Business proposal Assignment Example | Topics and Well Written Essays - 1000 words - 1

Business proposal - Assignment Example The company records low unit sales and lags behind Volkswagen AG and BMW in China. The stiff competition has to overall underperformance in China. The aim of this proposal is to look at the challenge facing the company and how they can be solved. It targets prospective investors and luxury automobile dealers who are willing to explore business opportunities in order to meet their goals. The audience needs to be concerned because any threat to the downfall of the Mercedes-Benz will affect them. Because the Mercedes-Benz defines class, prestige and luxury, its fall in the market will translate to lose of status and class and profit to the targeted audience. In order to Increase Unit sales and beat the stiff competition, Mercedes-Benz should first carry out research on consumer tastes and preferences to establish their needs. The findings will lead to the second solution of investing on new models. Adjusting its organization structure to be more flexible is yet another solution to the p roblem. A flexible structure ought to be established because it supports quick decision making and newer models will lead to increased market share hence beating the competition. The proposal also gives a solution of developing a cohesive strategy of targeting areas that highly populated with high class persons. Such audience have the capacity of buying the Mercedes-Benz which is likely to boost its sales. Despite having achieved high record sales of 1.46 million cars globally last year, the Daimler’s Mercedes-Benz car faces a lot of stiff competition from the Germany rivals and small cars who are still leading in terms of profitability, unit sales and appeal especially to the younger generation (Acquisdata snapshot 50). The major root of the challenge facing the Mercedes-Benz stems from the China market where it records under-performance. The China market is a vital market to pay attention to because it of its high

Customer Relationship Management of Lloyds Banking

Customer Relationship Management of Lloyds Banking 1.0 INTRODUCTION This chapter provides the brief introduction of research. Furthermore, it also discusses the aims, objectives of the research questions and scope of the study. 1.1 TOPIC OF THE RESEARCH Customer Relationship Management of Lloyds Banking Group PLC; A Critical Evaluation 1.2 INTRODUCTION TO RESEARCH Peter Drucker said, â€Å"The purpose of a business is to create customers†. Customer Relationship Management can be the single strongest weapon we have as manage to ensure that customers become and remain loyal. Customer Relationship Management, or CRM, is an essential part of modern business management. CRM concerns the relation between the organisation and its customers. Customers are the lifeblood of any company be it a global corporation with thousands of employees and a multi-billion turnover, or a sole trader with a handful of regular customers. CRM is the same in principle for both examples. Globalization and technology improvements have pushed companies into hard competition. In this new era organisations are targeting on managing customer relationships, mainly customer satisfaction, in order to maximize revenues (Constantinos 2003). Today, marketing is not just developing, delivering and selling; it is shifting towards developing and maintaining equally long term relationships with customers (Buttle, 1996). This new business values is called relationship marketing (RM), which has involved significant interest both from marketing academics and practitioners (Gronroos, 1994). The Greek philosopher, Epictetus said that â€Å"what concern me is not the way things are, but rather the way people think things are† (Szwarch, 2005, p.3). The concepts of consumer satisfaction were depending on the thinking of consumer. Research suggests that customer satisfaction, basic concept of relationship marketing, is important in achieving and retaining competitive advantage. Research studies have discovered that retaining current customers is much less expensive than attracting new customers (Desatnick, 1988; Stone et al., 1996; Bitran and Mondschein, 1997; Chattopadhyay, 2001; Massey et al., 2001). The best way to retain customers is to keep them satisfied, a number of studies have shown that customer satisfaction can guide to brand loyalty, repurchases intention and repeat sales (Day, 1984; Swan and Oliver, 1989; Oliver, 1999). Customer retention, in turn, seems to be related to profitability (Oliver, 1999). Relationship marketing is becoming significant in financial services (Zineldin, 1995). If a bank develops and sustains a solid relationship with its customers, its competitors cannot easily replace them and so this relationship provides for a continued competitive advantage (Gilbert, 2003). Moriarty et al. (1983) has suggested relationship concept in the banking sector which states that banks can increase their profits by maximising the profitability of the total customer relationship over time, instead of looking for to get more profit from any single transaction. Perrien et al. (1992) observed severe competitive pressures that forces financial institution to restructure their marketing strategies by developing into long-term relationship with customers. And banking industry purely related to financial services, which needs to create the trust among the people. This research is exploratory in nature and design. The data which is collected is going to be mostly primary data collected from the relevant persons within the bank. The data has gathered from the face to face interviews with the help of structured and semi-structured questionnaire with those persons. The above describe interviews has last 40 (fourty) to 45 (fourty five) minutes (approx). On the other hand the researcher has decided to collect primary data from random interviews of Lloyds Banking Groups customers. Sample size is around 200 customers and of structured questionnaire. But of course this research paper has relied on reviewing the various secondary data available from various researches such as books, magazines, website, previous research and publication etc. The collected data has been analysed by graphs, table and pi chart drawn from Microsoft excel. 1.3 AIM OF THE RESEARCH The aim of the research is to study why CRM is important in bank, how the CRM works in banks and also the effectiveness of Lloyds Banking Group in obtaining long term customer relationship, customer loyalty, and customer satisfaction by the use of CRM. And also suggest feasible recommendations to Lloyds Banking Group to increase the customer satisfaction and market share by the effective use of CRM. 1.4 OBJECTIVES OF THE RESEARCH The followings are the objectives of this research; To study how critically practised in Lloyds Banking Group Analysis the data mining process of Lloyds Banking Group To find out how the bank segments their customers To analysis how the bank retaining their customers To find out how does the bank measure customer Life Time Value To verify the relationship between the customers and the Lloyds Banking Group 1.5 SCOPE OF THE STUDY The scope of the study and research work has limited to Lloyds Banking Group only. This chosen level of aspects has stayed at large in the study so that it can be studied well and analyzed thoroughly to get a deeper understanding. Trying to cover too much ground may lead to a very superficial and confused analysis and may involve long time duration to complete the project work or report. Therefore a specified and narrow down approach with Lloyds Banking Group and an evaluation of its success has comprised with the researc 2.0 LITERATURE REVIEW This chapter contains a review of literature relevant to the research. This literature review deals with, about CRM, the history and goals of an integrated banking CRM, the technological factor of CRM, the process cycle in banks, data warehouse technology, data mining process, how to analysis the data, customer segmentation process, communication strategies of bank to the customers etc. 2.1 CUSTOMER RELATIONSIP MANAGEMENT Existing research states that ‘relationships are the base to the successful development and edition of new business viewpoint, though business have taken care of relationships with their customers for many centuries (Gronroos, 1994). Sheth and Parvathiyar, (1995) said that relationships demand much more than mere transactions. Rather, they symbolize strategic and tactical issues based on a new philosophical move that geared in the direction of long-term organisation survival. According to Storbacka, (1994) relationship marketing got popular in 1990s but it has a long history under different names. In its starting, one-to-one marketing appeared in the mid 1990s, which transformed into Customer Relationship Management. Parvatiyar and Sheth gave a static definition of CRM. â€Å"Customer Relationship Management is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer† (Parvatiyar and Sheth 2000, p.6) â€Å"What criteria determine who â€Å"How can we acquire this customer will be our most profitable in the most efficient and effective customers?† way?† â€Å"How can we increase the â€Å"How can we keep this customer loyalty and the profitability for as long as possible?† Of this customer?† 2.2 THE HISTORY AND GOALS OF AN INTEGRATED BANKING CRM According to Puccinelli (1999) the financial services industry as entering a new era where personal attention is decreasing because the institutions are using technology to replace human contact in many application areas. Sherif, 2002 advocated that, now global changes brought new trends, directions and new ways of doing business, which also brought new challenges and opportunities to financial institutions. In order to complete with newly increasing competitive pressures, financial institutions must recognize the need of balancing their performance by achieving their strategic goals and meeting continues volatile customer needs requirements. Different ways must be analyzed to meet customer needs. Foss said that banks are highly focusing on CRM for the last five years that is expected to continue. According to Peter (1998) and Chablo (1999) the main goals of an effective integrated CRM solution in the banking sector are to enable financial institutes to; a) Widen customer relationship through acquiring new customers, identifying and targeting new segments and expanding in new markets. b) Lengthen the existing relationship developing longer term relationships, increasing perceived value of products and introducing new products and c) Deepen the relationship with customers initiating the cross selling and up selling opportunities, understanding the propensity of different customer segments to purchase and increase sales. The implementation if CRM system in a bank helps the business organisation to obtain a complete picture of their existing customers, design both customer-oriented and market-driven financial products and services, as well as implement extensive and reliable financial marketing research and efficient campaigns, to achieve and enhance customer loyalty and profitability. The above goals can be achieved through the seamless integration of information technology solutions and business objectives at every process of the bank business that affects the customer. 2.3 THE PHASES OF CRM The main phases of CRM are as follows; 1. Customer selection or Segmentation According to Dave Chaffey (2009), customer selection defining the types of customers that a company will market to. It means identifying different groups of customers for which to develop offerings and to target during acquisition, retention and extension. Different ways of segmenting customers by value and by their detailed lifecycle with the customer are reviewed. Many companies are now only proactively marketing to favoured customers. Seth Godin (1999), says â€Å"Focus on share of customer, not market share fire 70 per cent customers and watch your profits go up!† According to Efraim Turban (2008), the most sophisticated segmentation and targeting schemes for extension of customers are often used by banks, which have full customer information and acquire history data as they search for to boost Customer Lifetime Value (CLV) through encouraging increased use of products overtime. The segmentation approach used by banks is based on five main basics which in result are covered on top of each other. The amount of options used, and therefore the complexity of approach, will depend on resources obtainable, opportunities, capabilities and technology afforded by catalog. i. Identify customer lifecycle groups When guests use online services then they basically pass those seven or more stages. The organisations have clear these segments and establish the CRM infrastructure to categories customers in this manner; then they deliver focused messages, whichever by modified web messaging or by e-mails that are triggered routinely because of various rules. First-time guests recognized by a cookie placed on their PC. When guests registered, they are tracked through the residual stages. The customers who have purchased one or more products are one particular important group. The key challenge is for a company to encourage a customer to shift from the first product to the second and then go on. Explicit offers can be try to push customer for further products. In the same way, when customers turn into an inactive then the customer required follow-up. ii. Identify customer profit characteristics This is a conventional segmentation which is based on the nature of customer. For Business 2 Business Companies it includes sex, age and geography. It includes volume of the organisation and the type of sector or application, the organisation operates in. iii. Identify behaviour in response and purchase As shown in 2.2 through analysis of data base when customer progress through the lifecycle, company is capable to build up a detail reaction and buy history which judges the details of frequency, recency, group of product buy and monetary value. This approach is known as ‘RFM (Recency, Frequency, Monetary value) analysis. iv. Identify multi-channel behaviour In spite of of the eagerness of the company for online channels, various customers are chosen for using online channels and others customers are chosen conventional channels. This is, to an extent, be indicated by RFM and response examination since customers with a preference for an online channel is more reactive and make more use online. Customer who likes online channels is focused mostly by online communications such as e-mail, but when customer like conventional channels is focused by conventional communications such as direct mail or phone. This is known as ‘right-channelling. v. Tone and style preference In a same way to channel liking, customers are respond in their own way to various types of message. Some customers like rational application, in that time a detailed e-mail may work best. On the other hand some customers are preferred an emotional appeal. Companies are test for this in customers or conclude it using profit description and response performance and then expand various inventive treatments consequently. 2. Customer acquisition Processes used to add new customer. According to Turban (2008), customer acquisition refers to marketing activities intended to form relationship with new customers while reducing acquisition cost and targeting high-value customers. Service value and selecting the right path for various customers are essential at this stage and during the lifecycle. The conventional manner to customer acquisition include a marketing manager developing a blend of mass marketing (billboards, magazine advertisements etc.) and direct marketing (mail, telephone, etc.) campaigns based on their knowledge of the particular customer base that was being focussed. Marketing campaign trying to pressure new customers to buy a particular type of diapers, the mass marketing ads might be determined in parenting magazines. The advertisements could also be positioned in more conventional publications whose readership demographics were alike to those of new parents. Customer acquisition is comparatively similar to mass marketing. A marketing manager selects the demographics that they are involved in and after that works with a data vendor to obtain lists of buyers who meet those features. The data vendors have large database holding millions of eventual customers that can be segment based on explicit demographic criteria. The idea of â€Å"similar demographics† has conventionally been an art rather than a science. Usually there are not hard-and-fast systems about whether two groups of buyers share the similar features. Most of the segmentation that took place in conventional direct marketing involves hunches on the division of the marketing professional. 3. Customer retention Dafe Chaffey 2009 said that customer retention refers to the marketing actions taken by a company to keep its current customers. Identifying applicable offerings based on their personal needs and complete position in the customer lifecycle (e.g. purchase value or number) is key. Customer retention strategy aims to keep a high percentage of valuable customers and a customer development strategy aims to boost the value of those retained customer to the organisation. Customer retention is based on customer loyalty. And customer loyalty is the point to which a customer will continue with a specific brand or vendor. Customer acquisition to retain and extend create long-term customer relationship. We need to calculate customer satisfaction, as satisfaction drives loyalty and loyalty drives profitability. This relationship is exposed below; The marketers aim is to push customers up the curve towards the affection zone. But the majority are not in that zone. Marketers must understand to achieve retention,why customers defers or are indifferent. 4. Customer extension This technique is encouraging customers to increase their involvement with a company. According to Turban 2008, customer extension is increasing the range of products that a customer buys from an organisation. Sometime it is referred ‘customer development. Increasing the lifetime value (CLV) of a customer is the main objective of customer extension by encouraging cross-sell. For example a customer of Egg credit card may be offered the loan or a deposit account. There are many of customer extension technique for CRM as follows; Re-sell: same type of products to existing customers-particular vital in some Business 2 Business background as re-buys or modified re-buys. Cross-sell: sell extra products which may be closely related to the original buy. Up-sell: this is mean, selling more expensive products. Reactivation: Customers who have purchased for some time or have lapsed can be encouraged to buy again. Referrals: generating sells from recommendation from existing customers. 2.4 CUSTOMER LIFETIME VALUE MODELLING Customer Lifetime Value (CLV) is also an important theory and practise of CRM. But the calculation of CLV is not straightforward. There are so many company, they do not calculate it. According to Dave Chaffey (2009) â€Å"Lifetime value is the total net benefits that a customer or group of customers will provide a company over their total relationship with the company†. CLV is based on estimating the income and costs related with each customer over a phase of time and then calculating the net present value in present monetary terms using a discount rate value applied over the stage. Efraim Turban (2006) said there is various scale of complexity in calculating LTC. Those are exposed in 2.6. Option 1 is a realistic way or estimated proxy for future LTV, but the true LTV is the future value of the customer at individual level. CLV modelling at a segment level 4 is crucial within marketing since it answers the question; How much can I afford to invest in acquiring a new customer? Lifetime value analysis helps marketers to: Create the true value of a companys customer base Recognize and compare crucial target segment Calculate the effectiveness of another customer retention strategy Plan and calculate investment in customer acquisition programmes Make decisions about product and offers 2.7 gives an example of how LTV can be used to develop a CRM strategy for different customer groups. There are 4 (four) main types of customers are indicated by their present and future value as bronze, silver, gold and platinum. Separate customers groupings (circles) are recognized according to their current value (as indicated by current profitability) and future value as indicated by CLV calculation. Every group will have a customer segmentation based on their demographics. Therefore this is used for customer selection. Within the four main value groupings, there are various strategies are developed for various customer groups. Few bronze customers such as group A and B practically do not have development potential and are usually unprofitable, therefore the objective is to reduce costs in communications and if they do not stay as customers this is acceptable. Some bronze customers like group C may have potential for growth; therefore for group C the strategy is to extend their purchases. Silver customers are focused with customer extension offer and gold customers are extended. Platinum customers are the best customers; therefore the communication is very important with these customers. 2.5 THE TECHNOLOGICAL FACTORS OF CRM According to Davenport and Short, (1990); Porter, (1987) ‘information technology is an enabler to thoroughly redesign business process to achieve improvements in organisational performance. ‘Information Technology help helps a business process by facilitating changes to job practices and establishing new techniques to link a customer with organisations, suppliers and stakeholders (Hammer and Champy, 1993). Eckerson and Watson (2000) advocated that ‘CRM take full advantage of technology to collect and analyze data on customer patters, expand predictive models, interpret customer behaviour, proper respond with communications, and deliver product and service to individual customers. By using technology a company can create a 360 degree view of customers to find out from past interactions to optimize future ones. Peppard (2000) said that ‘the leading factors in CRM development is improvement in network infrastructure, client/server computing, and business intelligence applications. CRM collect, store, maintain and distribute customer knowledge all over the organisation. The effectual management of information has a vital role to play in CRM. In the case of calculating customer lifetime value, consolidated view, product tailoring and service innovation, the information is essential. Along with data warehouses, enterprise resource planning (ERP) system and the internet are the central infrastructures to CRM applications. Fickel (1999) said ‘CRM applications link front office (e.g. marketing, sales and customer service) and back office (e.g. financial, logistics, operations and human resources) functions with the companys customer touch point. A companys touch point is â€Å"all of the communication, human and physical interactions your customers experience during their relationship lifecycle with your organisation. Whether an ad, Web site, sales person, store or office, touch points are important because customers from perceptions of your organisation and brand based on their cumulative experiences† (Source; http://www.imediaconnection.com/content/4508.imc at 16/10/2009 on 15:25) According to Eckerson and Watson (2000), ‘CRM integrated touch points is something like a common view of the customer. A separate information systems controlled these touch points. 2.8 demonstrates the relationship between customer touch point with back and front office operations Peppers and Rogres, (1999) said ‘In many companies, CRM is just a technology solution that extends divide databases and sales force automation tools to link sales and marketing functions in order to develop targeting efforts. On the other hand some organisations consider CRM as a tool that is exclusively designed for one-to-one relationship. According to Goldenberg (2000) ‘CRM is not just a technology applications for sales, marketing and service, but when CRM fully and successfully implemented, customer-driven, a cross-functional, technology-integrated business process management strategy that improves relationships and encompasses the whole organisation. 2.6 DATA WAREHOUSE TECHNOLOGY According to Watson (2000) ‘data warehouse is a tools of information technology management that helps business decision makers to instant access of information of customer data throughout the organisation by combining all database and operational systems like sales and transaction, human resource, inventory, purchasing, financial and marketing system. Data warehouse pull out, clean, convert and manage large volumes of data from various systems and creating a historical record of all customer. Data warehousing technology is the most crucial part of CRM because it makes CRM possible. Shepard et al. (1998) said ‘a better understanding of customer behaviour is possible because data warehousing technology consolidates correlates and convert customer data into customer intelligence. Understanding of customers and their purchase patterns can improve information related to customer service interactions, billing and account status, back orders, product returns, product shipment, and internal operating cost. The capacity of a data warehouse to store hundreds and thousands of gigabytes of data make an analysis feasible as well as immediate. Organisational benefits with a data warehouse are as follows; exact and faster access of information bad and duplicate data eliminate by quality data and filtering customer profiling and retention modelling it calculate total present value and estimate future value of every customer it gives detail report 2.7 DATA MINING TECHNOLOGY Peppers and Rogres, (1999) said that ‘the first analytical step of data mining is to describe the data. Data mining summarize its statistical attributes like standard deviations and means, visually review it by use of charts and graphs and distributes the value of the field in our data. But alone data description can not provide an action plan. We have to build a predictive model based on patterns determined from known results and after that we have to test the model on result outside the original sample. An ideal model should never be confused with reality, but it is useful guide to understanding our businesses. According to Eckerson and Watson (2000) ‘we can use data mining for both classification and regression problems. In first problem we can predict what type something will fall into. In second problems we are predicting a number like probability that a person will respond to an offer. In CRM process, data mining is often used to allocate a score to a particular customer. Data mining is also often using to recognize a set of characteristics, which is called profile. Data mining segments customers in to groups with similar behaviour like purchasing a particular product. 2.8 THE CRM PROCESS CYCLE IN BANKS Pound (2000) said that exploration and alteration process should be done by the banks on basis of customer information captured; this shows the full value of CRM initiatives. Banks set up a closed CRM cycle with the help of an integrated CRM solution, which composed of a set of continuous iterative process. It manages the whole customer related process for bank, analysing customer profile, customer data and life time value, which is helping to making marketing decision and optimizing the execution of marketing campaigns, customer service strategies and sales strategies across various channels during the bank. According to Professor Constantin Zopounidis (2002) CRM process cycle is based on a generic business view. It presents a continuous improvement of value between customers and banks across touch points. The main stages are as follows; Customer data collection Customer data analysis Marketing strategy and action programs Back-office Data External Data Touch-Point Data Pound 2000 said that ‘recent banking data sources are extremely heterogeneous. Geographic information is dispersed due to continual acquisitions, mergers and reorganizations. For example a bank might use web site, ATMs, e-mail, sales, call centres and marketing automation applications that must be integrated in a unified environment of CRM banking. An effective multi-channels customer interface will not be possible without a centrally integrated warehouse driving the entire CRM process cycle. This should be update real time. The historical data should be recorded by it, which is used to create propensity models and customer life time value models to recognize past behaviour and action in order to take future marketing strategy. 2.9 CUSTOMER DATA COLLECTION Kristin Anderson Carol Kerr (2002), said that in banking transaction system data such as (e.g. Checking, Credit, Savings) are frequently organised around accounts, channels, products and other alike transactional concepts. This limits the bank ability on identifying the total relationship and unique customers. An Integrated CRM is a major goal it consolidates these â€Å"information islands† and separate solution, which forms an open cross-bank system from all executives, business area department officers and branch employees, shares the identical customer information. Integrated banking CRM structure can be obtained from this necessary basis of data supply. Operation (contact) sources: Chou, Chou 2000, said the customer communication touch-point (ATM, Branch, Call-Centre, Internet-Banking, Mobile banking, personal contact, etc.) Internal sources: Professor Constantion Zopounidis (2000) said internal sources that are the available information island, data bases and product oriented systems from other banks such as (Cards, Deposits, Investments, and loans etc.), Marketing campaign response, meta-data analysis and reliable data mining results. External Sources: Professor Constanin Zopounidis 2002, said marketing researches that of external sources, infomediaries etc. Providing geo-demographic, psycho-graphic data and lifestyle, these can help to improve customer images 2.11 CUSTOMER DATA ANALYSIS Heygate (1998), said Simple and sophisticated data analysis techniques are required for deriving the valuable customer insight from the data collected in a central customer warehouse. More advance data analytics includes OLAP (Online Analytical Processing) mining techniques and tools, these extracts applicable patterns or trends in the data. According to Lawer (2000), key incorporated customer management insights provided by customer data analysis are customer segmentation/differentiation, concentration and distribution of customers value; share of purchases/profits, analysis of strategies that widen/lengthen/deepen customer relationship. Hawkes 2000, advocated customer data analysis enables the recognition of customers profit and customers preferences for definite bank product and services, indicates the most suitable channels to reach the customers, and assesses the profitability and life time value of every personality. Additionally, Delto 1998 said that the future manners of the consumers can be predicted by analysing their past behaviour. Customer statistics, profit and segmentation are the main amount produced of the analysis stage feeding the marketing strategy planning and completing process. Having easily accessible information to marketing makes the difference between a winning campaign and a failure. 2.12 MARKETING STRATEGY AND PROGRAMES Kristin Anderson and Carol Kerr 2002 advocated captured results and data of customer analysis support marketers to route marketing messages, processes and strategies. True values of data of Lloyd TSB are discovered by tools and process for marketing decision making, marketing decision making and CRM initiatives and campaign are deployed from converted information to customer knowledge. Goal of marketing automation within CRM are which personalise and optimizes each customer contact from planning, execution, monitoring marketing strategies and action programmes. Bryan Foss 2003 said it is critical for bank CRM not only to extract their data source to uncover patterns and insight but also to operationalise the system through the bank performance to turn the customer knowledge into importance creating achievement. Merlin Stone 2003 advocated the grades from advertising and CRM activities and strategies continue the process knowledge acquisition enhancing the on-going assessment of marketing data intelligence, closing the feed-back loop. Hence, the final element of CRM process cycle is the valuation of the results of campaign driven by marketing data intelligence. It is crucial to measure performance and feed result back into the centre customer data warehouse, in order to convey Customer Relationship Management of Lloyds Banking Customer Relationship Management of Lloyds Banking 1.0 INTRODUCTION This chapter provides the brief introduction of research. Furthermore, it also discusses the aims, objectives of the research questions and scope of the study. 1.1 TOPIC OF THE RESEARCH Customer Relationship Management of Lloyds Banking Group PLC; A Critical Evaluation 1.2 INTRODUCTION TO RESEARCH Peter Drucker said, â€Å"The purpose of a business is to create customers†. Customer Relationship Management can be the single strongest weapon we have as manage to ensure that customers become and remain loyal. Customer Relationship Management, or CRM, is an essential part of modern business management. CRM concerns the relation between the organisation and its customers. Customers are the lifeblood of any company be it a global corporation with thousands of employees and a multi-billion turnover, or a sole trader with a handful of regular customers. CRM is the same in principle for both examples. Globalization and technology improvements have pushed companies into hard competition. In this new era organisations are targeting on managing customer relationships, mainly customer satisfaction, in order to maximize revenues (Constantinos 2003). Today, marketing is not just developing, delivering and selling; it is shifting towards developing and maintaining equally long term relationships with customers (Buttle, 1996). This new business values is called relationship marketing (RM), which has involved significant interest both from marketing academics and practitioners (Gronroos, 1994). The Greek philosopher, Epictetus said that â€Å"what concern me is not the way things are, but rather the way people think things are† (Szwarch, 2005, p.3). The concepts of consumer satisfaction were depending on the thinking of consumer. Research suggests that customer satisfaction, basic concept of relationship marketing, is important in achieving and retaining competitive advantage. Research studies have discovered that retaining current customers is much less expensive than attracting new customers (Desatnick, 1988; Stone et al., 1996; Bitran and Mondschein, 1997; Chattopadhyay, 2001; Massey et al., 2001). The best way to retain customers is to keep them satisfied, a number of studies have shown that customer satisfaction can guide to brand loyalty, repurchases intention and repeat sales (Day, 1984; Swan and Oliver, 1989; Oliver, 1999). Customer retention, in turn, seems to be related to profitability (Oliver, 1999). Relationship marketing is becoming significant in financial services (Zineldin, 1995). If a bank develops and sustains a solid relationship with its customers, its competitors cannot easily replace them and so this relationship provides for a continued competitive advantage (Gilbert, 2003). Moriarty et al. (1983) has suggested relationship concept in the banking sector which states that banks can increase their profits by maximising the profitability of the total customer relationship over time, instead of looking for to get more profit from any single transaction. Perrien et al. (1992) observed severe competitive pressures that forces financial institution to restructure their marketing strategies by developing into long-term relationship with customers. And banking industry purely related to financial services, which needs to create the trust among the people. This research is exploratory in nature and design. The data which is collected is going to be mostly primary data collected from the relevant persons within the bank. The data has gathered from the face to face interviews with the help of structured and semi-structured questionnaire with those persons. The above describe interviews has last 40 (fourty) to 45 (fourty five) minutes (approx). On the other hand the researcher has decided to collect primary data from random interviews of Lloyds Banking Groups customers. Sample size is around 200 customers and of structured questionnaire. But of course this research paper has relied on reviewing the various secondary data available from various researches such as books, magazines, website, previous research and publication etc. The collected data has been analysed by graphs, table and pi chart drawn from Microsoft excel. 1.3 AIM OF THE RESEARCH The aim of the research is to study why CRM is important in bank, how the CRM works in banks and also the effectiveness of Lloyds Banking Group in obtaining long term customer relationship, customer loyalty, and customer satisfaction by the use of CRM. And also suggest feasible recommendations to Lloyds Banking Group to increase the customer satisfaction and market share by the effective use of CRM. 1.4 OBJECTIVES OF THE RESEARCH The followings are the objectives of this research; To study how critically practised in Lloyds Banking Group Analysis the data mining process of Lloyds Banking Group To find out how the bank segments their customers To analysis how the bank retaining their customers To find out how does the bank measure customer Life Time Value To verify the relationship between the customers and the Lloyds Banking Group 1.5 SCOPE OF THE STUDY The scope of the study and research work has limited to Lloyds Banking Group only. This chosen level of aspects has stayed at large in the study so that it can be studied well and analyzed thoroughly to get a deeper understanding. Trying to cover too much ground may lead to a very superficial and confused analysis and may involve long time duration to complete the project work or report. Therefore a specified and narrow down approach with Lloyds Banking Group and an evaluation of its success has comprised with the researc 2.0 LITERATURE REVIEW This chapter contains a review of literature relevant to the research. This literature review deals with, about CRM, the history and goals of an integrated banking CRM, the technological factor of CRM, the process cycle in banks, data warehouse technology, data mining process, how to analysis the data, customer segmentation process, communication strategies of bank to the customers etc. 2.1 CUSTOMER RELATIONSIP MANAGEMENT Existing research states that ‘relationships are the base to the successful development and edition of new business viewpoint, though business have taken care of relationships with their customers for many centuries (Gronroos, 1994). Sheth and Parvathiyar, (1995) said that relationships demand much more than mere transactions. Rather, they symbolize strategic and tactical issues based on a new philosophical move that geared in the direction of long-term organisation survival. According to Storbacka, (1994) relationship marketing got popular in 1990s but it has a long history under different names. In its starting, one-to-one marketing appeared in the mid 1990s, which transformed into Customer Relationship Management. Parvatiyar and Sheth gave a static definition of CRM. â€Å"Customer Relationship Management is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer† (Parvatiyar and Sheth 2000, p.6) â€Å"What criteria determine who â€Å"How can we acquire this customer will be our most profitable in the most efficient and effective customers?† way?† â€Å"How can we increase the â€Å"How can we keep this customer loyalty and the profitability for as long as possible?† Of this customer?† 2.2 THE HISTORY AND GOALS OF AN INTEGRATED BANKING CRM According to Puccinelli (1999) the financial services industry as entering a new era where personal attention is decreasing because the institutions are using technology to replace human contact in many application areas. Sherif, 2002 advocated that, now global changes brought new trends, directions and new ways of doing business, which also brought new challenges and opportunities to financial institutions. In order to complete with newly increasing competitive pressures, financial institutions must recognize the need of balancing their performance by achieving their strategic goals and meeting continues volatile customer needs requirements. Different ways must be analyzed to meet customer needs. Foss said that banks are highly focusing on CRM for the last five years that is expected to continue. According to Peter (1998) and Chablo (1999) the main goals of an effective integrated CRM solution in the banking sector are to enable financial institutes to; a) Widen customer relationship through acquiring new customers, identifying and targeting new segments and expanding in new markets. b) Lengthen the existing relationship developing longer term relationships, increasing perceived value of products and introducing new products and c) Deepen the relationship with customers initiating the cross selling and up selling opportunities, understanding the propensity of different customer segments to purchase and increase sales. The implementation if CRM system in a bank helps the business organisation to obtain a complete picture of their existing customers, design both customer-oriented and market-driven financial products and services, as well as implement extensive and reliable financial marketing research and efficient campaigns, to achieve and enhance customer loyalty and profitability. The above goals can be achieved through the seamless integration of information technology solutions and business objectives at every process of the bank business that affects the customer. 2.3 THE PHASES OF CRM The main phases of CRM are as follows; 1. Customer selection or Segmentation According to Dave Chaffey (2009), customer selection defining the types of customers that a company will market to. It means identifying different groups of customers for which to develop offerings and to target during acquisition, retention and extension. Different ways of segmenting customers by value and by their detailed lifecycle with the customer are reviewed. Many companies are now only proactively marketing to favoured customers. Seth Godin (1999), says â€Å"Focus on share of customer, not market share fire 70 per cent customers and watch your profits go up!† According to Efraim Turban (2008), the most sophisticated segmentation and targeting schemes for extension of customers are often used by banks, which have full customer information and acquire history data as they search for to boost Customer Lifetime Value (CLV) through encouraging increased use of products overtime. The segmentation approach used by banks is based on five main basics which in result are covered on top of each other. The amount of options used, and therefore the complexity of approach, will depend on resources obtainable, opportunities, capabilities and technology afforded by catalog. i. Identify customer lifecycle groups When guests use online services then they basically pass those seven or more stages. The organisations have clear these segments and establish the CRM infrastructure to categories customers in this manner; then they deliver focused messages, whichever by modified web messaging or by e-mails that are triggered routinely because of various rules. First-time guests recognized by a cookie placed on their PC. When guests registered, they are tracked through the residual stages. The customers who have purchased one or more products are one particular important group. The key challenge is for a company to encourage a customer to shift from the first product to the second and then go on. Explicit offers can be try to push customer for further products. In the same way, when customers turn into an inactive then the customer required follow-up. ii. Identify customer profit characteristics This is a conventional segmentation which is based on the nature of customer. For Business 2 Business Companies it includes sex, age and geography. It includes volume of the organisation and the type of sector or application, the organisation operates in. iii. Identify behaviour in response and purchase As shown in 2.2 through analysis of data base when customer progress through the lifecycle, company is capable to build up a detail reaction and buy history which judges the details of frequency, recency, group of product buy and monetary value. This approach is known as ‘RFM (Recency, Frequency, Monetary value) analysis. iv. Identify multi-channel behaviour In spite of of the eagerness of the company for online channels, various customers are chosen for using online channels and others customers are chosen conventional channels. This is, to an extent, be indicated by RFM and response examination since customers with a preference for an online channel is more reactive and make more use online. Customer who likes online channels is focused mostly by online communications such as e-mail, but when customer like conventional channels is focused by conventional communications such as direct mail or phone. This is known as ‘right-channelling. v. Tone and style preference In a same way to channel liking, customers are respond in their own way to various types of message. Some customers like rational application, in that time a detailed e-mail may work best. On the other hand some customers are preferred an emotional appeal. Companies are test for this in customers or conclude it using profit description and response performance and then expand various inventive treatments consequently. 2. Customer acquisition Processes used to add new customer. According to Turban (2008), customer acquisition refers to marketing activities intended to form relationship with new customers while reducing acquisition cost and targeting high-value customers. Service value and selecting the right path for various customers are essential at this stage and during the lifecycle. The conventional manner to customer acquisition include a marketing manager developing a blend of mass marketing (billboards, magazine advertisements etc.) and direct marketing (mail, telephone, etc.) campaigns based on their knowledge of the particular customer base that was being focussed. Marketing campaign trying to pressure new customers to buy a particular type of diapers, the mass marketing ads might be determined in parenting magazines. The advertisements could also be positioned in more conventional publications whose readership demographics were alike to those of new parents. Customer acquisition is comparatively similar to mass marketing. A marketing manager selects the demographics that they are involved in and after that works with a data vendor to obtain lists of buyers who meet those features. The data vendors have large database holding millions of eventual customers that can be segment based on explicit demographic criteria. The idea of â€Å"similar demographics† has conventionally been an art rather than a science. Usually there are not hard-and-fast systems about whether two groups of buyers share the similar features. Most of the segmentation that took place in conventional direct marketing involves hunches on the division of the marketing professional. 3. Customer retention Dafe Chaffey 2009 said that customer retention refers to the marketing actions taken by a company to keep its current customers. Identifying applicable offerings based on their personal needs and complete position in the customer lifecycle (e.g. purchase value or number) is key. Customer retention strategy aims to keep a high percentage of valuable customers and a customer development strategy aims to boost the value of those retained customer to the organisation. Customer retention is based on customer loyalty. And customer loyalty is the point to which a customer will continue with a specific brand or vendor. Customer acquisition to retain and extend create long-term customer relationship. We need to calculate customer satisfaction, as satisfaction drives loyalty and loyalty drives profitability. This relationship is exposed below; The marketers aim is to push customers up the curve towards the affection zone. But the majority are not in that zone. Marketers must understand to achieve retention,why customers defers or are indifferent. 4. Customer extension This technique is encouraging customers to increase their involvement with a company. According to Turban 2008, customer extension is increasing the range of products that a customer buys from an organisation. Sometime it is referred ‘customer development. Increasing the lifetime value (CLV) of a customer is the main objective of customer extension by encouraging cross-sell. For example a customer of Egg credit card may be offered the loan or a deposit account. There are many of customer extension technique for CRM as follows; Re-sell: same type of products to existing customers-particular vital in some Business 2 Business background as re-buys or modified re-buys. Cross-sell: sell extra products which may be closely related to the original buy. Up-sell: this is mean, selling more expensive products. Reactivation: Customers who have purchased for some time or have lapsed can be encouraged to buy again. Referrals: generating sells from recommendation from existing customers. 2.4 CUSTOMER LIFETIME VALUE MODELLING Customer Lifetime Value (CLV) is also an important theory and practise of CRM. But the calculation of CLV is not straightforward. There are so many company, they do not calculate it. According to Dave Chaffey (2009) â€Å"Lifetime value is the total net benefits that a customer or group of customers will provide a company over their total relationship with the company†. CLV is based on estimating the income and costs related with each customer over a phase of time and then calculating the net present value in present monetary terms using a discount rate value applied over the stage. Efraim Turban (2006) said there is various scale of complexity in calculating LTC. Those are exposed in 2.6. Option 1 is a realistic way or estimated proxy for future LTV, but the true LTV is the future value of the customer at individual level. CLV modelling at a segment level 4 is crucial within marketing since it answers the question; How much can I afford to invest in acquiring a new customer? Lifetime value analysis helps marketers to: Create the true value of a companys customer base Recognize and compare crucial target segment Calculate the effectiveness of another customer retention strategy Plan and calculate investment in customer acquisition programmes Make decisions about product and offers 2.7 gives an example of how LTV can be used to develop a CRM strategy for different customer groups. There are 4 (four) main types of customers are indicated by their present and future value as bronze, silver, gold and platinum. Separate customers groupings (circles) are recognized according to their current value (as indicated by current profitability) and future value as indicated by CLV calculation. Every group will have a customer segmentation based on their demographics. Therefore this is used for customer selection. Within the four main value groupings, there are various strategies are developed for various customer groups. Few bronze customers such as group A and B practically do not have development potential and are usually unprofitable, therefore the objective is to reduce costs in communications and if they do not stay as customers this is acceptable. Some bronze customers like group C may have potential for growth; therefore for group C the strategy is to extend their purchases. Silver customers are focused with customer extension offer and gold customers are extended. Platinum customers are the best customers; therefore the communication is very important with these customers. 2.5 THE TECHNOLOGICAL FACTORS OF CRM According to Davenport and Short, (1990); Porter, (1987) ‘information technology is an enabler to thoroughly redesign business process to achieve improvements in organisational performance. ‘Information Technology help helps a business process by facilitating changes to job practices and establishing new techniques to link a customer with organisations, suppliers and stakeholders (Hammer and Champy, 1993). Eckerson and Watson (2000) advocated that ‘CRM take full advantage of technology to collect and analyze data on customer patters, expand predictive models, interpret customer behaviour, proper respond with communications, and deliver product and service to individual customers. By using technology a company can create a 360 degree view of customers to find out from past interactions to optimize future ones. Peppard (2000) said that ‘the leading factors in CRM development is improvement in network infrastructure, client/server computing, and business intelligence applications. CRM collect, store, maintain and distribute customer knowledge all over the organisation. The effectual management of information has a vital role to play in CRM. In the case of calculating customer lifetime value, consolidated view, product tailoring and service innovation, the information is essential. Along with data warehouses, enterprise resource planning (ERP) system and the internet are the central infrastructures to CRM applications. Fickel (1999) said ‘CRM applications link front office (e.g. marketing, sales and customer service) and back office (e.g. financial, logistics, operations and human resources) functions with the companys customer touch point. A companys touch point is â€Å"all of the communication, human and physical interactions your customers experience during their relationship lifecycle with your organisation. Whether an ad, Web site, sales person, store or office, touch points are important because customers from perceptions of your organisation and brand based on their cumulative experiences† (Source; http://www.imediaconnection.com/content/4508.imc at 16/10/2009 on 15:25) According to Eckerson and Watson (2000), ‘CRM integrated touch points is something like a common view of the customer. A separate information systems controlled these touch points. 2.8 demonstrates the relationship between customer touch point with back and front office operations Peppers and Rogres, (1999) said ‘In many companies, CRM is just a technology solution that extends divide databases and sales force automation tools to link sales and marketing functions in order to develop targeting efforts. On the other hand some organisations consider CRM as a tool that is exclusively designed for one-to-one relationship. According to Goldenberg (2000) ‘CRM is not just a technology applications for sales, marketing and service, but when CRM fully and successfully implemented, customer-driven, a cross-functional, technology-integrated business process management strategy that improves relationships and encompasses the whole organisation. 2.6 DATA WAREHOUSE TECHNOLOGY According to Watson (2000) ‘data warehouse is a tools of information technology management that helps business decision makers to instant access of information of customer data throughout the organisation by combining all database and operational systems like sales and transaction, human resource, inventory, purchasing, financial and marketing system. Data warehouse pull out, clean, convert and manage large volumes of data from various systems and creating a historical record of all customer. Data warehousing technology is the most crucial part of CRM because it makes CRM possible. Shepard et al. (1998) said ‘a better understanding of customer behaviour is possible because data warehousing technology consolidates correlates and convert customer data into customer intelligence. Understanding of customers and their purchase patterns can improve information related to customer service interactions, billing and account status, back orders, product returns, product shipment, and internal operating cost. The capacity of a data warehouse to store hundreds and thousands of gigabytes of data make an analysis feasible as well as immediate. Organisational benefits with a data warehouse are as follows; exact and faster access of information bad and duplicate data eliminate by quality data and filtering customer profiling and retention modelling it calculate total present value and estimate future value of every customer it gives detail report 2.7 DATA MINING TECHNOLOGY Peppers and Rogres, (1999) said that ‘the first analytical step of data mining is to describe the data. Data mining summarize its statistical attributes like standard deviations and means, visually review it by use of charts and graphs and distributes the value of the field in our data. But alone data description can not provide an action plan. We have to build a predictive model based on patterns determined from known results and after that we have to test the model on result outside the original sample. An ideal model should never be confused with reality, but it is useful guide to understanding our businesses. According to Eckerson and Watson (2000) ‘we can use data mining for both classification and regression problems. In first problem we can predict what type something will fall into. In second problems we are predicting a number like probability that a person will respond to an offer. In CRM process, data mining is often used to allocate a score to a particular customer. Data mining is also often using to recognize a set of characteristics, which is called profile. Data mining segments customers in to groups with similar behaviour like purchasing a particular product. 2.8 THE CRM PROCESS CYCLE IN BANKS Pound (2000) said that exploration and alteration process should be done by the banks on basis of customer information captured; this shows the full value of CRM initiatives. Banks set up a closed CRM cycle with the help of an integrated CRM solution, which composed of a set of continuous iterative process. It manages the whole customer related process for bank, analysing customer profile, customer data and life time value, which is helping to making marketing decision and optimizing the execution of marketing campaigns, customer service strategies and sales strategies across various channels during the bank. According to Professor Constantin Zopounidis (2002) CRM process cycle is based on a generic business view. It presents a continuous improvement of value between customers and banks across touch points. The main stages are as follows; Customer data collection Customer data analysis Marketing strategy and action programs Back-office Data External Data Touch-Point Data Pound 2000 said that ‘recent banking data sources are extremely heterogeneous. Geographic information is dispersed due to continual acquisitions, mergers and reorganizations. For example a bank might use web site, ATMs, e-mail, sales, call centres and marketing automation applications that must be integrated in a unified environment of CRM banking. An effective multi-channels customer interface will not be possible without a centrally integrated warehouse driving the entire CRM process cycle. This should be update real time. The historical data should be recorded by it, which is used to create propensity models and customer life time value models to recognize past behaviour and action in order to take future marketing strategy. 2.9 CUSTOMER DATA COLLECTION Kristin Anderson Carol Kerr (2002), said that in banking transaction system data such as (e.g. Checking, Credit, Savings) are frequently organised around accounts, channels, products and other alike transactional concepts. This limits the bank ability on identifying the total relationship and unique customers. An Integrated CRM is a major goal it consolidates these â€Å"information islands† and separate solution, which forms an open cross-bank system from all executives, business area department officers and branch employees, shares the identical customer information. Integrated banking CRM structure can be obtained from this necessary basis of data supply. Operation (contact) sources: Chou, Chou 2000, said the customer communication touch-point (ATM, Branch, Call-Centre, Internet-Banking, Mobile banking, personal contact, etc.) Internal sources: Professor Constantion Zopounidis (2000) said internal sources that are the available information island, data bases and product oriented systems from other banks such as (Cards, Deposits, Investments, and loans etc.), Marketing campaign response, meta-data analysis and reliable data mining results. External Sources: Professor Constanin Zopounidis 2002, said marketing researches that of external sources, infomediaries etc. Providing geo-demographic, psycho-graphic data and lifestyle, these can help to improve customer images 2.11 CUSTOMER DATA ANALYSIS Heygate (1998), said Simple and sophisticated data analysis techniques are required for deriving the valuable customer insight from the data collected in a central customer warehouse. More advance data analytics includes OLAP (Online Analytical Processing) mining techniques and tools, these extracts applicable patterns or trends in the data. According to Lawer (2000), key incorporated customer management insights provided by customer data analysis are customer segmentation/differentiation, concentration and distribution of customers value; share of purchases/profits, analysis of strategies that widen/lengthen/deepen customer relationship. Hawkes 2000, advocated customer data analysis enables the recognition of customers profit and customers preferences for definite bank product and services, indicates the most suitable channels to reach the customers, and assesses the profitability and life time value of every personality. Additionally, Delto 1998 said that the future manners of the consumers can be predicted by analysing their past behaviour. Customer statistics, profit and segmentation are the main amount produced of the analysis stage feeding the marketing strategy planning and completing process. Having easily accessible information to marketing makes the difference between a winning campaign and a failure. 2.12 MARKETING STRATEGY AND PROGRAMES Kristin Anderson and Carol Kerr 2002 advocated captured results and data of customer analysis support marketers to route marketing messages, processes and strategies. True values of data of Lloyd TSB are discovered by tools and process for marketing decision making, marketing decision making and CRM initiatives and campaign are deployed from converted information to customer knowledge. Goal of marketing automation within CRM are which personalise and optimizes each customer contact from planning, execution, monitoring marketing strategies and action programmes. Bryan Foss 2003 said it is critical for bank CRM not only to extract their data source to uncover patterns and insight but also to operationalise the system through the bank performance to turn the customer knowledge into importance creating achievement. Merlin Stone 2003 advocated the grades from advertising and CRM activities and strategies continue the process knowledge acquisition enhancing the on-going assessment of marketing data intelligence, closing the feed-back loop. Hence, the final element of CRM process cycle is the valuation of the results of campaign driven by marketing data intelligence. It is crucial to measure performance and feed result back into the centre customer data warehouse, in order to convey

Design Build Test Operate :: essays research papers

Design Build Test Operate Table of Contents 1.  Ã‚  Ã‚  Ã‚  Ã‚  Introduction 2.  Ã‚  Ã‚  Ã‚  Ã‚  Teams and Leader Responsibilities 3.  Ã‚  Ã‚  Ã‚  Ã‚  Design Components 4.  Ã‚  Ã‚  Ã‚  Ã‚  Introductory Project 5.  Ã‚  Ã‚  Ã‚  Ã‚  Project Selection Process 6.  Ã‚  Ã‚  Ã‚  Ã‚  Analysis Report 7.  Ã‚  Ã‚  Ã‚  Ã‚  Preliminary Design Review 8.  Ã‚  Ã‚  Ã‚  Ã‚  Critical Design Review 9.  Ã‚  Ã‚  Ã‚  Ã‚  Final Presentation 10.  Ã‚  Ã‚  Ã‚  Ã‚  Conformity Inspection I.  Ã‚  Ã‚  Ã‚  Ã‚  Introduction The purpose of the detail design class is to provide a design-build-test-operate experience for the student. The requirements for the project that the students select begin with the requirement that the project have a minimum of three subsystems, chosen as a subset of the subsystems used in the project from preliminary design. In addition, it must have more than one sub-assembly; there must be a subset of the requirements that are test-able (with our campus facilities); it must undergo a vibrations test according to the requirements specified by the chosen launch vehicle; and the structure must be tested to failure. The design component consists of detailed drawings submitted in the context of the configuration management system defined under the Design folder in the Courses drive. More detail of the design component is given in the Design Components section. The students are required to build their design. This enables them to understand the manufacturability of their paper concept. It also gives them the opportunity to see if their predictions on the performance of their system are good. The build process provides an opportunity for the students to see clearly what the integration issues are in bringing the various subsystems together. The test component requires the students to write detailed test plans and to perform them with their design prototype. The project should have various subsystem tests as well as tests at the various phases of integration and finally, a fully integrated functionality test, which shows how the system as a whole operates. The entire design must be supported by analysis based on work done in previous courses as well as on any new material they must learn for their specific design. The analysis section describes in more detail the types of specific analyses required. II.  Ã‚  Ã‚  Ã‚  Ã‚  Teams and Leader Responsibilities The teams utilize the entire class and are divided into subsystem teams and an integration team. The integration team is composed of the team leaders from each subsystem team and the project lead is the team leader for this team. Each team must also have a person responsible for all the CAD drawings. The responsibilities of the integration team, project lead, team leads and the CAD person are defined below. Integration Team: This team is responsible for the system coming together. They must make sure that all integration issues are addressed early and are passed on to the appropriate team for resolution.

The Role of Financial Institutions and Markets

Technology, globalization, competition, and deregulation all have contributed to the revolution of worldwide financial markets and the creation of an efficient, internationally linked market. However, these developments have created potential problems (Brigham 1995: 111). As the worldwide financial crisis, which started in the early summer of 2007 in America and spread globally, still shapes the headlines of newspapers and the political agenda of developed countries. These recent economic developments drew back societies’ attention to the importance of the world economy and financial markets. A financial market is considered as â€Å"a market in which financial assets [..] can be purchased or sold† (Madura 2012: 3).Here, any kind of marketplace, where buyers and sellers participate in the trade of financial assets such as equities, bonds, currencies and derivatives, is meant. Mostly financial markets have transparent pricing, basic regulations on trading, costs and fees , and market forces that determine prices of securities that are traded. There are three relevant classifications of financial markets in the context of the financial crisis: money versus capital markets, primary versus secondary markets, and organized versus over-the counter markets (Madura 2012). The money versus capital market distinguishes in various points: The money market is only short- term oriented, a maturity of less than one year, and the trading objects are referred to as money market securities, which are debt securities.These have a â€Å"high degree of liquidity† and therefore offer a low return; however, they are less risky (Madura 2012: 5). In contrast, capital markets promote the sale of long-term securities, called capital market securities, which are most often bonds, mortgages and stocks. These are often bought with the intention of financing the purchase of capital assets such as buildings, equipment, or machinery. Capital market is composed of primary m arkets and secondary markets: In the primary market only the trade of newly issues securities occurs, whereas in the secondary market previously issued – so existing – securities are traded (Madura 2012). The organized versus over-the counter markets differentiate in the location factor.Whereas the organized markets represent true visible marketplaces, where member meet to trade and securities are listed like the New York Stock Exchange, the over-the-counter markets are a wired network of dealer, which do not need a central and physical location to trade, because it is a direct trade between the two participants (Madura 2012). Telecommunication and Internet allowed businesses to trade all over the world in every financial market. However, this global interconnection of financial markets also has its side effects as the fall of the Lehmann  Brothers and following economic developments have shown.In 2008 and 2009 there has been a worldwide crisis in the international f inancial markets, which has lead to an extreme high number of credit defaults and amortizations on speculative assets of banks and financial institutions. The financial crisis has been triggered by the lending practice, the insufficient collateralisation of mortgages and securitization of credits in the real estate market in the United States of America. The speculation on rising real estate prices bursted and risky bonds lost their value dramatically.The financial crisis developed to a liquidity crisis, because the credit lending of banks, which are equipped with liquidity, to banks, which need cash and cash equivalents in form of credits, stopped despite the fact that the most important national banks decreased the discount rate under 1 %. Due to lack of trust between the banks, the interbank credit lending decreased dramatically, so that the liquidity crisis turned to a bank crisis. Henceforth, this crisis covered the goods market, in result unemployment rates increased, internat ional trade decreased and the recession settled. Due to the dimensions the economic slump took it is considered as the new world economic crisis (bpb 2013).2. Financial InstitutionsFinancial Institutions are firms that provide access to the financial markets, both to savers, who wish to purchase financial instruments directly, and to borrowers, who want to issue them (Cecchetti/ Schoenholtz 2010). In fact, financial institutions – also referred to as financial intermediaries – are like most other businesses: the primary business is to generate profit by minimizing the costs and maximizing the revenues. Additionally, financial intermediaries design and sell financial products and services in accordance to customers demand at a reasonable profit level (Pilbeam 2010: 46). A financial intermediary interacts with savers or lenders and borrowers simultaneously; thereby it produces a set of services, which facilitate the transformation of its liabilities into assets such as l oans, which is referred to as intermediation (Madura 2012: 12).2.1 Types of Financial InstitutionsGenerally, there are three classifications of financial institutions: depository institutions, contractual saving institutions, and investment institutions. Firstly, depository institutions such as commercial banks and savings banks accept and manage cash deposits as well as make loans (Pilbeam 2010: 46). Furthermore, deposit-taking institutions strive to make a profit in the way of ‘spread income’ between the cost of the deposits that they accept and other sources of funding, and the return that they receive on their investment portfolio in the way of loans, equity stakes and other investments (Pilbeam 2010: 46).Depository institutions underlie default risks, regulatory risks as well as liquidity risks (Pilbeam 2010: 46). Secondly, contractual savings Institutions attain funds under long-term contractual arrangements and invest them largely in the capital market especially in long-term equity and debt instruments such as life insurances, private pension funds, and funded social pension insurance systems. Due to the agreement’s requirement of regular payments from for example policyholder and pension fund participant, contractual savings institutions have relatively stable inflows of funds.The stable cash flows – both inflows and outflows – are relatively stable as well as predictable, so that liquidity is not a predominant factor in the asset management of these institutions (Impavido/ Musalem 2000: 3-5). Thirdly, investment institutions are commonly known as investment companies, corporations, or trusts. An investment company issues securities and is predominantly engaged in the business of investing in securities.Hereby, it aggregates funds of a large number of investors into a specific investment in compliance with the objectives of the investors. Individuals invest in diversified, professionally managed portfolios of securiti es, whereby they have access to a wider range of securities and a guaranteed spread of risk than without the investing company as intermediary (Pilbeam 2010: 53-54).2. 2 Role of Financial Institutions in the Financial MarketAs previously described in reference to the financial crisis, financial markets are imperfect; participants in the market do not have full access to information (Madura 2012: 10). For example, an investor is not able to verify the creditworthiness of potential borrowers and there is a lack of expertise to assess this creditworthiness. Here financial institutions’  function is to resolve the limitations caused by market imperfections.Therefore, financial institutions are involved in the information processing (Madura 2012). Thereby, they investigate the financial conditions of the potential customers to figure out which have the best investment opportunities (Cecchetti/ Schoenholtz 2010). Consequently, financial intermediaries are saving information costs as well as transaction costs, because financial institutions â€Å"assist in the transfer of funds from surplus to deficit units in the economy† (Pilbeam 2010: 63). For example, there are many lenders/ surplus units, who all strive to lend various low value money market securities for different periods of time, or there few borrowers/ deficit units, who wish to borrow capital market securities for a fixed period of time – here financial institutions are useful as an intermediary.Lenders do not have to search the markets for suitable borrowers and vice versa. Financial institutions borrow various amounts of money from surplus units, reform these into an amount suitable for the final deficit unit, and transform them into a maturity suitable for the final borrower. Thereby financial institutions serve the special needs of the deficit units and surplus units (Madura 2012: 10-11). Overall, flexibility is existent for all participants, because lenders can change the terms a nd conditions of lending to the intermediary without the intermediary or final borrower being at disadvantage.While financial institution act as intermediary, they bear the risk and in result, the risk is reduced. By diversification meaning offering various bundles of financial assets, financial intermediaries spread the risk and thereby, transform risky assets to less risky ones (Madura 2012: 10-11). In fact, individual investors are capable of diversification, however, they may not do it as cost efficient as financial institutions and therefore, they possess a crucial role in financial markets.In conclusion, financial institutions â€Å"ensure that the costs and risk are lower than if the surplus and deficit agents dealt directly with each other, and thereby ensure that there is greater flow than in the absence of financial intermediaries† (Pilbeam 2010: 63). Pilbeam means with greater flow that intermediaries increase investment as well as economic growth (Cecchetti/ Schoe nholtz 2010).2.3 Role of Financial Institutions in the Financial CrisisFinancial crises mainly manifest themselves at the level of financial institutions; especially, the role of banking institutions in the occurrence and transmitting of financial crises is a deciding one for the recent financial crisis (Andries 2009: 151). Financial Institution such as banks can facilitate the financial crises through their activities in the financial markets. Their activities can influence the interest rates, the uncertainty on the market and the price of assets (Andries 2009: 152).The worldwide financial crisis of 2008 was subject to several developments of banks’ practices: Financial innovations and risky speculations such as in subprime mortgages and collateralized debt obligations have been practiced, loans have been expanded and the prices of assets increased without economic basis and unexpectedly decreased, so the orientation changed towards liquidity (Andries 2009: 149). Overall, ba nking institutions have overdone diversification and practiced financial innovations meaning structured finance, which were new complex products, whose risk could not be assessed by the rating agencies (Fratianni/ Marchionne 2009: 8-9).While the crisis there has been uncertainty among market participants and default risk increased, so that borrowers increased the interest rates to all borrowers (Fratianni/ Marchionne 2009: 13). Simultaneously, â€Å"banks reacted by selling assets to reduce leverage, setting in motion a vicious circle of asset liquidation and price declines across a vast range of assets. Financial integration and made possible for the crisis to spread virtually worldwideâ€Å"(Fratianni/ Marchionne 2009: 21).3. ConclusionIn conclusion, financial institutions possess a vibrant role in the financial markets and accelerate the development of financial crises, because of their activities. Furthermore, financial institutions act as an intermediary, thereby they decreas e transaction costs and risk, and simultaneously increase efficiency through information processing. However, besides economic growth financial institutions encourage side effects: Especially the banking institutions’ practices are responsible for the development of the recent financial crisis. Their striving for more profit with practices under the theme of no risk, no reward lead to the downturn of  the worldwide economy. In the future, governments and international institutions meet certain requirements and establish regulations, in order that such practices and activities are restrained.

Effectiveness of Sobriety Checkpoints

Briana Purifoy Effectiveness of Sobriety Checkpoints Special Problems in Criminal Justice Dr. Stone December 1, 2010 Abstract A good theoretical basis exists for believing that properly conducted sobriety checkpoints and campaigns, may reduce drunk driving, and data from multiple checkpoint programs support this belief. The courts have upheld the constitutionality of checkpoints, opposing those who believe them to violate the fourth amendment. Each year, more deaths result for alcohol-related automobile accidents than any other cause.Sobriety checkpoints, along with media coverage and cooperation from multiple groups, are a necessity to reduce the amount of drunk driving in America. Introduction For many years, the law enforcement community has attempted to detect impaired drivers through numerous innovative efforts and measures. The problem of driving under the influence (DUI) is well known throughout society, yet, even with all of the strategies used to remove these drivers from U. S. highways, it continues to cause needless and tragic loss of life each year. When will this end? When will society no longer tolerate drunk driving?Until that time, the law enforcement community must attempt to contain the carnage inflicted upon law-abiding citizens by impaired drivers. Motor vehicle crashes are the leading cause of fatal injury and the second-leading cause of nonfatal injury in the U. S. Young adults 15 to 24 years old are particularly at risk for motor-vehicle-related injury (Miller, Galbraith, Lawrence, 1998). Driving under the influence of alcohol is the dominant risk factor for serious highway crashes. General drunk-driving deterrence can be achieved with programs of frequent, highly visible checkpoints.Checkpoints also offer specific deterrence by apprehending drunk drivers. One study estimates that 87% of the drinking drivers apprehended at sobriety checkpoints would not be apprehended otherwise (Miller et al. , 1998). The consequential deaths of drunk dri ving are not â€Å"accidents. † They are the inevitable results of behavior that can be prevented. Although there is no one solution to this problem, sobriety checkpoints are an important component of programs that have reduced the incidence of drunken driving and the resulting loss of life.The purpose of this paper is to discuss the effectiveness of sobriety checkpoints on drunk driving. It will review the constitutionality of the checkpoints, along with reviewing several studies on checkpoints administered in certain areas or states and their effectiveness on drunk driving and alcohol related accidents. Literature Review Operationalizing Drunk Driving According to national Highway Traffic Safety Administration statistics, 16,653 people died in alcohol-related crashes in 200, an increase of more than 800 deaths from 1999.This represented the largest percentage increase on record (Mothers Against Drunk Driving (MADD), 2002). By some estimates, about two out of every five Amer icans will be involved in an alcohol-related crash at some time in their lives (Greene, 2003). An analysis conducted on the effects on crashes of DUI-checkpoints indicated that crashes involving alcohol are reduced by 17 percent at a minimum and that all crashes, independent of alcohol involvement, are reduced by about 10 to 15 percent (Erke, Goldenbeld, Vaa, 2009).Further research has revealed that authorities make 1 arrest for driving under the influence for every 772 episodes of driving within 2 hours of drinking and for every 88 occurrences of driving over the legal limit in the United States (Zador, Krawchuk, Moore, 2000). These tragic statistics dramatically illustrate that driving under the influence is a serious problem. Sobriety checkpoints have the greatest deterrent value of all impaired driving enforcement methods, and the public (87 percent in 2005) supports these measures (Kanable, 2006).Prevalence of Sobriety Checkpoints Sobriety checkpoints have existed for several y ears and have served as a deterrent to drunk driving across many communities. Although not the most aggressive method of removing impaired drivers from America’s roadways, these checkpoints comprise one piece of public awareness and education relevant to the drinking and driving dilemma. Sobriety checkpoint programs are defined as procedures in which law enforcement officers restrict traffic flow in a designated, specific location so they can check drivers for signs of alcohol impairment.If officers detect any type of incapacitation based upon their observations, they can perform additional testing, such as field sobriety or breath analysis tests (Greene, 2003). To this end, agencies using checkpoints must have a written policy as a directive for their officers to follow. Agencies normally choose locations for checkpoints from areas that statistically reveal crashes or offenses (Green, 2003). Officers stop vehicles based on traffic flow, staffing, and overall safety. They mus t stop vehicles in an arbitrary sequence, whether they stop all vehicles or a specified portion of them.Checkpoints offer a visible enforcement method intended to deter potential offenders, as well as to apprehend impaired drivers. Sobriety checkpoints must display warning signs to approaching motorists. Used to deter drinking and driving, sobriety checkpoints are related more directly to educating the public and encouraging designated drivers, rather than actually apprehending impaired drivers. They offer authorities an educational tool. Education and awareness serve as a significant part of deterrence.Frequent use of checkpoints and aggressive media coverage can create a convincing threat in people’s minds that officers will apprehend impaired drivers, a key to general deterrence. In addition, public opinion polls have indicated that 70 to 80 percent of Americans surveyed favored the increased use of sobriety checkpoints as an effective law enforcement tool to combat impair ed driving (MADD, 2002). The average motorist is stopped for a very brief period of time, found to be approximately 30 seconds by the trial court in Michigan Dept. of State Police v. Sitz (Willard, 1990).Only if there is evidence of intoxication is the motorist given traditional sobriety testing. The goal of sobriety checkpoints is to deter drunk driving by increasing the perceived risk that those who drive under the influence of alcohol will be apprehended. The checkpoint serves as a visible warning not only to drivers who are drunk, but also to those who are sober but might contemplate driving in an impaired state on some other occasion. Programs that include checkpoints prevent drunk driving more effectively than those that rely solely on conventional law-enforcement techniques, such as waiting to bserve erratic behavior (Willard, 1990). The National Commission on Drunk Driving and the U. S. Department of Transportation support the use of sobriety checkpoints because of their dem onstrated effectiveness. Critics of sobriety checkpoints have argued that they are unconstitutional because other methods of combating drunk driving are less intrusive and more efficient. Although these assertions are themselves highly debatable, the Supreme Court has held that such considerations do not provide a basis for finding a violation of the Fourth Amendment.Checkpoints do not involve the sort of unconstrained police discretion that the Court found objectionable in Delaware v. Prouse, 440 U. S. 648 (1979). Because every car or a predetermined ratio is subject to the checkpoint, police cannot stop motorists on an arbitrary or discriminatory basis. The validity of the checkpoints also can be sustained under the administrative search doctrine developed by the Supreme Court in such cases as New York v. Burger, 483 U. S. 691. Constitutionality of Sobriety Checkpoints In Michigan Department of State Police v.Sitz, The United States Supreme Court held that a Michigan sobriety chec kpoint program was consistent with the requirements of the fourth amendment. The Court, applying the balancing test announced in Brown v. Texas, held that the state had a legitimate interest in preventing drunk driving, the sobriety checkpoint sufficiently advanced the public interest, and the intrusion on individual motorists was slight (The Journal of Criminal Law & Criminology, 1991). Moreover, the Court understated the effectiveness of the sobriety checkpoint program by undervaluing its deterrent effect.The checkpoint’s intrusion on individual liberty is slight and indistinguishable from the intrusion upheld in Martinez-Fuerte. The Supreme Court has indicated that an individual in an automobile is not entitled to the same level of privacy as an individual in the home, according to South Dakota v. Opperman. The Court has held that stopping a vehicle and detaining its occupants is a â€Å"seizure† within the meaning of the fourth amendment. Yet, it has also held that a stop and seizure of a moving automobile can be made without a warrant (Almeida-Sanchez v. United States, 1973). However, the Court noted in United States v.Almeida-Sanchez that roving patrol searches of vehicles required consent or probable cause to be â€Å"reasonable† under the fourth amendment. Later, in United States v. Martinez-Fuerte, the Court found permanent checkpoints on major highways near the Mexican border consistent with the fourth amendment, because the permanent checkpoints stopped all vehicles and questioned the occupants in an effort to uncover illegal aliens. Furthermore, when proving the effectiveness of the sobriety checkpoint program, the Michigan Department of State Police did not need to show the checkpoint was the only practical alternative (Michigan Dept. f State Police v. Sitz, 1990). Accordingly, Justice Stevens inappropriately evaluated the effectiveness of the checkpoint program in comparison to other potential police procedures when he ar gued that a higher arrest rate could have been achieved through use of more conventional police techniques. Such an approach â€Å"violates the principle that such less-restrictive-alternative arguments are inapplicable in the search and seizure context† (The Journal of Criminal Law & Criminology, 1991).In fact, the Supreme Court rejected a less-restrictive-alternative argument in Martinez-Fuerte when it argued that â€Å"the logic of such elaborate less-restrictive-alternative arguments could raise insuperable barriers to the exercise of virtually all search and seizure powers. † The Court’s decision in upholding a sobriety checkpoint program paves the way for law enforcement officials to implement a promising technique for combating drunk driving. Importantly, the court accomplished this task without a radical departure from fourth amendment jurisprudence.Rather, the Court arrived at its decision through a consistent application of the case law on automobi le searches and seizures. The Court correctly applied the balancing test enunciated in Brown and properly held that the equities weighed in favor of upholding the constitutionality of the Michigan sobriety checkpoint program (Blade, 1990). The arrest rate realized in the Michigan program compared favorably with similar â€Å"seizures† upheld by the Court. Finally, the Court properly concluded that the subjective intrusion on individual liberty was slight in ight of the substantial drunken driving problem confronting this country, clearing the path for law enforcement officials to combat drunk driving more effectively. Review of Studies A comparative study implemented by Greene (2003) gives statistics compiled by two agencies, similar in size and area of responsibility. They offer an overview of the scope of the DUI problem. In 200, the Missouri State Highway Patrol conducted 58 sobriety checkpoints and arrested 323 drivers for DUI. The Ohio State Highway Patrol carried out 12 sobriety checkpoints and arrested 77 drivers for DUI.In 2001, Missouri effected 67 sobriety checkpoints and arrested 318 drivers for DUI. Ohio implemented 19 sobriety checkpoints and arrested 126 drivers for DUI. Since 1989, the Ohio State Highway Patrol has participated in 156 sobriety checkpoints and arrested 807 drivers for DUI. Also, from 1994 to 1995, Tennessee, in cooperation with the National Highway Traffic Safety Administration, implemented a statewide campaign completing nearly 900 sobriety checkpoints. Law enforcement agencies conducted these in all 95 counties in Tennessee in just over 1 year. The checkpoint programs were highly publicized and conducted basically every week.The evaluation of the program revealed it as highly favorable in reducing the number of alcohol-related fatal crashes. Basically, Missouri averaged about 5 DUI arrests per checkpoint. Ohio averaged less than 7 DUI arrests per checkpoint, and Tennessee’s aggressive checkpoint program averaged l ess than 1 arrest per checkpoint. Sobriety checkpoint programs in Florida, North Carolina, New Jersey, Tennessee, and Virginia have led to a reduction in alcohol-related crashes (Greene, 2003). In 1995, North Carolina conducted a statewide enforcement and publicity campaign aimed at impaired drivers.The campaign was deemed a success, indicating â€Å"drivers with blood alcohol levels at or above 0. 08 percent declined from 198 per 10,000 before the program to 90 per 10,000 after the intensive 3-week alcohol-impaired publicity and enforcement campaign† (Delkab County, Georgia Police Dept. , 2002). Another study conducted by Levy, Shea, and Asch (1989) reported the result of some studies of the effectiveness of DWI programs in New Jersey. Effectiveness was defined in terms of traffic crash experience. Their study was devoted to a drunk driving deterrence program named Strike Force, which implemented sobriety heckpoints administered at the county level, with supervision and fund ing from the state and federal government. The Strike Force program provided overtime funding to police departments on a county-wide basis and used a system of random roadside checkpoints to examine drivers for possible intoxication. Police directed traffic onto a single lane, where officers spoke to the driver and provided drunk driving information materials. Drivers who appeared to have been drinking were directed to an area off the roadway for further screening (psychomotor and breath tests).The checkpoint sites and times were determined by police personnel based on prior analysis of accident and arrest data. Operations were usually conducted on weekend nights and were moved to different sites. Although the Strike Force program remained small in terms of resources, their impact on public consciousness was important. The checkpoint programs were publicized on radio and television. The sites were unannounced, but visibility was a prime consideration. Checkpoint trailers with banner s were conspicuously parked in the participating county and driven in major areas when not in use.Surveys conducted for the state found that awareness of them is close to universal among drivers. An important part of the deterrence strategy was the informational and consciousness-raising programs, which not only educate citizens but also inform then of enforcement efforts. The fall in New Jersey’s single-vehicle nighttime rates relative to the state’s all-fatality rate and relative to the US single-vehicle nighttime fatality rate would suggest that New Jersey was effective at deterring alcohol-involved traffic crashes.The coefficient for the Strike Force variable indicated that the program at its peak reduced the single vehicle nighttime crash rate by greater than 20 percent. However, a number of other influences may have contributed, such as other statewide policy changes in New Jersey, including two increases in the minimum legal drinking age and stricter court penal ties for drinking and driving (Levy et al. , 1989). Finally, another study was conducted in an attempt to reduce the amount of drivers driving under the influence on a college campus (Clapp, Johnson, Voas, Lange, Shillington & Russell, 2003).DUI checkpoints were operated by the campus police with assistance from the local city police and the highway patrol. Checkpoints were conducted on three main streets surrounding the campus. These streets were selected because they had a significant amount of student foot traffic and motor vehicle traffic. On average, 730 cars were stopped at each checkpoint. Consistent with Ross (1982), the primary goal of the checkpoints was to increase the perception of risk of arrest for DUI. Arrests were a secondary goal. As such, the checkpoints included 10-15 officers, several police cars with their lights turned on, cones, flares and large spotlights.For each checkpoint, the local media (including the campus paper) were contacted. The checkpoints all received coverage on local television news broadcasts. During the intervention period, the campus newspaper ran six stories related to DUI. One of these stories focused directly on increased enforcement. During the baseline period, the school paper ran 11 DUI-related stories. Additional informational tactics were used, such as telephone interviews and personal interviews. The results revealed a considerable drop in self-reported driving after drinking following the DUI prevention campaign tested at the campus.Also, perceptions of DUI risk increased for students at the university. An important part of the deterrence strategy was the informational and consciousness-raising programs. Conclusion Law enforcement agencies should not accept mediocrity in the area of driving under the influence enforcement. It is not a societal problem. It is everyone’s problem, and no one should take it lightly. More people die or are injured on this nation’s highways due to impaired driving than from all other causes combined (Greene, 2003).It is unacceptable, and all Americans pay a price, whether personal, financial, or professional. Law enforcement agencies must take up the challenge and employ every available weapon to combat this deadly threat. This is a very possible ambition. Through better education, increased awareness, and some strict penalties, the battle can be won. Working in collaboration with one another, the public, the law enforcement community, and the judicial system can help prevent the needless loss of life that results from drunk driving. When people are knocked away one at a time, it doesn’t make the headlines like it should, but we’ve got to make Americans realize the fact that it’s still the number one killer, and it’s 100 percent preventable. This is one thing that we can all work together to do something about† (Webb, 2002).