Strategic customer relations in banks are very vital especially when banks need to keep customers satisfied to bank with them. In the recent past banks have embarked on customer relations so as to get more customers into their banks. This is because they want to win market share (to have a large market share). The key to improving on profits is to get more clients, win the market share, keep the existing customers by making them to be loyal and then benefits will definitely increase by day. However, customer’s loyalty and large market shares do not bring in profits to the banks always and this need to be checked thoroughly. For example, we have prestigious customers who are on their segments. Banks have divided customers into segments, which have customers who have similar needs and are worth broadly in the same economic value. Under these propositions, we have the prestige proposition. Non prestige customers have large amounts of money invested in banks but they do not always bring in profits because they have large costs which are associated with them because they need personalized banking, they also need special attention and on the other hand they might demand special services which are additional costs to the bank. So for the past years, companies have decided to embark on customer relationship marketing in retail banking because they have realized that service and value are intrinsically linked and the way you handle a small customer means a lot and this is how the bank will get more and more clients. Banks have tried to differentiate themselves for competitors through providing better customer service. Consistent delivery of superior service requires the careful design and execution of a whole system of activities that include people, technology and good processes. This will lead to more revenue from customers who will be impressed with services provided. To do this, banks embarked on creating a marketing customer information file or database where reports on customers can be sought through monthly statements. After this, they enhanced on computing the customer’s profitability. This is the analysis of the value bought in by the customer against the cost of running the type of product that customer owns. So each customers cost and revenue is known to measure whether the customer is a loyal customer who has no profits to the bank or whether he is a long-term profitable customer who needs nurturing so that the bank can give the customer the nurturing he deserves. They should also need to know about short-term customers who need to be exploited before they pull out.

Banks have also embarked on segmentation of their customers into different value propositions according to the profitability of customers. This is when the 80-20% profit generation against customers arises from. Banks customer segments have people with similar needs and worth broadly in the same economic value, earn almost similar income etc. They are given a combination of services, products, prices and branding which fit them. This is called managing customers according to segments. Banks also compute the lifetime value or profitability of customers through forecasting and use of strategies like introducing new products that will fit the customers in future. Banks can also modify existing products to fit customers in a particular way hence making them satisfied and this will lead to increased revenue.

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