While developing a CRM system in-house is not realistic for most community banks, there are a wide variety of options available in the marketplace, ranging from the simple to the intricate. Forming a strong partnership with the right outside vendor is essential to success with CRM, bankers and experts say.

Roy Balkus, vice president of technology for Naugatuck Savings Bank, has a "huge mountain" of data on the bank’s customers. "What we’re doing right now is data warehousing, which gives us a lot more in terms of details as to what customers do," he said.
But eventually Balkus, who chairs America’s Community Bankers’ Retail Banking, Operations, Security & Technology Committee, would like to take that data to compare customers, determine their profitability, and cross-sell appropriate products to them.

The $624 million-asset bank currently does not have the technology or software to do that. Customer relationship management software "would create the ability for me to know" what products to push to which customers, he said.

CRM, at its best, organizes the different areas within a bank, including information from branches, to create a unified memory of a customer and instructions on how to treat that customer. Many banks are finding that CRM software is becoming a must-have marketing tool.

Community banks are pretty good at knowing what their customers need, but their customer service and marketing efforts are often unstructured, said Kathleen Khirallah, TowerGroup’s research director of retail banking. "What a CRM system allows them to do is get it organized," she said.

While developing a CRM system in-house is not realistic for most community banks, there are a wide variety of options available in the marketplace, ranging from the simple to the intricate. Forming a strong partnership with the right outside vendor is essential to success with CRM, bankers and experts say. But navigating the seas of CRM software options can be daunting. Here are six steps banks can take to help guide their CRM software purchasing decisions.

Step 1: Assess Your Needs and Expectations

The first thing banks should do when considering CRM software is to determine the banks overall CRM strategy. Be clear about the goals of the organization, Khirallah said.

The term "CRM" can be vague and far-reaching. It can refer to methodologies, software, or Internet capabilities that help manage customer relationships in an organized way. The term is frequently used to encompass every interaction a bank has with its customers, especially all processes and procedures with the goal of customer service or sales.

The bottom line in all CRM systems is improved profitability, but banks can choose to reach that end through many different means. That could include cross-selling  products, working with existing household information, managing entire relationships, growing lending, or growing deposits. "Most people want to do all of the above," said Steve Kayser, senior vice president of marketing for COCC, a community bank outsourcing , development, and consulting company.

Paul Driscoll, executive vice president of $2.3 billion-asset Beneficial Mutual Savings Bank in Philadelphia, said that when his bank begins to look into CRM software, the planning group will be a combination of people at the bank, including representatives from technology, marketing, and banking. "It will be a mesh of all that … an enterprise-wide project," he said.

At this stage, banks should also decide who should be responsible for purchasing and implementing the CRM software. Khirallah suggested that two people at the bank, the head of business and the head of I.T., handle the project. "TowerGroup refers to this team as ‘Gemini pairs,’" she said. "This project cannot be delegated solely to the I.T. group."

Step 2: Decide Which Options Are Critical

At this point, banks should decide what they absolutely must have in terms of CRM software. They should also develop a list of important, but not critical, needs, and a list of things that would be nice to have in a system, like add-ons.

There are many levels of CRM software on the market. Weissman breaks the software down into five levels, ranging from basic to advanced.

The simplest systems just keep track of basic contact information. "It’s basically an elaborate, nice, telephone book," Weissman said.

The second level has the ability to track contacts. These systems take the concept of a universal telephone book and add the ability to track telephone calls, meetings, and e-mails. This and the universal telephone book are stand alone, meaning they don’t integrate with other databases in the bank.

The next level brings in account data. On these systems, when a bank employee looks up a customer, he or she can not only see the customers contact info, but also can look at which accounts the customer has with the bank.

Bringing in profitability data is the next step. At this level, the CRM system moves from one that houses information to one that creates information. These systems offer "an income statement for each account that each customer has" to show the bank "how much money they are making or losing for each account," Weissman said.

The highest level is a fully integrated CRM system. That’s where the CRM system is incorporated into the sales and marketing database  system and allows for analysis of each customer relationship for each account. Systems at this level look at customers to determine what new products to offer them. Systems at this level also have the ability to bring in external data, such as information on demographics and business graphics.

"We are firm believers that, at a minimum, you should have a level four" system, Weissman said.

Most experts and software providers agree that the best form of CRM software is enterprise wide. Enterprise-wide CRM systems interface with all of the bank’s other systems, so that the information flows through the entire organization. "If you’re going to do (CRM) right, you need the whole institution to play a role," Kayser said.

Step 3: Match Your Needs With Software

After determining the bank’s needs, the next step is to conduct due diligence to match those needs with appropriate vendors and services. Some vendors can match their technology with the software needs of many institutions. Other providers specialize in a certain area, which may or may not match the area of a bank’s focus. Either way, banks should require all vendors being considered to demonstrate how their software can meet the bank’s expectations.

"Work with a number of vendors to match your goals," Kayser said.

Banks should "cast a wide net" in this stage of the process, Khirallah said. She suggested evaluating about 10 different vendors at this point. Consulting groups can assist banks with vendor selection. Industry associations, such as America’s Community Bankers, also offer resources that can help. ACBs Buyers Guide, which is available online, provides contact information on 14 providers that offer CRM services  to community banks.

Step 4: Narrow Down Choices And Issue RFPs

At this point, banks should narrow down their vendor choices to about three or four. They should look for CRM software vendors with proven track records of success, Kayser said. They also should look for state-of-the-art technology.

"It’s important that they deal solely with financial institutions and have a very good knowledge of what financial institutions need and of the competitive landscape," Weissman said. "They should understand things besides CRM at banks," like teller systems, help desks, and the call center side, he said.

Banks should look for vendors that focus on financial institutions of their size, Khirallah said. She also recommended that banks visit the clients of the vendors they are considering, even flying to an out-of-town bank for a day visit. Once there, Khirallah said, ask the clients a series of questions about their CRM system, including: