Customer Relationship Management (CRM) seems an unlikely candidate to pull banks out of the messiest financial crisis in decades, given the disappointing results experienced by many institutions after their first wave of CRM investments.

Yet that is the very thing suggested in a joint press release by the European Financial Management & Marketing Association and Atos Consulting. “Can CRM be a differentiating factor for banks faced with the current financial crisis,” they ask in their announcement of a new pan-European study on CRM in retail banking.

For those who remember the CRM promises of seven or eight years ago, some of the report’s findings will be somewhat puzzling. For example, it states that CRM strategies are too focused on sales. Rather interesting, since in 2001, CRM was going to help banks maximise cross-selling and better target marketing campaigns.

It turns out the tools have been misused: a “product-centric,” rather than “customer-centric” approach has in fact resulted in high numbers of opt-out requests from campaign recipients, instead of higher conversion rates. One European bank, the study says, can now only address 25% of its customer base with its marketing campaigns.

Ill-timing is mainly to blame, the report claims, and banks should instead plan their CRM strategy with a long-term view, less focused on short-term profits. Banks should also make use of sophisticated analytics to better tailor their communication timing and offer risk-based pricing. And they should reward initiatives that enhance customer satisfaction, not just sales performance.

Whether the new generation of CRM will make banks better at relationships remains to be seen, but one potential driver for a renewed interest in CRM technology could indeed potentially stem from the current crisis.

This year’s annual results presentations saw several European banks devote a lot more time than usual to their unglamorous retail activities, which - at least initially - withstood the crisis better than their corporate and investment arms. Could this translate into an increased strategic focus and higher investments into their retail business? And if so, should the priority really be CRM?

Filed under: Credit Crunch, Retail Banking, Technology