Luận văn Thạc sĩ Kinh tế chính trị: Những vấn đề khoa học và thực tiễn để hình thành hệ thống bảo hiểm thất nghiệp ở Việt Nam

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA KINH TẾ

BÙI VIỆT BẢO

Những vấn đề khoa học và thực tiễn để hình thành hệ thống bảo hiểm thất nghiệp ở Việt Nam LUẬN VĂN THẠC SĨ KINH TẾ CHÍNH TRỊ

HÀ NỘI, 2001

TABLE OF CONTENT

Abstract………………………………………………………………………….. i Tóm tắt………………………………………………………………………….. ii Acknowledgements……………………………………………………………. iii List of table and chart…………………………………………………………. .vi

INTRODUCTION ....................................................................................................... 1

1. Necessity of the thesis 2. Objectives of the thesis 3. Methodology 4. Structure of the thesis

1.1.1 1.1.2

1.2 1.3 1.4

1.4.1 1.4.1

1.5

CHAPTER 1: THEORICAL FRAMEWORK ................................................................... 4 1.1 The definition of customer relationship management (CRM): ..................... 5 Definition of customer relationship management: ............................ 5 Comparison between relationship and transactional marketing: ..... 7 The principle of CRM .............................................................................. 8 The element of CRM: ................................................................................... 11 The characteristics and the challenges of CRM: .................................... 15 The characteristics of CRM: ........................................................... 15 The challenges of CRM: .................................................................. 16 Ideas support CRM:................................................................................ 17 The statistics of Harvard-Business review in December, 1995: ..... 17 Pareto's Principle - The 80-20 Rule: .............................................. 17 The benefits of CRM: ............................................................................. 18 Long-term profitability ......................................................................... 18 1.6.1 Lower costs ............................................................................................. 18 1.6.2 Repeat customer often cost less to service ...................................... 18 1.6.3 Opportunities for cross-selling ....................................................... 18 1.6.4 Defection less likely ........................................................................ 19 1.6.5 Employee retention ......................................................................... 19 1.6.6 Family influence .............................................................................. 19 1.6.7 1.6.8 Word of mouth marketing ............................................................... 19 The reason why CRM fails: ................................................................... 21

1.5.1 1.5.2 1.6

1.7

2.1.1 2.1.2 2.2

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CHAPTER 2: BACKGROUND ON VIETNAM BANKING MARKET AND VPBANK SITUATION ANALYSIS ............................................................................................................... 25 2.1 Overview of Vietnam Banking Market .................................................. 25 Background ..................................................................................... 25 Commercial Banks' Market ............................................................. 27 Situation of VPbank ............................................................................... 30 Vision .............................................................................................. 30 VPbank’s mission, strategy and performance results in 2001-2005… 31 2.2.1 2.2.2

2.2.3 2.2.4 SWOT analysis ................................................................................ 42 Value chain analyis ......................................................................... 48

CHAPTER 3: RECOMMENDATIONS TO BUILD A STRATEGIC PLAN FOR APPLYING CRM IN VPBANK ......................................................................................................................

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3.1 VPBank competitive advantages and general strategy from 2006-2010…53 3.2 Application plan of CRM in VPBank: ................................................... 57 The first phase: Build foundation for CRM .................................... 60 The second phase: Deploy CRM ..................................................... 65 The third phase: CRM development ............................................... 77 Conclusion ...................................................................................... 79 3.2.1 3.2.2 3.2.3 3.2.4

LIST OF TABLE AND CHART

Table 2.1- VPBank Financial statement analysis in 2001-2004

Table 2.2- Total mobilized funds in the market I in the period 2001-2004

Table 2.3- List of VPBank’s competitors’ software names

Table 2.4- The equity growth rate of banking system and some commercial banks

Table 2.5- KPI to evaluate the performance of bank

Chart 2.1– Financial statement analysis

Chart 2.2- Profit structure in VPBank

Chart 2.3- Profit in the first six months of 2005

Chart 2.4- Mobilizing fund grow rate in 2003-2004

Chart 2.5- ROE comparison

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INTRODUCTION

Competition in Vietnam business environment increases rapidly, especially

when opening the economy. By approval of operation of economic partners,

competition between industries and units of industry is significantly rising. Besides

that, expanding economic integration requires firms to improve quality of products and

services in order to create competitive advantages.

There is high competitiveness between commercial banks in inter-bank market.

Competitiveness is really carrying out between state banks and joint stock banks, two

biggest bank system in Vietnam. Moreover, joint venture banks and foreign banks are

emerging as potential competitors in the banking market.

Foreign banks will absolutely create high pressure on Vietnamese banks. When

foreign banks are free to operate in Vietnam, they will be big competitors of not only

state banks but also joint stock banks. This is reason why Vietnamese banks have to

apply modern technology in payment and management and diversify services in order

to create competitive advantages.

Vietnam joint stock commercial bank for private enterprises (VPBank) is entirely

businesses under high competitiveness pressure. It is difficult for VPBank to compete

against state banks because the government protects the state-owned banks. State banks

have many advantages under government‟s protection and they definitely drive

financial market. Furthermore, some joint stock competitors have high capital and large

market as well as wide distribution channel. To become one of the top five biggest

joint stock banks in Vietnam, VPBank must prepare its competitive strategy in next

period in order to explore potential markets and enhance its competitive advantages.

1. Necessity of the thesis

Joint Stock banks (JSBs) systems in Vietnam are significantly competing with

State-owned banks (SOBs) system. Because of being result of opening the economy as

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well as characteristics of economy system, JSBs are controlled by Central Bank much

more tight than SOBs. Besides that, set up after SOBs they are really weak in

infrastructure, competitive capacities and supported policies. Furthermore, when

Vietnam becomes member of the World Trade Organization, Joint Stock Banks will

face increasingly competitive pressure by foreign banks that have much more high

power of finance and technology.

Vietnam joint stock commercial bank for private enterprises (VPBank) is one of

JSBs operating in Vietnam banking market. It is entirely difficult for VPBank to

compete with SOBs. However, VPBank is opposing increasing competition of Joint

Stock competitors in order to exist and development.

Moreover, I have been working in VPBank, one of the first Joint Stock banks in

Vietnam, as an officer for nearly three years.

2. Objectives of the thesis

Based on defining difficulties of VPBank in terms of competing with not only

other non-state banks but also state-owned banks, the research will significantly find

out a relevant competitive strategy for VPBank in the period from 2006 to 2010 and

answer Why VPBank should apply CRM as a competitive tool.

To get the general objective the research thesis will take detail objectives: i) examining

main effects of external and internal environment on VPBank‟s operation; ii) finding a

relevant competitive strategy for VPBank in next five-year period and the relationship

between VPBank new competitive strategy and CRM; and iii) how to apply CRM at

VPBank.

Questions

To achieve these objectives above, the dissertation will answer three key questions

follow:

1) What factors have significantly affected operations of VPBank?

2) What will be competitive strategy for VPBank in 2006 – 2010 and the

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relationship between the new strategy and CRM?

3) How to apply CRM solution?

3. Methodology

To find a relevant strategy for VPBank, the thesis will analyze competitive

advantages based on analyzing SWOT and value chain.

Data is definitely collected from secondary data source. They are government‟s

reports, Central Bank‟s annual reports, legal documents related to banking system,

VPBank‟s Annual reports, VPBank‟s surveys and banking articles. Besides that, the

research uses data collected from other Joint Stock Banks and State-owned Banks.

The research also uses comparison and contrast methods in order to answer the

research questions.

4. Structure of the thesis

To regard to the research topic, the research is clearly divided into three

chapters including:

Chapter 1: Theorical framework

Chapter 2: Background on Vietnam banking market and VPBank situation analysis

Chapter 3: Recommendation on competitive Strategy of VPBank in 2006-2010, and

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how to apply CRM solution as a competitive tool.

CHAPTER 1: THEORICAL FRAMEWORK

The evolution of marketing

The word marketing is derived originally from Latin “mercatus”, which means

marketplace. It comes from the word “mercari”, which means, “to trade”. The word

can also be somewhat confusing. If you ask people what marketing is, many will

respond with a variety of words such as selling, advertising, promotion, targeting, or

marketing research. The fact is that marketing encompasses all of these and yet many

other activities and it is concerned with the identification of marketing opportunities.

The traditional view on marketing with the concept of 4ps: Price, Product, Place, and

Promotion, was originally constructed by Niel Hopper in 1964. This approaches that

has then over the years been further developed by a number of authors. These four

elements are regarded as the traditional marketing mix and the marketing mix approach

constitutes a production-oriented definition of marketing where transactions are put in

the focus.

From the early 1980s an alternative approach to marketing theory and practice

was gaining power, namely relationship marketing. The term itself can be traced back

to the service marketing literature, through arguably it can be said to have originated in

industrial marketing. In the scope of industrial marketing this shift from traditional

marketing towards relationship marketing are occurring and several scholars are

claiming that this is a paradigm shift in marketing defines relationship marketing in the

following way: “Marketing is to establish, maintain, and enhance relationship with

customers and other partners, at a profit, so that the objectives of the parties involved

are met. This is achieved by mutual exchange and fulfillment of promises.”

In its earliest forms, relationship marketing focused simply on the development and

cultivation of long-term, profitable, and mutually beneficial relationships between an

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organization and a defined customer group. However, the concept quickly broadened to

encompass internal marketing in acknowledgement that the successful management of

external relationships was largely dependent on the alignment of supporting internal

relationships.

1.1. The definition of customer relationship management (CRM):

1.1.1. Definition of customer relationship management:

As already stated, the change of the business environment and the evolution of

marketing to adapt to these changes have led to that the way companies organize

themselves has switched from product-based to customer-based structures. A key

driver of the change is the advent of customer relationship management-CRM, which

underpinned by information systems convergence and the development of support

software, promises to significantly improve the implementation of relationship

marketing principles.

From another perspective, CRM is a strategic view of how to handle customer

relations from a company perspective. The strategy deals with how to establish develop

and increase customer relations from a profitability perspective. Based upon

knowledge about the individual customer‟s need and potential, the company develops

customized strategies describing how different customers should be treated to become

long-term profitable customers. The basic philosophy underlying CRM is that the basic

of all marketing and management activities should be the establishment of mutually

beneficial partnership with customers and other partners in order to become successful

and profitable.

In order to more efficiently manage customer relationships, CRM focused on

effectively turning information into intelligent business knowledge. This information

can come from anywhere inside or outside the firm and this requires successful

integration of multiple databases and technologies such as the Internet, call center, sale

forces automation, and data warehouse. There is no universal explanation of what

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CRM is, since the area is fairly new and still is developing. It is therefore important to

remember that several attempts of defining CRM exist and that many companies adapt

the definition to their own business and their unique needs. The following quotations

are three examples of how CRM is defined:

“CRM is a new customer-centric business model that reorients firm operations

around customer needs (as opposed to products, resources, or processes) in order to

improve customer satisfaction, loyalty and retention”

“CRM is the integration of customer focus in marketing, sale, production, logistics

and accounting, i.e. in all parts of the company’s operations and structure”

“The activities a business performs to identify, qualify, acquire, develop and retain

increasingly loyal and profitable customer by delivering the right product or service,

to the right customer, through the right channel, at the right time and the right cost.

CRM integrates sales, marketing, service, and enterprise resource planning and

supply-chain management functions through business process automation,

technology solutions, and information resources to maximize each customer

contract. CRM facilitates relationships among enterprises, their customers, business

partners, suppliers, and employees”

As can be seen above, the three definitions have the following in common:

- They all include activities in all parts of the company

- The reason for CRM is to create a customer relationship focused company. In

essence, CRM provides management with the opportunity to implement

relationship marketing on a company-wide basis. However, for CRM to be

successful, all activities in a company need to be managed in a combination to

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reach success.

1.1.2 Comparison between relationship and transactional marketing:

Relationship marketing Objectives Transactional

marketing

Relationship marketing Transactional marketing

Customer base analysis Market and competitive

and Need perceptions analysis segmentation

Customer management Marketing strategies

strategies

Mix offer development

Customer management

Implementation

Results

Review

policies

We can make it more clearly through this table:

Transactional marketing Relationship marketing

- Only focus on sale - Focus on the retention and the

- Promote the characteristics of loyalty from customers.

product - Focus on some characteristics

- Short-term goal of product that are

- Don‟t care much for the customer meaningful to customers.

retention - Long-term goal, short-term

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- Less interaction with customer cost but more effective and

- Only the manufacturers take care cost savings later.

for quality. - Emphasis upon higher levels

- Less commitment of service that are possibly

tailored to individual

customer

- Care for the interaction with

customers to gain information

to build the relationship

- Always keep and develop

customer relationship

- High commitment

- The entire organization shares

a commitment to quality

Source: Transaction v relationship marketing (adapted from Christopher et al 1994)

Christopher M, Payne A & Ballantyne D 1993, relationship marketing,

ButterworthHeinemann.

The two comparison tables show that the transactional marketing focuses on the

capability of taking over new customers, attracting the potential customers from

competitors while relationship marketing focuses on the capability of protecting the

market share in the market, keeping close relationship with the current customers,

cross-selling and up-selling.

1.2 The principle of CRM

The principle of CRM is that all customers are not the right customers, so in CRM

each customer group will be treated in the different ways.

Given the many benefits of long-term customer relationships, it would appear foolish

for a company to refuse or terminate a relationship with a customer. This section

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considers the view that not all customer relationships are beneficial.

A key step towards successful customer relationship management is to

distinguish the transaction buyer from the relationship buyer. The transaction buyer

tends to be interested in price and will easily shift to a competitor who offers a reduced

price, even when the service may be inferior. The relationship buyer is looking for a

supplier they can trust. Even when they are aware of cheaper products, they will prefer

to stay with the original supplier for the peace of mind. Transaction buyers are rarely

profitable as they only discounted items. Very often, relationship buyers subsidize the

sales of transaction buyers.

Database marketing software enables suppliers to separate transaction buyers

from relationship buyers. For those whose customer files cannot be queried by profit

per customer, some system for flagging lower profit transactions is required. In some

businesses there are time periods when all transactions are discounted. Customers who

purchase only in these times are easy to identify as transaction buyers.

The remaining customers represent potential relationship buyers. They can be divided

into three district segments:

- Those who are significantly the most profitable;

- Those who are delivering good profit and suggest the capability of becoming

top profit customers;

- Those who are only marginally profitable.

This leads to one of the most basic database marketing tools: the monetary decide

analysis. These segment customers into tenths, showing the total profit each decile

contributed in the time period specified and the % in the total market that segment

represents. This analysis is consistent with Pareto‟s law which shows that 80% of a

business‟s revenue derives from 20% of customers. In most businesses, in fact, 60% of

the customer base accounts for at least 90% of sales and an even greater %of profit.

The next step is to conduct the purchase deciles analysis. This involves separating

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the total sales and profits into tenths to show how many customers account for each

10% of company profit. The results of this analysis frequently show that a little more

than 1% of customer account for 10% of company sales with an even smaller segment

contributing to 10% of total profit. Therefore, for a company with 150,000 potential

relationship customers, fewer than 1,500 represent 10% of company profit.

This analysis can be used to identify the three distinct segments of profitable

relationship buyers as follows:

- The first group of buyers: Those customers who represent 10% of the

company‟s business and are the most profitable should be the first to be targeted

for CRM. The purpose of the CRM efforts will be retention. Even although it

may be difficult to make these customers more profitable, CRM should help

assure that none of them are lost to the competition.

- The middle group of buyers: The balance of the customers in top 40% or 50% as

ranked by sales and profit. It will be just as important to target this middle group

of buyers who are delivering good profit but may be capable of moving up to

the top of profit level. Customers in this group are probably giving some of their

business to your competitors. CRM activities for these customers should be

aimed directly at increasing your company‟s share of their business. CRM

marketing strategy developed for this middle group of buyer more than paid for

the company‟s significant investment in database software within a year.

- The final, less profitable, group of customers: The third group of customers

represents those who, while profitable, are only marginally so. While it is

possible that some in this group would move up the sales ladder as a result of

increased communications, it will probably not be worth the effort. Typically,

this group will represent almost half of the customer file. Hence this simple

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analysis has greatly reduced the size of the challenge of implementing CRM.

1.3 The element of CRM:

CRM consist of three elements: People, Process and Technology, that help

companies to understand their customers. To gain the success in CRM project, the

company must coordinate all aspects.

People and Culture

The culture of an organization must be thoroughly understood before moving

forward with an implementation. Organizations must concentrate on overcoming

resistance. It is a strong reason why CRM projects often experience failure. Know your

corporate culture and where the challenges will be prior to the start of the

implementation so the appropriate changes can be made. Create long lasting awareness

that a CRM solution is needed in the organization and exactly why. “Customer

management behaviors … are often not embedded in the culture of an organization.

Hence, people change roles and their thinking is either lost or moves with them”

(Starkey, 2002). Explain the long-term goals and what the future culture will be so

employees can change their perspectives. Help them understand that it is a cultural

shift that must remain constant even through turnover or promotions.

In addition, an organization must consider culture and social norms are not

globally consistent. For example, the CRM approach in North America is very different

from the Nordic School, which focuses “much more on aligning the organizations

resources in such a way that ongoing (personal) relationships are formed and

maintained” (Schultz, 2002). The description further details that the North American

version of CRM is technology driven, and the Scandanavian version is built on personal

relationships. This means one program may not be able to be rolled out uniformly in

Japan, Europe, North America, and India. This is an interesting topic for global

businesses trying to integrate processes throughout their organizations. Organizations

must be keenly aware of the differences and how that affects a CRM program. There

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must be flexibility to change the process according to the cultural differences.

Employees may be resistant, because they feel overwhelmed with more work or

drastically changing responsibilities. In addition, there may be blame in areas having

significant customer failures. In a CRM environment the culture must shift to solutions

rather than punishment for errors. In order to determine the root cause of problems, the

culture must exhibit the freedom to communicate at all levels without fear of recourse

for mistakes.

In addition, the culture must shift from silos to one integrated operation. For

example, sales people have traditionally guarded their turf, refusing to share

information on customers they have cultivated. Teams must begin to work efficiently

with other departments and other divisions around the world (Arthur, 2002). This

means overcoming organizational and global cultural differences.

Clear communication, resources, awareness, and training must be integrated into

the culture or the transformation cannot occur. “Have a vision and passionately

communicate it” (Brendler, 2001). This means communication is key; it will reduce

resistance of employees. Employees want to know how they are expected to support

the business. The more educated employees are on their new role, the smoother the

transformation. In addition, providing a forum for employees to give input and give

feedback can ease the implementation. Implementation should have complete

involvement of those that know the business best. In order to have success, a complete

view of the organization and „buy in‟ should be ingrained into the culture.

Process

The current process requires evaluation to determine what changes in the

process must occur. "This is not just about investing in software; it is investing in a

new approach to relationships," says Ronald S. Swift, vice president of strategic

customer relationships with NCR Corp (Groves, 2002). Change the process before

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making technology infrastructure changes. Technology is the enabler not the focus.

The process of implementation has fundamental steps of development,

implementation, and maintenance. There are also four key factors as the project

advances from development to maintenance. These project factors include teamwork,

resource commitment, consensus, and clear communications (Menon et. al., 1999).

Teamwork is pinnacle at the early stages in the implementation. Resource commitment

may seem obvious, but it still is an issue for organizations to resource adequately when

undertaking a large project. Consensus represents the strategic alignment of managers

and employees in the organization. Clear communication is important for the same

reasons mentioned in the discussion on culture. A project cannot be successful if it fails

to be methodical from development through maintenance while at the same time

incorporating the success factors.

During the developmental stage it is important to first define the outcome that is

to be achieved from the project. “Ready, fire, aim” doesn‟t work. Resist the temptation

to make it up as you go along. CRM is complex (Thompson, 2001). A well thought out

strategy is a requirement for success (Menon et al, 1999). This will minimize scope

creep and ensure the ultimate goal is clear. At this vital stage it is key to determine the

members of the team.

The team members of the project should be a cross functional group

representing the different areas of the organization. For example, a manufacturing

company should include quality assurance, supply chain, operations, accounting,

research, and sales departments. This is most effective in problem solving and

understanding a range of complex issues or opportunities.

During the implementation phase of the process it is critical to have strong

commitment from participants, leadership, and the entire organization. This

commitment can be best achieved by laying out the project steps of implementation.

The project must be broken down into achievable steps that are manageable. “We tend

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to implement in small phases,” says Boise CEO Milliken. Focusing on objectives with

a documented plan creates structure to the CRM implementation that ensures resource

allocation and commitment to tasks. Resources include financial, people, training, and

support. Clear commitment and resource allocation go hand in hand to achieving

success. A company cannot have success without both factors.

There also must be a focus on post implementation involvement to keep the

project alive, create continuity and momentum as part of the process. The project

doesn‟t end after the initial implementation. The implementation of CRM is a process

and cultural change that must continue to offer results over time. In addition, poor

follow-up could stifle customer relationships if attention doesn‟t continue.

Think of customer relationship management as a never-ending journey with

satisfied customers as guideposts along the way. No matter how successful you‟ve

been, you‟re never really done with CRM. As customer expectations continue to rise,

what was exceptional service yesterday becomes the status quo today—and will be

going out of business strategy tomorrow (Thompson, 2001, p.64).

Technology

The success of CRM is not based on technology, but is described as the enabler of

the process integration. The technology must be strategic, cost effective, and

accessible. Strategic technology means there is flexibility and growth for the long-term

corporate strategy. The information technology manager must select a healthy

company that has a firm foundation in cutting edge software offerings. If the goal is to

have Internet access for customers to place and track orders, the software must be able

to provide or integrate with such systems. The system must also meet the needs defined

by the business for security. Failure to take the proper security precautions can be a

deadly experience for a business if intellectual property is lost or customer trust is

publicly destroyed.

The system should be cost effective. The technology should aim for configuration,

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not customization. This allows companies to “break the habit of writing custom code to

accommodate unique business processes; it will be well worth the effort when it is time

to upgrade” (Bednarz, 2001). The more customization the harder it is to upgrade to the

next version of the software. In addition, from personal experience the more code

manipulations the less standardized the programming, and harder to proof out in

productive systems.

Managing the content of this information means ensuring customer information is

properly collected, analyzed, and documented so that each department within the

company has the customer data it needs to implement CRM functions (Groves, 2002).

Otherwise information can create a wealth of data without a positive means of applying

it properly in decision-making.

The financial community, the board, and senior management are mostly focused on

outcome indicators, especially those pertaining to the value created for investors. In

addition to conventional financial and share measures the CRM system affords a more

finegrained look at marketing effectiveness with respect to customer acquisition and

defection rates, customer tenure, customer value and work, percent inactive customers

and cross-selling (Crosby and Johnson, 2001, p.2)

People

Process

Technology

1.4 The characteristics and the challenges of CRM:

1.4.1 The characteristics of CRM:

 Customer database centrally: Give to the company a overall view of

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relationship of each customer.

 Profitability of customer analysis: CRM helps to create the balance sheet of

individual customer, and helps the company to invest more effectively on each

customer, the profitability is the most important thing to evaluate and classify

customers. Normally, each company has three classes of customers:

- The first class: Take about 10% of total customers, this class makes the highest

profit and has long-term transactions with the company.

- The middle class: Take about 40%-50% of total customers, this class makes

profit and is very potential.

- The last class: Also take about 40%-50% of total customers, the profit of this

class is not high and mainly is the current customers who have few transactions

or only come to the company in some special occasions like sale-off, discount...

 Customer segmentation: CRM classifies customers into different segmentations

and measures the effectiveness of each segmentation.

 Marketing campaigns base on customer database: Use the database and

information of each segmentation to plan and implement marketing campaigns

 Analysis of customer‟s needs: Help to give personalized product or service to

each customer and find more new and potential needs from customers to

compete with competitors.

1.4.2 The challenges of CRM:

 Have to change the policies and process in the whole

 Need full support from the board of management and all staffs, for example: the

way they import the customer information to CRM system and dig this

database...

 Need large initial cost to invest on software, machine, equipment and human

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resource...

1.5 Ideas support CRM:

1.5.1 The statistics of Harvard-Business review in December, 1995:

- Only 4% of dissatisfying customers complain, the other say nothing but they

will come to your competitors. In the banking industry, 65% of customer will

chose other suppliers if they are not satisfied.

- The average person with a problem eventually tells nine other people

- Satisfied customers tell 5 other people about their good treatment

- The cost of acquiring a new customer is 5 to 7 times greater than retaining

current ones

- The cost of recruitment a new employee is 10 times greater than retaining

current ones

1.5.2 Pareto's Principle - The 80-20 Rule:

In 1906, Italian economist Vilfredo Pareto created a mathematical formula to

describe the unequal distribution of wealth in his country, observing that twenty

percent of the people owned eighty percent of the wealth. In the late 1940s, Dr.

Joseph M. Juran inaccurately attributed the 80/20 Rule to Pareto, calling it Pareto's

Principle. While it may be misnamed, Pareto's Principle or Pareto's Law as it is

sometimes called can be a very effective tool to help the company manage

effectively.

The 80/20 Rule means that in anything a few (20 percent) are vital and many (80

percent) are trivial. In Pareto's case it meant 20 percent of the people owned 80

percent of the wealth. In Juran's initial work he identified 20 percent of the defects

causing 80 percent of the problems. Project Managers know that 20 percent of the

work (the first 10 percent and the last 10 percent) consumes 80 percent of your time

and resources. .

You know 20 percent of you stock takes up 80 percent of your warehouse space and

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that 80 percent of your stock comes from 20 percent of your suppliers. Also 80

percent of your sales will come from 20 percent of your sales staff. 20 percent of

your staff will cause 80 percent of your problems, but another 20 percent of your

staff will provide 80 percent of your production.

It means that in your company only 20% of your total customer brings 80% of total

20%

80%

benefit to you. So, CRM help to keep these 20% customers.

1.6 The benefits of CRM:

1.6.1 Long-term profitability

At the beginning of CRM project, it takes costly but if the company keeps,

maintains and develops the close relationship with customer they will gain the

loyalty, and the high retention. It means that in a long timescale the company can

receive more profit from them.

1.6.2 Lower costs

There is often substantial start-up cost associated with attracting new customer.

These include advertising, sales commissions and the operating costs of setting up

an account. Sometimes these costs can outweigh the revenue expected from the new

customer un the short term

1.6.3 Repeat customer often cost less to service

Repeat customers are more likely to be familiar with the company and its products

and may make fewer demands on the time of employees

1.6.4 Opportunities for cross-selling

Over time, business customer often grows larger and may need to purchase in larger

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quantities. Individuals may purchase more products as their families grow or as

they become more affluent. Both types of customers may decide to consolidate their

purchase with a single supplier who provides high quality service.

Another advantage of an increase in cross-sale is the corresponding effect on the

organization‟s share of the customer‟s total consumption in the particular market.

This has been referred to as an increase in the share of wallet and is simply a

measure of the consumer‟s expenditure with the organization as a percentage of his

or her total expenditure in that market.

1.6.5 Defection less likely

Satisfied customers will be less susceptible to the pull of competition. Moreover

when customers trust a supplier, they may be more willing to pay higher prices in

return for the assurance of quality service (up-selling).

1.6.6 Employee retention

An indirect benefit of customer retention is employee retention. The stress

associated with dealing with customers who are unhappy with products and services

can lead to high employee turnover and poor quality. Conversely, customer

satisfaction can improve employee morale and encourage them to remain with the

firm.

1.6.7 Family influence

One of the key factors influencing the choice of many purchases for young people

is parental influence. Hence it is assumed that building a relationship with one

family member will have an impact on other members of the same family.

1.6.8 Word of mouth marketing

The satisfied customers provide referrals and may be willing to pay a price

premium. And they may generate positive word of mouth and provide free and

credible advertising for the institution.

19

In general, we can withdraw three main benefits from CRM, as following:

Main benefits Explanation

Increase customer loyalty Information captured by CRM system

helps a company to identify the actual

costs of winning and retaining

individual customers.

Having this data allows the

organization to focus its time and

resources on its most profitable

customers.

Classifying one‟s best customers in

this way allows the company to

manage them more efficiently as

premium group, with the

understanding that it is neither

necessary nor advisable to treat every

customer in the exact same way.

More effective marketing Having detailed customer satisfaction

from CRM system allows a company

to predict the kind of products that a

customer is likely to buy as well as the

timing of purchases.

CRM allows for more targeted

campaigns and tracking of campaign

effectiveness.

Customer data can be analyzed from

multiple perspectives to discover

20

which elements of a marketing

campaign had the greatest impact on

sales and therefore profitability.

Greater efficiency and costs Integrating customer data into a single

reduction database allows marketing teams,

sales force, and other departments

within a company share information

and work toward common corporate

objectives using the same underlying

statistics.

Source: Adapted from Scullin, S., Allotra, J., Lioyd, G.O. and Fjemestad.,J. (2002),

Electronic customer relationship management: benefit, consideration, pitfalls and

trend

1.7 The reason why CRM fails:

Lack of planning The number- one reason CRM initiatives fail is lack of adequate

planning. Planning in this case includes not only a comprehensive project plan, but also

a detailed business case that properly sets expectations for the likely return on

investment. The CRM plan should be broken down into phases of not more than six

months, with measurable goals and success metrics for each phase.

Narrow Focus on Technology For many organizations, CRM is technology, but

achieving a true focus on customers and demonstrating a positive return on investment

requires that the organization look beyond technology. CRM technologies are tools;

however, without new or significantly revised business processes and business focus,

it's extremely difficult to develop true relationships with customers.

Lack of Senior Management Commitment Creating, maintaining and sustaining

customer relationships is not easy; it requires a significant shift in business focus. That

type of shift is next to impossible without broad senior management commitment. Yes,

21

new technology can be implemented, but chances are that the staff who interact with

customers every day will not change the way they do business with customers unless

that "new way" is prescribed throughout the organization - and that means from the top

down. Senior management participation in defining success metrics is also essential.

Not Listening to Customers. It's truly surprising just how many organizations try to

implement CRM without first talking to customers. You can't create and maintain

relationships with customers without providing lasting value. Additionally, you can't

truly know what customers believe is valuable unless you ask them. Qualitative and

quantitative research with customers is essential to success.

Try to Maintain the Organization Status Quo. Achieving a customer focus almost

always requires some revisions in the organization structure. Throughout the early

stages of the initiative, all staff that touch customers need to participate on the CRM

task force. This group will be instrumental in defining the organization changes

required to achieve the organization's CRM goals.

Lack of consistent voice: The organization may be able to demonstrate efficiencies in

sales processes with associated ROI; however, long term, it may be difficult to

demonstrate just how relationships with customers have been improved. This is

especially true if related processes and technologies in marketing and customer service

remain unchanged. Relationships with customers are based on all the interactions they

have with the organization. Positive strides in one area can be totally undermined by

lack of consistent voice and uncoordinated offerings throughout the organization.

Not Focusing on Best Customers Many organizations have blown their business case

(if they had one), by not appropriately allocating their CRM resources. In fact, the

major problem is either trying to focus on all customers equally or, in some cases,

focusing too narrowly on only the best customers. Most organizations cannot afford to

universally improve sales, marketing and service for all customers. In fact, the business

case should easily demonstrate those customers where improvements are likely to have

22

the most impact in terms of increased profitability. Generally, this translates to:

 Recognizing best customers with express service, assigned sales and customer

service representatives and special benefits. Decreasing heavy marketing efforts,

except for those that demonstrate increased activity only when incensed or



during specific seasons. The focus is retention.

Increasing marketing and service efforts with "next best" and marginally

profitable customers that show greatest promise (based on statistical models and

lifetime value analysis) for increased profitability. Also target those unprofitable

customers that look most like best customers. The focus is additional cross-sell

 Decreasing marketing and service levels for unprofitable customers that have

or up-sell.

limited probability of higher lifetime values. Chances are these are one- time

buyers or those that only buy with deep discounts or heavy promotions.

Not Beginning with a Pilot. It's surprising to us just how many organizations don't

start their CRM initiatives with a pilot project to prove the concept. A pilot will quickly

demonstrate where you don't have adequate senior commitment and where the business

case may be flawed. The pilot can also help to further define organizational change

requirements. Most importantly, a pilot can help you to further qualify what success

can mean, especially if you continue your primary research efforts throughout the term

of the pilot.

No Customer-Focused Metrics. Many organizations fail to revise the metrics they

track to include customer-focused variables. The most important variables relate to

how customer segments are changing over time. The most effective way to do this is

through a customer scorecard. Your scorecard should track changes in customer

profitability and lifetime value, up-sell and cross-sell, and acquisition rate and retention

23

month to month as well as year to year. In addition, these metrics and the related trends

should be used during the strategic planning process to set organization and

departmental goals and objectives.

No Updates on Progress. This one is simple - a plan without regular progress updates

is not truly a plan. Good or bad, progress must be measured. Communicate progress

against each of the pre-identified success metrics and against the project plan on a

24

regular basis. Discuss how you're adjusting to deal with setbacks.

CHAPTER 2: BACKGROUND ON VIETNAM BANKING MARKET AND

VPBANK SITUATION ANALYSIS

2.1 Overview of Vietnam Banking Market

2.1.1 Background

Interbank market is „the playground‟ among the professionals. Therefore, its

activities receive rules and regulations especially from big events such as the Vietnam-

America Bilateral Trade Agreement (BTA), or Vietnam's penetration into World Trade

Organization (WTO).

Inter-bank's movement in Vietnam is growing constricted which is

conspicuously marked by more attention on risk check and level ranking in

transactions. Business is run professionally for mutual benefits.

Different types of banks are joining Inter-bank including State Commercial Bank,

Joint-Stock Commercial Bank, Joint-Venture Bank, foreign bank branches and other

financial companies.

State Commercial Bank: There are 6 banks of this type now running their

business. These banks own a large system of branches that can join Inter-bank

independently or dependently owing to its policy and management capacity or they can choose not to join Inter-bank market.1

Joint-Stock Commercial Bank system consists of 37 members. It is now seeing a decline in number but an increase in scale for each member.2

Joint-Venture Bank, foreign bank branches: 4 Joint-Venture Banks and 27

foreign bank branches are in operation in Vietnam. Their customers are mainly foreign

1 State Bank of Vietnam, “2004 Report” 2 State Bank of Vietnam, “2004 Report”

25

financial groups or joint-venture companies. Several banks of this kind such as City-

bank or Standard & Chartered Banks have been offering services in Inter-bank, though still humble.3

Financial companies: 5 financial companies that seem unable to afford big

business due to shortage of long-term capital want to switch to Inter-bank market. Most

of these companies lack of banking tools. These banks offer services mainly in sending and lending money, bond transactions, and moneyed papers.4

Market changes take place under the influence of State bank policy. Under State bank,

state commercial banks play key roles in the market thanks to their large-scale

transactions. Vietcombank appear a great example as it takes the lead in influencing the

market. Foreign banks also depend largely on state banks in relation to VND as they

have USD surplus and VND in shortage. However, this difference will be belittled

because the State bank is getting under way to open door policy.

Vietnam market is small and has small number of partners, running in the

shortage of banking tools and weak cooperation among state banks, so Inter-bank

usually run in one direction when there's change. For example, the whole market need

or have abundant VND in the same time, so happened to USD.

In such occasions, price jumps significantly. However, transaction interruption seems

even worse.

Small and rural joint-stock banks are merged or acquired by bigger banks

(decreasing in number from 52 in 2000 to 36 now) and the scales of big banks are

extended.

Some foreign banks cut down their activities in Vietnam by reducing staff (ABM

AMRO), or close (ING, Indosue, Bank of America)

Joint-stock banks increase market share in mobilization (28,2%) and credit

3 State Bank of Vietnam, “2003 Annual Report”, p.9 4 State Bank of Vietnam, “2003 Annual Report”, p.9

26

(from 12% in 2000 to 22,5% in 2004) as well as profits ( 38,5%).

State banks strengthen the barrier against joint-stock banks, issuing no permission to

new banks and setting limit in broadening branches. However, they encourage the

banks to merged or sold to them.

2.1.2 Commercial Banks' Market

2.1.2.1 Enterprises' market:

 State enterprises (SE)

The most recent statistics shows that there are 6000 SE, 5% of the whole enterprises

running in the country (160,000 units). The 5% possesses 119,500 billion. The number

of below-10 billion-in-capital enterprises occupies 75.5 % of all. There are 17

corporations, 91,76 companies and 4000 independent SE in the State group. The State

corporations hold a number of 1,605 members, 28.3 % of the total number of SE.

State companies hold 75% of property, 20% of total social investment, 50-70% of total

bank credit, 70% of foreign loans and 98% of joint-venture projects with foreign

countries. They contribute 40% GDP and 50% export turnover.

Those enterprises that make profits claim 76.9%, loss 15.8% and even 7.3%. Average

profit rate in State enterprise' s capital reaches only 10%. Profitable businesses belong

to small and medium-sized enterprises.

Of the 17 corporations 91 holding large amount of state budget, 12 of them

make loss or even and only 5 make profit. Those corporations making profit are mainly

state monopolies. In 2004, the government makes attempt to minimize the number of

SE borrowing money with favored interest rate.

In 2004, the government also continues inequality between different economic

sectors. Bank laws will be amended to clarify the roles of each type of bank.

 Privatizing State Enterprises

Of the 6000 SE, only 1300 finish privatizing and diversifying ownership. Of those

privatized that did well Vinamilk takes the best example. Hanoi has 100 State

27

enterprises under privatizing process and the government intends to keep other 60

SMEs related to spearhead industries, 28.8 % of total State enterprises such as

electronics, information technology, mechanics, garment and textile, leather and

footwear unchanged. Industrial enterprises of this area must own a capital and turn-

over more than 10 billion with a staff of over 200 and contribute to the budget over 1

billion.

The market is characterized by high demands for credit and banking services;

diversified areas; favorable conditions for loan and property security. However, this

subject requires interest priority and other cost. The group contains latent risk when

there's change in leadership.

Moreover, these companies can take their advantages in relation to governmental

offices. And in addition, the ownership gives the staff and leaders impetus to well

perform their tasks.

Banks need to maintain relationship with the area to strengthen their services in the

future when this area becomes advanced.

 Big private enterprises

There are over 150,000 private enterprises, though unlisted but the number of BPE

is quite large. In fact, only successful businessmen can build such great private-owned

companies, groups like Hoa Phat, Masan, Gammi, TCT etc.

The development trend of this session is optimistic. Enterprises outside state sector

will grow quickly into strong conglomerates due to government guidelines of

developing private economy. Corporations can grow from small companies or be

established by merging smaller enterprises. VPbank need to build strong shortcut

strategy to meet these potential demands, as they are delicious sausages to any banks.

 Small and medium-sized private enterprises

According to latest statistics, private sector has 80,000 newly built units, the total

28

number of enterprises nationwide increases to 150,000 four years after the introduction

of business laws. This economic area is proving to be the most dynamic area in our

economy.

Besides SMEs, 14,207 cooperatives with 8349 in Agriculture, 570 in Trading and

services, 927 people's credit fund, 2069 in industry and small craft industry, 1027 in

transportation, 481 in construction and 538 in fishery provides jobs for about 7.2

million people. Hanoi owns 768 cooperatives of which 354 in agriculture and 246 in

others. While HCM city has 6 cooperatives leagues, 380 cooperatives and 1653

complexes.

After 4 years run under business law, the rate of private enterprises out of the

registered declines from 64%( 1991-1999) to 34% while the rate of joint-stock

enterprises increases from 36% to 66%. That the number of 7000 joint-stock

companies registered shows a tenfold compared to period '91-99. 80-85% of the

registered are now in operation. This area has new investment and capital increase to

144,000 billion VND (9.5 billion USD). The investment rate has made a gradual rise

from 20% in 2001 to 27% in 2003. This rate in HCM city amounts to 38%

Before 2002, SMEs are main customers of joint-stock banks. However, State Banks

switch to pay more attention to this market share. Up to third quarter of 2003, VCB has

lent 5.378 billion VND to 1044 SMEs, emphasis was put on successful enterprises with

premise, technology and good potential for further development.

 Foreign investment sector

By September, 2003, there have been 4178 foreign investment projects licensed

with the total registered capital of US$ 40,02 billion, 2163 business and manufacturing

projects of that the total registered capital is US$ 25,4 billion and the other 75 projects

with the total registered capital of US$ 9,5 billion nationwide.

By September, 2002, there have been 2,014 foreign invested enterprises doing

business in Vietnam in which 1337 enterprises are wholly foreign invested ones, an

29

increase of 786% in comparison with the same period of 1995, in which 1539

enterprises in industrial sector, 141 enterprises in trading, tourist- restaurant, service

sector, 88 enterprises in construction, transportation and post and telecom, 54

enterprises in agro-forestry, fishery sector and 192 enterprises in other sectors.

By the end of February, 2003, the proportion of Foreign invested enterprises in the

total industrial production value is 26.3%, increasing 54.8% in garment, 32.5% in beer,

20% in silk, 70.9% in pesticide, 90% in tablet, 49.6% in hygiene porcelain, 42.9% in

cement, 21.8% in tile, 20% in transformer, 27.3% in electric fan, 46.4% in TV, 64.1%

in car, 99.6% in motorbike production, etc (compared with the same period of 2002).

2.1.2.2 Household and retail market

Consumption and retailed market is a potential market of Banks (in 2002

Standard Charter Bank had a proportion and benefit from banking services of 51% and

44% in total surplus debt and profit of credit). Some retailed products of VPBank such

as “new houses” and “brand new car” have also gain a marked growth since

implemented in 2002 than planned figures (over 1000 clients for each)

The division of market is as followed:

- The division of market according to geography, urban and rural population

- According to provincial geography.

- According to job (monthly paid workers who can be classified according to average

income per month and private business)

- Retailed market can be classified into market of clients who use services and products

of Bank such as saving, buying cards, real estate loaning, loaning for car buying,

loaning for studying abroad.

2.2 Situation of VPbank

2.2.1 Vision

Up to 2010, VPbank will become the first-ranked commercial bank in the

northern of Vietnam in the credit service; especially installment consuming loans and

30

VPBank difference is created by effective customer relationship management.

2.2.2 VPbank’s mission, strategy and performance results in 2001-2005

VPbank was established on 12/8/1993; at the same time that many commercial

banks were born (there are 54 new commercial banks). Most of the commercial banks

mainly operate in the biggest cities of Vietnam; the 21 remaining banks operate as the

rural banks. All the headquarters are placed in Hanoi, Ho Chi Minh City and they

expand their branches to other big cities like Hai Phong, Da Nang, Vung Tau...In

Hanoi there are six headquarters and 12 branches of other banks.

The period from 1993 to the beginning of 1996 is the strong development of

VPbank as well as other banks. At that time, VPbank‟s profit was remarkable but the

hot development period pushed VPbank into the financial crisis quickly that lasted

nearly 10 years.

At this time, VPBank has not had any clear strategy because all the efforts are

concentrated on recovering themselves from Hanoi state bank‟s special control.

From 2001 to 2004, this is the period that VPBank had to try their best. At the end of

the year 2000, the NPLs number was 335 billion VND, but 90% was frozen NPLs and

NPLs from the deferred L/C was over 36 million USD. VPBank was put in the second special control from Hanoi state bank on September 1st, 2002.

From that time, the board of management took all their efforts to recover VPBank

from the special control and the immediate tasks are the reducing of NPLs and deferred

L/C in the minimum amount.

The objectives of VPBank in 2001-2004:

- Complete the loan approval procedure, lessen the risk in making loans

- Associate with the legal organization to collect the NPLs by liquidating their

collateral.

- Negotiate with foreign partners to write-off for VPBank

31

- Associate closely with Hanoi state bank, provide full of required reports

- Restructure and Union the whole of employees to try their best to help VPbank

overcome the difficult period.

- Improve VPBank financial statements

- Keep all shareholders calm

- Improve the information technology

Table 2.1: VPBank Financial statement analysis in 2001-2004:

Unit: Mil VND

Criteria 2001 2002 %(+/-) 2003 %(+/-) 2004 %(+/-)

1,297,124 1,476,732 13.85% 2,491,853 68.74% 4,149,288 66.51% Total assets

Total loan

852,910 1,103,426 29.37% 1,525,198 38.22% 1,865,364 22.30% balance

314,700 373,042 18.54% 201,632 -45.95% 9,249 -95.41% NPLs

36.90% 33.81% -8.37% 13.22% -60.90% 0.50% -96.25% % NPLs

234,854 232,485 -1.01% 208,026 -10.52% 199,297 -4.20% Equity

1,039,769 1,216,652 17.01% 2,224,056 82.80% 3,880,845 74.49% Total MF

768,910 797,116 3.67% 1,032,513 29.53% 1,541,341 49.28% Savings

2,369 20,564 768.05% 42,828 108.27% 60,012 40.12% EBT và DPRR

32

Source: Vpbank annual reports 2002; 2003; 2004

See on the chart, the situation of total assets, VPBank‟s total loan balance and the ratio

of NPLs has been improved considerably. The columns that show the total assets, total

loan balance are higher year by year and the line that shows the ratio of NPLs goes down below 1%, this is the sign of bright operation. And on July 6th, 2004, Hanoi state

bank gave the decision No 835/QD-NHNN to stop the special control to VPBank.

However, the growth rates of the total assets and outstanding loan are not balance;

there is still a big gap. In the asset side of the statement balance, credit portfolio takes

the majority but it reduces year by year, and others like money market investment,

33

securities investment... increase.

Source: Vpbank annual reports 2002; 2003; 2004

These charts represent clearly the profit structure of VPBank. In 2002, the percentage

of profit from the credit portfolio is 34% but in 2004 it is only 14%. And the profit

from banking services reduces considerably from 47% to 6%. These two profit

portfolios of the bank, so their decrease is the warning bell for VPBank operation

(more detail in SWOT). At this time, perhaps VPBank escapes from the dangerous area

but in the long term VPBank needs a clear strategy.

So, Where VPBank‟s profit mainly comes from? They come from the profits of inter-

bank investment and securities trading from 54% (44%+10%) to 72% (14%+58%). In

the fact, these profits are safer and more profitable; they are the tools to help VPB

34

overcome.

However, I can make more detail about the profit from those two portfolios above, it

mainly comes from:

- The difference between the interest rate of USD and VND

- The cheap capital in the inter-bank market from the big state-owned banks like

VCB or BIDV....

These activities are short-term, not professional and easy to copy. If other competitors

recognize, they can copy whenever they want, so it will put VPBank in the difficult

situation. And there are other limited reasons for the long-term:

- The USD interest rate in the increasing trend.

- The interest rate for mobilizing fund is going up, so the cheap capital in the

interbank market will be rare.

Besides these activities to be continued, in 2005 the board of management has cared for

improving the effectiveness of other activities to help VPBank grow stably and firm

such as opening more branches, VPBank brand promotion, sale promotions on the

35

special occasions like VPBank‟s birthday, Tet holiday...

Source: VPBank annual report 2005

The number in this table represents somewhat the operation of VPBank. Although this

data is not quite exact because the demand of banking services increases so much in the

end of the year, the main activities still take the small percentage of the total profit.

About human resource: The total employees of VPBank increases very quickly from

249 people in 2001 to 658 person in the middle of 2005. The ratio of graduated and

upper graduated employees takes 77%.

2.2.3 SWOT analysis

To recognize the current situation of VPBank, we use SWOT tool. With this tool, we

can see not only VPBank‟s strength, weakness but also opportunity and threat in the

financial industry as well.

2.2.3.1 Strength

 Firstly, Vpbank has the quick growth rate in mobilizing funds, especially in

savings. You can see the total mobilized funds in the period 2001-2004, as

below:

Table 2.2: Total mobilized funds in the market I in the period 2001-2004

Unit: Mil VND

Criteria 2002 2003 (+/-) % 2004 (+/-) %

974,632 1,273,993 30.72% 1,869,589 46.75% Customer’s deposits

797,116 1,032,513 29.53% 1,541,341 49.28% * Savings account

134,697 210,371 56.18% 283,198 34.62% * Current account

42,819 31,109 -27.35% 45,050 44.81% * Others

So, the growth rate in mobilizing fund is quick, it is because VPBank always offers the

attractive mobilized interest rate, as compared with other Vietnam commercial banks

36

and VPbank often provides many promotion programs or advertisements. The

customer‟s deposits come from 30.7% to 46.7% during the two years 2003-2004,

including that savings take the most percentage.

Source: Vpbank, ACB, Eximbank, VPBank, Saigon Cong Thuong bank‟s anual

reports 2003-2004

 Secondly, VPBank has a young and skillful human resource. The graduated and

upper graduated employees take 74% of total employees, and two-third is the

new comers. Of course, it says nothing, the most important thing is the

capability of adapting with the new environment, processing the task but the

youth will bring the fresh environment and be more active and creative.

 Thirdly, the NPLs rate over the total loan balance in VPBank is low at the

current time. After VPbank was in Hanoi state bank‟s special control with the

NPLs rate 37% (2001), this current rate is only 0.5% (2004). The number can

say that VPbank are operating very safely.

 Fourthly, VPBank has the strong relationship in the inter-bank market. It helps

VPBank increase the profit that comes from the inter-bank market investments,

securities trading… At the current time, these activities are mainly feeding all

37

VPBank system.

2.2.3.2 Weakness

 Firstly, VPBank weak point is the information technology system, The

software that VPBank is applying is not very useful anymore because the

demand of customers is developing; they want to buy modern bank services.

While other competitors have finished the modernizing-bank project, VPBank

still use B2K. With new application software, the competitors can deploy some

new services that attract customers like mobile-banking, home-

banking…Although these services are not popular with the medium and low

income customers now, they promote brand names for VPBank‟s competitors.

Table 2.3: List of VPBank’s competitors’ software names

No Bank’s name Software’s name

1 VPBank Globus

2 ACB TBCS

3 Vietcombank Huyndai

4 BIDV Silver Lake

5 Incombank Silver Lake

6 Sacombank Globus

7 Ảgribank Huyndai

8 Habubank Smartbank

9 Eximbank Silver Lake

10 East Asia Intercube (Ấn độ)

Although the information technology is not the key element to decide the

success or fail of one bank, the key is still the right strategy; it helps banks

38

improve the quality of their services to take competitive advantages. If VPbank

wants to deploy CRM, the current IT has to be changed because the technology

takes one-third to the success of the project.

 Secondly, customer‟s reorganization of VPBank‟s brand name. In 2005 VPBank

launched many sale and brand promotion, sponsor programs but VPbank‟s

brand name is effected by many factors such as:

- VPBank has gone through the two big crises; it makes them nearly to go

bankruptcy. So, it is very difficult for the old customers to believe in VPBank

again.

- The most important and decisive thing is the quality of products and services.

These activities help to make brand name partly. In fact, the quality of

VPBank‟s products and services is not better than others, except for the high

interest rate for mobilizing fund. So, only deposited fund has the quick growth

rate (see on VPBank‟s strength).

 Thirdly, VPBank‟s equity is still small as compared with other competitors. Up

to June 2005 the total equity is only 243,753 million VND, this makes many

effects to the bank‟s operation because the equity will decide the maximum loan

that provides to one customer, many other things... The growth rate of VPBank

39

equity is still low and the number is so small compared with competitors.

Table 2. 4: The equity growth rate of banking system and some commercial banks

Unit: Bil VND

No Banks 31/12/2003 31/12/2004 Rate%

198-243* 13.79% 174 1 Vpbank

412 128.88% 180 1 VPBank

481-600* 11.60% 431 2 ACB

350-500* 59.09% 220 3 East Asia Bank

740-1250* 46.53% 505 4 Sacombank

120 200 66.67% 5 Habubank

2,500 4,300 72.00% 6 Vietcombank

300 500-700* 66.67% 7 Eximbank

8 Rural and Agriculture Development 4,500 5,200 15.56%

bank

10 Total for all joint stock banks 3,290 5,052* 53.56%

11 Total for all state commercial banks 12,890 16,960* 31.57%

(*): Updated to 1/2005

Source: Internet, commercial bank‟s annual reports 2005

At the current time, VPBank equity is only equal to 59% of VPBank, 40.5% of ACB,

48.6% of EAB, 19.4% of Sacombank, and 4.6% of Agribank-The bank with the

biggest equity in Vietnam..

When we take the comparison with VPBank, one year ago VPBank is the bank that has

the same scale, the same equity as VPbank but now they are twice time more than

VPBank, their performance also grows very quickly (consist of deploying the new

information technology-Globus, branding, launching some new services such as Fast

40

asccess...) and now VPBank sees VPbank as a lower-rank competitor.

 Forthly, VPbank service‟s quality is still low such as domestic money transfer,

L/C service, and foreign currency transfer.... According to the table above both

the profit and the income percentage that come from services go down year by

year compared with the total profit. The current trend of banking industry

increases service profit because it is less risk but gives higher return than loans

but it is not true with VPBank. We can study more deeply about VPBank

service, we can see:

- About product: VPBank are providing services that are not new and different

from those of other competitors (about speed, procedure, comfort…).

- About price: Fees, commission, charges of VPBank services are not cheaper

than others.

- About distribution: at the current time, VPbank‟s network is expanded much

more than itself in the special control period but the current IT has not met the

demand of all branches, so it makes customers uncomfortable when they have a

transaction with VPBank.

- About promotion: All the sale promotion and marketing activities are not

different from others such as brochure, ads board; sponsor for TV show

game…But VPbank has not given any activities for promoting the long-term

relationship with customers.

So, after studying all criteria of quality of the bank‟s services, VPbank has not exposed

any difference that is better than its competitors, VPbank is even worse for example:

VPBank has not been providing online service, issuing ATM card, installing POS…It

is in the danger that other competitors are taking customers from VPBank.

 Fifthly, the recruitment procedure for senior positions. Due to the demand of

expanding more branches in the short time, so the demand of recruiting manager

is high. VPbank has not prepared the perfect and professional procedure of

41

recruiting for important positions yet. In this current time, to recruit an enough

quality person is very difficult. It will bring the potential risk for VPBank if they

choose the wrong employees.

 Sixthly, the result from all weaknesses above is the low profitability rate. It is

lower than other commercial banks in ROE, ROA.

Source: Seven commercial banks‟ annual reports 2004

2.2.3.3 Opportunity

 Firstly, it is the high entry for the new comer. In fact, to open a new one, the

legal regulations are required so complexly. Moreover, the state bank‟s

guideline is to build the really strong commercial banks to compete with the

foreign ones, they do encourage opening more new small banks. With VPBank,

the domestic competitors do not arise but it is easy to appear the merge and

42

acquisition trend in the future. The competitors are the current domestic banks,

foreign banks, and the financial companies that provide the same services such

as insurance company, post office savings, and securities exchange…

 Secondly, Vietnam government are maintaining the market economy, so in the

future the growth rate of Vietnam economy goes up stably and firmly. This

environment encourages the private economy sector to develop; this is also the

target market of other retail banks and VPBank.

 Thirdly, the habit of Vietnamese people is changing day by day, the new

generation has newer thinking, newer habit than the previous generation because

they have the chance to meet and get in touch with the foreign culture, their

knowledge is also different, they need a more comfortable life. In the past, all

Vietnamese people is poor, so they used to save their money up to enough in

order to buy a new thing that they want, they are afraid of making loans, but

now it changes. The intellectual has the high and stable income; they want to be

independent with their parents when they are still young. It will increase the

demand of installment loans for purchasing car, house… Besides, Vietnamese

people are turning into using non-cash payment, they will use plastic and chip

payment cards like ATM, Credits card…This is the big opportunities for banks

including VPbank.

 Fourthly, the banking industry has the potential development trend and high

profitability, at this time the stocks of commercial banks are so attractive in the

investors‟ eyes. The price of banks‟ stock is always higher than its face value,

the investors believe in the potential growth. So, due to both the demand of

expanding and the high value of stock in OTC market, other commercial banks

have just issued more new shares to the market to increase their equity (analysis

in weakness). This opportunity still offer to other bank like VPBank, they still

keep investors‟ belief because Vietnam commercial banks‟ strategies are to

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develop stably and firmly and to reduce the risk as much as possible.

2.2.3.4 Threat

 Firstly, the competition is tougher and tougher day by day when Vietnam joints

some associate like ASEAN, WTO, AFTA...As analyzed above, VPBank‟s

competitors are below:

- Group 1: Five state-owned commercial bank, they are VCB, BIDV, Incombank,

Agribank and Mekong Delta Bank. In the past these banks are the wholesale

ones, their customers are national projects and state-owned corporations

according to Vietnam government‟s guide but in the last few years Vietnam

economy has changed into the market economy, so all the state-owned have

changed their strategies and now they are also the retail banks, so they are the

biggest competitors (over 70% of market share) of joint stock commercial banks

like VPBank.

+ Advantage: Their capital is rich with the big scale (Net work, for example:

Vietcombank has branches in 26 cities and provinces, BIDV has 79 branches and

Agribank has 110 branches), Vietnamese government‟s support and customer‟s

belief.

+ Disadvantage: The organizational structure is huge and not effective, their

attitude is slow (except for VCB, and BIDV), they are in the privatized process.

- Group 2: All the urban joint stock commercial banks, there are 25 banks. They

are the same type, the same target market... with VPBank. However, VPBank is

only ranked in the third level (If compared in the scale of capital, profitability,

well-known brand)

o The first level: They are the banks like ACB, EAB, Sacombank. These banks

have over 500 billion VND equity and ROE of Sacombank reaches to

26.6%, ROE of ACB reaches to 58% and ROE of EAB reaches 26.5%. They

attract their customer because they create differences from others in a certain

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field. For example: ACB is well-known by their card service, they apply

modern technology to deploy some new services such as home-banking,

phone-banking...while Sacombank has the competitive advantage that is

retail service and network in the southern of Vietnam and EAB is good at

small and medium loans and trade finance.

o The second level: They are VPBank, Eximbank, VIBank, MB. They are also

in the same level with VPBank in the last few years, especially Eximbank

and VIB were also in the special control of Hanoi state bank like VPBank

and their performances are very bad and poor. But after escaping from the

special control, they take advantage and take market share quickly. They are

building their IT project and launching some new services with professional

marketing program. For example: VPBank hires a foreign professional

marketing company to design its logo and advertising board...They are very

effective and attractive, VPBank‟s brand name is quite well-known at the

current time.

o The third level: VPbank belongs to this level. They are VPBank, Habubank,

Phuongnam banks, Phuong Dong bank. They have their equity under 500

billion VND, and their total assets are around 7,000 billion VND...

o The forth level: They are the following competitors of VPBank such as

MHB, Asia Northern Bank, Asia Southern Bank.... Their operational scale

and equity are smaller than VPBank but VPbank cannot be subjective

because the gap between VPBank and these banks is not big.

+ Advantage: Very creative with market fluctuation, flexible and suitable

organizational structure, skillful management, thin regulation from Vietnam state bank

(interest rate frame, equity...)

+ Disadvantage: Small scale of equity, thin relationship with foreign partner, less belief

from customers because they think that joint stock banks are riskier than state-owned

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ones.

- Group 3: All the joint venture banks, foreign branches of multi nation banks

such as VID-public, Chohungvina bank, Indovina bank hay City bank, ANZ,

HSBC...These bank are the very potential competitors for not only VPBank but

for Vietnam commercial banks as well. At this time they must accept many

regulations from Vietnam government and Vietnam state bank but these

regulations are thinner and thinner, especially after Vietnam takes part in WTO.

In the near future, in 2006 Vietnam must reduce the restriction of the rate of

purchasing joint stock companies‟ shares for foreign financial institutions

according to the commercial agreement between Vietnam and USA. Up to 2008,

Vietnam must open freely and cancel every regulations of limiting share

contribution rate, services, and transaction value for the foreign banks according

to the agreement in the framework of AFAS from ASEAN.

Moreover, Vietnamese people like to use abroad products and services, they are

very proud of the oversea product that they have and they believe in over sea

companies. This habit raises many difficulties for domestic banks. Recently, the

research implemented by united nation development program (UNDP)

cooperating with Investment and planning department says that 42% companies

and 52% individuals give the answer “ when the financial market open freely,

they will come to use services like loans from foreign banks”. Moreover, 50%

companies and 62% individuals say that they will choose foreign banks to

deposit their savings. This number is the warning bell to all domestic banks for

waking up and preparing for a very tough competition in the near future.

+ Advantage: Experience, professional, big equity and easy to attract well-qualified

employees...

+ Disadvantage: Vietnamese limit regulations (no more in the near future), depend

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so much on the relationship between Vietnam and others.

- Group 4: All the financial companies, they are providing some same services

with banks such as insurance companies, securities companies, and investment

funds...Like BaoViet, Post financial company, Petrol financial company,

IDG...They are not the direct competitors but they also bring the potential loss

for banks.

This is the general analysis about VPBank‟s competitor at the current time. However,

VPbank cannot show many strategies to fight because our resources are limited. With

the vision to become the best bank in the northern of Vietnam, VPBank defines the

direct competitors that VPbank has to fight are the joint stock commercial bank whose

head quarter is located in the northern area like VPBank, VIB, MB...Because the area

around the bank‟s head quarter will operate more effectively and profitable. (Analysis

more detail in VPBank’s value chain)

 Secondly, VPBank‟s employees are mainly young and they have just graduated

from the university. So, they often go to work in VPBank for a short time before

going to foreign or state-owned banks for a work because the employees like the

stability of state-owned banks and the high salary and profession of foreign

banks. This dangers VPBank‟s performance because their employees lack of

experience and the human resource is not stable. And the bank‟s business

secrets will be exposed.

 Thirdly, the information technology competition is so tough, especially in

banking industry. VPBank has to accept this fact because all banking products

and services are related to technology. In order to invest in improving

information technology, VPbank has to pay a huge initial capital and upgrade

year by year to catch up with the globalization trend. The board of management

has to find the active way to see future changes in the banking market in order

47

to choose the suitable method.

2.2.4 Value chain analyis

With SWOT analysis, VPBank can see them and find their opportunity. However, if

VPbank want to find the competitive advantage to build a certain strategy to guide

VPBank to go on the right way, we have to analyze value chain because SWOT is not

enough.

In the part above, we define our direct and current competitors are the banks whose

head quarters are located in the northern of Vietnam. We want to become the best joint

stock bank in this area, so I take some such banks to compare with VPBank in the

value chain analysis.

The selected banks: VPBank, Habubank, VIB, MB, SEA bank.

2.2.4.1 Value chain model

Value chain model of M.Porter is divided into two types:

+ Primary activities: those that are directly concerned with creating and delivering a

product (e.g. component assembly); and

+ Support activities: which whilst they are not directly involved in production, may

increase effectiveness or efficiency (e.g. human resource management). It is rare for a

48

business to undertake all primary and support activities.

Primary activities:

- Inbound logistics: All those activities concerned with receiving and storing

externally sourced materials

- Operations: The manufacture of products and services - the way in which

resource inputs (e.g. materials) are converted to outputs (e.g. products)

- Outbound logistics: All those activities associated with getting finished goods

and services to buyers

- Marketing and sales: Essentially an information activity - informing buyers and

consumers about products and services (benefits, use, price etc.)

- Service: All those activities associated with maintaining product performance

after the product has been sold

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Support activities:

- Procurement: This concerns how resources are acquired for a business (e.g.

sourcing and negotiating with materials suppliers)

- Human Resource Management: Those activities concerned with recruiting,

developing, motivating and rewarding the workforce of a business

- Technology Development: Activities concerned with managing information

processing and the development and protection of "knowledge" in a business

- Infrastructure: Concerned with a wide range of support systems and functions

such as finance, planning, quality control and general senior management

But if we apply value chain model in the banking industry, there are some different

characteristics because this is the special service industry. With the support activities,

Procurement is different from others because a bank has not the process that purchases

all material from all suppliers; the input process of a bank is also one side of their

business because they have to face to their customers in this process. In a commercial

bank, this process is called as risk management. And the primary activities in the

banking industry are a little bit different from other.

Some certain primary activities in a commercial bank:

- Marketing: Advertising, branding, sale support

- Sales: Multi-channel management, market expansion

- Product: Product offering, product expansion

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- Transaction: Payment, clearing, settlement...

2.2.4.2 Value chain analysis based on comparing with some current competitors

Point range: 6-Best; 1-Worst

Bank‟s name VPbank TECH VIB SEA MB HAB

bank U Activities

Infrastructure 3 2 5 2 4 6

Human resource management 4 3 5 3 4 6

Information technology 2 2 4 2 4 5

Product 4 4 4 4 5 5

Distribution network 5 1 4 2 3 6

Procedure 3 3 3 3 3 3

Brand 3 2 4 3 4 5

Service after sale 3 3 3 3 3 3

Because many criteria are qualitative to make it difficult to evaluate, so I choose a

certain KPI for each activities to compare to each other:

Table 2.5: KPI to evaluate the performance of banks

Activities KPI

Infrastructure Total assets and Total equity

Human resource management The maximum and minimum salary

Information technology The completeness of IT modernization

project

Product The number of products and services

provided

Distribution network The number of branches and ATM

Procedure The average time to finish a loan

Brand Market research from VPBank

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Service after sale Customer care policies and solutions

So, after taking value chain analysis and comparing with some selected

competitors. We can understand where VPBank is standing in the market and what

competitive advantages from VPbank are better than others. You can see in the table

number..., VPBank does not expose anything that is the best, VPBank only has some

points that are relatively strong and able to compete (not much worse than VPBank‟s

competitors), they are credit business and service after sale.

Compared as a loan provider, all the joint stock commercial banks are the same

and they have not exposed any strength in that business such as the short procedure,

consulting for customer, the way to approach customers and the diversity of loan

product...

Compared in service after sale, in Vietnam banking industry we are in the low

level, not professional like foreign banks. All activities that Vietnamese banks provide

for their customers are customer conference, market research...

So, VPBank should concentrate on these two fields. They will become

competitive advantages for VPBank to be able to exist in this tough market. In next

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few years, If one bank has not any competitive advantage, they can not live any more.

CHAPTER 3: RECOMMENDATIONS TO BUILD A STRATEGIC PLAN FOR

APPLYING CRM IN VPBANK

3.1 VPBank competitive advantages and general strategy from 2006-2010

The difficult period has just passed through. However, at the current time, if

VPBank does not plan any clear strategy, VPBank will drop in another crisis, even

more terrible than previous period because a clear strategy will be a red yarn to guide

for all activities in the bank.

As referred in the 2001-2005 period, VPBank tries to overcome the special control, so

they can forget the competitive strategy; they concentrate on the recovery strategy. But

now, they have to choose one of Porter‟s three clear competitive strategies or mix

them. They are:

 Cost leadership: This strategy emphasizes efficiency. By producing high

volumes of standardized products, the firm hopes to take advantage of

economies of scale and experience curve effects. The product is often a basic

no-frills product that is produced at a relatively low cost and made available to a

very large customer base. Maintaining this strategy requires a continuous search

for cost reductions in all aspects of the business. The associated distribution

strategy is to obtain the most extensive distribution possible. Promotional

strategy often involves trying to make a virtue out of low cost product features.

To be successful, this strategy usually requires a considerable market share

advantage or preferential access to raw materials, components, labor, or some

other important input. Without one or more of these advantages, competitors can

easily mimic the strategy. Successful implementation also benefits from:

+ Process engineering skills

+ Products design for ease of manufacture

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+ Sustained access to inexpensive capital

+ Close supervision of labor

+ Tight cost control

+ Incentives based on quantitative targets

 Differentiation: This strategy involves creating a product that is perceived as

unique. The unique features or benefits should provide superior value for the

customer if this strategy is to be successful. Because customers see the product

as unrivaled and unequaled, the price elasticity of demand tends to be reduced

and customers tend to be more brands loyal. This can provide considerable

insulation from competition. However there are usually additional costs

associated with the differentiating product features and this could require a

premium pricing strategy.

To maintain this strategy the firm should have:

+ Strong research and development skills

+ Strong product engineering skills

+ Strong creativity skills

+ Good cooperation with distribution channels

+ Strong marketing skills

+ Incentives based largely on subjective measures

+ Be able to communicate the importance of the differentiating product

characteristics

+ Stress continuous improvement and innovation

+ Attract highly skilled, creative people

 Focus: In this strategy the firm concentrates on a select few target markets. It is

also called a focus strategy or niche strategy. It is hoped that by focusing your

marketing efforts on one or two narrow market segments and tailoring your

marketing mix to these specialized markets, you can better meet the needs of

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that target market. The firm typically looks to gain a competitive advantage

through effectiveness rather than efficiency. It is most suitable for relatively

small firms and has much in common with guerrilla marketing warfare

strategies

In these three competitive advantages, some companies will choose a certain one but

some others will mix two in one, maybe:

- Cost leadership + Focus

- Differentiation + Focus

However, VPBank stuck in the middle of these three strategies, this is the worst

case for each company. Because our resources are limited, we cannot share and the

purposes of these two strategies like cost leadership and differentiation are opposited.

At the current time, VPBank has not raised any unique impression in the customers‟

memory, so it is too difficult to market VPBank.

With the current capability of VPbank through SWOT and value chain, VPBank

can mix: differentiation and focus strategies to lead other performance activities.

VPBank cannot choose the cost leadership strategy because the input cost is related to

the interest rate in the market and it is one of important factor to keep the bank

performance developed and stable. Now it becomes tougher and tougher in the banking

industry, so VPBank can decrease the input interest rate because of the danger of lack

of capital for other activities. So, VPBank can apply as below:

As we know, VPBank has not any competitive advantage or the strongest point

when compared with other competitor. So, now VPBank must concentrate on the

stronger points and make them become the strongest, and that is credit business. Why

should VPBank develop this business? It is because:

- The demand of credit, especially consuming loan will increase in the near

future:

+ Higher income

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+ Modern life of Vietnamese youth (more independent and active)

- Mostly, other commercial banks concentrate on improving modern banking

services like issuing card ATM, credit card, money transfer…And they see these

services as strategic product according to some international banks‟ trend.

- All credit products from VPbank competitors are the same with VPBank and

they also do not expose anything better.

- All modern services based on the high technology, but at this time VPBank‟s IT

still runs 3-5 years behind other top competitors.

- Although, the percentage of profit that comes from loans has been reduced but

the number also increases (as the table 2). VPBank is also the first mover in

providing consuming loan such as house loan, car loan…. The percentage of

consuming loan is 27% of total loan balance.

Besides, applying CRM will help VPBank increase the close relationship with

customer, so VPbank will increase cross selling, up selling and save cost in finding

customers.

So, VPBank will:

 Concentrate on credit business => apply focus strategy

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 Apply CRM => apply differentiate strategy

3.2 Application plan of CRM in VPBank:

CRM strategic plan is applied and deployed in VPBank:

Step 1: Find Step 2: Classify Step 3: Interact Step 4: Privatize

Customer (*) customer customer customer

Recognize new Classify customer Organize training Privatize in

customers by by profitability programs for all communicating

marketing tools. staffs how to take and serving

care customers. customer.

Plan to take over Discover each Train to improve Design product

customers group of communication and customize for

customers‟ and serving skill each customer

demand and for employees. and each group of

private demand customer.

Find new Use all the To meet all Ensure to satisfy

customers policies of service demands of each customer

after sale to customers. perfectly.

differentiate

VPBank‟s

services.

Take customers Build all

from competitors‟ relationship with

customers.

Improve and

Promote all

interaction

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activities with

customers.

Record all history

transactions of

customers to

analyze and

forecast the

demand.

CRM benefits to VPBank

Improve profitability Save and reduce costs Affect to performance

and turnover

Increase the capability of Improve service quality Increase the loyalty with

taking over and keeping but not increase so much VPBank brand

customer cost

Cross-selling Increase the effectiveness Create the competitive

for marketing activities advantages

and marketing cost

Meet all the demand of Reduce the cost to own a Improve the

customers => take the new customer (because of effectiveness of VPBank

maximum share in word of mouth tool) performance

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customers‟ wallets

Increase the retention

Increase the number of

customers to make profit

and the profitability of

each customer

(*): With CRM, the main objective is not to find new customer, however with VPBank

current situation, we need an enough qualified customer database before. Now, the

number of VPBank customers is few. At the first step VPbank must improve their

customer database by attracting and taking over more new customers.

 The objectives of CRM program in VPBank:

- Increase customer‟s lifecycle.

- Increase turnover, and profit for VPBank

- Increase cross-selling

- Reduce cost to attract new customers and promote VPBank‟s brand

With the competitive strategy above in 2006-2010 period, the application plan of CRM

program is divided into 3 phases:

+ The first phase (2006-2007): Build foundation for CRM, especially VPBank

customer database

+ The second phase (2007-2009): Deploy CRM

+ The third phase (2010): Review, evaluate and develop CRM

In order to apply CRM program successfully, VPBank must be singleness of mind,

CRM can be lack of recognition and voluntary supports from employees in VPBank

from the board of management to employees in the lowest level like bodyguard,

tellers… CRM will create organizational culture for VPBank that is the customer-

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centric culture.

3.2.1 The first phase: Build foundation for CRM

CRM is a long-term program with the success ratio that is only 50%. However most of

the successful companies are small and medium ones, VPBank must have the

preparation period in order to build the foundation for CRM.

As analyzed in the theory part, CRM consists of three elements: People, Procedure and

Technology. So, what does VPBank have to do for this phase?

3.2.1.1 VPBank has to prepare “people”

VPBank must build a core team for CRM application. They are the key persons for the

whole project; they come from all departments for example: the board of management,

deposit, credit, and accounting…. But the departments that have to meet and

communicate directly with customers such as tellers, creditors, and customer care

department…are more important. The board of CRM project need to know: People is

the most important factor, VPbank must provide human resource polices that meet their

demands, if they satisfy after that they will care and serve customers well.

 Some basic requirements to recruit human resource for CRM core team:

+ Have long experience in VPBank

+ Come from all departments

+ No need long experience in IT

+ Need one person who will be expert at the changes and procedure management

VPBank must be active in arranging essential resources like time, capital and human to

deploy CRM at the bank.

 The tasks of CRM core team:

+ Evaluate and analyze the current situation of customer relationship management at

VPBank

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+ Propose the strategy and objectives for CRM program

+ Notice and transmit not only the ideas but also the method of implementing CRM as

well to all the employees. Consistently, all the staffs have to understand the

customer-centric culture.

+ Choose the suitable information technology system like software and hardware for

the selected strategies of CRM.

+ Control the process of implementing CRM

3.2.1.2 VPBank must standardize the procurement

VPBank must improve the procedure according to the customer-centric approach, and

create a professional call-center (hotline, customer service center…). In this period,

VPBank must standardize their procedure and give some initial commitments with

their customers (at least, they will help to create the belief and impression of VPBank).

There are some examples that VPBank can apply to commit with customers:

- For customers who find a loan:

VPBank commits to help all customers to understand clearly about the method of

interest rate calculation for each kind of loans and draw an estimated cost list for each

customer if they use a certain kind of loan. VPBank also provide all calculation tools

for customers in order to help them be able to check by themselves and decide to take

any loan when they are provide full of information.

- For customers who find private transactions:

VPbank commit to bring the most benefit to customers through VPBank service

package. For example: If customers pay a certain fee monthly, they will get free

services or get discount from service fee for any additional service…

- For all customers:

VPBank will refund and indemnify if VPBank does not meet the commitments in some

certain cases as below:

 Reply the loan application (fully completed) for consuming or business loans, in

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a certain working day.

 Receive the demand of customers immediately as customers come to the bank.

The bank will arrange staffs to consult and provide information to customers

while they are waiting for being served.

3.2.1.3 VPBank must build the plan for selecting CRM vendor

VPBank must build the plan for selecting the suitable supplier of CRM information

technology. IT is not the key element to decide the success or fail of CRM project but

we can not be lack of one information technology. Study CRM strategies and demands

of VPBank carefully before purchasing.

3.2.1.4 VPBank must improve customer database

In the first step to implement CRM at VPbank, we must build a qualified customer

database; it is the foundation of CRM. With VPBank current rag and desultory

customer database, we need to complete and improve it. The current number of

VPBank customer is so small, so we have to find and attract more new customer in this

phase. CRM bases on the qualified customer database, it means that we must have a

certain number of customers with their clear profile.

There are some activities that help VPBank to attract more new customers, especially

in the credit business- the strategic business of VPBank:

o Create the close relationship with the middleman in housing and land trading

and the construction companies.

o Associate with the head hunting companies to have the list of high-income

employees because they are the potential customers (young, risk-taker, high and

stable income) for VPBank services. After that VPbank approaches these

subjects by providing the prefer cards, customer care. They are the target

customer of consuming loans.

o Organize the meeting in some enterprises to market for VPBank product and

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service. This is the chance for both VPBank and the employees in those

enterprises; VPbank can offer some prefer policies for them. And this must be

the win-win relationship because of CRM long-term strategies.

o The students, who are in the last year or have just graduated, are also the

potential customers for VPBank. Maybe, in the current time they have not so

much demand of banking services but in the near future everything will change.

So, VPBank should approach these subjects but with the limited resources,

VPBank only concentrates on the best-graduated students. VPBank will apply

the special customer care policies for this group, for example: VPBank will

provide the card named “Vietnamese talent” for them, with this card they can

receive birthday‟s gift, discount fee or other prefer policies…If VPbank

implements these policies, they will get the following benefits:

- The demand of banking services in the youth is very high, especially with

the retail banks.

- The demand of consuming loans in the youth is also high like house loan,

car loan… because they want to be independent with their families; they

are affected by the oversea culture.

- This kind of card is only provided for the best students of every

university, so the risky of the customers is also less. Morever, those

students are proud of themselves and of course, they want to use this card

more frequently in the public. VPBank card will help them to affirm their

level.

Besides the current marketing activities, VPBank should use more channels to provide

information and approach customers in the first phase. We can share some ideas:

- Approach customers through SMS message: VPBank designs a nice small and

very attractive message and sends them to all mobile subscribers. When

VPBank uses this channel, we can be sure the information will reach to

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customers „eyes and the total cost is so small as compared with other methods.

- Approach customers through e-mail, the effectiveness of e-mail are not as high

as SMS but VPBank nearly pays nothing.

 The channels of collecting information

- Branches and tellers:

This is the traditional distribution channel of the banking industry. With the method

of face to face, it is easy to collect information from customers, consisting of basic

and qualitative information such as attitudes, characteristics, oponions, hobby,

demands, needs and feelings of customers, so banks have opportunities to create

and maintain the relationships.

The advantage of this channel is the face-to-face relationship; one of tellers‟ main

tasks is to collect information from customers. Besides the basic information in the

regulated forms, the feeling of tellers about customers‟ experience, which exposes

as communicating with customers, is very important.

- Others like mail, e-mail, mobile phone‟s SMS, fax, website, internet-

banking, call-center, focus group...

The advantage of e-mail that is the main channel to collect information:

+ E-mail is extremely fast

+ E-mail is inexpensive; even for someone across the world there are no long

distance bills.

+ You can send your message or attached documents when it is convenient for you

and the recipient can reply when it is convenient for them; no phone tag

+ Customers can read your e-mail from anywhere in the world

3.2.1.5 Evaluating activities

We need a year for this phase, after one year VPBank must have some KPI to evaluate

for the preparation of the CRM foundation, they are:

 The number of new customers (this is the most important thing)

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 The customer database (completeness, clearness, and qualification…)

 Turnover from VPBank credit business.

 The customer retention and the percentage of customers who go away (closed

accounts, non-performing accounts…).

3.2.2 The second phase: Deploy CRM

After one year preparing for CRM application, now the main objective is not to find

new customers, the main objectives in this phase as below (within three year):

 Finish procurement, and deploy the software of customer relationship

management at VPBank

 Train the employees from all levels, all departments about not only the tasks and

functions that are changed when VPBank applies CRM but also the serving and

communicating skill in the new environment.

 Standardize all steps in the procurement to bring the best and stable quality

services to customers (one of the main limitations in service industry is

inconsistent in the service quality; it is affected by people and information

technology).

 Classify VPBank customers and creat action plan for building customer

relationship at VPBank.

3.2.2.1 CRM software application

CRM software is the important tools to help VPBank not only collect and record the

information from their customers but analyze and forecast the demand of customers in

the current period or near future as well. VPBank will meet all demands completely

and perfectly and they will understand their customers deeply, they can build the

relationship based on the customers‟ wishes, habits, and needs. After that VPBank

customers will not see VPBank as a normal company but as a close friend. This

65

relationship is based on the WIN-WIN foundation.

Customer VPbank

- Be offered prefer policies - The profit margin in the

and special care. individual customer may be

- Save costs reduced but the total profit will

- Be met maximum the increase.

demand - Save costs

- Create well-known brand and

differentiation from

competitors.

- Develop stably and firmly

The CRM core team must define the mission and strategy and application

solution of CRM before organizing the tender for CRM software solution and choose

who the most suitable vendor is. At the current time, there are many suppliers, who

provide the package of CRM solution such as Siebel, SAS, ACISE…

After defining the mission and strategy and application solution of CRM at

VPBank, the core team has to raise the customer relationship management

requirements for the tender. About customer information collection, the CIF module

from all core bank solutions can meet, however this module can not provide analysis

and evaluation tools and create the model of analyzing and forecasting the demand, the

risk of customers in order to support VPBank to build and maintain the relationship

In order to manage the relationship, all CRM solutions must meet these requirements

as below:

 Classify customers by different given criterion (age, industry, gender,

relations...)

 List of new and defecting customers in a certain period

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 Report of profit of each cuatomer, each group.

 Report of customer defection rate... (The number of customer saying good bye

and their total profit)

 Record of transaction history (from the time marketing customer).

 Record and summarize customer‟s comments in a certain period (comments,

requirements, complaints...)

 Creating the model to analyze customer behaviors such as classifying customers

by satisfaction and profitability in order to create customer policies for a certain

group.

 Record of average real-time serving a customer by product or general average

 Report of cross-selling situation (Statistic of the number of VPBank products

used by a certain customer)

 Report of customer risk analysis by subject, and time

 Transaction density statistic for each customer to identify average frequency

(average time they transact or visit Vpbank) that enable to customer relationship

management

 Profitability analysis for each customer, each customer group by given certain

criterion such as: customer behavior, actual profit, cross-selling opportunity,

credit worthiness, financial capability...

 Statistic of density and transaction value by distribution channel such as:

branch, ATM, POS, Internet-banking...

 Loyal and potential customer statistic and management by certain given criteria

 Develop customer information by many ways. For example: By product, teller

or information collecting channel...

 Enable to manage and analyze marketing, customer relationship program

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effectiveness (for example: Award-winning, interest rate policy, gifts...) for each

customer=> Choosing the right and suitable marketing channel to each customer

group with the same consuming behaviors

The following picture is the relationship-marketing model that is supported by CRM

solution integrated with the information system of a bank:

3.2.2.2 VPBank employee training:

In the CRM implement process, the people are the key factor to succeed. CRM

concentrates on creating and maintaining the relationship between VPBank and

customers, so the staffs will the face of VPBank. They are representatives for VPBank

to communicate, to serve and to keep the relationship with customers. The objectives

and the benefits of CRM are understood and committed much clearly by VPBank

staffs. According to the statistic from Havard business review, the failure of CRM is

not mainly from CRM software solution but mainly from each individual person in the

company. They do not commit and perform inconsistently from the board of

management to the employees.

CRM core team is responsible for training functional departments on:

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- CRM strategy selected

- The way to use CRM module and the requirements to work on CRM interface

for each user.

- Standardization of the culture and behavior of all staffs, such as in the manner to

express greetings and appreciations to customers, etc.

- Establishment of consultancy for customers (this will be a channel to get

information for the bank)

The quality of the banking services through distribution channels strongly depends

on the behaviors of the staffs. It is noted that to stabilize morale and standardize

behaviors in implementing CRM is very necessary. Therefore, the bank should

figure out solutions to keep the staffs and make them voluntarily serve customers

the best. Herewith are some of the solutions:

- Regulations concerning salary and reward: for a small bank with little

reputation, regulations concerning salary and reward are given priority if the

bank leaders want their staffs to work for them with all their heart. It would be a

great loss if experienced staffs leave the bank. The more worthy they are treated,

the better they serve customers.

- Regulations concerning strict punishment: regulations concerning strict and

clear punishment should be stipulated in the bank regulations and staff manual.

The bank may set up cameras in front offices to control serving customers of the

staffs. For back offices whose job are relevant to the quality of banking services

such as account department, administration department and informatics

department, it is also required to figure out strict punishment regulations to

remain the quality of relevant departments. Each functional department should

consider other departments their customers, thus making better efficiency of the

whole chain of the profession, in turn improving and stabilizing the quality of

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the banking services.

- Fringe benefit policies: such as sport and entertainment activities, promotion

and training opportunities, etc.

3.2.2.3 Accomplishment of standardization of the procedure

CRM will enable the bank leaders to control the essential time of all stages of

banking activities. If the real average time to serve a customer prolong and

disappoint them, the bank will have to find out the reasons and solutions in order to

improve the competitiveness of the bank. The reasons are as followings:

- Objective reasons (from the point of view of the staffs):

+ Informatics technology system is not good

+ The procedure given out is identical or unnecessary in some stages

+ Infrastructure of the bank is weak

- Subjective reasons:

+ Skill of the staffs

+ Awareness of the staffs

The procedure of all professions should be standardized and identically

implementing in the bank in both of its period of time and quality

The benefits of standardization of the banking procedure are as followings:

- Improving the prestige and making differentiation for the bank

- Improving efficiency and easily evaluating work of each staff

- Saving time for customers and facilitating them in transactions with the bank

- Reducing errors in work

The change and standardization of the procedure should be clearly declared and

lectured to each staff to ensure that all the customers of the whole system of the

bank are served in a speedy and professional manner.

3.2.2.4 Classification of customers

The core of CRM is classification of customers. For each group, the bank will have

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to figure out appropriate customer policies and balance between the returns and the

cost. It is the way to calculate the efficiency of CRM. After a period of time of

implementing CRM, the bank will have to calculate ROI for each group of

customers.

CRM software solution will support the bank in classification of customers. In

implementing CRM, transactions procedure with customers will change. The staffs

will not only note down the information supplied but also the mentality, response

and feeling of the customers. This will also be taken through period researches,

such as interviews and questionnaires. These are database to evaluate and quantify

qualitative criteria, such as satisfaction, potentiality of customers, along with

quantities criteria such as turnover and benefit derived from them.

It depends on the target of the bank in implementing CRM that the bank could

choose certain criteria to classify customers. For example, the bank chooses

Profitable Capability and Satisfaction Level to classify customers:

Profitable Capability reflects potentiality to create turnover. The bank always

desires to increase the number of customers with high profitable capability. Thus,

the bank has to clearly define this group and figure out target strategies to keep and

make them their royal customers.

Satisfaction Level reflects satisfaction and feelings of customers with services of the

bank. The bank will have to maintain and adjust the quality of the services to

continuously increase this ratio. Customers with high Satisfaction Level will more

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easily become loyal customers of the bank.

- The red box shows customer group that provides the highest profitability and

satisfy perfectly with VPBank services. Certainly, this rate of this customer

group is not high compared with the total number. But only small ratio can

makes the considerable profit for the bank. If they go to another bank, VPBank

will lose so much. One customer of this group can create the profit that is ten or

hundred times bigger than normal.

- The yellow box shows the customer group that brings the highest profit but has

average satisfaction or the one that bring the average profit but satisfy perfectly

with VPBank services. They are the subjective that CRM should impact and

VPBank should use some CRM policies to bring them to the first group

- The blue box shows the customer group that provides the highest profitability

but dissatisfies with VPBank services or the one that has the low profitability

but satisfy perfectly. They are the customers that VPBank must pay attention

and consider carefully because it is very easy for them to say “good bye” with

VPBank and only low profitable customers stay.

- The grey box show the customer group that has the average profitability,

dissatisfy with VPBank and has the low profitability, average satisfaction.

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VPBank cannot put additional marketing cost for this group.

- The black box shows the low profitability and low satisfaction. VPbank can

forget this group.

Based on this model, VPBank board of management will have the specified

relationship policies for each group of customers. VPbank will know how to

allocate the marketing cost and know who VPBank potential customers are.

All the customers will be classified as below:

- Diamond customers in the red box

- Gold customers in the yellow box

- Silver customers in the blue box

- Normal and mass customers in the grey and black boxes

The bank must calculate the ratio among these groups and type of customers and

this is also the item to compare between different periods.

When VPBank applies CRM, The budget of marketing will be allocated mainly in

building customized relationship with customers, not concentrate on the mass

marketing that is costly but a little effective.

Based on each type of group, the bank must plan:

+ Budget

+ Human resource

+ Customer care policies

3.2.2.5 Some customer relationship solutions and customer services for VPBank

In this phase, VPBank has supports from CRM software solution, all the customers will

devided into different groups like above. In order to influence the customer behavior,

especially the old customers in VPBank, the customer service department must know

what their customers are thinking and caring.

When VPBank has already CRM solution, it means that VPBank will not launch so

many other marketing campaigns anymore. The most impotant thing is the long-term

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relationship.

The important tool that is used to build and maintain the relationship with customers is

communication. It helps both VPBank and customers to update information. For

example: new event of customers (wedding, baby...) will raise some new demand that

VPBank can provide...

Some loyalty solutions:

- Customer consuming behavior

- Motivation in both physical and spirit

- Social activities.

 Customer consuming behavior:

VPBank can influence to customer behavior by improving the quality of service. For

service industries, customers only have their own experience when they have already

purchased. So, the core and long-term solution is still the quality. VPBank must

improve all characteristics. Whatever VPBank commits with their customers, VPBank

must keep the promises and meet the customer‟s expectation.

The quality is affected by many factors; the following is the list of some important

factors:

- Staff‟s attitudes

- Procedure

Information technology -

- Interest rate

- Distribution channels

- Diversification of product

 Motivation in both physical and spirit:

CRM software solution will support VPBank to record and analyze the information of

customer, classify customers according different characteristics like age, portability,

habits...

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Some tactics as below:

- The right mix of rewards for the company's unique customer base

- An effective communications program to keep them engaged

- A program structure that encourages desired/profitable behaviors

Some motivated ways as below:

- Mail, e-mail, SMS message, fax... Congratulation letter, thank letter...

- Website: Exchange information, collect the ideas and comments from customers

- Prefer card, monthly banking magazine, and postcard, catalogue on some

special occasions...

- Directly meeting: Focus group, private meeting.

- Call center: Maximize the capability of meeting customers‟ demand,

customizing and consulting.

- Gift and Discount: The more customers make profit for VPBank, the more

benefit they get.

Some incentives to spending activities of customers :

o In sense of spirit:

- Keep in mind the name of customers

- Associate, organize and issue member card for customers in activities such as

bodybuilding, tennis, swimming, dancing, etc.

- Note down important anniversaries of each customer such as birthday, wedding

day, special days, for example give birth to a child, etc. The bank should send

flowers and/or gifts and/or greetings cards for congratulations.

- Send thankful cards to customers on specials days in various ways

- Send news, magazines periodic updated information of the bank and customer-

oriented descriptions of services and instructions of procedure (the easiest the

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best) to customers.

- Establish central switchboard 24/24 availably give answers to all questions and

comments as well as consult usage of appropriate banking services to

customers.

- Make call to customers to inquire after and inform them about new policies in

case they have no transactions with the bank for a certain/stipulated period of

time or intend to use banking services of other banks.

o In sense of material:

There are many ways to encourage the spending activities of customers. Most of

companies that implement CRM issue cards for royal customers. CRM software

solutions could make score for customers based on the turnover derived from them.

Upon various numbers of total score, the bank will grant out many options of rewards

for customers. Herewith are some of the rewards granted to customers

- Reduced price and fee of banking services

- Rewards and preferred interest rates

- New products without fee in certain time

- Preferred prices when using non-banking services such as restaurants, hotels,

tourism, cosmetic, household utensils, etc.

- Credit guarantee in certain cases

3.2.2.6 Evaluation

It depends on kind of customers that the bank choose the appropriate customer

incentive policy. It is noted that this is the most important phase in implementing CRM

plan at the bank. The success of this phase could determine the success of the whole

program. The estimated time to perform and evaluate the result of CRM in this phase is

three years, however it is required to annually review and evaluate the performance.

Hereunder are some important criteria (KPI) in this phase:

- The profit growth of the bank

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- Average profitable capability of each customer

- The number of customers of “diamond” and “gold” group in certain time

- Average returns on investment cost (cost for relationship with customers) ratio

and ROI for each kind of customers.

- Make comparison of average returns on investment cost ratio between pre and

post CRM

- Do periodic researches to evaluate comments and feelings of customers.

- Number and ratio of customers that do not use the bank‟s services anymore in

certain time

- Profit ratio derived from the customers that leave the bank in certain time

- Number of new customers (In implementing CRM, the target is to maintain the

current customers, however, it is the advantage of CRM that attracts more new

customers)

After completion of the second phase and based on the result, the bank leaders and the

core team will make decision to continuously implement the next phase. The condition

to implement this phase is a certain number of “quality” royal customers and an

adequate database of them.

3.2.3 The third phase: CRM development

In this phase, the bank will have to clearly classify groups of customers. Division of

banking activities relies on characteristics of each group, e.g.: normal customers,

important customers and VIP customers. These groups are divided based on their real

turnover and profitable capability (as mentioned above). This phase is to figure out

appropriate services procedure and policies for each group of customers. They must be

privatized in banking services. It is noted that this is the highest phase of CRM,

individualization in serving customers. So, what is individualization?

It is when each customer is satisfied with serving manner, product design,

communications, etc. of the service.

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 The benefit of privatization:

- Customers will feel satisfaction and respect and feel that they are “unique”

- Meet the needs of customers and markets

- Increase up-selling and cross-

 Some of CRM solutions of privatization:

- Arrange account manager: arrange certain account manager serving the whole

services to each royal and important customer.

- Individualization in communications with customers. Each customer wants to be

respectfully treated; hence, individualization is very important. It could be done

through call/mail to require after or advise information of the bank, etc. All of

the channels should be directed to customers with real name.

- If it is possible, the bank will offer customer-oriented products. For example, for

consume lending, the bank not only offers pay-in-installments service for

purchase of cars or houses, but also for purchase of computers, household

utensils, cost for wedding anniversary, hospital bills, etc.

- Customer researches should be individualized too. This will make a greater

efficiency because customers will be respectfully treated and in turn, giving out

precise and careful answers.

- Marketing activities are directed to certain customers (marketing one to one).

Each customer is differently characterized; hence they need to be differently

treated in order to get the best result from them. For example, on the chance of

8/3 or 20/10, the bank should send flowers to female ones with various kinds,

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etc.

3.2.4 Conclusion

The competition on the market is increasing domestically as well as globally.

Nowadays, if one bank operates without any competitive advantage, it is not sure that

the bank can no longer exist. In order for VPBank to survive and grow they must find

the new way of thinking to operate. Banking industry is the special one; it can not live

without the customers‟ belief.

Given the competitive nature of the banking business with its intricate diverse

demands today, nurturing and deepening customer relationships is integral to any

bank‟s success. After all, satisfied customers are loyal customers, their retention rate is

much higher and so is their overall profitability for the bank. As it happens, CRM

offers the most holistic route for banks to enhance customer relationships. A powerful

CRM solution provides a complete perspective of a customer‟s relationship with the

bank across multiple channels like e-mail, telephone, IVR, branch, web chat and across

multiple products ensuring that every bank employee is better informed to deal

effectively with customers and their needs. It enables banks to understand their

customer's expectations and preferences better and offer the potential to deliver higher

levels of personalized service and more effectively implement cross-selling and up-

selling strategies. By doing so, banks can enhance customer retention, profitability and

loyalty and get an increased “share of wallet” from their customers. Further, in the face

of the recent spate of Know Your Customer (KYC) regulations, CRM systems provide

the optimum solution to the need for unified customer data, information and

intelligence.

So, the effective way to keep customer in the long term is customer relationship

management (CRM). The goal with CRM is to maximize the company profits by

maximizing the value of interaction with the customers. And this chapter 3, there are

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recommendations a plan to VPBank how to build an effective CRM program.

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2. Brock Richard and et al. 2000. Profitable Customer Relationships: The Keys to

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3. Frederick Newell. Why CRM Doesn't Work: How to Win by Letting Customers

Manage the Relationship. Bloomberg

4. Michael T. Bosworth and John R. Holland. Customer Centric Selling. McGraw-

Hill

5. Neil Woodcock, Merlin Stone and Bryan Foss. The Customer Management

Scorecard: Managing CRM for Profit. Kogan Page Limited

6. Philip Blight and Douglas Turk. CRM unplugged releasing CRM’s strategic

value. John Wiley and Sons, Inc.

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9. www.guru.com

10. www.asiabanker.com

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11. www.vpb.com.vn