Financial institutions require a basic understanding of customer profitability or contribution if they are to segment their customer base effectively and design appropriate customer-centric strategies. If nothing else, it should now be obvious that CRM and customer loyalty are complex business concepts built upon an ongoing relationship between the institution and the customer. Simply stated, customer loyalty is a two-way street . Customers are equal partners in the relationship, and their satisfaction with the state of the relationship is a key indicator of their loyalty. Financial institutions such as Charles Schwab are seeking to increase the loyalty of customers through attention to customer needs - creating an increase in customer satisfaction.
Satisfied customers are far more likely to be loyal customers.
As the loyalty of customer's increases, so does the institutions ability to retain customers. In essence, these financial institutions have created the virtuous circle for CRM shown in Exhibit 1. Reinforcing this virtuous circle is not an easy task. A significant reason for the difficulty is that customer behavior is not static and neither is that of the institution. Also, customers' expectations of an institution will change frequently over the course of time.