus a basis for
justifying investments in campaigns that have a
high cost of acquiring new customers and
wouldn’t normally be recouped by a single
purchase.
This is a continuous improvement strategy based
on the belief that operational-level workers know
best how processes are failing and thus more able
to make improvements if given some form of
authority to do so.
QCs are groups of employees, perhaps eight in
number, meeting regularly to discuss problems of
quality and quality control in their area of work
and suggesting ways of improving quality.
Just-in-time is a system of working which aims to
eliminate waste—i.e. the use of resources which
fail to add value to a product—by means of
managing workflow and is applied to four main
areas of business i.e. purchasing, production,
quality and modern manufacturing technology
It is part of quality management recognizing the
need
and it is a way of taping employees’ for continual
examination and improvement of existing
A Draft qualification exam for the Institute of Bankers in Malawi
5
processes based on the understanding that
customers need change in the normal course of
events leading to cost savings or design
improvements.
CI encourages experimentation and a scientific
approach to production knowledge

Scheme/ Script:
Five [5] marks for each method
Number of aspects requested
05
x4
[Total Marks
20]
QUESTION 5
CRM which creates and heightens 'the moments of truth' or 'customer lifetime value
(CLV) with customers (Payne, Christopher, Clark & Peck, 2001), involves four
rational steps critical to the implementation of a viable CRM strategy.
[Total 20 Marks]
Answers Question 5
No
1
2
Step
The
identification
customers
Description
of
The differentiation of service

To enable organization to select those customers
regarded as strategically significant and likely to
contribute to the success of the organization.

Customers must have unique needs and due to
their value products are developed to meet
these needs.

Process involves collecting data to obtain a
clear picture of customers and their profile.

Process involves developing a database or its
continued maintenance to ensure recent data is
always available.

Information enables organization to rank
customers by age, type of services and products
etc

Ensures different customers receive different
levels of service and different products;
depending on the value of their needs to the
A Draft qualification exam for the Institute of Bankers in Malawi
6
organization.
3
Interaction with customers

Process involves organization identifying the top/
most significant customers and adapting service
accordingly.

Identification process uses sales figures
calculations of CLV of each customer.

Interacting with the customer is critical in
relationship building using a variety of
communication tools and technologies to
continually determine and refine customer
needs, perceptions and desires.
Process involves development of proactive
communication methods and initiating dialogue
with customers.
Greater use of technology encouraged but not
essential (Brunjes & Roderick, 2002).
Communication
should
be
targeted
at
customers considered strategically significant.
Interaction should be used as means to increase
customer expectations regarding services
received as well as the quality of the
relationship.
Organization carries out customization to ensure
that customer needs are continually met and
thus increase customer satisfaction and thus
customer loyalty.
Organization continually adapts its product,
service or communication to create something
unique for each customer.
Communications are customized to address the
specific needs and profile of customers
including use of personalization approaches.
Products are customized to fulfill specific desires
of customers
In the case of financial services, product
packages must be offered to customers.




4
Customization of products,
services and communication





Scheme/ Script:
Two [2] marks for listing each step correctly
Three [3] marks of at least three bullet points in every step
[Total Marks
A Draft qualification exam for the Institute of Bankers in Malawi
or
08
12
20]
7
QUESTION 6
In a report format, contrast the five key functions between the traditional and the
new Customer Relationship Management roles in banking.
(Total 20 marks)
Answers Question 3
Activity
Marketing
Traditional Role
Communicating
branding
Sales
Selling products
Selling customer solutions
Services
Delivering services
Delivering customer relations
Support
Supporting products
Supporting customers
IT. Department
Enabling business activities
Enabling customer activities
and
New CRM Role
Customer advocate
Scheme/ Script:
Four [4] marks for each correct treatment
No of answers required
04
x5
[Total Marks
20]
QUESTION 7
Discuss in a correct order, five key interventions you as a Customer Relations
Manager would undertake as part of service quality improvement aimed at
enhancing "right first time" customer focus?
[Total 20 Marks]
No
1
Action
Identify key aspects
of service quality
2
Set
standards
service delivery
3
Set up systems for
service delivery.
for
Discussion
Identification may involve market research to determine
existing levels of satisfaction and use research to identify
service quality gaps between expected and actual levels
of service quality.
These should be based on the SMART principle—
quantifiable and attainable e.g. maximum queuing time or
queue length. Maximum number of rings before a
telephone is answered
Delivery targets are more effective if supported by an
operating systems enabling service staff to meet those
targets.
A Draft qualification exam for the Institute of Bankers in Malawi
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4
Analyse
employee
training needs
5
Develop
programs
6
Set up systems to
measure and monitor
success
Set up performance
related
pay
and
recognition systems
Effect
cultural
change.
7
8
training
Analyze current practice and identify weaknesses in terms
of what employees know enough about the company
products and whether they have sufficient interpersonal
skills. Use such information to set up responsive training
programs
Using information identified during the analysis of training
needs develop training programs in areas related to the
nature of the business, employee knowledge of business
product, customer awareness and interpersonal skills
System to be used to measure achievements of set targets
and market research may be used to examine customer
perceptions of actual service quality.
Pay and recognition system for employees is necessary to
back organization’s commitment to service quality and thus
motivate staff towards greater CRM.
Where necessary look to restructure the organization
towards a CRM employee ‘contractor’ role model
Scheme/ Script:
Five [5] marks for each ‘action area’ treated
Number of ‘action areas’ requested
05
x4.
[Total Marks
20]
(Total 20 marks)
QUESTION 8
As part of effective CRM the need for enfranchising service or frontline employees is
increasingly important in modern banks.
a) Briefly define the concept of "service workers enfranchisement"
(5 marks)
b) Briefly explain five possible reasons why the implementation of “service workers
enfranchisement is a challenge in banking.
(15 marks)
Answers Question 8
a.
b.
No
1
"Service workers enfranchizement"--is a way of granting freedom and responsibility to
an employee within a franchise without requiring a monetary investment or
ownership on the part of the employee.
Major Challenges to
Enfrachizement
implementation
Shortage of human
technical skills
Explanation and Examples
and
Shortages make the process of enfranchizement
difficult because of poor service delivery that may
negatively impact on bank reputation
A Draft qualification exam for the Institute of Bankers in Malawi
9
2
Middle
management
resistance to change
3
Senior
management
resistance to change
4
Perceived unfairness in the
application
of
the
enfranchizement
5
Inadequate information on
the new roles involved in
the 'contractor status' of
enfranchized employees
6
Poorly designed and poorly
implemented
enfranchizement programs
7
Unionized labor may resist
efforts to enfranchise their
members
Middle managers used to "supervising" and "micromanagement' may resist letting go of their turf and shift
to a coaching and advisory role
Senior management unwilling to shift upwards from
operational to a strategic orientation involving
planning, policy and contractual negotiations and
obligations
Interdepartmental rivalries may become blown out
especially when the system of rewarding performance
also changes and rewards people on different and
difficult to understand performance indicators
Where advance information is sparse employees may
not see themselves as contractors and likely to be
disappointed when they do not meet their "contractor
obligations" and thus are not rewarded according;
worse if this is interpreted as punishment for non
performance
Design of Enfranchizement may not fit current
organizational culture or employees may not be given
an option to or not to participate; resulting in negative
perceptions of the programs
Trade unions may be suspicious of programs that seek
to "individualize" their members through "contractor
statuses" that render the employees not part of group
negotiated wage settlements
Scheme/ Script:
Three [3] marks for the definition of employee enfranchisement
Three [3] marks for four [4] correctly attempted challenges on enfranchisement
[Total Marks
3
12
15]
A Draft qualification exam for the Institute of Bankers in Malawi
10