MIS Complete DATA

MIS & Its TYPES
Decision
Support System
 The term DSS refers to systems which support the
process of decision making. DSS may be defined as a
What is a DSS
“what-if” approach that uses an information system to
assist management in formulating policies and projecting
the likely consequences of decisions.
DSS
 DSS supports the decision making process rather than

automating the decision making process.
 DSS allows the decision maker to retrieve data and test
alternative solutions during the process of decision
making .
 DSS may be considered as an extension of MIS.
Objectives of DSS
 To save time and effort in decision making process.

 To help in processing the collected data and in producing
a suggested solution to a problem.
 To provide sophisticated and fast analysis of vast amount
of data and information.
 To provide support for decision maker at all management
levels mainly in semi-structured or unstructured situation
by bringing together human judgement and computerized
information.
Objectives of DSS
 To promote learning, which leads to new demands and

refinement of application
 To provide efficient and effective solution of every
complex problem.
 To check the impact of changes on the proposed
solution with help of “what-if” analysis
 To use the goal seeking analysis to find the value of the
inputs necessary to achieve a desired level of output.
Characteristics of a DSS
 Provide rapid access to information

 Handle large amounts of data from different sources
 Provides report and preparation flexibility
 Offer both textual and graphical orientation
 Support drill-down analysis
 Perform complex, sophisticated analysis and
comparison using advanced s/w
 Support optimization, satisfying and heuristic approaches.
 Goal seeking analysis
 Simulatio
Capabilities of DSS
 Support for problem solving Phase

 Support for different decision frequencies
 Support for different problem structures
 Support for various decision-making levels
Difference between DSS and
MIS
MIS DSS
 MIS focuses on  DSS focuses on semi-
structured tasks and structured tasks which
routine require managerial
judgements
 MIS emphasis on data
storage  DSS emphasis on data
manipulation
 In MIS, data is often
accesses indirectly by  In DSS, data is directly
managers by managers
Difference between DSS and
MIS
 MIS puts reliance on  DSS puts reliance on
computer experts manager’s own
judgement.
 MIS places emphasis on
efficiency of decision  DSS places emphasis on
effectiveness of decision
 MIS provides tactical
information to top  DSS provides strategic
management to take information
decisions.
 The need for DSS can
 MIS are regular and be irregular
recurring
Types of DSS’s
 Data –oriented
 Model-oriented DSS
Data -oriented DSS
 DSS- database plays a vital role in structure of DSS, It

provide the data retrieval, analysis and presentation. Very
often data from TPS are collected in data warehouse and
this data can be analyzed with use of online analytical
processing and data mining.
File Drawer Systems
 They are the simplest type of DSS

 Can provide access to data items
 Data is used to make a decision
 ATM Machine
 Use the balance to make transfer of funds decisions
Data Analysis Systems
 Provide access to data

 Allows data manipulation capabilities
 Airline Reservation system
 No more seats available
 Provide alternative flights you can use
 Use the info to make flight plans
Analysis Information Systems
 Information from several files are combined

 Some of these files may be external
 We have a true “data base”
 The information from one file, table, can be combined
with information from other files to answer a specific
query
Accounting Models
 Use internal accounting data

 Provide accounting modeling capabilities
 Can not handle uncertainty
 Use Bill of Material
–Calculate production cost
–Make pricing decisions
Representational Model
 Can incorporate uncertainty

 Uses models to solve decision problem using forecasts
 Can be used to augment the capabilities of Accounting
models
 Use the demand data to forecast next years demand
 Use the results to make inventory decisions.
Optimization Systems
 Used to estimate the effects of different decision

alternative
 Based on optimization models
 Can incorporate uncertainty Assign sales force to territory
 Provide the best assignment schedule
Suggestion Systems
 A descriptive model used to suggest to the decision

maker the best action
 A prescriptive model used to suggest to the decision
maker the best action
 May incorporate an Expert System
 Use the system to recommend a decision
 Ex: Applicant applies for personal loan
Model based DSSs
 Model based DSS’s use some type of model to perform

‘what-if’ and other kind of analysis to make decisions.
These systems include activities such simulation,
optimizing scenario this type of DSS’s usually are
developed by persons with management science
background.
Elements of DSS
Elements of DSS
 USERS
 Databases
 DSS software-DBMS, MMS(Model Management
Software)
 Model base: Optimization models, Forecasting Models
and Sensitivity analysis models
Applications of DSS
 DSS’s support unstructured and semi-structured

decisions
 DSS support different decision frequencies.
 DSS support different problems structures
 DSS support various decision making levels
Advantages of DSS
 As DSS reduces the time and efforts in collecting and

analysis of data for different sources, a large number of
alternatives can be evaluated
 As modelling and forecasting is made easy by DSS,
managers gets more insights into business processes.
Thus, it enables a thorough quantitative analysis in a very
short time. Even major changes in a scenario can be
evaluated objectively in a timely manner.
 DSS makes it possible to explain to others the basis for
arriving at a particular conclusion.
Advantages of DSS
 DSS allows the decision makers to interact in a natural

manners due to the careful design of the interface
 Cost saving • Improve managerial effectiveness
 Support of individual/ groups
 Use and control rests with the user and not with the EDP
dept
 Flexible and adaptive.
 Improve the effectiveness of the decisions
GROUP DSS
 A Group Support System( GSS), Also called a group

decision support system and a computerized
collaborative work system, consists of most of the
elements in DSS, plus s/w to provide effective support in
group decision-making settings
GROUP DSS
 The DSS approach has resulted in better decision

making for all level so find individual users
 However, Many DSS approaches and techniques are not
suitable for a group decision-making environment.
 Although not all workers and managers are not involved
in committee meetings and group decision- making
sessions, some tactical and strategic-level managers
spend more than half their decision-making time in group
settings
 Such manager a need assistance with group decision
making
Features of Group DSS
 Ease of use
 Better decision making
 Emphasis on Semi-structured and Unstructured decision
 Specific and general support
 Supports all phases of the decision making
 Support positive group behavior
Executive Support System
48
Knowledge Management Systems
• Before start the topic it is necessary to discuss Knowledge

Management Systems ("KMS") exist to help businesses
create and share information. These are typically used in a
business where employees create new knowledge and
expertise - which can then be shared by other people in the
organization to create further commercial opportunities. Good
examples include firms of lawyers, accountants and
management consultants.
• KMS are built around systems which allow efficient
categorization and distribution of knowledge. For example,
the knowledge itself might be contained in word processing
documents, spreadsheets, PowerPoint presentations. internet
pages or whatever. To share the knowledge, a KMS would use
group collaboration systems such as an intranet.
Executive Support System
(ESS)
By the help ofKnowledge Management
Systems , Comprehensive support system
that goes beyond EIS to include
• Communications
• Office automation
• Analysis support
• Intelligence
50
Enterprise Information System
• Corporate-wide system
• Provides holistic information
• From a corporate view
• Part of enterprise resource planning (ERP)
systems
• For business intelligence
• Leading up to enterprise information portals
and knowledge management systems
51
Organizational DSS (ODSS)
• Organizational decision support focuses on an organizational task or
activity involving a sequence of operations and actors
• Each individual's activities must mesh closely with other people's
work
• Computer support is for
• Improving communication and coordination
• Problem solving
Repository-Based EIS ESS Architecture
Group Support system
Structure
Data Model
Repository Interface GSS
Environmentally Base Base
Target IS Collected & Scanned Information:

Development Tools Interface
Internal/External
Process
Support
Problem & Problem Process

Opprotunity Identification:
Data Base Intelligence Tool Data Base
Normativ Descriptive
e Business
Design
Design Process
DeSanctis and Gallupe, 1985 Redesigns
Turban and Watson, 1989
Decision
Teng, Kettinger, and Guha, 1992
Chen, 1995
Choice
This paper
Implementation/Outcomes
53
Executive Support Systems/Executive IS
• Executive Support Systems (ESS). These are a relatively new category of systems
that support decision making by senior management.
• ESS - is designed to help senior management make strategic decisions They serve
at strategic level of the organization. Although they have limited capabilities they
employ the most advanced graphics and can deliver graphs and data from many
sources immediately to senior executives offices or boardrooms.
• ESS gathers, analyses and summarizes the key internal and external information
used in the business. They are oriented towards external events, although they do
take summarized information from MIS and DSS. A good way to think of an ESS is to
imagine the senior management team in an aircraft cockpit - with the instrument
panel showing them the status of all the key activities. ESS typically involve lots of
data analysis and modeling tools such as "what-if" analysis to help strategic decision-
making.
Future of Executive andOrganizational
Support Systems
• Toolbox for customized systems
• Multimedia support
• Better access (via PDFs and cell phones)
• Virtual Reality and 3-D Image Displays
• Merging of analytical systems (OLAP / multidimensional
analysis)) with desktop publishing
• Client/server architecture
• Web-enabled EIS
• Automated support and intelligent assistance
• Integration of EIS and Group Support Systems
• Global EIS
• Integration and deployment with ERP products
55
Data Flow Diagram
A data flow diagram (DFD) illustrates how data is processed by a system in

terms of
inputs and outputs. As its name indicates its focus is on the flow of information,
where
Data comes
data Flow Diagrams
from, where it goes and how it gets stored.
Symbols
There are essentially two different types of notations for data flow diagrams
(Yourdon &
Coad or Gane & Sarson) defining different visual representations for processes,
data
Yourdon andflow
stores, data Coad type
and data flow
external diagrams are usually used for system analysis
entities.
and
design, while Gane and Sarson type DFDs are more common for visualizing
information
Visually,
systems. the biggest difference between the two ways of drawing data flow
diagrams is
how processes look. In the Yourdon and Coad way, processes are depicted as
circles,
while in the Gane and Sarson diagram the processes are squares with rounded
corners.
Process Notations. A process transforms incoming data flow into outgoing
data flow.
Datastore Notations. Datastores are repositories of data in the system.

They are
sometimes also referred to as files.
Dataflow Notations. Dataflows are pipelines through which packets of information

flow.
Label the arrows with the name of the data that moves through it.
External Entity Notations. External entities are objects outside the system, with
which
the system communicates. External entities are sources and destinations of the
system's
DFD
inputsExternal Entity Notation
and outputs.
Data Flow Diagram

Levels
Context Diagram. A context diagram is a top level (also known as "Level 0") data
flow
diagram. It only contains one process node ("Process 0") that generalizes the
function of
DFD Layers.
the entire Draw
system in data flow diagrams
relationship can be
to external made in several nested layers. A
entities.
single
process node on a high level diagram can be expanded to show a more detailed
data flow
diagram. Draw the context diagram first, followed by various layers of data flow
DFD Levels. The first level DFD shows the main processes within the system.
diagrams.
Each of
these processes can be broken into further processes until you reach pseudo
code
Examples of DFD
 Networking:
Networking is the name of joining two or more computers for the purpose of communication and
transfer of data. It is the exchange of information or services among individuals, groups, or institutions;
specifically: the cultivation of productive relationships for employment or business.
Creating a group of acquaintances and associates and keeping it active through regular communication
for mutual benefit. Networking is based on the question "How can I help?" and not with "What can I
get?" Fine example of networking is Internet called World Wide Web (www). Www is a collection of
millions of computers and servers.
 Work Station:
A workstation is a special computer designed for technical or scientific applications. Intended

primarily to be used by one person at a time, they are commonly connected to a local area network and
run multi-user operating systems. It is a big computer in an organization. It is a computer intended for
individual use that is faster and more capable than a personal computer. It's intended for business or
professional use (rather than home or recreational use). Workstations and applications designed for
them are used by small engineering companies, architects, graphic designers, and any organization,
department, or individual that requires a faster microprocessor, a large amount of random access
memory (RAM), and special features such as high-speed graphics adapters. Historically, the workstation
developed technologically about the same time and for the same audience as the UNIX operating
system, which is often used as the workstation operating system. Among the most successful makers of
this kind of workstation are Sun Microsystems, Hewlett-Packard, DEC, and IBM.
 Server:
Server is a big computer who provides required data and information when a small or personal
computer send request for it. In a technical sense, a server is an instance of a computer program that
accepts and responds to requests made by another program; known as a client. Less formally, any
device that runs server software could be considered a server as well. Servers are used to manage
network resources. For example, a user may setup a server to control access to a network, send/receive
e-mail, manage print jobs, or host a website.
Some servers are committed to a specific task; often referred to as dedicated. As a result, there are a
number of dedicated server categories, like print servers, file servers, network servers and database
servers.
 LAN:
LAN stands for local area network. It is the most common type of network. It covers a small area. It
usually connects computers and devices within one office or group of buildings and covers a small area.
The data transfer rate of a local area network is 10Mbps to 1000Mbps. It is much faster than data
transfer over a telephone line. There is a limit of number of computers to be attached in it.
 WAN:
WAN stands for wide area network. This type of network covers a large area. It connects computers and
different devices in different cities and different countries. Wide area network simply connects several
Local area networks together. Computers in WAN are often connected from fiber optic cable and
satellites. The speed of this network depends upon speed provided from service Provider Company. The
speed is from 56Kbps to 50Mbps. The best example of WAN is the internet.
 MAN:
MAN stands for metropolitan area network. This type of network covers the area of a city. It is larger
than LAN but smaller than WAN. It usually used to connect two or more LANs in a city. A telephone line,
cable television operators is the fine example of MAN. This Network (MAN) is a large computer network
that spans a metropolitan area or campus. Its geographic scope falls between a WAN and LAN. MANs
provide Internet connectivity for LANs in a metropolitan region, and connect them to wider area
networks like the Internet. A MAN might be owned and operated by a single organization, but it usually
will be used by many individuals and organizations. MANs might also be owned and operated as public
utilities. They will often provide means for inter-networking of local networks.
 VAN:
Van stands for value-added network. A Value-added Network (VAN) is a hosted service offering that
acts as an intermediary between business partners sharing standards based or proprietary data via
shared Business Processes. The offered service is referred to as "Value-added Network Service". Value-
added networks got their first real foothold in the business world in the area of electronic data
interchange (EDI). VANs were deployed to help trading and supply chain partners automate
many business-to-business communications and thereby reduce the number of paper transfers
needed, cut costs and speed up a wide range of tasks and processes, from inventory and order
management to payment.
A Value Added Network's customers typically purchase leased lines that connect them to the
network or they use a dial-up number, given by the network owner, to gain access to the
network. A value-added network, or VAN, involves the use of a common carrier’s phone lines to
allow business-to-business network communication; the network is “value-added” because it has
various services and enhancements that improve the way business applications communicate
with each other.
The use of a VAN provides communication channels among supply chain and trading partners
by allowing the transmission of data and its translation between formats. The automated
communications achieved through a VAN can help a business and its trading partners engage in
more effective e-commerce transactions through the encryption, retransmission, and support of
messages, but from a small business’s cost perspective, the implementation of a VAN can also
be expensive and a resource-intensive endeavor.
 DSL:
DSL stand for Digital subscriber line. Digital subscriber line (DSL; originally digital subscriber
loop) is a family of technologies that provide internet access by transmitting digital data using a
local telephone network which uses the Public switched telephone network. In
telecommunications marketing, the term DSL is widely understood to mean asymmetric digital
subscriber line (ADSL), the most commonly installed DSL technology. DSL service is delivered
simultaneously with wired telephone service on the same telephone line. This is possible because
DSL uses higher frequency bands for data. On the customer premises, a DSL filter on each non-
DSL outlet blocks any high frequency interference, to enable simultaneous use of the voice and
DSL services.
The bit rate of consumer DSL services typically ranges from 256 Kbit/s to over 100 Mbit/s in the
direction to the customer (downstream), depending on DSL technology, line conditions, and
service-level implementation. Bit rates of 1 Gbit/s have been reached in trials. In ADSL, the data
throughput in the upstream direction, (the direction to the service provider) is lower, hence the
designation of asymmetric service. In symmetric digital subscriber line (SDSL) services, the
downstream and upstream data rates are equal. Researchers at Bell Labs have reached broadband
speeds of 10Gbps, while delivering 1Gbit/s symmetrical ultra-broadband access services using
traditional copper telephone lines. These speeds can be achieved with existing telephone lines
and can be used to deliver broadband where fiber optic cables can't be installed to the premise.
 Modem:
It is a device used to convert words into digital signals vice versa. A modem (modulator-
demodulator) is a device that modulates signals to encode digital information and demodulates
signals to decode the transmitted information. The goal is to produce a signal that can be
transmitted easily and decoded to reproduce the original digital data. Modems can be used with
any means of transmitting analog signals, from light emitting diodes to radio. A common type of
modem is one that turns the digital data of a computer into modulated electrical signal for
transmission over telephone lines and demodulated by another modem at the receiver side to
recover the digital data. Modems are generally classified by the amount of data they can send in
a given unit of time, usually expressed in bits per second (symbol bit/s, sometimes abbreviated
"bps"), or bytes per second (symbol B/s). Modems can also be classified by their symbol rate,
measured in baud. The baud unit denotes symbols per second, or the number of times per second
the modem sends a new signal.
 Fiber Optic cable:
An optical fiber cable is a cable containing one or more optical fibers that are used to carry light.
The optical fiber elements are typically individually coated with plastic layers and contained in a
protective tube suitable for the environment where the cable will be deployed. Different types of
cable are used for different applications, for example long distance telecommunication, or
providing a high-speed data connection between different parts of a building. Optical fibers are
widely used in fiber-optic communications, where they permit transmission over longer distances
and at higher bandwidths (data rates) than wire cables. Fibers are used instead of metal wires
because signals travel along them with less loss and are also immune to electromagnetic
interference. Fibers are also used for illumination, and are wrapped in bundles so that they may
be used to carry images, thus allowing viewing in confined spaces. Specially designed fibers are
used for a variety of other applications, including sensors and fiber lasers.
9
DATABASE AND DATABASE

MANAGEMENT SYSTEM
• Adatabaseisanorganizedcollectionofdata,
generallystoredandaccessedelectronicallyfroma
computersystem....Thedatabasemanagement
system(DBMS)isthesoftwarethatinteractswithend
users,applications,andthedatabaseitselftocapture
andanalyzethedata.
10
TIME TABLE
DAYS TIME
8:00am 9:30am 11:00am
MON Ms office English Pak

TUES Islamiat
WED Ms office
THUR English Pak
11
Fri
3 WHY
DATABASES?
• Databases solvemanyof the problems
encountered in data management
– Usedin almostall modernsettingsinvolving
datamanagement:
• Business
• Research
• Administration
• Important tounderstand how databases work
and interact with other applications
4 DATAVS.
INFORMATION
• Data areraw facts
• Information isthe result of processingraw
data toreveal meaning
• Information requires context toreveal meaning
• Raw data mustbe formatted for storage,
processing, and presentation
• Data arethe foundation of information, which is
the bedrock of knowledge
5 DATAVS. INFORMATION
• Data: building blocks of information

• Information produced by processing data
• Information used toreveal meaningin data
• Accurate, relevant, timelyinformationis the key
togood decision making
• Good decision makingis the keyto
organizational survival
6 INTRODUCING THE
DATABASE
• Database: shared, integrated computer
structure that stores acollection of:
– End-userdata:rawfacts ofinterest to end user
• Database management system(DBMS)
: collection of programs
– Managesstructure andcontrols accessto data
R7OLE AND
ADVANTAGESOFTHE DBMS
• DBMS isthe intermediary between the user
and the database
– Databasestructurestoredasfile collection
– Canonly accessfiles through the DBMS
• DBMS enables data tobe shared
• DBMS integrates manyusers’views of the data
R8OLE AND ADVANTAGESOFTHE
DBMS
• Advantages of a DBMS:
– Improveddata sharing
– Improveddata security
– Better data integration
– Minimized data inconsistency
– Improveddata access
– Improveddecision making
– Increasedend-user productivity
9 TYPES OF
DATABASES
• Databases canbe classified according to:
– Numberof users
– Database location
– Expected type andextent of use
• Single-user database supports only one user
at a time
– Desktopdatabase:single-user; runson PC
• Multiuser database supportsmultiple users at
the same time
– Workgroup andenterprise databases
TYPES OF DATABASES
• Centralized database: data located at asingle

site
• Distributed database: data distributed across
several different sites
• Operational database: supportsacompany’s
day-to-day operations
–Transactionalorproduction database
1
0
TYPES OF DATABASES
• Unstructuredd ata exist in their original state

• Structured data result from formatting
– Structure applied basedontype of processingto
be performed
• Semistructured datah ave been processed to
some extent
1
1
12WHY DATABASE DESIGN IS
IMPORTANT
• Database design focuses on design of
database structure used for end-user data
– Designermust identify database’sexpected use
• Well-designed database:
– Facilitates data management
– Generatesaccurate andvaluable information
• Poorly designed database:
– Causesdifficult-to-trace errors
13STRUCTURAL AND DATA
DEPENDENCE
• Structural dependence: accesstoafileis
dependent on its own structure
–All file systemprogramsmust be modifiedto
conformto anewfile structure
• Structural independence: changefile
structure without affecting data access
• Data dependence: data accesschangeswhen
data storage characteristicschange
• Data independence: datastorage
characteristics do not affect data access
STRUCTURAL AND DATA 14
DEPENDENCE
• Practical significance of datadependence is
difference between logical and physical format
• Logical data format:how human views the
data
• Physical data format:how computer must
work with data
• Each program must contain:
– Lines specifying openingofspecific file type
– Record specification
– Field definitions
16
15 LACK OFDESIGN AND DATA-

MODELING
• Most users lack the skiSll
KtoILprLoSperly design databases,
despite multiplepersonal productivity tools
being available
• Data-modeling skillsare vital inthe data design
process
• Good data modeling facilitates communication
between the designer, user, and thedeveloper
16 DATABASE
SYSTEMS
• Database system consistsof logically related
data stored in asingle logical data repository
– Maybephysically distributed amongmultiple
storage facilities
– DBMSeliminates most offile system’s problems
– Current generation storesdata structures,
relationships between structures, andaccess
paths
• Also defines, stores, and manages all access
paths and components
17THEDATABASE SYSTEM
ENVIRONMENT
• Database system: defines and regulates the
collection, storage, management, useof data
• Five majorparts of adatabase system:
– Hardware
– Software
– People
– Procedures
– Data
ENVIRONMENT
• Hardware: all thesystem’s physical devices
• Software: three types of software required:
– Operating system software
– DBMS software
– Application programsandutility software
ENVIRONMENT
• People: all users of the database system
– System anddatabase administrators
– Database designers
– Systemsanalysts and programmers
– End users
• Procedures: instructions and rules thatgovern
the design and use of the database system
ENVIRONMENT
• Data: the collection of factsstored in the
database
ENVIRONMENT
• Database systems arecreatedandmanaged
at different levels of complexity
• Database solutions mustbe cost-effective as
well as tactically and strategically effective
• Database technology already in use affects
selection of adatabase system
DBMSFUNCTIONS
• Most functions aretransparent to end users

– Canonly beachievedthrough the DBMS
• Data dictionary management
– DBMSstoresdefinitions ofdata elementsand
relationships (metadata)in adata dictionary
– DBMSlooks uprequired data component
structures and relationships
– Changesautomatically recorded in the
dictionary
2
1
DBMS FUNCTIONS
• Data storage management

– DBMScreates andmanagescomplexstructures
required for data storage
– Also storesrelated data entry forms,screen
definitions, reportdefinitions, etc.
– Performance tuning:activities that make the
databaseperform more efficiently
– DBMSstoresthe databasein multiple physical
data files
DBMS FUNCTIONS
– DBMSprovidesdataabstractionandremoves
structuralanddatadependency 2
2
DBMS FUNCTIONS
• Data transformation and presentation

– DBMStransforms data entered to conformto
required data structures
– DBMStransforms physically retrieved data to
conformto user’slogical expectations
• Security management
– DBMScreates asecurity system that enforces
usersecurity anddata privacy
– Securityrulesdeterminewhichuserscan
accessthedatabase,whichitemscanbe
accessed
2
3
DBMS FUNCTIONS
• Multiuser access control

– DBMSusessophisticated algorithms to ensure
concurrentaccessdoesnotaffect integrity
• Backup and recovery management
– DBMSprovides backupanddata recoveryto
ensuredata safetyand integrity
– Recoverymanagement deals with recoveryof
databaseafter afailure
• Critical topreserving database’s integrity
DBMS FUNCTIONS
2
4
• Data integrity management
– DBMSpromotesandenforces integrity rules
• Minimizes redundancy
• Maximizes consistency
– Datarelationships storedin datadictionary used
to enforcedata integrity
– Integrity is especiallyimportantin transaction-
oriented databasesystems
DBMS FUNCTIONS
2
5
• Database access languages and application
programming interfaces
– DBMSprovides accessthrough aquery
language
– Query language is anonprocedural language
– Structured Query Language (SQL) is the de
facto query language
• Standard supported by majorityof DBMS vendors
DBMS FUNCTIONS
2
6
• Database communication interfaces
– Current DBMSs acceptend-userrequestsvia
multiple different network environments
– Communicationsaccomplishedin several ways:
• End users generate answers to queries byfilling
in screen forms through Web browser
• DBMS automatically publishes predefined reports
on aWeb site
DBMS FUNCTIONS
• DBMS connects tothird-party systemsto
distribute information via e-mail
2
7
28MANAGING THE DATABASE
SYSTEM: ASHIFT IN
FOCUS
• Database system provides aframework in
which strictprocedures and standards enforced
–Role of humanchangesfrom programmingto
managingorganization’s resources
• Database system enables moresophisticated
use of the data
• Data structurescreated within the database and
their relationships determine effectiveness
SYSTEM: ASHIFT IN FOCUS
• Disadvantages of database systems:
– Increased costs
– Management complexity
– Maintaining currency
– Vendordependence
– Frequentupgrade/replacement cycles
BIDGOLI
6
MIS
3
DATABASE
SYSTEMS,
DATA
WAREHOUSE
S, AND DATA
MARTS
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publicly accessible website, in whole or in part.
LEARNING
OUTCOMES
1 Define a database and a database
management system
2 Explain logical database design and the
relational database model
3 Define the components of a database
management system
4 Summarize recent trends in database design
and use
5 Explain the components and functions of a
data warehouse
website, in whole or in part.
MIS6
Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible | CH3 2
LEARNING OUTCOMES (continued)
6 Describe the functions of a data mart

7 Define business analytics, and describe its
role in the decision-making process
8 Explain big data and its business applications

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible MIS5 | CH3 3

Databases
• Database
• Collection of related data that is stored in a
central location or in multiple locations
• Data hierarchy: Structure and
organization of data involving fields,
records, and files
• Database management system
(DBMS)
• Software for creating, storing, maintaining,
and accessing database files
• Makes using databases more efficient
3.2 Interaction Between the User,
DBMS and Database
Methods for Accessing Files
• Sequential access file structure

Records are organized and processed in
o
numerical or sequential order

Organized based on a primary key
o
– Social Security numbers or account

numbers
• Used for backup and archive files as they
rarely need updating
Types of Data in a Database
• Internal
Collected from within an organization
o
Stored in the organization’s internal

o
databases
• External
Comes from a variety of resources
o
Stored in a data warehouse

o
• Random access file structure

Records can be accessed in any order
o
irrespective of the physical locations in

storage media
Fast and very effective when a small
o
number of records need to be processed

daily or weekly
Records are stored on magnetic tapes
o
• Indexed sequential access method

(ISAM)
o Records are accessed sequentially or
randomly depending on the number being
accessed
– Random access is used for a small
number
– Sequential access is used for a large
number
• Uses an index structure and has two parts
– Indexed value
– Pointer to the disk location of the record
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| CH3 9
matching the indexed value

Logical Database Design
• Physical view
Involves how data is stored on and retrieved
o
from storage media

– Hard disks, magnetic tapes, or CDs
• Logical view
Involves how information appears to users
o
and how it can be organized and retrieved

Includes more than one logical view of data,
o
depending on the user
• Data model
Determines how data is created,
o
represented, organized, and maintained

Contains
o
– Data structure
– Operations
– Integrity rules
• Hierarchical model
Relationships between records form a
o
treelike structure
– A Hierarchical Model
• Network model
Similar to the hierarchical model but records
o
are organized differently

Includes multiple parent and child records
o
– A Network Model
Relational Model
• Uses a two-dimensional table of rows

and columns of data
o Rows are records
o Columns are fields
• Data dictionary: Stores definitions
Data types for fields, default values, and
o
validation rules for data in each field
Relational Model
– Primary key
o Uniquely identifies every record in a
relational database
– Foreign key
o Field in a relational table that matches the
primary key column of another table
o Used to cross-reference tables
Relational Model
• Normalization
Improves database efficiency by eliminating
o
redundant data
• Ensures that only related data is stored in a
table
– Goes through different stages from first
normal form (1NF) to fifth normal form (5NF)
Relational Model
• Retrieves data from tables using

operations that pick and combine data
from one or more tables
o Select
o Project
o Join
o Intersection
o Union
o Difference
Components of a DBMS
Database engine
Data definition
Data manipulation
Application generation
Data administration
Database Engine
• Heart of DBMS software
• Responsible for data storage,
manipulation, and retrieval
• Converts logical requests from users
into their physical equivalents
o By interacting with other components of the
DBMS
Data Definition
– Creates and maintains the data

dictionary
– Defines the structure of files in a
database
– Makes changes to a database’s
structure
o Adding and deleting fields
o Changing field size and data type
Data Manipulation
• Used to add, delete, modify, and retrieve

records from a database
• Uses a query language
o Structured Query Language (SQL)
– Standard fourth-generation query
language that consists of several
keywords specifying actions to take
• Query by example (QBE)
– Involves requesting data from a database
by constructing a statement formed by
query forms
Application Generation
• Designs elements of an application

using a database
o Data entry screens
o Interactive menus
o Interfaces with other programming
languages
• Used by IT professionals and database
administrators
Data Administration
• Used for the tasks backup and recovery,

security, and change management
• Used to determine who has permission
to perform certain functions
o Summarized as create, read, update, and
delete (CRUD)
Data Administration
• Database administrator (DBA)
o Handles database design and management
– Setting up database
– Establishing security measures to
determine users’ access rights
– Developing recovery procedures when
data is lost or corrupted
– Evaluating database performance
– Adding and fine-tuning database functions
Recent Trends in Database Design and
Use
• Data-driven website
Interface to a database
o
Retrieves data and allows users to enter

o
data
Improves access to information
o
Gives users more current information from a

o
variety of data sources
Use
• Distributed database: Stores data on

multiple servers throughout an
organization
• Approaches to setting up a DDBMS
o Fragmentation: Addresses how tables are
divided among multiple locations
o Replication: Each site stores a copy of the
data in the organization’s database
o Allocation: Combines fragmentation and
replication, with each site storing the data
used most often
Use
– Object-oriented database: Single object

contains data and their relationships
o Object consists of attributes and methods
that can be performed on the object’s data
o Encapsulation: Grouping objects along with
their attributes and methods into a single unit
o Inheritance: New objects can be created
faster and easily by entering new data in
attributes
Data Warehouses
• Collection of data from a variety of

sources
o Used to support decision-making
applications and generate business
intelligence
o As they store multidimensional data, they
are called hypercubes
Characteristics of Data in a Data
Warehouse
• Characteristics of data in a data

warehouse
o Subject oriented
o Comes from a variety of sources
o Categorized based on time
o Captures aggregated data
o Used for analytical purposes
– A Data Warehouse
Configuration
Input
• Different sources of data together

provide input for a data warehouse to
perform analyses and generate reports
o External data sources
o Databases
o Transaction files
o Enterprise resource planning (ERP)
systems
o Customer relationship management (CRM)
systems
Extraction, Transformation, and Loading
(ETL)
– Processes used in a data warehouse

o Extracting data from outside sources
o Transforming data to fit operational needs
o Loading data into the database or data
warehouse
Storage
• Collected information is organized in a
data warehouse as:
o Raw data: Information in the original form
o Summary data: Gives users subtotals of
various categories
o Metadata: Information about data’s content,
quality, condition, origin, and other
characteristics
Output
– Online transaction processing (OLTP)

o Facilitates and manages transaction-
oriented applications
o Uses internal data and responds in real time
– Online analytical processing (OLAP)
o Generates business intelligence
o Uses multiple sources of information and
provides multidimensional analysis
Output
• Viewing data based on time, product, and
location
• Slicing and Dicing Data
Output
– Data-mining analysis: Discovers
patterns and relationships
– Data warehouses help generate various
types of information and reports for
decision making
o Cross-reference segments of an
organization’s operations for comparison
purposes
o Generate complex queries and reports
faster and easier
Output
o Generate reports efficiently using data from
a variety of sources
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| CH3 37
Output
– Find patterns and trends that can’t be found
with databases
– Analyze large amounts of historical data
quickly
– Assist management in making well-informed
business decisions
– Manage high demand information from
many users with different needs and
decision making styles
Data Mart
– Smaller version of data warehouse,

used by single department or function
– Advantages over data warehouses
o Access to data is faster due to their smaller
size
o Response time for users is improved
o Easy to create because they are smaller
and simple
o Less expensive
o Users are targeted better
– Has limited scope
Business Analytics (BA)
– Uses data and statistical methods to

gain insight into the data
– Provides decision makers with
information to act on
Types of BA Methods
• Descriptive analytics
Reviews past events
o
Analyzes the data

o
Provides a report indicating what happened

o
over a given period of time and how to

prepare for future
Reactive strategy
o
• Predictive analytics
Prepares decision maker for future events
o
Types of BA Methods
o Proactive strategy
Big Data Era
– Big data: Voluminous data which the

conventional computing methods are
unable to efficiently process and
manage
o Involves dimensions known as 3 Vs
– Volume: Quantity of transactions
– Variety: Combination of structured and
unstructured data
– Velocity: Speed with which data needs to
be gathered and processed
Who Benefits from Big Data?
– Industries benefit and gain a competitive

advantage in areas like:
o Retail
o Financial services
o Advertising and public relations
o Government
o Manufacturing
o Media and telecommunications
o Energy
o Healthcare
Factors in the Growth and Popularity of Big
Data
Mobile and wireless technology
Popularity of social networks

Enhanced power and sophistication of
smartphones and handheld devices
KEY TERMS
– Allocation
– Big data
– Business analytics
– Create, read, update, and delete (CRUD)
– Data dictionary
– Data hierarchy
– Data mart
– Data model
– Data warehouse
– Database
KEY TERMS
– Database administrator (DBA)
– Database management system (DBMS)
– Data-driven website
– Data-mining analysis
– Distributed database management
system (DDBMS)
– Encapsulation
– Extraction, transformation, and loading
(ETL)
– Foreign key
KEY TERMS
– Fragmentation
• Hierarchical model
• Indexed sequential access method
(ISAM)
• Inheritance
• Logical view
• Network model
• Normalization
• Object-oriented databases
• Online analytical processing (OLAP)
KEY TERMS
• Online transaction processing (OLTP)
• Physical view
– Primary key
– Query by example (QBE)
– Random access file structure
– Relational model
– Replication
– Sequential access file structure
– Structured Query Language (SQL)
SUMMARY
• In a database system, all files are

integrated
• Retrieving data from a database is much
faster
• Files are accessed by using a
sequential, random, or indexed
sequential method
• Components of a DBMS
SUMMARY
o Database engine, data definition, data
manipulation, application generation, and
data administration
– Recent trends in database design and

use include data-driven websites, natural
language processing, distributed and
object-oriented databases
– Data marts focus on business functions
for a specific user group in an
organization
SUMMARY
– Industries benefit from big data analytics
and gain a competitive advantage

97
An Introduction to Data Mining

Overview
Data mining, the extraction of hidden predictive information from large databases, is a
powerful new technology with great potential to help companies focus on the most
important information in their data warehouses. Data mining tools predict future trends
and behaviors, allowing businesses to make proactive, knowledge-driven decisions.
The automated, prospective analyses offered by data mining move beyond the analyses
of past events provided by retrospective tools typical of decision support systems. Data
mining tools can answer business questions that traditionally were too time consuming
to resolve. They scour databases for hidden patterns, finding predictive information that
experts may miss because it lies outside their expectations.
Most companies already collect and refine massive quantities of data. Data mining
techniques can be implemented rapidly on existing software and hardware platforms to
enhance the value of existing information resources, and can be integrated with new
products and systems as they are brought on-line. When implemented on high
performance client/server or parallel processing computers, data mining tools can
analyze massive databases to deliver answers to questions such as, "Which clients are
most likely to respond to my next promotional mailing, and why?"
This white paper provides an introduction to the basic technologies of data mining.
Examples of profitable applications illustrate its relevance to today’s business
environment as well as a basic description of how data warehouse architectures can
evolve to deliver the value of data mining to end users.
The Foundations of Data Mining
Data mining techniques are the result of a long process of research and product
development. This evolution began when business data was first stored on computers,
continued with improvements in data access, and more recently, generated technologies
that allow users to navigate through their data in real time. Data mining takes this
evolutionary process beyond retrospective data access and navigation to prospective
and proactive information delivery. Data mining is ready for application in the business
community because it is supported by three technologies that are now sufficiently
mature:
 Massive data collection
 Powerful multiprocessor computers
 Data mining algorithms
Commercial databases are growing at unprecedented rates. A recent META Group
survey of data warehouse projects found that 19% of respondents are beyond the 50
gigabyte level, while 59% expect to be there by second quarter of 1996.1 In some
industries, such as retail, these numbers can be much larger. The accompanying need
for improved computational engines can now be met in a cost-effective manner with
parallel multiprocessor computer technology. Data mining algorithms embody
techniques that have existed for at least 10 years, but have only recently been
implemented as mature, reliable, understandable tools that consistently outperform
older statistical methods.
In the evolution from business data to business information, each new step has built
upon the previous one. For example, dynamic data access is critical for drill-through in
data navigation applications, and the ability to store large databases is critical to
data mining. From the user’s point of view, the four steps listed in Table 1 were
revolutionary because they allowed new business questions to be answered accurately
and quickly.

98
Evolutionary Business Question Enabling Product Characteristics

Step Technologies Providers
Data Collection "What was my total Computers, tapes, IBM, CDC Retrospective,
(1960s) revenue in the last five disks static data
years?" delivery
Data Access "What were unit sales in Relational databases Oracle, Retrospective,
(1980s) New England last (RDBMS), Sybase, dynamic data
March?" Structured Query Informix, delivery at
Language (SQL), IBM, record level
ODBC Microsoft
Data "What were unit sales in On-line analytic Pilot, Retrospective,

Warehousing & New England last processing (OLAP), Comshare, dynamic data
Decision Support March? Drill down to multidimensional Arbor, delivery at
(1990s) Boston." databases, data Cognos, multiple levels
warehouses Microstrategy
Data Mining "What’s likely to Advanced Pilot, Prospective,

(Emerging happen to Boston unit algorithms, Lockheed, proactive
Today) sales next month? multiprocessor IBM, SGI, information
Why?" computers, massive numerous delivery
databases startups
(nascent
industry)
Table 1. Steps in the Evolution of Data Mining.
The core components of data mining technology have been under development for
decades, in research areas such as statistics, artificial intelligence, and machine learning.
Today, the maturity of these techniques, coupled with high-performance relational
database engines and broad data integration efforts, make these technologies practical
for current data warehouse environments.
The Scope of Data Mining
Data mining derives its name from the similarities between searching for valuable
business information in a large database — for example, finding linked products in
gigabytes of store scanner data — and mining a mountain for a vein of valuable ore.
Both processes require either sifting through an immense amount of material, or
intelligently probing it to find exactly where the value resides. Given databases of
sufficient size and quality, data mining technology can generate new business
opportunities by providing these capabilities:
Automated prediction of trends and behaviors. Data mining automates the process of
finding predictive information in large databases. Questions that traditionally required
extensive hands-on analysis can now be answered directly from the data — quickly. A
typical example of a predictive problem is targeted marketing. Data mining uses data
on past promotional mailings to identify the targets most likely to maximize return on
investment in future mailings. Other predictive problems include forecasting
bankruptcy and other forms of default, and identifying segments of a population likely
to respond similarly to given events.
Automated discovery of previously unknown patterns. Data mining tools sweep
through databases and identify previously hidden patterns in one step. An example of
pattern discovery is the analysis of retail sales data to identify seemingly unrelated
products that are often purchased together. Other pattern discovery problems include
detecting fraudulent credit card transactions and identifying anomalous data that could
represent data entry keying errors.
Data mining techniques can yield the benefits of automation on existing software and
hardware platforms, and can be implemented on new systems as existing platforms
are upgraded and new products developed. When data mining tools are implemented

99
on high performance parallel processing systems, they can analyze massive databases
in minutes. Faster processing means that users can automatically experiment with
more models to understand complex data. High speed makes it practical for users to
analyze huge quantities of data. Larger databases, in turn, yield improved predictions.
Databases can be larger in both depth and breadth:
 More columns. Analysts must often limit the number of variables they
examine when doing hands-on analysis due to time constraints. Yet variables
that are discarded because they seem unimportant may carry information about
unknown patterns. High performance data mining allows users to explore the
full depth of a database, without preselecting a subset of variables.
 More rows. Larger samples yield lower estimation errors and variance, and
allow users to make inferences about small but important segments of a
population.
A recent Gartner Group Advanced Technology Research Note listed data mining and
artificial intelligence at the top of the five key technology areas that "will clearly have
a major impact across a wide range of industries within the next 3 to 5 years."2 Gartner
also listed parallel architectures and data mining as two of the top 10 new technologies
in which companies will invest during the next 5 years. According to a recent Gartner
HPC Research Note, "With the rapid advance in data capture, transmission and storage,
large-systems users will increasingly need to implement new and innovative ways to
mine the after-market value of their vast stores of detail data, employing MPP
[massively parallel processing] systems to create new sources of business advantage
(0.9 probability)."3
The most commonly used techniques in data mining are:
Artificial neural networks: Non-linear predictive models that learn through training
and resemble biological neural networks in structure.
Decision trees: Tree-shaped structures that represent sets of decisions. These decisions
generate rules for the classification of a dataset. Specific decision tree methods include
Classification and Regression Trees (CART) and Chi Square Automatic Interaction
Detection (CHAID) .
Genetic algorithms: Optimization techniques that use processes such as genetic
combination, mutation, and natural selection in a design based on the concepts of
evolution.
 Nearest neighbor method: A technique that classifies each record in a dataset
based on a combination of the classes of the k record(s) most similar to it in a
historical dataset (where k ³ 1). Sometimes called the k-nearest neighbor
technique.
 Rule induction: The extraction of useful if-then rules from data based on
statistical significance.
Many of these technologies have been in use for more than a decade in specialized
analysis tools that work with relatively small volumes of data. These capabilities are
now evolving to integrate directly with industry-standard data warehouse and OLAP
platforms. The appendix to this white paper provides a glossary of data mining terms.
How Data Mining Works
How exactly is data mining able to tell you important things that you didn't know or
what is going to happen next? The technique that is used to perform these feats in data
mining is called modeling. Modeling is simply the act of building a model in one
situation where you know the answer and then applying it to another situation that you
don't. For instance, if you were looking for a sunken Spanish galleon on the high seas
the first thing you might do is to research the times when Spanish treasure had been
found by others in the past. You might note that these ships often tend to be found off
the coast of Bermuda and that there are certain characteristics to the ocean currents,
and certain routes that have likely been taken by the ship’s captains in that era. You
note these similarities and build a model that includes the characteristics that are
common to the locations of these sunken treasures. With these models in hand you sail

100
off looking for treasure where your model indicates it most likely might be given a
similar situation in the past. Hopefully, if you've got a good model, you find your
treasure.
This act of model building is thus something that people have been doing for a long
time, certainly before the advent of computers or data mining technology. What
happens on computers, however, is not much different than the way people build
models. Computers are loaded up with lots of information about a variety of situations
where an answer is known and then the data mining software on the computer must run
through that data and distill the characteristics of the data that should go into the model.
Once the model is built it can then be used in similar situations where you don't know
the answer. For example, say that you are the director of marketing for a
telecommunications company and you'd like to acquire some new long distance phone
customers. You could just randomly go out and mail coupons to the general population
- just as you could randomly sail the seas looking for sunken treasure. In neither case
would you achieve the results you desired and of course you have the opportunity to do
much better than random - you could use your business experience stored in your
database to build a model.
As the marketing director you have access to a lot of information about all of your
customers: their age, sex, credit history and long distance calling usage. The good news
is that you also have a lot of information about your prospective customers: their age,
sex, credit history etc. Your problem is that you don't know the long distance calling
usage of these prospects (since they are most likely now customers of your
competition). You'd like to concentrate on those prospects who have large amounts of
long distance usage. You can accomplish this by building a model. Table 2 illustrates
the data used for building a model for new customer prospecting in a data warehouse.
Customers Prospects
General information (e.g. demographic Known Known

data)
Proprietary information (e.g. customer Known Target

transactions)
Table 2 - Data Mining for Prospecting
The goal in prospecting is to make some calculated guesses about the information in
the lower right hand quadrant based on the model that we build going from Customer
General Information to Customer Proprietary Information. For instance, a simple model
for a telecommunications company might be:
98% of my customers who make more than $60,000/year spend more than $80/month
on long distance
This model could then be applied to the prospect data to try to tell something about the
proprietary information that this telecommunications company does not currently have
access to. With this model in hand new customers can be selectively targeted.
Test marketing is an excellent source of data for this kind of modeling. Mining the
results of a test market representing a broad but relatively small sample of prospects
can provide a foundation for identifying good prospects in the overall market. Table 3
shows another common scenario for building models: predict what is going to happen
in the future.
Yesterday Today Tomorrow

101
Static information and current plans Known Known Known

(e.g. demographic data, marketing
plans)
Dynamic information (e.g. Known Known Target

customer transactions)
Table 3 - Data Mining for Predictions
If someone told you that he had a model that could predict customer usage how would
you know if he really had a good model? The first thing you might try would be to ask
him to apply his model to your customer base - where you already knew the answer.
With data mining, the best way to accomplish this is by setting aside some of your data
in a vault to isolate it from the mining process. Once the mining is complete, the results
can be tested against the data held in the vault to confirm the model’s validity. If the
model works, its observations should hold for the vaulted data.
An Architecture for Data Mining
To best apply these advanced techniques, they must be fully integrated with a data
warehouse as well as flexible interactive business analysis tools. Many data mining
tools currently operate outside of the warehouse, requiring extra steps for extracting,
importing, and analyzing the data. Furthermore, when new insights require operational
implementation, integration with the warehouse simplifies the application of results
from data mining. The resulting analytic data warehouse can be applied to improve
business processes throughout the organization, in areas such as promotional campaign
management, fraud detection, new product rollout, and so on. Figure 1 illustrates an
architecture for advanced analysis in a large data warehouse.
Figure 1 - Integrated Data Mining Architecture
The ideal starting point is a data warehouse containing a combination of internal data
tracking all customer contact coupled with external market data about competitor
activity. Background information on potential customers also provides an excellent
basis for prospecting. This warehouse can be implemented in a variety of relational
database systems: Sybase, Oracle, Redbrick, and so on, and should be optimized for
flexible and fast data access.
An OLAP (On-Line Analytical Processing) server enables a more sophisticated end-
user business model to be applied when navigating the data warehouse. The
multidimensional structures allow the user to analyze the data as they want to view their
business – summarizing by product line, region, and other key perspectives of their
business. The Data Mining Server must be integrated with the data warehouse and the
OLAP server to embed ROI-focused business analysis directly into this infrastructure.
An advanced, process-centric metadata template defines the data mining objectives for
specific business issues like campaign management, prospecting, and promotion
optimization. Integration with the data warehouse enables
operational decisions to be directly implemented and tracked. As the warehouse grows
with new decisions and results, the organization can continually mine the best practices
and apply them to future decisions.

102
This design represents a fundamental shift from conventional decision support systems.
Rather than simply delivering data to the end user through query and reporting software,
the Advanced Analysis Server applies users’ business models directly to the warehouse
and returns a proactive analysis of the most relevant information. These results enhance
the metadata in the OLAP Server by providing a dynamic metadata layer that represents
a distilled view of the data. Reporting, visualization, and other analysis tools can then
be applied to plan future actions and confirm the impact of those plans.
Profitable Applications
A wide range of companies have deployed successful applications of data mining.
While early adopters of this technology have tended to be in information-intensive
industries such as financial services and direct mail marketing, the technology is
applicable to any company looking to leverage a large data warehouse to better manage
their customer relationships. Two critical factors for success with data mining are: a
large, well-integrated data warehouse and a well-defined understanding of the business
process within which data mining is to be applied (such as customer prospecting,
retention, campaign management, and so on).
Some successful application areas include:
A pharmaceutical company can analyze its recent sales force activity and their results
to improve targeting of high-value physicians and determine which marketing activities
will have the greatest impact in the next few months. The data needs to include
competitor market activity as well as information about the local health care systems.
The results can be distributed to the sales force via a wide-area network that enables the
representatives to review the recommendations from the perspective of the key
attributes in the decision process. The ongoing, dynamic analysis of the data warehouse
allows best practices from throughout the organization to be applied in specific sales
situations.
A credit card company can leverage its vast warehouse of customer transaction data to
identify customers most likely to be interested in a new credit product. Using a small
test mailing, the attributes of customers with an affinity for the product can be
identified. Recent projects have indicated more than a 20-fold decrease in costs for
targeted mailing campaigns over conventional approaches.
A diversified transportation company with a large direct sales force can apply data
mining to identify the best prospects for its services. Using data mining to analyze its
own customer experience, this company can build a unique segmentation identifying
the attributes of high-value prospects. Applying this segmentation to a general business
database such as those provided by Dun & Bradstreet can yield a prioritized list of
prospects by region.
A large consumer package goods company can apply data mining to improve its sales
process to retailers. Data from consumer panels, shipments, and competitor activity can
be applied to understand the reasons for brand and store switching. Through this
analysis, the manufacturer can select promotional strategies that best reach their target
customer segments.
Each of these examples have a clear common ground. They leverage the knowledge
about customers implicit in a data warehouse to reduce costs and improve the value of
customer relationships. These organizations can now focus their efforts on the most
important (profitable) customers and prospects, and design targeted marketing
strategies to best reach them.
Conclusion
Comprehensive data warehouses that integrate operational data with customer, supplier,
and market information have resulted in an explosion of information. Competition

103
requires timely and sophisticated analysis on an integrated view of the data. However,
there is a growing gap between more powerful storage and retrieval systems and the
users’ ability to effectively analyze and act on the information they contain. Both
relational and OLAP technologies have tremendous capabilities for navigating massive
data warehouses, but brute force navigation of data is not enough. A new technological
leap is needed to structure and prioritize information for specific end-user problems.
The data mining tools can make this leap. Quantifiable business benefits have been
proven through the integration of data mining with current information systems, and
new products are on the horizon that will bring this integration to an even wider
audience of users.
Glossary of Data Mining Terms

analytical model A structure and process for analyzing a dataset. For example, a decision
tree is a model for the classification of a dataset.
anomalous data Data that result from errors (for example, data entry keying errors) or that
represent unusual events. Anomalous data should be examined carefully
because it may carry important information.
artificial neural Non-linear predictive models that learn through training and resemble
networks biological neural networks in structure.
CART Classification and Regression Trees. A decision tree technique used for
classification of a dataset. Provides a set of rules that you can apply to a
new (unclassified) dataset to predict which records will have a given
outcome. Segments a dataset by creating 2-way splits. Requires less data
preparation than CHAID.
CHAID Chi Square Automatic Interaction Detection. A decision tree technique

used for classification of a dataset. Provides a set of rules that you can
apply to a new (unclassified) dataset to predict which records will have a
given outcome. Segments a dataset by using chi square tests to create
multi-way splits. Preceded, and requires more data preparation than,
CART.
classification The process of dividing a dataset into mutually exclusive groups such that
the members of each group are as "close" as possible to one another, and
different groups are as "far" as possible from one another, where distance
is measured with respect to specific variable(s) you are trying to predict.
For example, a typical classification problem is to divide a database of
companies into groups that are as homogeneous as possible with respect to
a creditworthiness variable with values "Good" and "Bad."
clustering The process of dividing a dataset into mutually exclusive groups such that
the members of each group are as "close" as possible to one another, and
different groups are as "far" as possible from one another, where distance
is measured with respect to all available variables.
data cleansing The process of ensuring that all values in a dataset are consistent and
correctly recorded.
data mining The extraction of hidden predictive information from large databases.
data navigation The process of viewing different dimensions, slices, and levels of detail of
a multidimensional database. See OLAP.
data visualization The visual interpretation of complex relationships in multidimensional

data.
data warehouse A system for storing and delivering massive quantities of data.

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decision tree A tree-shaped structure that represents a set of decisions. These decisions
generate rules for the classification of a dataset. See CART and CHAID.
dimension In a flat or relational database, each field in a record represents a

dimension. In a multidimensional database, a dimension is a set of similar
entities; for example, a multidimensional sales database might include the
dimensions Product, Time, and City.
exploratory data The use of graphical and descriptive statistical techniques to learn about
analysis the structure of a dataset.
genetic Optimization techniques that use processes such as genetic combination,

algorithms mutation, and natural selection in a design based on the concepts of natural
evolution.
linear model An analytical model that assumes linear relationships in the coefficients of
the variables being studied.
linear regression A statistical technique used to find the best-fitting linear relationship
between a target (dependent) variable and its predictors (independent
variables).
logistic A linear regression that predicts the proportions of a categorical target

regression variable, such as type of customer, in a population.
multidimensional A database designed for on-line analytical processing. Structured as a

database multidimensional hypercube with one axis per dimension.
multiprocessor A computer that includes multiple processors connected by a network. See

computer parallel processing.
nearest neighbor A technique that classifies each record in a dataset based on a combination
of the classes of the k record(s) most similar to it in a historical dataset
(where k ³ 1). Sometimes called a k-nearest neighbor technique.
non-linear model An analytical model that does not assume linear relationships in the
coefficients of the variables being studied.
OLAP On-line analytical processing. Refers to array-oriented database

applications that allow users to view, navigate through, manipulate, and
analyze multidimensional databases.
outlier A data item whose value falls outside the bounds enclosing most of the
other corresponding values in the sample. May indicate anomalous data.
Should be examined carefully; may carry important information.
parallel The coordinated use of multiple processors to perform computational

processing tasks. Parallel processing can occur on a multiprocessor computer or on a
network of workstations or PCs.
predictive model A structure and process for predicting the values of specified variables in a
dataset.
prospective data Data analysis that predicts future trends, behaviors, or events based on
analysis historical data.
RAID Redundant Array of Inexpensive Disks. A technology for the efficient

parallel storage of data for high-performance computer systems.
retrospective Data analysis that provides insights into trends, behaviors, or events that
data analysis have already occurred.
rule induction The extraction of useful if-then rules from data based on statistical
significance.

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SMP Symmetric multiprocessor. A type of multiprocessor computer in which

memory is shared among the processors.
terabyte One trillion bytes.
time series The analysis of a sequence of measurements made at specified time

analysis intervals. Time is usually the dominating dimension of the data.
What Is Data Mining?

Data mining is the practice of automatically searching large stores of data to discover
patterns and trends that go beyond simple analysis. Data mining uses sophisticated
mathematical algorithms to segment the data and evaluate the probability of future
events. Data mining is also known as Knowledge Discovery in Data (KDD).
The key properties of data mining are:
 Automatic discovery of patterns

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 Prediction of likely outcomes
 Creation of actionable information
 Focus on large data sets and databases
Data mining can answer questions that cannot be addressed through simple query and
reporting techniques.
Automatic Discovery
Data mining is accomplished by building models. A model uses an algorithm to act on
a set of data. The notion of automatic discovery refers to the execution of data mining
models.
Data mining models can be used to mine the data on which they are built, but most
types of models are generalizable to new data. The process of applying a model to
new data is known as scoring.
Oracle Data Mining Application Developer's Guide for a discussion of scoring and
deployment in Oracle Data Mining
Prediction
Many forms of data mining are predictive. For example, a model might predict income
based on education and other demographic factors. Predictions have an associated
probability (How likely is this prediction to be true?). Prediction probabilities are also
known as confidence (How confident can I be of this prediction?).
Some forms of predictive data mining generate rules, which are conditions that imply a
given outcome. For example, a rule might specify that a person who has a bachelor's
degree and lives in a certain neighborhood is likely to have an income greater than the
regional average. Rules have an associated support (What percentage of the population
satisfies the rule?).
Grouping
Other forms of data mining identify natural groupings in the data. For example, a model
might identify the segment of the population that has an income within a specified
range, that has a good driving record, and that leases a new car on a yearly basis.
Actionable Information
Data mining can derive actionable information from large volumes of data. For
example, a town planner might use a model that predicts income based on demographics
to develop a plan for low-income housing. A car leasing agency might a use model that
identifies customer segments to design a promotion targeting high-value customers.
"Data Mining Functions" for an overview of predictive and descriptive data mining. A
general introduction to algorithms is provided in "Data Mining Algorithms".
Data Mining and Statistics
There is a great deal of overlap between data mining and statistics. In fact most of the
techniques used in data mining can be placed in a statistical framework. However, data
mining techniques are not the same as traditional statistical techniques.
Traditional statistical methods, in general, require a great deal of user interaction in
order to validate the correctness of a model. As a result, statistical methods can be
difficult to automate. Moreover, statistical methods typically do not scale well to very
large data sets. Statistical methods rely on testing hypotheses or finding correlations
based on smaller, representative samples of a larger population.

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Data mining methods are suitable for large data sets and can be more readily automated.
In fact, data mining algorithms often require large data sets for the creation of quality
models.
Data Mining and OLAP

On-Line Analytical Processing (OLAP) can been defined as fast analysis of shared
multidimensional data. OLAP and data mining are different but complementary
activities.
OLAP supports activities such as data summarization, cost allocation, time series
analysis, and what-if analysis. However, most OLAP systems do not have inductive
inference capabilities beyond the support for time-series forecast. Inductive inference,
the process of reaching a general conclusion from specific examples, is a characteristic
of data mining. Inductive inference is also known as computational learning.
OLAP systems provide a multidimensional view of the data, including full support for
hierarchies. This view of the data is a natural way to analyze businesses and
organizations. Data mining, on the other hand, usually does not have a concept of
dimensions and hierarchies.
Data mining and OLAP can be integrated in a number of ways. For example, data
mining can be used to select the dimensions for a cube, create new values for a
dimension, or create new measures for a cube. OLAP can be used to analyze data
mining results at different levels of granularity.
Data Mining can help you construct more interesting and useful cubes. For example,
the results of predictive data mining could be added as custom measures to a cube. Such
measures might provide information such as "likely to default" or "likely to buy" for
each customer. OLAP processing could then aggregate and summarize the probabilities.
Data Mining and Data Warehousing

Data can be mined whether it is stored in flat files, spreadsheets, database tables, or
some other storage format. The important criteria for the data is not the storage format,
but its applicability to the problem to be solved.
Proper data cleansing and preparation are very important for data mining, and a data
warehouse can facilitate these activities. However, a data warehouse will be of no use
if it does not contain the data you need to solve your problem.
Oracle Data Mining requires that the data be presented as a case table in single-record
case format. All the data for each record (case) must be contained within a row. Most
typically, the case table is a view that presents the data in the required format for mining.
What Can Data Mining Do and Not Do?
Data mining is a powerful tool that can help you find patterns and relationships within
your data. But data mining does not work by itself. It does not eliminate the need to
know your business, to understand your data, or to understand analytical methods. Data
mining discovers hidden information in your data, but it cannot tell you the value of the
information to your organization.
You might already be aware of important patterns as a result of working with your data
over time. Data mining can confirm or qualify such empirical observations in addition
to finding new patterns that may not be immediately discernible through simple
observation.

108
It is important to remember that the predictive relationships discovered through data

mining are not necessarily causes of an action or behavior. For example, data mining
might determine that males with incomes between $50,000 and $65,000 who subscribe
to certain magazines are likely to buy a given product. You can use this information to
help you develop a marketing strategy. However, you should not assume that the
population identified through data mining will buy the product because they belong to
this population.
Asking the Right Questions

Data mining does not automatically discover solutions without guidance. The patterns
you find through data mining will be very different depending on how you formulate
the problem.
To obtain meaningful results, you must learn how to ask the right questions. For
example, rather than trying to learn how to "improve the response to a direct mail
solicitation," you might try to find the characteristics of people who have responded to
your solicitations in the past.
Understanding Your Data

To ensure meaningful data mining results, you must understand your data. Data mining
algorithms are often sensitive to specific characteristics of the data: outliers (data values
that are very different from the typical values in your database), irrelevant columns,
columns that vary together (such as age and date of birth), data coding, and data that
you choose to include or exclude. Oracle Data Mining can automatically perform much
of the data preparation required by the algorithm. But some of the data preparation is
typically specific to the domain or the data mining problem. At any rate, you need to
understand the data that was used to build the model in order to properly interpret the
results when the model is applied.
The Data Mining Process

Figure 1-1 illustrates the phases, and the iterative nature, of a data mining project. The
process flow shows that a data mining project does not stop when a particular solution
is deployed. The results of data mining trigger new business questions, which in turn
can be used to develop more focused models.
Problem Definition
This initial phase of a data mining project focuses on understanding the project
objectives and requirements. Once you have specified the project from a business
perspective, you can formulate it as a data mining problem and develop a preliminary
implementation plan.
For example, your business problem might be: "How can I sell more of my product to
customers?" You might translate this into a data mining problem such as: "Which
customers are most likely to purchase the product?" A model that predicts who is most
likely to purchase the product must be built on data that describes the customers who
have purchased the product in the past. Before building the model, you must assemble
the data that is likely to contain relationships between customers who have purchased
the product and customers who have not purchased the product. Customer attributes
might include age, number of children, years of residence, owners/renters, and so on.
Data Gathering and Preparation

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The data understanding phase involves data collection and exploration. As you take a
closer look at the data, you can determine how well it addresses the business problem.
You might decide to remove some of the data or add additional data. This is also the
time to identify data quality problems and to scan for patterns in the data.
The data preparation phase covers all the tasks involved in creating the case table you
will use to build the model. Data preparation tasks are likely to be performed multiple
times, and not in any prescribed order. Tasks include table, case, and attribute selection
as well as data cleansing and transformation. For example, you might transform a
DATE_OF_BIRTH column to AGE; you might insert the average income in cases
where the INCOME column is null.
Additionally you might add new computed attributes in an effort to tease information
closer to the surface of the data. For example, rather than using the purchase amount,
you might create a new attribute: "Number of Times Amount Purchase Exceeds $500
in a 12 month time period." Customers who frequently make large purchases may also
be related to customers who respond or don't respond to an offer.
Thoughtful data preparation can significantly improve the information that can be
discovered through data mining.
Model Building and Evaluation

In this phase, you select and apply various modeling techniques and calibrate the
parameters to optimal values. If the algorithm requires data transformations, you will
need to step back to the previous phase to implement them (unless you are using Oracle
Automatic Data Preparation, as described in Chapter 19).
In preliminary model building, it often makes sense to work with a reduced set of data
(fewer rows in the case table), since the final case table might contain thousands or
millions of cases.
At this stage of the project, it is time to evaluate how well the model satisfies the
originally-stated business goal (phase 1). If the model is supposed to predict customers
who are likely to purchase a product, does it sufficiently differentiate between the two
classes? Is there sufficient lift? Are the trade-offs shown in the confusion matrix
acceptable? Would the model be improved by adding text data? Should transactional
data such as purchases (market-basket data) be included? Should
costs associated with false positives or false negatives be incorporated into the model?
Knowledge Deployment
Knowledge deployment is the use of data mining within a target environment. In the
deployment phase, insight and actionable information can be derived from data.
Deployment can involve scoring (the application of models to new data), the extraction
of model details (for example the rules of a decision tree), or the integration of data
mining models within applications, data warehouse infrastructure, or query and
reporting tools.
Because Oracle Data Mining builds and applies data mining models inside Oracle
Database, the results are immediately available. BI reporting tools and dashboards can
easily display the results of data mining. Additionally, Oracle Data Mining supports
scoring in real time: Data can be mined and the results returned within a single database
transaction. For example, a sales representative could run a model that predicts the
likelihood of fraud within the context of an online sales transaction.

110
Data Mining Process Steps:

Below mentioned are steps to identify hidden pattern in data in data mining process-
data-mining-process
1. Data Integration: At the very beginning we collects data from variety of

sources (CRM, OLTP, Excel,MS Access, Oracle, SQL Server, csv etc) into a single
data source called target data/ database using some technology.
2. Data Selection: In this step focus on only those data set which are required to
fulfill our hypothesis/ research/ assumption it means only meaningful data is selected
to proceed.
3. Data Cleaning: Data imported from data sources may be in different format
than target database then we need to clean the data using some data cleaning algorithm.
Data Transformation: Data is then prepossessed and transformed into standard format.
4. Data Mining: Then we analyse and identify the type of data mining algorithm
which will be suitable for current data and then applying algorithm(s) to identify the
hidden patterns.
5. Pattern Evaluation: The pattern we identified from the data is then interpreted
and evaluated to gain knowledge out of it.
Knowledge Presentation: This is the goal of data mining technique where knowledge
collected from data mining process is then taken into consideration to make crucial
business decision for the benefit of organization. Data Mining Process Steps:
6. Data Integration: At the very beginning we collects data from variety of
sources (CRM, OLTP, Excel,MS Access, Oracle, SQL Server, csv etc) into a single
data source called target data/ database using some technology.
7. Pattern Evaluation: The pattern we identified from the data is then
interpreted and evaluated to gain knowledge out of it.
8. Knowledge Presentation: This is the goal of data mining technique where
knowledge collected from data mining process is then taken into consideration to
make crucial business decision for the benefit of organization.

111

112
Customer Relationship
Management (CRM ) & IT
113
Definition of CRM
“CRM is concerned with the creation,
development and enhancement of
individualised customer relationships with
carefully targeted customers and customer
groups resulting in maximizing their total
customer life-time value”.

114
Customer Relationship
Management
• CRM is about…
v finding customers
v collecting info about them along the way
v using that info to enhance their
experience and foster long-term
relationships
115
Custo
mer
Product/Progr
am offerings
Marketing, Sales,
Support
Technology
Focus On Customers
116
What are their needs?
Do you offer programs/products in response to their

needs?
…or your
organization’s
convenience?

117
Traditional Organization
Decision-
Information flow making

118
Customer contact
Customer Contact
Many organizations place customers in the hands

of entry-level staff who are…
v Poorly trained
v Poorly paid
119
v Lacking information to do their jobs

120
The purpose of CRM

v “The focus of [CRM] is on creating value for
the customer and the company over the
longer term”.
v When customers value the customer service
that they receive from suppliers, they are less
likely to look to alternative suppliers for their
needs.

121
Why is CRM important?
v “Today’s businesses compete

with multi- product offerings
created and delivered by
networks, alliances and
partnerships of many kinds.
v “The adoption of C.R.M. is being
fuelled by a recognition that long-
term relationships with customers
are one of the most important
assets of an organization”.
122
how did CRM develop?

CRM developed for a number of reasons:
v The 1980’s onwards saw rapid shifts
in business that changed customer
power..
v Supply exceeded demands for most
products.
v Sellers had little pricing power.
v The only protection available to
123
suppliers of goods and services was

in their relationships with customers.
What does CRM involve?

CRM involves the following:
• Organisations must become customer focused

• Organisations must be prepared to adapt so that it
take customer needs into account and delivers them

124
• Market research must be undertaken to assess

customer needs and satisfaction

125
“Strategically significant
customers”
v “Customer relationship management
focuses on strategically significant
markets. Not all customers are
equally important”.
v Building relationships with customers
that will provide little value could result
in a loss of time, staff and financial
resources
126
Face-to-face CRM
v CRM can also be carried out in face-to-face
interactions without the use of technology.
v Staff members often remember the names
and favourite services/products of regular
customers and use this information to create
a personalised service for them.

127
Face-to-face CRM
• For example, in a hospital library you will know
the name of nurses that come in often and
probably remember the area that they work in.
•However, face-to-face CRM could prove less
useful when organizations have a large number
of customers.

128
Benefits of CRM
Benefits of CRM include:
v Reduced costs, because the right things are

being done (ie., effective and efficient
operation)
v Increased customer satisfaction (ie.
meeting and exceeding expectations)
v Growth in numbers of customers

129
Benefits of CRM
v Maximization of opportunities (eg. increased

services, referrals, etc.)
v Increased access to a source of market and
competitor information
v Highlighting poor operational
processes
v long term profitability.

130
Is CRM a Technology?
CRM is a Philosophy that is

Supported and Enhanced by
technology.

131
CRM and IT
Technology plays a pivotal role in CRM
• Customer value
• Profitability
• Customer record
• Purchase History
132
• Specific Needs
• Customer Loyalty
CRM and IT
– Phone calls, emails, mobile phone text messages, or

WAP services

133
CRM and IT

134
• Cookies
• Loyalty cards
• CRM software- “Front office” solutions
v Customer account preferences a n d

135
personalization of content
v Customer self-service
v Event management and registration
v E-communications tools

CHAPTER- II
CUSTOMER RELATIONSHIP
MANAGEMENT IN BANKING SECTOR

2.1 INTRODUCTION
2.2 SIGNIFICANCE OF CUSTOMER RELATIONSHIP MANAGEMENT
2.3 CRM IN BANKING SECTOR
2.4 CRM AND BANKS
2.5 CRM IN INDIAN BANKS
2.6 CUSTOMERS RELATIONSHIP MANAGEMENT– PRINCIPLES
2.7 BENEFITS OF CRM
2.8 CHALLENGES FOR CRM IMPLMENTATION
2.9 METHOD OF EFFECTIVE CRM IMPLEMENTATION
2.10 PROFILES OF SELECTED PUBLIC AND PRIVATE SECTOR
BANKS IN MADURAI DISTRICT
2.11 PERFORMANCE OF SELECTED PUBLIC AND PRIVATE
SECTOR BANKS IN MADURAI DISTRICT
2.12 CONCLUSION

2.1 INTRODUCTION
In this chapter an attempt is made to analyze the significance of customer
relationship management in banking sector, its principles and benefits to their
customers, challenges for CRM implementation and the method of its effective
implementation. The profiles of sample banks and their working performance in
Madurai district are also analyzed.
2.2 SIGNIFICANCE OF CUSTOMER RELATIONSHIP MANAGEMENT
In this globalized world managing relationships with the customer and
making them contented has become a necessity. It is a ground reality for many
companies which had realized the customers need. They had started seriously
giving more care to them than ever before. The perception and understanding of the
bank is based on the customers varied experiences with their employees and
services. It is accepted that the cost to bring a new customer is ten times higher than
to retain the existing customer. In addition to this it is also agreed that the various
choices have opened today for the customers. Therefore all this require a better
understanding of the customer. What customer expects from the bank and their
requirements are to be understood, even though all customers do not contribute
equally to the profit kitty of the banks. If the customer relationship management is
attended to properly it will not only help to improve the bank but also help to focus
bank‘s effort where it required the most. Customer relationship management is the
most efficient and strongest approach while creating and maintaining relationship
45
with consumers. It is not only pure business but also it develops strong personal
bonding with the customers. Through maintaining CRM it is very easy for them to
identify the customers’ actual requirement. It may help them to serve with a better
quality and way of services. It is said that if banks want to be strong and fruitful,
they should implement sophisticated strategies involved in customer relationship
management. It is also the most important tool for better future growth. Customers’
requirements and complaints are part of their banking business life.1
2.3 CRM IN BANKING SECTOR
Customer relationship management helps banking sector to use of
technology and human resources. These factors allow them to gain insight of
consumer behavior and their values. If CRM works better then the bank can
provide better customer service, help sales staff close deals faster, cross sell
products more effectively, make call centers more efficient, discover new
customers, simplify marketing and sales processes and increasing consumer
revenue. It could not happen with just buying software and installing into the
system. In this the bank must decide as what type of customer information that they
are asking. It has to further decide as to what they intend to do with the information.
After all these after that the banks decide and run a model considered by them
simply the best. Efficiently dealing with all the customers and providing them what
they actually need increases the customer satisfaction. This increases the chance of

1 www.crm.com
46
getting more business which ultimately enhances turnover and profit. If the
customer is satisfied they will always be loyal to the bank and will remain with the
same bank forever resulting in increasing customer base and ultimately enhancing
net growth of banking business. In today’s commercial world, practice of dealing
with existing customers and get a thriving business by bringing in more customers
into loop is predominant. Installing a CRM system can definitely improve the
situation and help in challenging the new ways of marketing and business in an
efficient manner. Hence in the era of business every organization should be
recommended to have a full-fledged CRM system to cope up with all the business
needs. So, banking business is not an exception. 2
CRM is a powerful management tool that can be used to exploit sales
potential and maximize the value of the customer to the bank. Generally, CRM
integrates various components of a business such as sales, marketing, IT and
accounting. This strategy may not increase a business's profit today or tomorrow,
but it will add customer loyalty to the business. In the long run, CRM produces
continuous scrutiny of the bank's business relationship with the customer, thereby
increasing the value of his business. Although CRM is known to be a relatively new
method in managing customer loyalty, it has been used previously by retail
businesses for many years. The core objective of modern CRM methodology is to
help businesses to use technology and human resources to gain a better view of
customer behavior. With this, a business can hope to achieve better customer

2 www.sodhganga.com
47
service, make call centers more efficient, cross-sell products more effectively,
simplify marketing and sales processes, identify new customers and increase
customer revenues.
As an example, banks may keep track of a customer's life stages in order to
market appropriate banking products, such as mortgages or credit cards to their
customers at the appropriate time. The next stage is to look into the different
methods of gathering customers', where and how this data is stored and how it is
currently being used. For instance, banks may interact with customers in a countless
ways via mails, emails, call centers, marketing and advertising. The collected data
may flow between operational (such as sales and stock systems) and analytical
systems that can help sort through these records to identify patterns. Business
analysts can then browse through the data to obtain an in-depth view of each
customer and identify areas where better services are required.
2.4 CRM AND BANKS
One of the banks' greatest assets is their knowledge of their customers.
Banks can use this asset and turn it into a key competitive advantage by retaining
those customers who represent the highest lifetime value and profitability. Banks
can develop customer relationships across a broad spectrum of touch points such as
bank branches, kiosks, ATMs, internet, electronic banking and call centers.
CRM is not a new phenomenon in the industry. Over the years, banks have
invested heavily in CRM, especially in developing call centers, which, in the past,
48
were designed to improve the process of inbound calls. In future, call centers will
evolve to encompass more than just cost reduction and improve efficiency.
According to Gartner Group, more than 80 per cent of all US banks will develop
their call centers as alternative delivery channels and revenue centers, to be used for
the delivery of existing products and services. But to be successful, a bank needs
more than the ability to handle customer service calls. It needs a comprehensive
CRM strategy in which all departments within the bank are integrated.
2.4.1 Objectives of CRM in Banks
CRM, the technology, along with human resources of the banks, enables the
banks to analyze the behavior of customers and their value. The main areas of focus
are as the name suggests: customer, relationship, and the management of
relationship and the main objectives to implement CRM in the business strategy
are:
To simplify marketing and sales process
To make call centers more efficient
To provide better customer service
To discover new customers and increase customer revenue and
to cross sell products more effectively
The CRM processes should fully support the basic steps of customer life cycle. The
basic steps are:
49
Attracting present and new customers
Acquiring new customers
Serving the customers and
retaining the customers
In today's increasingly competitive environment, maximizing organic
growth through sales momentum has become a priority for banks and financial
institutions. To build this momentum banks are focusing on customer relationship
management initiatives to improve
Customer satisfaction and loyalty
Customer insight/ 360º view of customer
Speed to market products and services
Increase products-to-customer ratio
Improve up sales and cross sales and
capitalizing on new market opportunities
The idea of CRM is that it helps businesses use technology and human
resources to gain insight into the behavior and value of those customers. If it works
as hoped, a business can: provide better customer service, make call centers more
efficient , cross sell products more effectively, help sales staff close deals faster,
simplify marketing and sales processes, discover new customers and increase
customer revenues .It doesn't happen by simply buying software and installing it.
For CRM to be truly effective an organization must first decide what kind of
50
customer information it is looking for and it must decide what it intends to do with
that information.
For example, many financial institutions keep track of customers' life stages
in order to market appropriate banking products like mortgages of them at the right
time to fit their needs. Next, the organization must look into all of the different
ways of gathering information about customers who come into a business, where
and how this data is stored and how it is currently used. One company, for instance,
may interact with customers in a myriad of different ways including mail
campaigns, web sites, brick-and-mortar stores, call centers, mobile sales force staff
and marketing and advertising. Solid CRM systems link up each of these points.
The collected data flows between operational systems and analytical systems that
can help sort through these records for patterns. Company analysts can then comb
through the data to obtain a holistic view of each customer and pinpoint areas where
better services are needed.
2.4.2 Need of CRM in Banks
The bank merely is an organization as it accepts deposits and lends money
to the needy persons, but banking is the process associated with the activities of
banks. It includes issuance of cherubs and cards, monthly statements, timely
announcement of new services, helping the customers to avail online and mobile
banking etc. Huge growth of customer relationship management is predicted in the
banking sector over the next few years. Banks are aiming to increase customer
51
profitability with customer retention. It is a sound business strategy to identify the
bank’s most profitable customers and prospects, and devotes time and attention to
expanding account relationships with those customers through individualized
marketing, pricing, discretionary decision making.
In banking sector, relationship management could be defined as having and
acting upon deeper knowledge about the customer, ensure that the customer such as
how to fund the customer, get to know the customer, keep in touch with the
customer, ensure that the customer gets what he wishes from service provider and
understand that when they are not satisfied might leave the service provider and act
accordingly. CRM in banking industry is entirely different from other sectors,
because banking industry is purely related to financial services, which needs to
create the trust among the people. Establishing customer care support during on and
off official hours, making timely information about interest payments, maturity of
time deposit, issuing credit and debit cum ATM cards, creating awareness regarding
online and e-banking, adopting mobile request and others are required to keep
regular relationship with customers.
The present day CRM includes developing customer base. The bank has to
pay adequate attention to increase customer base by all means. It is possible if the
performance is at satisfactory level, the existing clients can recommend others to
have banking connection with the bank he is they are connected. Hence seeking
references from the existing customers for the prospective future customers can
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develop their client base. If the base is increased, the profitability also increases.
Therefore the bank has to implement lot of innovative CRM measures to capture
and retain the customers. There is need for a shift from bank centric activities to
customer centric activities. The private sector banks in India deployed much
innovative strategies to attract new customers and to retain existing customers.
CRM in banking sector is still in an evolutionary stage. It is the time for taking
ideas from customers to enrich its service. The use of CRM in banking has gained
importance with the aggressive strategies for customer acquisition and retention
being employed by the banks in today’s competitive milieu. This has resulted in the
adoption of various CRM initiatives by these banks. 3
2.4.3 Steps to Follow
The following steps minimize the work regarding adoption of CRM strategy.
These are:
¾ Identification of proper CRM initiatives
¾ Implementing adequate technologies in order to assist CRM initiative
¾ Setting standards (targets) for each initiative and each person involved in that
circle
¾ Evaluating actual performance with the standard or benchmark and
¾ Taking corrective actions to improve deviations, if any

3 www.articlesbase.com
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Customer relationship management is concerned with attracting, maintaining
and enhancing customer relationship in multi service organizations. CRM goes
beyond the transactional exchange and enables the marketer to estimate the
customer’s sentiments and buying intentions so that the customer can be provided
with products and services before they start demanding. Customers are the
backbone of any kind of business activities, maintaining relationship with them
yield better result.
2.4.4 CRM Strategies
This is a new way of thinking for many banks with thousands, even millions
of customers. Managing customer relationships successfully means learning about
the habits and needs of the customers, anticipating future buying patterns and
finding new opportunities to add value to the relationship.
2.4.4.1 Customer Behavior Patterns
In the financial sector, early beneficiaries of successful CRM strategies were
the banks. These banks use data warehousing and data mining technologies to learn
from the millions of transactions and interactions with their customers, and to
anticipate their needs. The patterns of customer behavior and attitude derived from
this information enable the banks to effectively segment customers on pre-
determined criteria. Detailed customer data can provide answers to the following
questions:
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¾ Which communication channel do they prefer?
¾ What would be the risk of giving up one bank for another bank? and
¾ What is the probability that the customer will buy a service or product?
This knowledge assists financial institutions with CRM solutions in place to
develop marketing programs that respond to each customer segment, support cross-
selling and customer retention programs. It enables the staff to understand how to
maximize the value of each customer’s interaction. CRM applications provide
functionality to enhance customer interactions. Banks known for their high level of
customer service might use this characteristic as a starting point for implementing a
CRM application. Another company may be very good at targeting profitable
customers. Each bank should seek a niche for itself on which to develop its CRM
strategy.
2.4.4.2 Customer Data
A common problem many organizations share is integrating customer
information. When information is disparate and fragmented, it is difficult to know
who the customers are and the nature of their associations or relationships. This also
makes it difficult to capitalize on opportunities to increase customer service, loyalty
and profitability. For example, knowing that other family members are also
customers provides an opportunity to up-sell or cross-sell products or services, or
knowing that a customer uses several sources of interaction with a supplier can also
provide opportunities to enhance the relationship. The creation and execution of a
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successful CRM strategy depends on close examination and rationalization of the
relationship between an organization’s vision and business strategy. Building
toward a CRM solution and evaluating the use of customer data requires analysis
and alignment of the following core capabilities:
x Customer value management
x Prospecting
x Selling
x Collection and use of customer intelligence
x Customer development (up-selling and cross-selling)
x Customer service and retention and
x protection of customer privacy
Successful CRM implementations result from the capability of the
organization and its employees to integrate human resources, business processes
and technology, to create differentiation and excellence in service to customers, and
to perform all of these functions better than its competitors. The current economic
context and financial crisis has most probably led many financial services
institutions to refocus their CRM strategies with the customer relationship being
more than ever the key to profitability of a retail activity. These institutions have to
design a new approach to regain and reassure customers. Even if they have only
started building a “how to win back trust" strategy, there is a general movement
towards “refocusing on the customer” for the “post-financial” crisis phase.
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2.4.5 Techniques in CRM
Techniques in customer relationship management can be classified as
follows. .
2.4.5.1 Customer Service and Retention
More competition and increased regulation made it more difficult for banks
to stand out from the crowd. However, the development of CRM gave banks
proactive access to technology that helped them improve customer retention by
using customer feedback to offer conveniences like ATMs and online banking.
Banks can also use CRM tools to improve customer loyalty by using data collected
through customer sign-ups, transactions and feedback processes.
2.4.5.2 Call Centers
Bank call centers use CRM solutions for various purposes. Cost-driven call
centers use CRM to track call transactions and troubleshooting techniques to fine-
tune the service resolution processes. Metrics like average handle time and
customer feedback ratings help bank call centers improve their customer support for
retention. Profit-driven call centers also leverage CRM customer account records
for add-on selling opportunities.
2.4.5.3 Sales
Sales have gained more importance in banks with the evolution of CRM.
Bundling of products and premier customer accounts are examples of techniques
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used by banks to build single-product customer accounts into full product suites
including a range of financial services. With CRM software, bankers can easily see
what products the customers currently use, what products they are eligible for and
what the benefits should be added to the additional product or service.4
2.4.6 Critical Success Factor of CRM
CRM is a holistic approach, which needs alignment of different aspects of a
business. Management and leadership, change of management, human resources
and using right technologies are the critical success factors of CRM.
2.4.6.1 Management and Leadership
Leaders/Mangers in a bank should have an important role by sharing CRM
team’s vision with the management. The leaders’ role has to be that of a facilitator
for implementing CRM. Effective Leadership skills result in the success of CRM
initiatives. Innovative mangers work with his team, make decisions by consulting
his team, while still maintaining control over the group as well as appreciate all the
feedbacks in the organization related with CRM implementation and strategies and
try to integrate people into it. Because CRM is the backbone of communication,
manager’s communication and coaching skills are important in CRM
implementation in any bank.

4 http://www.ehow.com
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2.4.6.2 Change Management
“CRM is an evaluation. Change is inevitable." When new IT systems, software,
and the like are deployed, the way people doing their jobs would also change.
Therefore the cultural change adaptation is crucial. It can be also be as Multi
Pronged Change Strategy. Instead of rushing, CRM team can prefer a gradual
change. Workshops and brainstorming meetings with sales, marketing, and
customer service staff can be conducted to discuss CRM strategies. Banks do train
employees and first of all, they tried to change employees’ mindset from operation
centric to customer centric ones. Change in management is crucial to promote user
adaptation. Major focus is based on training to achieve adaptation.
2.4.6.3 Information Technology
Nowadays many banks have begun to deploy new technologies according to
their needs. With advanced technologies, they get the advantage of doing tasks
faster and with more accuracy. There are various software tools for CRM like
Siebel systems for operational CRM; Teradata for data warehouse; Unica’s
Affinium for campaign management; SAS for data modeling activities. Banks also
develop a task manager program that helps sales representatives to see 360-degree
of customer view.
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2.4.6.4 Human Resources
CRM is the backbone for communication. For a successful CRM
implementation, human resources management of a company is very important.
Integrating employees into strategies and training them is very important to adapt
them to change. Employees are the interface of the company and so they can highly
affect the bank’s image.5
2.5 CRM IN INDIAN BANKS
In recent years, the banking industry around the world has been undergoing
a rapid transformation. In India also, the wave of deregulation of early 1990s had
created heightened competition and greater risk for banks and other financial
intermediaries. The cross-border flows and entry of new players and products have
forced banks to adjust the product-mix and undertake rapid changes in their
processes and operations to remain competitive. The deepening of technology has
facilitated better tracking and fulfillment of commitments, multiple delivery
channels for customers and faster resolution of miscoordinations.
Unlike in the past, the banks today are market driven and market responsive.
The top concern in the mind of every bank's CEO is increasing or at least
maintaining the market share in every line of business against the backdrop of
heightened competition. With the entry of new players and multiple channels,

5 Babin Pokharel, “Customer Relationship Management: Related Theories, Challenges and
Application in Banking Sector”, Banking Journal, Vol. 1, No.1, pp.20.
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customers (both corporate and retail) have become more discerning and less "loyal"
to banks. This makes it imperative that banks provide best possible products and
services to ensure customer satisfaction. To address the challenge of retention of
customers, there have been active efforts in the banking circles to switch over to
customer-centric business model. The success of such a model depends upon the
approach adopted by banks with respect to customer data management and
customer relationship management.
Over the years, Indian banks have expanded to cover a large geographic and
functional area to meet the developmental needs. They have been managing a world
of information about customers - their profiles, location, and the like. They have a
close relationship with their customers and a good knowledge of their needs,
requirements and cash positions. Though this offers them a unique advantage, they
face a fundamental problem. During the period of planned economic development,
the bank products were bought in India and not sold. What our banks, especially
those in the public sector lack are the marketing attitude. Marketing is a customer-
oriented operation. What is needed is the effort on their part to improve their service
image and exploit their large customer information base effectively to communicate
product availability. Achieving customer focus requires leveraging existing
customer information to gain a deeper insight into the relationship a customer has
with the institution, and improving customer service-related processes so that the
services are quick, error free and convenient for the customers.
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Furthermore, banks need to have very strong in-house research and market
intelligence units in order to face the future challenges of competition, especially
customer retention. Marketing is a question of demand (customers) and supply
(financial products and services, customer services through various delivery
channels). Both demand and supply have to be understood in the context of
geographic locations and competitor analysis to undertake focused marketing
(advertising) efforts. Focusing on region-specific campaigns rather than national
media campaigns would be a better strategy for a diverse country like India.
Customer-centricity also implies increasing investment in technology. Throughout
much of the last decade, banks world-over have re-engineered their organizations to
improve efficiency and move customers to lower cost, automated channels, such as
ATMs and online banking. But this need not be the case.
As is proved by the experience, banks are now realizing that one of their
best assets for building profitable customer relationships especially in a developing
country like India is the opening of branch-branches which are a key channel for
customer retention and profit growth in rural and semi-urban set up. However, to
maximize the value of this resource, our banks need to transform their branches
from transaction processing centers into customer-centric service centers. This
transformation would help them achieve bottom line business benefits by retaining
the most profitable customers. Branches could also be used to inform and educate
customers about other, more efficient channels, to advise on and sell new financial
instruments like consumer loans, insurance products, mutual fund products, and the
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like. There is a growing realization among Indian banks that it no longer pays to
have a "transaction-based" operating model. There are active efforts to develop a
relationship-oriented model of operations focusing on customer-centric services.
The biggest challenge the banks face today is to establish customer intimacy
without which all other efforts towards operational excellence are meaningless. The
banks need to ensure through their services that the customers come back to them.
This is because a major chunk of income for most of the banks comes from existing
customers, rather than from new customers.
Customer relationship management (CRM) solutions, if implemented and
integrated correctly, can help significantly in improving customer satisfaction
levels. Data warehousing can help in providing better transaction experiences for
customers over different transaction channels. This is because data warehousing
helps bring all the transactions coming from different channels under the same roof.
Data mining helps banks analyses and measure customer transaction patterns and
behavior. This can help a lot in improving service levels and finding new business
opportunities. It must be noted, however, that customer-centric banking also
involves many risks. The banking industry world over is being thrust into a wild
new world of privacy controversy. The banks need to set up serious governance
systems for privacy risk management. It must be remembered that customer privacy
issues threaten to compromise the use of information technology which is at the
very center of e-commerce and customer relationship management – the two areas
which are crucial for banks' future. The critical issue for banks is that they will not
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be able to safeguard customer privacy completely without undermining the most
exciting innovations in banking. These innovations promise huge benefits, both for
customers and providers. But to capture them, financial services companies and
their customers will have to make some critical tradeoffs.
2.5.1 Importance of CRM in Indian Banks
For long, Indian banks had presumed that their operations were customer-
centric, simply because they had customers. These banks ruled the roost, protected
by regulations that did not allow free entry of anybody into the sector. And to their
credit, when the banking sector was opened up, they survived by adapting quickly
to the new rules of the game. Many managed to post profits. For them an
unexpected bonanza came from government bonds. Ironically, the Reserve Bank of
India's moves to cut aggressively the interest rates after 1999, pushed up the prices
of bonds. So banks had a windfall doing almost nothing. The bond profits, like
manna from heaven, improved the balance-sheets of all banks irrespective of their
core performance. However, the era of lazy banking is soon to end. The mesh of
rules that propped up the Indian banking industry is now being dismantled rapidly.
According to a RBI road-map, India will have a competitive banking market
after 2009. As one of the most attractive emerging market destinations, India will
see allows foreign banks to come in with more freedom grow and acquire.
Therefore, it is imperative that Indian banks wake up to this reality and re-focus on
their core asset-the customer. A greater focus on customer relationship management
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is the only way the banking industry can protect its market share and boost growth.
CRM would also make Indian bankers realize that the purpose of their business is to
"create and keep a customer" and to "view the entire business process as consisting
of a tightly integrated effort to discover, create, and satisfy customer needs."
CRM is variously misunderstood as a fancy sales strategy, an expensive
software product, or even a new method of data collection. It is none of these.
Customer relationship management in the Indian banking system is fundamental to
building a customer-centric organization. CRM systems link customer data into a
single and logical customer repository. CRM in banking is a key element that
allows a bank to develop its customer base and sales capacity. The goal of CRM is
to manage all aspects of customer interactions in a manner that enables banks to
maximize profitability from every customer. Increasing competition, deregulation,
and the internet have all contributed to the increase in customer power. Customers,
faced with an increasing array of banking products and services, are expecting more
from banks in terms of customized offerings, attractive returns, ease of access, and
transparency in dealings. Retaining customers is a major concern for banking
institutions which underscores the importance of CRM. Banks can turn customer
relationship into a key competitive advantage through the strategic development
across a broad spectrum.
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CRM is a simple philosophy that places the customer at the heart of a
business organization’s processes, activities and culture to improve his satisfaction
of service and, in turn, maximize the profits for the organization. A successful CRM
strategy aims at understanding the needs of the customer and integrating them with
the organization’s strategy, people, technology and business process. Therefore, one
of the best ways of launching a CRM initiative is to start with what the organization
is doing now and working out what should be done to improve its interface with its
customers. Then the only solution is to link an information technology. For large
organizations it can be a mammoth task unless a gradual step-by-step process is
adopted. It does not happen simply by buying the software and installing it. For
CRM to be truly effective, it requires a well-thought-out initiative involving
strategy, people, technology, and processes. Above all, it requires the realization
that the CRM philosophy of doing business should be adopted incrementally with
an iterative approach to learn at every stage of development.
2.5.2 Implementation of CRM in Indian Banks
Although CRM as a concept is of recent origin its tenets have been around
for some time. Field officers in the banks have always promoted close relationships
with customers, but the focus on customer orientation rather than product
orientation as a commitment had been on the Indian banking scene for nearly a
decade. But the fact remains that implementing customer relationship management
is not easy. There are really very few organizations that are actually optimizing
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customer experiences at all points of contacts. It is necessary to understand the
customers are and their value, select customer carefully, design products and
services that deliver the desired value, design effective sales channels and customer
touch points, recruit, equip employees to deliver, increase customer value, and
constantly refine bank’s value proposition to ensure customer loyalty and retention
With the advancement of banking technology and computerization and
networking of bank branches, bank customers are becoming more and more
dynamic and less loyal in their behaviour. The development of the Internet is further
adding to this trend and the whole market becomes transparent and customers are in
a position to move easily from one bank to another. In such a situation, customer
satisfaction is the key to bank marketing, which aims at retention of the old
customers and their bringing in new customers.
CRM deserves differential treatment to different class of customers at times.
Service can be given to customers either personally through individuals such as
customer service manager or the process that can be automated by using computers.
These different approaches are adopted depending on the value of relationship with
the customer. Personal management of relationship is extended to business
customers and high value personal customers and automated relationship
management to lower margin mass- market segments.
CRM system can open up new channels of delivery, which are most cost
effective. as in the case of the Internet and call centers. According to an estimate,
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cost per transaction through these modes can be reduced by 90 per cent when
compared to cost of transaction at branch. To offer better and extended services to
customers new technology platforms are being created through huge investment in
information technology in the banking sector. The recent development in this field
is the introduction of CBS (Core Banking Solutions). A CBS helps in centralizing
the transactions of branches and different banking channels and the customers start
banking with the bank instead of at different branches. This is the only way to offer
seamless transactions across different channels (branches, the Internet, the
telephone and Automated Teller Machines or ATMs). As such nowadays a
customer is called a customer of the bank rather than that of a branch.
Another problem generally faced by a bank in implementing CRM is
resistance to change. The banking industry is passing through a radical
transformation, from a seller’s market to a customer’s market, a regulated economy
to a more liberalized and open economy, advancement in technology and a lot of
other developments. These complex changes are forcing the banks to change the
way they do business. A change denotes making things in a different manner. It
should be planned properly, proactive and goal oriented. It requires two things:
Firstly, the ability of the organization to adapt changes in the business
environment is to be increased. Secondly, the mindset of the employees has got to
be changed in the development of right attitude, skills, expectations, perceptions
and behaviour. Implementation of CRM in Indian banking is still in its initial stage
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and has to go a long way to be developed to the global standards. But the Indian
banks including the public sector banks are coming in a big way to address this
issue to remain competitive with their counterparts—the foreign and private sector
banks.
2.6 CUSTOMER RELATIONSHIP MANAGEMENT– PRINCIPLES
Nowadays banks have to work keeping in mind the position of the
financial market and anticipate change in the market place and prepare themselves
accordingly. They have to make new resolutions to build further on their own
strengths to explore new avenues of customers relationship management. This is the
only strategic weapon to be pursued for excellence in the pursuit of performance
and achievement. Both the retention of old business as well as to search for new
business, CRM is the only choice. CRM, being the essence of modern banking, a
sound understanding of the key principles, its theories and practices should be
revisited and redefined to provide a road map to new ideas and techniques in the
field. Over the years, banking institutions have been feeling the pressing need of
putting up greater thrust on this initiative for improving their operations and
appearances.
2.6.1 CRM Principles
The main principles of CRM can be grouped into seven guiding factors:
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2.6.1.1 Customer Focus
The first and foremost important guiding principle in CRM is customer
focus. The first question that arises in this regard is to define the customer. This
question is very fundamental. A customer is a person or group of persons who
receives the product or service—the final output of a process or group of processes.
A customer is the final arbiter of quality, value and price of a product or service. A
satisfied customer only assigns value to a service, on the contrary, to a dissatisfied
customer a product or service has no value, even if the concerned service or product
has been designed with lot of effort, energy and cost after a thorough planning. A
satisfied customer motivates his fellow members to go in for the service or product
that he has already acquired. But a disgruntled customer always counsels his
friends, and fellow members not to go to banks where his experience proved to be
wrong bitter or other-wise. So customer’s delight or customer’s satisfaction is the
essence of any CRM program. As a part of this focus on customers, banks should
ensure that clients are identified; their requirements are determined, understood and
met duly enhancing customers’ satisfaction.
2.6.1.2Leadership
Persuasion, judgment and decision-making abilities are the main attributes
of quality leadership. When there is a slight chance of getting a business but the
client is hesitating or in a fix, or not in a position to decide properly, it should be
followed up by the relationship manager by patient hearing, mild counseling and to
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stand by the side of the prospective client to help clear his doubts and to make him
feel happy by realizing that he is going in the right direction and he is right in
choosing his requirements.
The following points may be found helpful in this regard:
¾ It is to be communicated to all employees that all customers should be given
a proper hearing and it should be supported from all levels.
¾ Ways and means should be identified and practiced in getting and staying
closer to customers.
¾ Proper regard should be extended to the customers. All relevant information
about them should be collected from them with a humble and discrete
approach. Proper value should be given to their feedback.
¾ There should be proper re-action to the information and feedback provided
by the customers in designing, developing and providing desired products at
afford-able cost.
2.6.1.3 Process Approach
A process transforms an input into desired output by the use of resources,
energies and time. In producing an output there may one single process or a group
of inter-related processes. In case of inter-related processes, often the output from
one process directly forms the input for the next. For effective functioning of an
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organization, it has to identify and manage numerous linked activities with the help
of different processes for accomplishing its goal.
Proper attention should be given to the following points:
¾ All processes should be de-signed keeping in view the requirements and
desires of the customers, within the policy, resource availability, strategy of
the company.
¾ All processes should meet the legal and statutory requirements to perform
the activity or deliver the product or service.
¾ Time involved in processing should be less with least waiting time for the
customers. If required delegation of authority and assignment of account-
ability at various executive levels should be addressed, they should be
revised and fine-tuned to meet the requirements.
¾ All the processes should be properly integrated to meet the goal of
congruence and should not function at cross-purpose and
¾ There should be in built control mechanism for ease of measuring, reviewing
and taking corrective action.
2.6.1.4 System Approach
Customer’s requirement is one level of commitment. That level implies a
system that is reactive and provides customers what they want but the target should
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be to achieve more and to exceed the customer’s expectation to accommodate their
future requirements and to build a cushion against the competitors’ attributes. CRM
denotes the management of the entire system and is not confined to only one or the
other sub-systems or functional departments. CRM is based on a system approach
to management. Its primary objective is to increase value to customers on a
continuous basis by designing and improving organizational processes and systems
on an ongoing basis. Meeting each sub-system may have its own goal but the goal
and objectives of all sub-systems are to be integrated to achieve the overall goal.
There may be one sub-system to acknowledge the customer’s order, a
separate one to deliver the product within the delivery schedule, another sub-system
to comply with the complaints of the customers etc, but all directed to accomplish
the goal—value to the customers. The total system as a whole should decide on the
product to be manufactured, the services to be offered, the quality to be imbedded
, the price to be fixed , markets and customers to targeted upon and similar other
issues.
2.6.1.5 Involvement of People
The fundamentals of CRM bear the genes of customer relationship through
involvement of people, i.e., the work-force at the disposal of the organization. The
whole gamut of CRM is for the people, of the people and by the people. People’s
involvement at all levels is essential for the success of a CRM program. The bank
managers and staff must be in a position to exploit the concept of customer
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relationship completely. Customer relation may be defined as that dimension of
relationship marketing that seeks and ensures customer loyalty by fulfilling
promises and continuing to satisfy customer’s wants and needs so that defection is
zero. It comprises of three levels of; financial, social and structural relationships
The main focus of financial relationship is frequency marketing programs
based on financial incentives such as reduction of processing fees, lower rate of
commitment charges, organization of loan mela on special occasions and the like. A
social relationship program revolves round a social bonding between company and
its customers and establishes brand loyalty. Bankers, nowadays, make house calls,
offer different services outside their formal activities, share the feelings and
emotions of clients and even send clients bouquets on birthdays and anniversaries.
A marketing relation with the middleman and interested groups is developed in an
in-side-out manner mainly based on software, which would help in data
warehousing, data mining and data analysis. The optimization of structural
relationship lies in the replacement of physical resources by total service
replacement. Drawing of money through ATMs instead of physical presence in the
branch for withdrawal of cash through cheques or withdrawal forms may be cited as
an example. To obtain the full benefits of people involvement, the human resource
management should focus on employee empowerment, productivity linked reward,
and zero defeat service oriented training and total quality management.
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2.6.1.6 Mutually Beneficial Customer Relationship
The relationship with the customer should be based on a mutually beneficial
relationship. A bank should not concentrate its attention towards earning of profits
only, but focus should be directed to the customers’ wealth creation or value
enhancement with the motto of earning through service. As an example we can talk
of a savings account that’s ‘fixed up’ to give a customer more interest. It ensures
that any balance in your savings account above a certain amount, say, Rs 3,000
automatically gets transferred to a fixed deposit to give you higher returns, which
will be swept back into your savings account, when you need it.
Sometimes, other benefits are also extended, such as, free personal accident
insurance coverage along with fixed deposit scheme above a certain amount and
above a certain term. Banks are no more restricting their activities to deposit and
advances; rather they work with the motto of offering ‘integrated total package
solutions’ to all needs of a customer. Banks have gone to the extent of booking
cinema tickets, paying utility bills, school fees etc. for the ease of their clients who
are very busy and do not find time for such works. Many of such activities are not
profitable in terms of time and efforts spent by the bank. But banks are carrying out
such services for mutual benefits, which pays in the long run.
Wealthy individuals are in the habit of placing all sorts of demands on their
private bankers and a bank has to respond to such requests not merely for income
generation but as a gesture of goodwill and at times such activities add a consider-
75
able percentage to a bank’s fee based income. According to an estimate, a bank can
earn Rs 35,000 to Rs 100,000 per an-num for a good customer. But generally it is
found that earnings start after the first two- three years of dealing with the customer.
In a mature relationship, such fee-based income is a regular feature and is very
much crucial in today’s banking where interest spread is getting reduced due to
competition and fee based income can increase the bottom line. But in many
instances, the expenses in terms of time, effort, recognizing individual needs and
offering a customized investment solution are high. Retention of customers and
building a long lasting relationship is the main criteria under this concept.
2.6.1.7 Continuing Improvement
Another objective of CRM is the efforts towards continuous improvement in
the customer relationship through the provision of value added services at a
favorable cost. Business processes in the areas of finance, system integration,
human resource management etc are to be automated and optimized with an aim to
increase the efficiency and effectiveness of operations.
The most effective way of improvement lies in innovation and change
management. Today’s successful organizations must stimulate and foster innovation
and master the art of change. Organizations that maintain their flexibility,
spontaneity and unpredictability, continually improve their quality and beat their
competitors in the market place with a constant stream of innovative products and
services. They will be the winners.
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The major areas to be targeted are:
¾ Improving the effectiveness of marketing.
¾ Implementing multichannel trigger driven marketing
¾ Implementing a strategic analysis capability to support strategic decision
making and
¾ the ability to deliver the increasing levels service demanded by customers.
Also building a transparent communication system and employee
participation to better define the needs of the customers and deliver the right
services and products are equally important.
2.7 BENEFITS OF CRM
Despite the fact that in most banks sometimes fail to get profits, they seldom
pay attention to or adopt any customer strategy. It has long been the misconception
that banks need not pay much attention to customer focus just because they had
customers. Some banks even if they possess good customer relationships are unable
to cross sell as they have not figured out the product or service with which to target
the customers. They also are unaware of what may happen when customers are
often approached with the wrong products. However the new millennium has
resulted in banks and financial agencies rethinking their strategies and goals. They
have come to understand the importance of banking on to the customer and keeping
him happy. The rules that once governed the banking industry have changed. They
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have realized that adopting a customer centric strategy is essential and needs to be
compulsorily undertaken. The vast majority of banks now realize that they need a
customer strategy and are opting for CRM.
Banking CRM software serves to increase the market share and boost
growth in the banking industry. CRM banking solutions change the way the
employees think and mould them into customer conscious people. CRM induces
bankers to know that they are required to maintain good relationships with their
customers and should strive to retain them. They are made to realize that the
business process should consist of efforts to discover and satisfy customer
requirements. Since the banking field now boasts of so much of technological
innovations there has been a wide variety of innovations in CRM banking as well.
Statistics show that bankers will bear staggering expenditure on CRM. The sector
will also evidence an increase in expenditure of 14 percent each year. With such
phenomenal statistics it is but a surety that with CRM, banking solutions sales will
improve in the coming years.
2.7.1 Benefits of CRM for Banks
2.7.1.1 Focus on the Customer
CRM manages to place the customer at the focal point of the organization in
order to cater to his needs, satisfy him and thus maximize its profits. CRM
understands the needs of the customer and integrates it with people, technology,
resources and business processes. It focuses on the existing data available in the
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organization and uses it to improve its relationship with the customers. Banking
CRM uses information and analytical tools to secure customer focus. Thus it is
completely essential that banks implement CRM in order to secure maximum gain
all-round.
2.7.1.2 Overall Profitability
CRM enables banks to give employee's better training that helps them handle
customers easily. It achieves better infrastructure and ultimately contributes to
better overall performance. The byproducts of CRM banking solutions are customer
acquisition, retention and profitability. Banks that don't implement CRM will
undoubtedly find themselves with lesser profitability coupled with a sharp decline
in the number of customers.
2.7.1.3 Satisfied Customers
It is important to make a customer feel as if he / she is the only one customer
in the bank. This will go a long way in satisfying and retaining them. Bankers need
a return on investment and it has been proved that increase in customer satisfaction
more than contributes a fair share to ROI. The main value of CRM banking lies in
satisfaction and increased retention of customers.
2.7.1.4 Centralized Information
CRM banking solutions manage to clearly integrate people, processes and
technology. CRM banking provides banks with a holistic view of all bank
transactions and customer information as well and stores it in a single data
warehouse where it can be studied later.
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2.7.1.5 CRM Banking Boosts Small Banks
Banking CRM software meets the needs of banks of all sizes in terms of
attaining the required accuracy and understanding of customers. Merely assuming
that banks that are considerably smaller in size have a better customer approach and
are able to deal with their customers in a better manner is wrong. They are just as
much in need of CRM aid as the others. Small banks on account of a limited
amount of money have had to realize that a large contribution to profits is directly
the result of good customer service. CRM makes sure that the bank delivers exactly
what the customer expects.
2.7.1.6 Customer Segregation
CRM enables a bank to see which customers are costing them and which are
bringing benefits. CRM provides them with the required analytical tools that will
help them focus on the importance of segregating these two and doing what is
required to avail of the maximum returns. After this segregation is done CRM easily
enables banks to increase their communication and cross-selling to their customers
effectively and efficiently.
2.7.1.7 Aggressive Customer Acquisition
CRM solution supports the creation of demand generation through multi-
channel and multi-wave campaigns. The solution ensures that the bank’s marketing
message is appropriately personalized and targeted towards the most suitable
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segment of prospects. This optimizes marketing efforts and results in greater
conversion of prospects.
2.7.1.8 Improved Cross-selling Framework
The solution presents a unified 360° view of the customer, allowing single
point access to all the relationships the customer has forged with the bank. This
along with robust customer analysis effectively supports true relationship banking,
providing a robust framework for cross-selling opportunities. CRM solution also
integrates with other white labeled solutions to facilitate contextual and
personalized customer engagement, with a keen focus on right-talk driven right-sell.
2.7.1.9 Increased Operational Efficiencies and Collaboration
CRM solution supports business automation for processes and business
activities, eliminating manual tasks and reducing process time. Straight through
processing abilities enhance reduction in turnaround and processing time, increasing
output and enabling speedy completion of tasks. The multilingual web-based single
repository of information enables remotely located bankers to collaborate and
transact seamlessly.
2.7.1.10 Lower Total Cost of Ownership (TCO)
A web-based solution leveraging new-generation technologies, Finacle
CRM solution is future-proof and can be seamlessly integrated with other enterprise
applications. With a robust architecture and proven scalability, it ensures protection
for the bank’s technology investments.
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2.7.1.11 Campaign Management
Banks need to identify customers, tailor products and services to meet their
needs and sell these products to them. CRM achieves this through campaign
management by analyzing data from banks internal applications or by importing
data from external applications to evaluate customer profitability and designing
comprehensive customer profiles in terms of individual lifestyle preferences,
income levels and other related criteria. Based on these profiles, banks can identify
the most prospective customers and customer segments, and execute targeted,
personalized multi-channel marketing campaigns to reach these customers and
maximize the lifetime value of those relationships.
2.7.1.12 Customer Information Consolidation
Instead of customer information being stored in product centric silos, with
CRM the information is stored in a customer centric manner covering all the
products of the bank. CRM integrates various channels to deliver a host of services
to customers, while aiding the functioning of the bank.
2.7.1.13 Marketing Encyclopedia
It is the central repository for products, pricing and competitive
information, as well as internal training material, sales presentations, proposal
templates and marketing collateral.
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2.7.1.14 360-degree View of Company
This means whoever the bank speaks to, irrespective of whether the
communication is from sales, finance or support, the bank is aware of the
interaction. Removal of inconsistencies of data makes the client interaction
processes smooth and efficient, thus leading to enhanced customer satisfaction
2.7.1.15 Personalized Sales Home Page
CRM can provide a single view where sales mangers and agents can get all
the most up-to-date information in one place, including opportunity, account,
news, and expense report information. This would make sales decision fast and
consistent.
2.7.1.16 Lead and Opportunity Management
These enable organizations to effectively manage leads and opportunities
and track the leads through deal closure, the required follow-up and interaction with
the prospects.
2.7.1.17 Operational Inefficiency Removal
CRM can help in strategy formulation to eliminate current operational
inefficiencies. An effective CRM solution supports all channels of customer
interaction including telephone, fax, e-mail, the online portals, wireless devices,
ATMs, and face-to-face contacts with bank personnel. It also links these customer
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touch points to an operations center and connects the operations center with the
relevant internal and external business partners.
2.7.1.18 CRM with Business Intelligence
Banks need to analyze the performance of customer relationships, uncover
trends in customer behavior, and understand the true business value of their
customers. CRM with business intelligence allows banks to assess customer
segments, which help them calculate the net present value (NPV) of a customer
segment over a given period to derive customer lifetime value. Customers can be
evaluated within a scoring framework. Combining the behavior key figure and
frequency to monetary acquisition analysis with a marketing revenue quota can
optimize acquisition costs and cut the number of inefficient activities. With such a
knowledge, banks can efficiently allocate resources to the most profitable customers
and reengineer the unprofitable ones. Data warehousing solutions have been
implemented in Citibank, Reserve Bank of India, State Bank of India, IDBI, ICICI,
Max Touch, ACC, National Stock Exchange and PepsiCo. Business Intelligence
players hope many more will follow suit.
2.7.2 Benefits of CRM to Customers
Customer relationships are becoming even more important for banks as
market conditions get harder. Competition is increasing, margins are eroding,
customers are becoming more demanding and the life-cycles of products and
services are shortening dramatically. All these forces make it necessary for banks to
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intensify the relationship with their customers and offer them the services they need
via the channels they prefer.
2.7.2.1 CRM – Benefits to Customers
Service provisioning throughout the entire life cycle of the corporate
customer, from the initial stages to the establishment of a close, long-term
relationship with profitable clients,
Optimization of the use of bank resources, such as alternative channels of
distribution (internet and home banking),
Significant reduction in and limitation of operational costs through system
automation and standardization,
Low maintenance and expansion costs owing to the use of modern
administration tools which allow bank employees to make a wide range of
modifications to the system
CRM permits businesses to leverage information from their databases to
achieve customer retention and to cross-sell new products and services to
existing customers.
Companies that implement CRM make better relationships with their
customers, achieve loyal customers and a substantial pay back, increased
revenue and reduced cost.
85
CRM when successfully deployed can have a dramatic effect on bottom-line
performance. For example, Lowe’s Home Improvement Warehouse, in a
span of 18 months, achieved a 265 percent return on investment (ROI) on its
$ 11m CRM investment.
According to a study conducted in the sector of banking, convenience of
location, price, recommendations from others and advertising are not
important selection criteria for banks. From customers’ point of view, the
important criteria are: account and transaction accuracy and carefulness,
efficiency in correcting mistakes and friendliness and helpfulness of
personnel. Thus, CRM, high-quality attributes of the product / service and
differentiation proved to be the most important factors for customers.
Another study conducted in a European bank shows that with CRM, the bank
was able to focus on profitable clients through efficient segmentation
according to individual behavior. Information about ‘who buys what and
how much’ enabled the bank to have a commercial approach based on the
client and not solely on the product. Thus, the bank was able to better satisfy
and retain its customers.
Eventually, CRM results both in higher revenues and lower costs, making
companies more effective and efficient: effective in targeting the right customer
base with the right services via the right channels, and they are efficient in doing
this at the lowest costs. For example, those banks that are moving transactions from
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the more expensive channels to less costly channels – like the call centre or
Internet– are therefore able to save money.
2.8 CHALLENGES FOR CRM IMPLEMENTATION
The most pervasive challenges to effective customer knowledge include:
¾ The difficulty of obtaining a complete view of customers.
¾ The need to move away from disjointed, standalone, and inconsistent
channels to provide a cohesive, multichannel offering.
¾ The burden of disconnected legacy systems and disparate databases
that store client financial data.
¾ The cost and complexity of meeting stringent government regulatory
and client security and privacy requirements.
¾ The pressure on margins and growth prospects from increased
competition.
¾ The costs associated with retaining customers and developing
customer loyalty.
Although CRM can help banking institutions efficiently manage their
customers, many banks fail to mold the concept into the prevailing work culture.
But the high incidence of CRM failure has very little to do with the CRM concept
itself. Usually it's a case of the banks failing to pay attention to customer data they
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already have. A lot of banks underestimate the magnitude of CRM. They tend to
treat it just like any other application technology, without realizing that CRM, if
done properly, is a strategic initiative that touches all areas of an organization.
2.8.1 Measuring CRM benefits
A key basic CRM challenge is establishing the measurement method. Banks
may find it hard to build the initial business case justification and then to prove the
worth or success of their investment What makes the latter task even more difficult
is the fact that the metrics that are best used to justify a significant IT investment are
not always the most appropriate for evaluating ongoing success. When banks seek
to justify the cost of their investment in CRM-related technology they usually focus
on hard numbers, typically those related to decreased costs and increased sales. In
other words, the proponents look to justify the top-line expenses with bottom-line
benefits.
Traditionally, banks have determined the success of any project or product
mainly in terms of internal business gauges such as return on investment, units sold,
asset growth, or service level agreement measures. One exception to the typical
practice of focusing solely on internal data for gauging success is market share, or
market performance. Interestingly, most CRM practitioners quickly default to
marketing and sales measures when asked about the success of CRM
implementations. The tendency to frame the discussion of CRM measurements in
terms of sales and marketing measures is completely understandable given the
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phased nature of most CRM projects. Since the majority of CRM projects are
expensive multiphase and multiyear projects that often involve multiple
technologies, the funding for CRM projects is also often phased. CRM sponsors
grant funding to project leaders at the completion of one phase and start of the next.
To ensure that the subsequent phases will get funding, project leaders typically
build into each phase of a CRM project’s demonstrable business benefits.
At completion of each phase of a project, business benefits are expected to
accrue rapidly to the bank. Revenue generation--whether through sales or marketing
improvements--is the preferred business benefit for CRM project sponsors. Not
surprisingly, it is far easier to continue funding large, intricate IT projects when
incremental revenue generation can be squarely identified.
2.8.2 Customer Profitability
Many banks use profitability as a key component in determining as how to
treat their customers. But measuring profit in a bank is not an easy task. Many
banks allow the use of an accountant's approach to the measurement process. This
means the accounting and finance people are in charge of the process, resulting in
textbook-accurate allocations that often do not accurately reflect the activities they
are intended to measure. For example, most bank costs are step-fixed. This means
that they are neither purely fixed nor purely variable, with the resource able to
process only a finite number of transactions before more investment is required.
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The way the step-fixed resources are allocated, they can dramatically affect the
resulting measurement of account level profitability.
2.8.3 The 80-20 Rule
Most banks make critical pricing decisions based on the so-called 80-20
rule, the notion that 80 per cent of profits derive from 20 per cent of customers. This
may be true, but the use of incomplete or inaccurate cost information and unproven
hypotheses on customer buying behavior make this rule difficult to apply. One
significant problem is that banks let their customers use the bank's products and
services in an unprofitable way. By providing a lower level of service to these
customers, the bank faces the danger of driving them away to institutions that
provide better service. Given the step-fixed nature of bank costs as discussed, banks
should not view losing unprofitable customers as the way to improved profits.
2.9 METHOD OF EFFECTIVE CRM IMPLEMENTATION
Banks can take several steps to strengthen their customer relationship
management in an effective manner.
2.9.1 Acknowledge Email Enquiries
At the very minimum, banks should send out an automated email response
that acknowledges receipt of a customer's email and let the sender know when to
expect a more complete response. It is then vital to get back to the customer within
the promised time frame. Banks can earn more customer goodwill if they respond
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faster than the imposed deadline. To handle significant volumes of email, banks
need adequate routing technology. Many banks regard a voice call centre as a cost
of doing business, but they don't look at it the same way with email.
2.9.2 Develop the Right Contact Strategy
By knowing which offers and incentives to offer to which customers and
when, banks will not annoy customers with unwanted marketing offers, building
customer loyalty along the way. Such goals can be at least as important as realizing
cross-selling opportunities.
2.9.3 Providing Online ‘Chatting’
An alternative to telephone support, online chatting is providing a service
via emails or any other form of immediate response. This service also offers some
of the immediacy of the phone but primarily allows customers to remain online.
With online chatting, service agents can usually handle between one and three
customer inquiries at once. Given that the average call lasts about four minutes, a
customer-service representative can handle 10 to 12 customers per hour using
"chat", compared with six to eight per hour over the telephone. One of chat's
important advantages is that it keeps customers in an online store environment
where they remain exposed to merchandise and promotions.
2.9.4 Reduce costs by Improving Website Design and Self-Service
Email, telephone support, and chat all involve considerable staffing costs.
But to reduce these expenses a site should anticipate customer needs. Sites that are
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difficult to navigate and do not provide needed information chase away some
customers and force those who stay to resort to more expensive channels to satisfy
their service needs.
2.9.5 Analyses the Project's Scope
Before recommending or embracing CRM, bank executives must analyze
the business issues, the customer relationship model and the exact nature of
customer interactions and see how they tie together. Banks should not embrace top-
line growth as an objective until they can understand precisely how CRM
technology will provide those new revenues.
2.9.6 Limitations
Many CRM implementations are severely limited because they fail to
provide a complete and meaningful view of the customer. CRM is primarily a
business program, and it requires a genuine partnership between various
departments to ensure that both business and technology issues are managed
effectively. Furthermore, CRM not only takes existing business processes and
makes them more efficient, but it also requires these processes to be modified. For a
CRM implementation to be successful, decision makers within the bank need to
make sure that all the stakeholders understand and support the required process
changes.
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2.9.7 Treating Accounts as Customer
Traditionally banks have closely associated customers with accounts, to the
point of calling the account the customer and vice versa. Customers will tend to feel
alienated when they are treated like a number instead of a person. A conventional
account structure usually contains very little information about customers and their
needs, or their relationship with competitors or other divisions within the bank. The
banks in the forefront have excellent reasons to adopt comprehensive CRM
strategies to cultivate a lifetime customer relationship. As banks move from
transaction-centric to a relationship-centric business approach, effective leveraging
of customer relationship becomes all the more critical.
Today, customers are expecting even more individual attention,
responsiveness and product customization, yet are unwilling to pay a premium for
these services. They are willing, however, to build a long-term relationship with
banks that offers differentiated and more personalized services. This is where
electronic banking can offer a competitive advantage. Successful CRM
implementation in electronic banking needs to integrate data from all customer
touch points, employee feedback and even shareholders' perceptions. If used
effectively and in an innovative way, this approach will enable banks to develop a
strategy to deliver to the customer the most appropriate products and services.6

6 www.crmguru.com
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2.10 PROFILES OF SELECTED PUBLIC AND PRIVATE SECTOR BANKS
In this Section, the profile of selected public and private sector banks in
Madurai District are discussed.
2.10.1 State Bank of India
The origin of the SBI goes back to the first decade of the nineteenth century
with the establishment of the Bank of Calcutta in Calcutta on 2nd June 1806. Three
years later the bank received its charter and was re-designed as the Bank of Bengal.
It was the first joint-stock bank of British India sponsored by the Government of
Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July
1843) followed the Bank of Bengal. These three banks remained at the apex of
modern banking in India till their amalgamation as the Imperial Bank of India on 27
January 1921. Primarily an Anglo-Indian creations, the three presidency banks
came into existence either as a result of the compulsions of imperial finance or by
the felt needs of local European commerce and were not imposed from outside in an
arbitrary manner to modernize India’s economy. Their evolution was, however,
shaped by ideas gained from similar developments in Europe and England and was
influenced by changes occurring in the structure of both the local trading
environment and those in the relations of the Indian economy to the economy of
Europe and the global economic framework.7

7 www.freejobalert.com
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2.10.2 Canara Bank
Canara Bank is a state-owned commercial bank with headquarters in
Bangalore. The Bank operates in four segments, namely treasury operations, retail
banking operations, wholesale banking operations and other banking operations.8
The Bank provides a range of products and services to the customers. Canara Bank
was incorporated on July 1, 1906 with the name Canara Hindu Permanent Fund Ltd.
In the year 1910, the name of the Bank was changed to Canara Bank Ltd. In July
19, 1969, the Bank was nationalized. In the year 1976, they inaugurated their
1000th branch. Their achievements are many over the years and are recorded as
under.
At present they have a network of 3257 branches, including four overseas
branches one each at London, Leicester, Hong Kong and Shanghai. As of March 31,
2011, the Bank had a network of 382 correspondent banks spread across 80
countries.9
2.10.3 Indian Bank
A premier bank owned by the Government of India, the Indian Bank was
incorporated in the year 1907 as Indian Bank Limited and commenced operations in

8 The subsidiaries of the Bank include Canbank Financial Services Ltd, Canbank Venture
Capital Fund Ltd, Canbank Factors Ltd, Canara Robecco Asset Management Company Ltd,
Canbank Computer Services Ltd, Canara Bank Securities Ltd and Canara HSBC Oriental Bank
of Commerce Life Insurance Company Ltd.
9 www.indiainfoline.com
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15th August of the year 1907 and cooperated with the Swadeshi movement. Indian
Bank has many deposit schemes tailored to suit the needs of its customers, both
individuals and organizations. It provides Credit/Advances/Loan Schemes
specifically designed for its customers. Also it offers various novel services to
customers, both individuals and organizations. The network of the bank comprises
100 per cent business computerization, 168 centers throughout the country covered
under 'Anywhere Banking', Core Banking Solution (CBS) in 1557 branches and 66
extension counters, 618 connected Automated Teller Machines (ATM) in 225
cities/towns and also 24 x 7 Service through 32,000 ATMs under shared network.10
2.10.4 ICICI bank
` ICICI Bank Ltd is a major banking and financial services organization in
India. The Bank is the second largest bank in India and the largest private sector
bank in India by market capitalization. They are a publicly held banking company
engaged in providing a wide range of banking and financial services including
commercial banking and treasury operations. The Bank and their subsidiaries offer
a wide range of banking and financial services including commercial banking, retail
banking, project and corporate finance, working capital finance, insurance, venture
capital and private equity, investment banking, broking and treasury products and
services. They offer through a variety of delivery channels and through their
specialized subsidiaries in the areas of investment banking, life and non-life
insurance, venture capital and asset management. Including these, their branch

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network increased from 1,707 branches at March 31, 2010 to 2,529 branches at
March 31, 2011. They also increased their ATM network from 5,219 ATMs at
March 31, 2010 to 6,055 ATMs at March 31, 2011.11
2.10.5 Karur Vysya Bank
Karur Vysya Bank is a privately held Indian bank, headquartered in Karur in
Tamil Nadu. The company operates in four business segments: treasury operations,
corporate/ wholesale banking operations, retail banking operations and other
banking operations. The company's investments are categorized into three
categories, held to maturity, held for trading and available for sale. Karur Vysya
Bank was incorporated on June 22, 1916. As of December 31, 2010, the Bank had
set up 360 branches, 437 ATMs, 7 satellite offices, 13 service centers and 24
administrative offices. They have implemented core banking solutions across all its
branches. The Bank has set up a Disaster Recovery Site (DRS) at Cyber Pearl, Hi-
Tech City, and Hyderabad. The Bank is ensuring less than 30 minutes old data
backup of the Primary Data Centre Databases at this DRS using a Disaster
Recovery Automation Solution.12
2.10.6 Tamilnad Mercantile Bank Limited (TMB)
Tamilnad Mercantile Bank Limited is a bank headquartered in Tuticorin in
Tamil Nadu, India. TMB was founded in 1921 as the Nadar Bank, but changed its
name to Tamilnad Mercantile Bank in November 1962 to widen its appeal beyond

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the Nadar community. For the financial year 2011-2012, the bank reported a net
profit of 4,845.3 million. The bank currently has 379 full fledged branches
throughout India, nine regional offices and eleven extension counters, two mobile
banking branches, six central processing centers, three currency chests and 700
Automated Teller Machines(ATM). TMB has plans to open branches in Colombo,
Singapore and Malaysia to serve the Tamil community living in those countries.
The bank has been growing strongly throughout South India, making inroads into
new markets and opening up new branches. TMB was also set to go for an Initial
public offering in 2013. The growth model of the bank is said to be the most unique
of its kind in the country and is always depicted as the Bank of America of India.
The Bank on September, 2013 won the ASSOCHAM’s Best Private Sector Bank
2013 award.13
2.11 PERFORMANCE OF SELECTED PUBLIC AND PRIVATE SECTOR
BANKS
In this Section, the working performance of selected public and private sector
banks in Madurai district as regards branches, deposits, advances- target and
achievements and credit deposit ratios are discussed. For the purpose of analysis the
time series data from 2004-2005 to 2013 – 2014 are taken into account from the
various issues of annual reports of the selected banks.

13 www.tmb.in
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2.11.1 Number of Branches of Selected Public and Private Sector Banks (2004-
2005 to 2013-2014) in Madurai District
Branch expansion is an index of bank progress. The main purpose of both
public and private sector banks in the study area can be well served only by rapid
expansion of branches within the area of its jurisdiction. The growth of branch
expansion as measured by the increase in number of branches is reported in table
2.1.
TABLE 2.1
Number of Branches of Selected Public and Private Sector
(Rs. in Crores)
State
Karur Tamil Nadu
Canara bank Indian
Year ICICI Vysya Mercantile
bank of Bank
Bank Bank
India
2004 – 05 28 31 22 9 5 8
2005 – 06 28 31 22 9 5 8
2006 – 07 28 31 22 5 5 8
2007 – 08 29 31 22 18 5 8
2008 – 09 29 36 20 17 6 8
2009 – 10 31 41 22 17 6 8
2010 – 11 32 43 24 17 7 8
2011 – 12 34 44 29 17 8 9
2012 – 13 35 45 26 17 11 11
2013 – 14 37 52 32 17 13 13
Source: Lead Bank Report, Annual Credit Plan, 2004-05 to 2013-14.
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It is observed from the above table that the branches of selected public sector
banks in Madurai district in the year 2004-2005, the number of branches Canara
bank was 28 and it remained constant till 2006-2007. In the year 2007-2008, it had
increased to 29 and it remained constant till 2008-2009. Further it had increased
from 31 in the year 2009-2011 to 37 in the year 2013-2014. In the case of State
Bank of India, the number of branches was 31 in the year 2004-2005 and it
remained constant till 2007-2008. Further it had increased from 36 in the year 2008-
2009 to 52 in the year 2013-2014. In the case of Indian Bank, the number of
branches was fluctuating. It was 22 in the year 2004-2005 and it remained constant
till 2007-2008. In the year 2013-2014 there were 52 bank branches.
Further the table reveals that the branches of selected private sector banks in
Madurai district. In the year 2004-2005, the number of branches in ICICI bank was
nine and it remained constant till 2005-2006. In the year 2006-2007, it had
decreased to five. . Suddenly in the year 2007-2008 it had increased to 18. But in
the following years it came down to 17 and it remained constant till the year 2013-
2014. In case of Karur Vyshya Bank, the number of branches was five and it
remained constant till 2007-2008. But it had increased to 13 in the year 2013-2014.
The above table also reveals that the number of branches in Tamilnad Mercantile
Bank was eight in the year 2004-2005 and it remained constant till 2010-2011.
Later it had increased to 13 in the year 2013-2014.
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It is concluded that the public sector bank branches showed a good
development in Madurai District. In the case of private sector bank branches, it is
seen slow improvement because of poor customer relationship in banking sector.
Hence, the private sector banks have to improve the good customer relationship
management so as to attract the potential customers and retain the existing
customers in a better way.
2.11.2 Analysis of Deposits
The higher the deposits of the banks, the higher the productivity as they have
a higher financial self-support which is a paramount factor. The growth of deposits
of the selected public sector banks during the period from 2004-2005 to 2013-2014
is presented in table 2.2.
2.11.2.1 Deposit components of selected public sector banks in Madurai
District.
Table 2.2 presents the growth of deposits of selected public sector banks
during the year 2004-05 to 2013-14.
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TABLE 2.2
Deposits in Selected Public Sector Banks (2004 – 05 to 2013 - 14)
(Rs. in crores)
Year Canara Bank State Bank of India Indian Bank
2004 – 05 463.32 710.25 349.13
2005 – 06 484.26 499.38 393.15
2006 -07 549.60 968.21 465.38
2007 – 08 700.69 1061.55 548.84
2008 - 09 842.17 1438.73 733.54
2009 – 10 968.45 1868.43 944.54
2010 – 11 1023.89 2121.84 1029.46
2011 – 12 1161.35 2551.51 1157.61
2012 – 13 1244.71 2877.08 1349.85
2013 - 14 1531.49 3091.00 1245.84
Mean 896.90 1718.80 821.80
SD 355.074 923.90 372.21
CV (%) 39. 59 53.75 45.29

It could be seen from the above table 2.2 that the amount of deposits
mobilized by Canara bank had increased from Rs. 463.3218 crores to Rs.
1,531.4900 crores during the study period, recording more than a threefold increase.
Hence there was a steady growth in the deposits. It shows the reputation enjoyed by
the bank among the public. The mean value of the deposits was Rs. 896.90 crores.
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The value of standard deviation was Rs. 355.074 crores. The co-efficient of
variation of the deposit worked out to 39.59 per cent.
Further the table reveals that the amount of deposits invested in the State
Bank of India had increased from Rs. 710.2537 crores to Rs. 3,091.0000 crores
during the study period, registering more than a fourfold increase. Hence there was
a steady increase in deposit mobilization by the banks. It proved that the bank had
attracted the public in a better way. The mean value of the deposits was Rs.
1,718.80 crores. The value of standard deviation was Rs. 923.903 crores. The co-
efficient of variation of the deposits worked out to 53.75 per cent.
The deposits of Indian bank had increased from Rs.349.1317 crores to Rs.
1,349.8507 crores from 2004-2005 to 2012-2013. In the year 2013-2014, it had
declined to Rs. 1,245.8400 crores due to non up gradation of technological services
by the bank. The mean value of the deposits was Rs. 821.80 crores. The value of
standard deviation was Rs. 372.219 crores. The co-efficient of variation of the
deposit worked out to 45.29 per cent.
It is concluded from the above table, that the State Bank of India had
garnered the highest deposits from the public viz., Rs. 3,091.0000 crores in the year
2013-2014 followed by Canara bank registering Rs. 1,531.4900 crores and Indian
bank recorded Rs. 1,245.8400 crores as deposits.
The compound growth rates of the deposits held by the selected public sector
banks are shown below vide Table 2.3.
103
TABLE 2.3
Trend and Growth of Deposits in Selected Public sector Banks
Significan
Measures Linear R2 F CGR %
t
Canara Bank 115.691 0.973 289.116 0.000 14.5
State Bank of India 300.630 0.971 263.786 0.000 21.9
Indian Bank 120.533 0.961 198.350 0.000 17.6

Source: Computed From the Primary Data (Significant at 5 per cent level)
The growth rates of the deposits mobilized by the Canara bank, State bank of
India and Indian bank were analyzed and the results are given vide table 2.3 . The
R2 value of all the banks was more than 0.3 and ‘F’ value statistic was significant at
five per cent level. Therefore the growth values of the deposits were found
statistically significant. The compound growth rate for the Canara bank was 14.5
per cent, 21.9 per cent for the State bank of India and 17.6 per cent for the Indian
bank.
2.11.2.2 Deposits of Selected Private Sector Banks
The deposits accrual of private sector banks are presented vide Table 2.4
104
TABLE 2.4
Deposits in Selected Private Sector Banks
(Rs. in Crores)
Tamilnad Mercantile
Year ICICI Karur Vysya Bank
bank
2004 – 05 331.50 75.22 265.22
2005 – 06 406.46 76.25 296.08
2006 – 07 329.12 76.25 343.76
2007 – 08 374.82 76.25 342.80
2008 – 09 436.49 143.25 594.64
2009 – 10 411.32 206.05 594.64
2010 – 11 419.92 249.89 707.18
2011 – 12 508.77 316.88 830.93
2012 – 13 543.24 398.93 928.66
2013 – 14 602.62 480.13 1036.87
Mean 436.40 209.80 594.20
SD 89.71 148.42 278.88
CV (%) 20.55 70.74 46.93

Table 2.4 indicates that the amount of deposits mobilized by ICICI bank had
increased from Rs. 331.50 crores to Rs. 602.62 crores during the study period.
There was a fluctuation in the deposits. It showed that the low rates of interest for
deposits provided by the ICICI might have been the reason for the low deposit
accrual. The mean value of the deposits was Rs. 436.40 crores. The value of
105
standard deviation was Rs. 89.71 crores. The co-efficient of variation of the deposit
worked out to 20.55 per cent.
The table also shows that the amount of deposits invested in Karur Vysya
bank had increased from Rs. 75.2252 crores to Rs. 480.1300 crores during the study
period, registering more than a six fold increase. There was a gradual increase in
deposit mobilization by the bank. It showed that the bank attracted the public in a
better way. The mean value of the deposits was Rs. 209.80 crores. The value of
standard deviation was Rs. 148.424 crores. The co-efficient of variation of the
deposits worked out to 70.74 per cent.
The table inferred that the deposits of Tamilnad Mercantile Bank had
increased from Rs. 265.23 crores to Rs. 1,036.87 crores during the study period. In
the year 2007-2008, there was a fluctuation in the deposits. It indicated that there
was a threefold increase in the deposits during the period. The mean value of the
deposits was Rs. 594.20 crores. The value of standard deviation was Rs. 278.879
crores. The co-efficient of variation of the deposit worked out to 46.93 per cent.
It is concluded from the above table, that Tamilnad Mercantile bank had
accorded the highest deposits from the public viz., Rs. 1,036.87 crores in the year
2013-2014 followed by ICICI bank registering Rs. 602.62 crores and Karur Vysya
Bank recording Rs 480.13 crores.
The compound growth rates of the deposits held by the selected private
sector banks are shown below vide Table 2.5
106
TABLE 2.5
Trend and Growth of Deposits in Selected Private Sector Banks
CGR
Measures Linear R2 F Significant
%
ICICI 26.715 0.813 34.758 0.000 6.2
Karur Vysya Bank 46.642 0.905 76.425 0.000 27
Tamilnad Mercantile Bank 90.339 0.962 202.040 0.000 17.7

The growth rates of the deposits mobilized by the ICICI bank, Karur Vysya
Bank and Tamilnad Mercantile Bank were analyzed and the results are given vide
Table 2.5. The R2 value of all the banks was more than 0.3 and ‘F’ value statistic
was significant at five per cent level. Therefore the growth values of the deposits
were statistically significant. The compound growth rate of ICICI bank was 6.2 per
cent, 27 per cent in Karur Vysya Bank and 17.7 per cent for the Tamilnad
Mercantile Bank.
2.11.3 Analysis of Advances
The success of these banks should be judged as much by their efforts at
extending and expanding the area of credit as by the conventional yardstick of
profitability. Therefore the advances issued by the banks to the public are analyzed
in this section.
107
2.11.3.1 Advances of Selected Public Sector Banks
The advances made by the selected public sector banks are presented in
Table 2.6.
TABLE 2.6
Advances of Selected Public Sector Banks
(Rs. in crores)
Year Canara Bank State Bank of India Indian Bank
2004 – 05 336.70 659.36 116.97
2005 – 06 373.64 310.32 154.12
2006 – 07 493.75 1227.53 199.40
2007 – 08 588.16 1278.69 334.00
2008 – 09 714.43 2007.13 462.13
2009 – 10 766.74 2331.61 605.73
2010 – 11 923.11 2377.04 617.82
2011 – 12 1072.46 2703.56 792.82
2012 – 13 1200.10 2951.28 1032.55
2013 – 14 1715.64 3655.00 1175.25
Mean 818.50 1950.20 549.10
SD 425.26 1061.28 367.06
CV ( %) 51.96 54.42 66.85

It is evident from Table 2.6 that there was an increase in the advances of
Canara bank from Rs. 336.71 to 1,715.64 during the study period. The mean value
108
of the advances was Rs. 818.50 crores. The value of standard deviation was Rs.
425.27 crores. The co-efficient of variation of the advances worked out to 51.96 per
cent.
In case of State bank of India, there was an increase in the advances from Rs.
659.37 to Rs. 3,655.00 during the study period except in the year 2005-2006. There
was a fluctuation in the year 2005-2006. The mean value of the advances was Rs.
1,950.20 crores. The value of standard deviation was Rs. 1,061.28 crores. The co-
efficient of variation of the advances was 54.42 per cent.
The advances in Indian Bank had increased from Rs. 116.98 crores to Rs.
1,175.25 crores during the study period. The mean value of advances was Rs.
549.10 crores. The value of standard deviation was Rs. 367.06 crores. The co-
efficient of variation was worked out to 66.85 per cent.
It is concluded that all the selected public sector banks showed an increase in
issuing advances. This is because of the government policy which encouraged the
issue of extending credit in a liberal manner to the public.
The compound growth rates of the advances issued by the selected public
sector banks are shown below vide Table 2.7.
109
TABLE 2.7
Trend and growth of Advances in Selected Public Sector Banks
Measures Linear R2 F Significant CGR %
Canara Bank 134.188 0.913 83.615 0.000 18.6
State Bank of India 342.121 0.953 160.779 0.001 25.2
Indian Bank 119.036 0.964 214.375 0.000 29.9

Table 2.7 shows the compound growth rate and the growth of advances in
the selected public sector banks. It is seen from the table that the R2 value was more
than 0.3. So it was considered that the model was fit to analyze the advances
position of selected public sector banks . The level of significance was less than
0.05 in all cases and so the growth values of advances of the above banks were
statistically significant. The compound growth rate was 18.6 per cent, for the
Canara Bank, 25.2 per cent for the State Bank and 29.9 per cent for the Indian bank.
2.11.3.2 Advances of Selected Private Sector Banks
The following table shows the advances made by the selected private sector
banks in Madurai district.
110
TABLE 2.8
Advances Made by Selected Private Sector Banks
(Rs. in crores)
Tamilnad
Year ICICI Karur Vysya Bank
Mercantile Bank
2004 – 05 67.41 36.35 159.98
2005 – 06 318.95 37.28 182.07
2006 – 07 448.97 37.28 201.64
2007 – 08 583.27 37.28 203.71
2008 – 09 665.42 72.01 320.70
2009 – 10 409.20 81.28 320.70
2010 – 11 306.34 126.68 372.87
2011 – 12 538.94 238.39 525.44
2012 – 13 583.08 432.73 699.31
2013 – 14 519.06 612.56 831.65
Mean 443.90 171.10 381.90
SD 76.44 200.12 231.98
CV (%) 17.22 116.96 60.74
It is seen from the table 2.8 that there was an increase in the advances of
ICICI bank from Rs. 67.41 crores to Rs. 519.06 crores during the study period from
2004-2005 to 2013-2014 except in the years 2009, 2010 and 2013. The mean value
of the advances was Rs. 443.90 crores. The value of standard deviation was Rs.
76.44 crores. The co-efficient of variation of the advances worked out to 17.22 per
cent.
111
In case of Karur Vysya Bank, there was an increase in the advances from Rs.
36.35 crores to Rs. 612.56 crores during the study period. In the year 2005 – 2006
the advances were Rs. 37.28 crores and it remained constant till 2007-2008 and it
had increased from Rs. 72.02 crores in the year 2008 – 2009 to Rs. 612.56 crores in
the year 2013 – 2014. The mean value of the advances was Rs. 171.10 crores. The
value of standard deviation was Rs. 200.12 crores. The co-efficient of variation of
the advances worked out to 116.96 per cent.
The advances in Tamilnad Mercantile Bank had increased from Rs. 159.98
crores to Rs. 831.65 crores during the study period. The mean value of advances
was Rs. 381.90 crores. The value of standard deviation was Rs. 231.98 crores. The
co-efficient of variation worked out to 60.74 per cent. It is concluded that all the
selected private sector banks had increased their issual of advances
The compounded growth rate of the deposits held by the selected public
sector banks is shown below wide Table 2.9.
TABLE 2.9
Trend and Growth of Advances in Selected Private Sector Banks
Measures Linear R2 F Significant CGR %
ICICI Bank 31.994 0.301 3.452 0.100 13.7
Karur Vysya Bank 56.055 0.719 20.491 0.002 40.3
Indian Bank 71.448 0.870 53.331 0.000 20.6

112
Table 2.9 shows the compound growth rate of advances by the selected
private sector banks. It is seen from the table that the R2 value was more than 0.3.
So it was considered that the model was fit for the analysis of advances of selected
private sector banks. The level of significance was less than 0.05 in all cases and so
the growth values of advances of the above banks were statistically significant. The
compound growth rate for ICICI bank was 13.7 per cent, for the Karur Vysya Bank
was 40.3 per cent and for the Tamilnad Mercantile Bank it was 20.6 per cent.
2.11.4 Analysis of Credit – Deposit Ratio

The credit – deposit ratio is an important parameter to assess the
functioning and performance of a bank. The computed credit-deposit ratios of
Canara bank, State Bank of India, Indian bank, ICICI bank, Karur Vysya Bank and
Tamilnad Mercantile Bank are given in Table 2.10.
TABLE 2.10
Credit Deposit Ratios of both the Public and Private Sector Banks
State Karur Tamil Nadu

Canara Indian
Year Bank of ICICI Vysya Mercantile
bank Bank
India Bank Bank
2004 – 05 72 84 31 16 48 58
2005 – 06 77 62 40 78 48 62
2006 -07 89 116 43 136 48 59
2007 – 08 94 120 61 156 49 59
2008 - 09 85 140 63 152 50 54
2009 – 10 79 125 64 99 39 54
2010 – 11 90 112 60 73 51 53
2011 – 12 92 106 68 106 75 63
2012 – 13 96 103 76 107 108 75
2013 - 14 112 118 100 86 128 80
113
It is seen from Table 2.10 that credit deposit ratio of Canara bank had
fluctuated during the year 2008-2009 and 2009-2010. In SBI, it had fluctuated
during the study period. In the case of Indian Bank, it had a steady increase except
in the year 2010-2011.
In ICICI bank, it showed a fluctuating ratio during the study period. In the
case of Karur Vysya Bank, credit deposit ratio had declined from 48 per cent in
2004-2005 to 39 per cent in 2009-2010. In the case of Tamil Nadu Mercantile Bank,
credit deposit ratio had declined from 58 per cent in 2004-2005 to 53 per cent in
2010-2011.
The gradual lowering of credit-deposit ratio should be viewed as a slight
improvement in the banking habit of the borrower and not entirely as a matter of
change in the policy alone.
2.12 CONCLUSION
Significance of Customer relationship management, CRM in banking sector
and their benefits to their customers, principles of CRM, challenges for
implementation, profile of sample banks and their working performance were
discussed in this chapter. The major theme of the thesis, viz., perception of service
quality of public and private sector banks and their expectations in this regard are
discussed in forthcoming chapters. In the next chapter the socio economic profile of
the respondents is discussed.
114
What is E-Trade?
• Electronic trading, sometimes called e trading, is a method
of trading securities (such as stocks, and bonds), foreign exchange
or financial derivatives electronically. Information technology is
used to bring together buyers and sellers through an electronic
trading platform and network to create virtual market places.
Content and features
• White-label front end.

• Price making.
• Auto-Hedging.
• Limit order management
White Label Front End
• Hosted e-commerce white-label solutions enable liquidity providers
to price clients directly through a variety of distribution channels
while maintaining brand presence.
• When you build a website, one of your top priorities should always
be to put your personal stamp on the project. You can do this
through your visual style choices, your custom graphics, or even
custom footers that say—in essence—I made this.
Price making
• Automate FX price generation with data from over 2,000 interbank
and broker data sources.
• Price making strategy is done through foreign or stock exchange
rates.
• One of the secrets to business success is pricing your products
properly. Price your products correctly and that can enhance how
much you sell, creating the foundation for a business that will
prosper. Get your pricing strategy wrong and you may create
problems that your business may never be able to overcome.
Auto-hedging
• Aggregation and smart order routing logic for agency, risk and
warehouse based execution.
• Auto hedging refers to the use of algorithms to hedge portfolio risk
or to clear positions efficiently. Besides auto-hedging, algorithmic
strategies include statistical trading, algorithmic execution, direct
market access and high frequency trading, all of which can be
applied to forex transactions.
Limit order management
• Customer limit order management tools.
• An investor with a short position will set a limit price below the
current price as the initial target and also use a stop order above
the current price to manage risk. There are no rules that regulate
how investors can use stop and limit orders to manage their
positions.
Markets and industries
• Foreign exchange
• Thomson Reuters is the leading provider of trading and analysis
platforms for foreign exchange markets.
• Foreign exchange also refers to the global market where currencies are
traded virtually around the clock. The largest trading centers are London,
New York, Singapore and Tokyo. The term foreign exchange is usually
abbreviated as "forex" and occasionally as "FX."
E-Business Today
CONTENTS
E-business ..............................................................................................2
Where does e-business take place? ........................................................2
Types of e-business ................................................................................2
E-commerce and its realtion to e-business.............................................3
Importance of e-business........................................................................3
Pros and cons of e-business....................................................................4
E-business in pakistan ............................................................................5
Conclusion..............................................................................................6
E-BUSINESS
Online Business or e-business is a term which can be used for any kind
of business or commercial transaction that includes sharing
information across the internet.
WHERE DOES E-BUSINESS TAKE PLACE?

E-business is offered to all users via the internet, to internal users via
an intranet (similar to the internet, an intranet is a smaller network of
1
computers usually within a single organization), and to specified users
via an extranet (an intranet partially accessible to specified users from
outside an organization via a valid username and password).
TYPES OF E-BUSINESS
There are 3 main type of E-Business:
1) Business to Consumer (B2C) The most widely recognized
form of e-business, B2C is the exchange of information,
products or services taking place between a business and a
consumer over the internet. As the internet develops, B2C is
continually changing the way consumers acquire information,
the way products are compared against one another and the way
in which they are purchased.
Example:
An example of a B2C only site is amazon.com. Ae.com is an
example of a B2C site housing a physical location as well.
2) Business to Business (B2B) The largest form of e-business in

terms of money spent is B2B. Business-to-business allows
trading to take place between businesses, using a low-cost sales
channel for the sale of goods and services and is responsible for
constantly changing corporate buying habits.
Example:
An example of a B2B site would be a car part company selling
parts to a car dealership, another company, rather than directly
to consumers.
3) Business to Government (B2G) B2G is the online exchange

of information and transactions between businesses and
government agencies, also known as e-government. B2G
allows government agencies and businesses to use electronic
means to conduct business and interact with each other over the
internet.
Example:
An example of a B2G site would be one that offers electronic
tax filing.
2
E-COMMERCE AND ITS REALTION TO E-
BUSINESS
E-business and e-commerce are terms that are sometimes used
interchangeably, and sometimes they're used to differentiate one
vendor's product from another. But the terms are different, and that
difference matters to today's companies.
E-Commerce can be defined as, “any transaction completed over a
computer mediated network that involves the transfer of ownership or
rights to use goods and services. Transactions occur within selected e-
business processes (eg. selling process) and are 'completed' when
agreement is reached between buyer and seller to transfer ownership or
rights to use goods or services." So, while e-business covers the entire
range of online business dealings (from customer service to selling), e-
commerce refers specifically to one entity paying for goods or services
from another entity via the internet. With this in mind, remember that
e-commerce can relate to all types of e-business involved in the
transfer of goods or services, including but not limited to B2C, B2B
and B2G.
IMPORTANCE OF E-BUSINESS
1) COST
Operational costs such as maintenance of inventory and transaction
costs have reduced.
2) MARKETING
Companies using e-business have a wider online presence. They can
advertise their products and services either on their websites or by
hosting them on other domains.
3) COMMUNICATIONS
Adoption of e-business has improved communication in the
hypermarket industry. The use of email has enabled companies to
respond better and faster to customer issues.
4) REVENUES
Companies that have adopted e-business have a faster product
development cycle, enabling them to respond quickly to market needs.
They take advantage of being market leaders to increase revenues
before their competitors can enter the market.
3
PROS AND CONS OF E-BUSINESS
PROS
1) High Quality Customer Service
Customers can provide their feedback or register their complaints quite
conveniently in case of online business as compared to offline
business, and in light of that an e-business can improve its customer
services.
2) No Inventory Cost
An e-business can have minimum overhead cost. You do not need to
have any special physical place to start your business or hire any staff
to operate the business as required in offline business. One can start an
e-business as a intermediary or a middle man.
3) Worldwide Reach of Your Business
An online business has global reach. In
a way people living anywhere in the world are potential customers of
an e-business. Moreover, the e-commerce site is open
24 hours a day, so shopping can be done from there at any time.
4) Bulk Transactions
One can do bulk transactions during one visit to an e-
shop, since there is no limitation of collecting,
packaging or carrying goods in contrast to
shopping from a traditional offline shop.
CONS
1) Less Security
The biggest obstacle in the growth of e-business is the issue of
security. Internet is not a secured source of communication. There are
tools and options available to the hackers whereby they can not only
monitor but also control any data communicated over internet.
Particularly, people are not comfortable while providing their financial
information due to this fact.
2) No physical Proximity with Items Purchased
In certain cases, customers cannot decide about buying the thing before
they can physically examine it. For example, a customer would ideally
want to feel and touch the texture of the piece of cloth before buying.
Similarly, a customer would want to smell the perfume before
4
purchasing. In such cases, people cannot expect to physically examine
the thing before buying it online.
3) Purchase To Delivery Time
As much as the Internet has the advantage of processing orders and
payments in real time, this has little benefit to the customer who
requires the purchased item equally fast. Purchases from your e-
business typically have a time lag from purchase to delivery of the
physical goods. Some customers would rather go to the physical store
and pick up the item unless it's of a digital kind, such as an e-book or
music file.
4) Sectoral Limitations
Not every company can participate in e-business. Some are challenged
in terms of expertise and availability of technology, while others carry
products that can't be shipped economically.
For example, some large, odd-sized items may be uneconomical to
transport across state lines, making it difficult to sell them online.
Other products may be legally restricted, depending on state and
federal laws, such as certain explosives, ammunition and alcoholic
beverages.
E-BUSINESS IN PAKISTAN
E-business in Pakistan is facing many challenges to grow because;
 The people in Pakistan are economically poor and illiterate that

is why the number of users transacting online are limited.
 The number of organizations offering online business is also
limited and few of them are generating sufficient revenues.
 Globalization is increasingly dominating the minds of
progressive business executives in the country to opt for e-
business.
CONCLUSION
Success of e-business strategy like any strategy in Pakistan requires,
Setting the objectives; developing knowledge and training; enabling
technology; redesigning business processes and regulations;
identifying security issues; staffing; movement from conventional to e-
business; cooperating with co-business organizations; continuous
management development programs to keep on updating the e-business
systems; and integration of these plans with the business objectives.
5
Information System
1
IS (information system) is the collection of technical and human resources that provide the
storage, computing, distribution, and communication for the information required by all or
some part of an enterprise . A special form of IS is a management information system (
MIS ), which provides information for managing an enterprise.
2
A combination of hardware, software, infrastructure and trained personnel organized to
facilitate planning, control, coordination, and decision making in an organization.
Advantage
Globalization - IT has not only brought the world closer together, but it has allowed the
world's economy to become a single interdependent system. This means that we can not
only share information quickly and efficiently, but we can also bring down barriers of
linguistic and geographic boundaries. The world has developed into a global village due to
the help of information technology allowing countries like Chile and Japan who are not
only separated by distance but also by language to shares ideas and information with each
other.
Communication - With the help of information technology, communication has also

become cheaper, quicker, and more efficient. We can now communicate with anyone
around the globe by simply text messaging them or sending them an email for an almost
instantaneous response. The internet has also opened up face to face direct communication
from different parts of the world thanks to the helps of video conferencing.
Cost effectiveness - Information technology has helped to computerize the business

process thus streamlining businesses to make them extremely cost effective money making
machines. This in turn increases productivity which ultimately gives rise to profits that
means better pay and less strenuous working conditions.
Bridging the cultural gap - Information technology has helped to bridge the cultural gap by
helping people from different cultures to communicate with one another, and allow for the
exchange of views and ideas, thus increasing awareness and reducing prejudice.
More time - IT has made it possible for businesses to be open 24 x7 all over the globe.
This means that a business can be open anytime anywhere, making purchases from
different countries easier and more convenient. It also means that you can have your goods
delivered right to your doorstep with having to move a single muscle.
Creation of new jobs - Probably the best advantage of information technology is the
creation of new and interesting jobs. Computer programmers, Systems analyzers,
Hardware and Software developers and Web designers are just some of the many new
employment opportunities created with the help of IT.
Disadvantages
Unemployment - While information technology may have streamlined the business process
it has also crated job redundancies, downsizing and outsourcing. This means that a lot of
lower and middle level jobs have been done away with causing more people to become
unemployed.
Privacy - Though information technology may have made communication quicker, easier
and more convenient, it has also bought along privacy issues. From cell phone signal
interceptions to email hacking, people are now worried about their once private information
becoming public knowledge.
Lack of job security - Industry experts believe that the internet has made job security a big
issue as since technology keeps on changing with each day. This means that one has to be
in a constant learning mode, if he or she wishes for their job to be secure.
Dominant culture - While information technology may have made the world a global
village, it has also contributed to one culture dominating another weaker one. For example
it is now argued that US influences how most young teenagers all over the world now act,
dress and behave. Languages too have become overshadowed, with English becoming the
primary mode of communication for business and everything else.
Typical Components Of Information Systems
While information systems may differ in how they are used within an organization, they
typically contain the following components:
1. Hardware. Computer-based information systems use computer hardware, such as
processors, monitors, keyboard, and printers.
2. Software. These are the programs used to organize, process and analyze data.
3. Databases. Information systems work with data, organized into tables and files.
4. Network. Different elements need to be connected to each other, especially if many
different people in an organization use the same information system.
5. Procedures. These describe how specific data are processed and analyzed in order to
get the answers for which the information system is designed.
Computer Hardware
Today even the smallest firms, as well as many households throughout the world, own or
lease computers. These are usually microcomputers, also called personal computers.
Individuals may own multiple computers in the form of smart phones and other portable
devices. Large organizations typically employ distributed computer systems, from
powerful parallel-processing servers located in data centers to widely dispersed personal
computers and mobile devices, integrated into the organizational information systems.
Together with the peripheral equipment, such as magnetic or solid-state storage
disks, input-output devices, and telecommunications gear, these constitute the hardware of
information systems. The cost of hardware has steadily and rapidly decreased, while
processing speed and storage capacity have increased vastly. However, hardware’s use of
electric power and its environmental impact are concerns being addressed by designers.
Computer software
Computer software falls into two broad classes: system software and application software.
The principal system software is the operating system. It manages the hardware, data and
program files, and other system resources and provides means for the user to control the
computer, generally via a graphical user interface (GUI).Application software is programs
designed to handle specific tasks for users. Examples include general-purpose application
suites with their spreadsheet and word-processing programs, as well as “vertical”
applications that serve a specific industry segment—for instance, an application that
schedules, routes, and tracks package deliveries for an overnight carrier. Larger firms use
licensed applications, customizing them to meet their specific needs, and develop other
applications in-house or on an outsourced basis. Companies may also use applications
delivered as software-as-a-service (SaaS) over the Web. Proprietary software, available
from and supported by its vendors, is being challenged by open-source software available
on the Web for free use and modification under a license that protects its future availability.
Telecommunications
Telecommunications are used to connect, or network, computer systems and transmit
information. Connections are established via wired or wireless media. Wired technologies
include coaxial cable and fibre optics. Wireless technologies, predominantly based on the
transmission of microwaves and radio waves, support mobile computing. Pervasive
information systems have arisen with the computing devices embedded in many different
physical objects. For example, sensors such as radio frequency identification devices
(RFIDs) can be attached to products moving through the supply chain to enable the tracking
of their location and the monitoring of their condition. Wireless sensor networks that are
integrated into the Internet can produce massive amounts of data that can be used in seeking
higher productivity or in monitoring the environment.
Various computer network configurations are possible, depending on the needs of an
organization. Local area networks (LANs) join computers at a particular site, such as an
office building or an academic campus. Metropolitan area networks (MANs) cover a
limited densely populated area. Wide area networks (WANs) connect widely distributed
data centres, frequently run by different organizations. The Internet is a network of
networks, connecting billions of computers located on every continent. Through
networking, users gain access to information resources, such as large databases, and to
other individuals, such as coworkers, clients, or people who share their professional or
private interests. Internet-type services can be provided within an organization and for its
exclusive use by various intranets that are accessible through a browser; for example, an
intranet may be deployed as an access portal to a shared corporate document base. To
connect with business partners over the Internet in a private and secure manner, extranets
are established as so-called virtual private networks (VPNs) by encrypting the messages.
Databases and Data Ware Houses

Many information systems are primarily delivery vehicles for data stored in databases. A
database is a collection of interrelated data (records) organized so that individual records
or groups of records can be retrieved to satisfy various criteria. Typical examples of
databases include employee records and product catalogs. Databases support the operations
and management functions of an enterprise. Data warehouses contain the archival data,
collected over time, that can be mined for information in order to develop and market new
products, serve the existing customers better, or reach out to potential new customers.
Anyone who has ever purchased something with a credit card—in person, by mail order,
or over the Web—is included within such data collections.
Human resources and procedures
Qualified people are a vital component of any information system. Technical personnel
include development and operations managers, business analysts, systems analysts and
designers, database administrators, computer programmers, computer security specialists,
and computer operators. In addition, all workers in an organization must be trained to
utilize the capabilities of information systems. Billions of people around the world are
learning about information systems as they use the Web.
Procedures for using, operating, and maintaining an information system are part of its
documentation. For example, procedures need to be established to run a payroll program,
including when to run it, who is authorized to run it, and who has access to the output.
Types of Information System

Three level pyramid model based on the type of decisions taken at different
levels in the organization.
Three level pyramid model based on the type of decisions taken at different
levels in the organization
Similarly, by changing our criteria to the differnt types of date / information /

knowledge that are processed at different levels in the organization, we can
create a five level model.
Five level pyramid model based on the processing requirement of different

levels in the organization
What are the most common types of information system in

an organization?
While there are several different versions of the pyramid model, the most
common is probably a four level model based on the people who use the
systems. Basing the classification on the people who use the information
system means that many of the other characteristics such as the nature of the
task and informational requirements, are taken into account more or less
automatically.
Four level pyramid model based on the different levels of hierarchy in the
organization
A comparison of different kinds of Information

Systems
Using the four level pyramid model above, we can now compare how the
information systems in our model differ from each other.
1. Transaction Processing Systems
Transaction Processing System are operational-level systems at the

bottom of the pyramid. They are usually operated directly by shop floor
workers or front line staff, which provide the key data required to
support the management of operations. This data is usually obtained
through the automated or semi-automated tracking of low-level activities
and basic transactions.
Functions of a TPS in terms of data processing requirements
Inputs Processing Outputs
Validation
Sorting Lists
Transactions Listing Detail reports
Events Merging Action reports
Updating Summary reports?
Calculation
Some examples of TPS
o Payroll systems
o Order processing systems
o Reservation systems
o Stock control systems
o Systems for payments and funds transfers
The role of TPS
o Produce information for other systems

o Cross boundaries (internal and external)
o Used by operational personnel + supervisory levels
o Efficiency oriented
2. Management Information Systems
What is a Management Information System?
For historical reasons, many of the different types of Information

Systems found in commercial organizations are referred to as
"Management Information Systems". However, within our pyramid
model, Management Information Systems are management-level
systems that are used by middle managers to help ensure the smooth
running of the organization in the short to medium term. The highly
structured information provided by these systems allows managers to
evaluate an organization's performance by comparing current with
previous outputs.
Functions of a MIS
MIS are built on the data provided by the TPS
Functions of a MIS in terms of data processing requirements
Internal Transactions Sorting Summary reports

Internal Files Merging Action reports
Structured data Summarizing Detailed reports
Some examples of MIS
o Sales management systems

o Inventory control systems
o Budgeting systems
o Management Reporting Systems (MRS)
o Personnel (HRM) systems
The role of MIS
o Based on internal information flows

o Support relatively structured decisions
o Inflexible and have little analytical capacity
o Used by lower and middle managerial levels
o Deals with the past and present rather than the future
o Efficiency oriented?
3. Decision Support Systems
What is a Decision Support System?
A Decision Support System can be seen as a knowledge based system,

used by senior managers, which facilitates the creation of knowledge
and allow its integration into the organization. These systems are often
used to analyze existing structured information and allow managers to
project the potential effects of their decisions into the future. Such
systems are usually interactive and are used to solve ill structured
problems. They offer access to databases, analytical tools, allow "what
if" simulations, and may support the exchange of information within the
organization.
Functions of a DSS
DSS manipulate and build upon the information from a MIS and/or TPS
to generate insights and new information.
Functions of a DSS in terms of data processing requirements
Modeling
Internal Transactions Summary reports
Simulation
Internal Files Forecasts
Analysis
External Information? Graphs / Plots
Summarizing
Some examples of DSS
o Group Decision Support Systems (GDSS)

o Computer Supported Co-operative work (CSCW)
o Logistics systems
o Financial Planning systems
o Spreadsheet Models?
The role of DSS
o Support ill- structured or semi-structured decisions

o Have analytical and/or modeling capacity
o Used by more senior managerial levels
o Are concerned with predicting the future
o Are effectiveness oriented?
4. Executive Information Systems
What is an EIS?
Executive Information Systems are strategic-level information systems

that are found at the top of the Pyramid. They help executives and
senior managers analyze the environment in which the organization
operates, to identify long-term trends, and to plan appropriate courses
of action. The information in such systems is often weakly structured
and comes from both internal and external sources. Executive
Information System are designed to be operated directly by executives
without the need for intermediaries and easily tailored to the
preferences of the individual using them.
Functions of an EIS
EIS organizes and presents data and information from both external
data sources and internal MIS or TPS in order to support and extend the
inherent capabilities of senior executives.
Functions of a EIS in terms of data processing requirements
External Data Summarizing Summary reports

Internal Files Simulation Forecasts
Pre-defined models "Drilling Down" Graphs / Plots
Some examples of EIS
Executive Information Systems tend to be highly individualized and are

often custom made for a particular client group; however, a number of
off-the-shelf EIS packages do exist and many enterprise level systems
offer a customizable EIS module.
The role of EIS
o Are concerned with ease of use

o Are concerned with predicting the future
o Are effectiveness oriented
o Are highly flexible
o Support unstructured decisions
o Use internal and external data sources
o Used only at the most senior management levels
ADVANCED INFORMATION SYSTEM
Definition - What does Client-Server Model mean?
The client-server model is a distributed communication framework of network

processes among service requestors, clients and service providers. The client-
server connection is established through a network or the Internet.
The client-server model is a core network computing concept also building

functionality for email exchange and Web/database access. Web technologies
and protocols built around the client-server model are:
 Hypertext Transfer Protocol (HTTP)
 Domain Name System (DNS)
 Simple Mail Transfer Protocol (SMTP)
 Telnet
Clients include Web browsers, chat applications, and email software, among
others. Servers include Web, database, application, chat and email, etc.
Techopedia explains Client-Server Model

A server manages most processes and stores all data. A client requests
specified data or processes. The server relays process output to the client.
Clients sometimes handle processing, but require server data resources for
completion.
The client-server model differs from a peer-to-peer (P2P) model where
communicating systems are the client or server, each with equal status and
responsibilities. The P2P model is decentralized networking. The client-server
model is centralized networking.
One client-server model drawback is having too many client requests underrun a
server and lead to improper functioning or total shutdown. Hackers often use
such tactics to terminate specific organizational services through distributed
denial-of-service (DDoS) attacks.
What is Peer Networking?

Peer-to-peer networking is a serverless networking technology that allows several
network devices to share resources and communicate directly with each other.
This technology is available for Windows XP with Service Pack 1 (SP1) and later
clients that run the Advanced Networking Pack for the Peer-to-Peer Infrastructure.
The Peer-to-Peer Infrastructure is a set of networking APIs to help you develop
decentralized networking applications that use the collective power of computers
on a network. For example, peer-to-peer applications can be collaborative
communications, content distribution technologies, and so on.
The Peer-to-Peer Infrastructure provides a solid networking infrastructure so that
you can concentrate on developing applications, because the infrastructure is
developed for you.
The Peer-to-Peer Infrastructure includes the following major components:
 Scalable and secure peer name resolution

 Efficient multipoint communication
 Distributed data management
 Secure peer identities
 Secure Peer-to-Peer groups
Scalable and Secure Peer Name Resolution

The Peer Name Resolution Protocol (PNRP) Namespace Provider API is a name-
to-IP resolution protocol. The IPv6 scope or context that includes all participating
peers is called a cloud. PNRP allows peers to interact with each other within a
cloud.
Efficient Multipoint Communication
The Peer-to-Peer Infrastructure includes the Graphing API that provides efficient
multipoint communication. Like PNRP, peer-to-peer graphing allows a set of nodes
to interact, and pass data to and from each other in the form of a record. Each
record that a peer generates or updates is sent to all nodes in a graph.
Distributed Data Management
Distributed data management automatically stores all records sent to a peer-to-
peer graph until the specified expiration time for each record. Peer-to-peer
networking ensures that each node in a peer-to-peer graph has a similar view of
the record database. If a peer-to-peer graph has a security model associated with
it, the graph contains the following information:
Who can and cannot connect to a graph
Who can secure and validate records based on externally defined criteria
Secure Peer Identities
The Peer-to-Peer Infrastructure provides a Peer-to-Peer Identity Manager API that
allows you to create, manage, and manipulate the peer identities. Peer identities
are used to define names for secure endpoints in PNRP, and can represent any
resource that participates in a peer-to-peer network, including secure peer-to-peer
groups and services.
Secure Peer-to-Peer Groups
The Peer-to-Peer Grouping API combines the Peer-to-Peer Graphing, Identity
Manager, and PNRP APIs to form a cohesive and convenient solution for peer-to-
peer networking application development. The Peer-to-Peer Grouping API uses
the Peer-to-Peer Identity Manager API and a self-signed certificate scheme to
ensure security within the graphing infrastructure. Each group can be resolved and
registered through PNRP, which allows for the name resolution of random peers
within a registered peer-to-peer group. A group can be an endpoint in PNRP, just
like a peer.
For an overview of the Peer-to-Peer Infrastructure, see the article "Introduction to
Windows XP Peer-to-Peer Networking".
Difference Between P2P and Client Server Model
Web-based information displays many benefits of multimedia
technology. Using today's fast broadband connections, it is possible to stream
sophisticated content to a computer anywhere in the world. This is an advantage
for many people as the information can be received and read wherever and
whenever it is convenient for them, which can be a crucial factor for a busy
executive. A significant amount of interactive multimedia content is now delivered
via the internet.
Web information system, or web-based information system, is
an information system that uses Internet web technologies to deliver information and
services, to users or other information systems/applications. It is a software system
whose main purpose is to publish and maintain data by using hypertext-based
principles.
A web information system usually consists of one or more web applications, specific
functionality-oriented components, together with information components and
other non-web components. Web browser is typically used as front-
end whereasdatabase as back-end.
Validation of knowledge
Definition:
Checking that knowledge is fit for purpose, and free from fundamental errors.
Key words:
Knowledge validation, knowledge verification, knowledge evaluation, validation
criteria, knowledge validation principles
Introduction:
Looking at the most popular techniques of KV: graph- tree- or table-oriented, we
try to define certain principles useful in the validation procedures referring to two
levels: general and detailed. Specific dependence of knowledge verification
criteria in contrast to independence of knowledge evaluation criteria are examples
of the general principles. Naturally, each of the individual technique scan be used
for specific, more precisely defined conditions however more universal principles
can be formalized as above.
KNOWLEDGE VALIDATION APPROACHES

OVERVIEW
Among the software community, validation is interpreted as “building the right
product”, verification as “building the product right”. After we assume the
validation process can be considered as some determined composition of two kinds
of tasks: Activities that intend to reach the structural correctness of the KB
(verification),Activities that intend to demonstrate the KB ability to reach correct
conclusions (evaluation).On the other hand, validation refers to different
components of a knowledge-based system. We can validate a knowledge base,
inference engine, and user interface etc. We focus on validation of knowledge,
especially on validation of a knowledge base. In the validation process, two sorts
of activities mentioned – verification and evaluation – are complementary and
therefore different methods to reach their goals are applied.
GENERAL PRINCIPLES OF KNOWLEDGEVALIDATION
To state specific "rules" for knowledge validation, conforming to the established

assumptions, we will present a formal description of each of them, together with
some comments. The list of these rules is presented below.
General principles for knowledge validation
1. Conformity of knowledge validation procedures and criteria

2. Specific dependence of knowledge verification criteria
3. Independence of knowledge evaluation criteria
4. Unity of practical approaches to knowledge validation
5. Complementarily of practical approaches for knowledge validation.
1. According to the first rule: "conformity of knowledge validation procedures and

criteria" particular criteria are assigned to the specific procedure. To be more
precise: verification is identified with completeness and consistency, while the
others (adequacy, reliability and economics) pertain to the evaluation procedure.
2. The second principle: "specific dependence of knowledge verification criteria"
expresses potential interactions between two verification criteria: completeness and
consistency. If we start from checking completeness(which can be effected by a
rule set modification) and then check knowledge-base consistency, the final results
of the verification may be different. Thus, we discover an impact of applied
approaches on achieved knowledge base properties.
3. An output of the third principle - "independence of knowledge evaluation
criteria" states: knowledge adequacy, reliability and economics can be treated as
unconnected properties. As a consequence, the mentioned criteria and evaluation
of knowledge can be tested and measured in any order.
4. The fourth rule - "unity of practical approaches to knowledge validation"
determines the general assumption of the specific validation method. Each method
has a strictly defined procedure, with stated input and output streams, which all
constitute a unity.
5. According to the fifth general principle: "complementarily of practical
approaches for knowledge validation" almost all methods are developed for a very
specific purpose. Complete verification and evaluation require the application of
more than one method. There are very few total solutions in this respect.
CONCLUSIONS
We argued the need for the development of some principles aimed at performing
the knowledge validation process. Analyzing the chosen interrelationships amongst
the components, we have formulated principles with a more general range. They
describe real and potential references among validation procedures and a set of
criteria, stressing some usability aspects. The second group of principles is strictly
oriented towards a particular form of knowledge representation. A set of general
and specific regulations is necessary to perform validation effectively.
DECISION TREE
A decision tree is a graph that uses a branching method to illustrate every possible
outcome of a decision.
Decision trees can be drawn by hand or created with a graphics program or

specialized software. Informally, decision trees are useful for focusing discussion
when a group must make a decision. Programmatically, they can be used to assign
monetary/time or other values to possible outcomes so that decisions can be
automated. Decision tree software is used in data mining to simplify complex
strategic challenges and evaluate the cost-effectiveness of research and business
decisions. Variables in a decision tree are usually represented by circles.
Here’s a simple example: An email management decision tree might begin with a
box labeled “Receive new message.” From that, one branch leading off might lead
to “Requires immediate response.” From there, a “Yes” box leads to a single
decision: “Respond.” A “No” box leads to “Will take less than three minutes to
answer” or “Will take more than three minutes to answer.” From the first box, a
box leads to “Respond” and from the second box, a branch leads to “Mark as task
and assign priority.” The branches might converge after that to “Email responded
to? File or delete message.”

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MIS & Its TYPES

 DSS supports the decision making process rather than

 To save time and effort in decision making process.

 To promote learning, which leads to new demands and

 Provide rapid access to information

 Support for problem solving Phase

 DSS- database plays a vital role in structure of DSS, It

 They are the simplest type of DSS

 Provide access to data

 Information from several files are combined

 Use internal accounting data

 Can incorporate uncertainty

 Used to estimate the effects of different decision

 A descriptive model used to suggest to the decision

 Model based DSS’s use some type of model to perform

 DSS’s support unstructured and semi-structured

 As DSS reduces the time and efforts in collecting and

 DSS allows the decision makers to interact in a natural

 A Group Support System( GSS), Also called a group

 The DSS approach has resulted in better decision

• Before start the topic it is necessary to discuss Knowledge

activity involving a sequence of operations and actors

• Each individual's activities must mesh closely with other people's

• Computer support is for

• Improving communication and coordination

Target IS Collected & Scanned Information:

Problem & Problem Process

that support decision making by senior management.

sources immediately to senior executives offices or boardrooms.

A data flow diagram (DFD) illustrates how data is processed by a system in

Datastore Notations. Datastores are repositories of data in the system.

Dataflow Notations. Dataflows are pipelines through which packets of information

Data Flow Diagram

A workstation is a special computer designed for technical or scientific applications. Intended

DATABASE AND DATABASE

MON Ms office English Pak

• Data: building blocks of information

• Centralized database: data located at asingle

• Unstructuredd ata exist in their original state

15 LACK OFDESIGN AND DATA-

• Most functions aretransparent to end users

• Data storage management

• Data transformation and presentation

• Multiuser access control

LEARNING OUTCOMES (continued)

6 Describe the functions of a data mart

website, in whole or in part.

website, in whole or in part.

Methods for Accessing Files

• Sequential access file structure

numerical or sequential order

– Social Security numbers or account

Types of Data in a Database

Stored in the organization’s internal

Stored in a data warehouse

Methods for Accessing Files

• Random access file structure

irrespective of the physical locations in

number of records need to be processed