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Customers

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Look Inside your Customers

Customer Intelligence & Analytical CRM


WWW.CUSTOMERS-DNA.COM FREE Presentation - July 2010

Customers

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Look Inside your Customers

Customer Insight & Marketing

Overall CRM Framework

1.Voiceofthecustomerastoppriority 3. Dynamic segmentation andcustomer value 4. Customerretention &development 5.Multiwave,multi channelcampaigns

2. Customer Insight

6. Continuous improvement strategy

7.Organization process,programs,KPIs,incentives 8.ITarchitectureandinvestmentprioritization 9.Implementationapproach Doit,Tryit,Fixit 10.Newproductdevelopment CRMinput


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Customer Insight for CRM

TYPEOFINSIGHT
CRM

Example of insight Propensity to churn by customer Drivers of customer value Likely actions to drive crosssell/up-sell Drivers of downward migration

Typical methodology used to generate insight Data mining Targeted research

Customer insight

Newproduct development

Unfulfilled needs Willingness to pay for new product/service offering

Focus groups Quantitative research

Branding

Needs and behaviors by segment Media consumption and channel usage by segment Population distribution within country Population distribution within customer base
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Focus groups External sources Conjoint analysis

Networkbuildout

External sources Data mining Focus groups


Focusofthis presentation

Marketing Actions using different Segmentation Schemes

TYPE Needs/Attitudinal
Analysistoascertaincustomersneeds,wantsor attitudespertainingtothecompanysservices andproducts

APPLICATIONS
Brandimageandproductpositioning Tailoringcustomercommunicationsmessages Newproductdesignandpromotions Supportsservicedeliverystrategy Targetingprospects/acquisition Newofferdevelopment BranchesNetworkDesign Targetingforexistingproductmanagement Targetingchurnprevention Lifestagemarketing DeferentialCustomerRelationshipMarketing KPIstrackingandcompetitionanalysis Monitorandmeasurethenumberandvalue growthwithineachsegment(businessplanning) Executeservicedeliverystrategy Investmentresourceallocation&prioritization Customermanagementstrategy EfficientCampaignTargetingforbetterROI SupportofNextBestActivity

Demographics
Describesthesegmentbasedondemographical informationmanytimesretrievedfromexternal lists

Behavioral
Grouping peoplebyhowtheyactmulti dimensionaltechniques,e.g.,detailusage, buy,revenue

Value
Usingacustomerprofitabilitymeasure,e.g., billedrevenue,ARPU,MARPU,LTV

Propensity
Grouping peopleusingalsoderived propensityvalues,e.g.,presentvalueVS potentialvalue,valueVSrisk

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Predictive Scores Could Mean

Likelihood to respond to an offer Which product to offer next Estimate of customer lifetime Likelihood of voluntary churn Likelihood of forced churn Which segment a customer belongs to Similarity to some customer profile Which channel is the best way to reach the customer

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Three Methods to Drive Retention & Development

Campaigns

A customer centric company needs to build expertise in three distinct capabilities to drive retention and development initiatives
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Type of Campaigns

USE OF CAMPAIGNS

Company-scheduled campaigns The company decides to run a campaign towards a target group at a time that fits the companys outbound campaign execution schedule

Outbound

Company initiates a contact either based on a company schedule or on an event e.g., customer moving house

Event-triggered campaigns An event in a customers life triggers a campaign to be run towards that specific customer

Inbound

A customer initiated contact is used to make a campaign offer once the reason for the contact has been dealt with

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Customers

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Look Inside your Customers

Data Mining in the Analytical CRM Framework

What is Data Mining

Data

Information

This what Data Mining is all about

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Data Mining Methodology CRISP DM

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Data Mining Applications in CRM


Segmentation
Value Based Segmentation Present Value VS Potential Value Present Value VS Risk Behavioral Segmentation Multi Attribute Segmentation

Prediction Classification
RFM Churn Prediction Cross/Up Selling Modeling Credit Risk Propensity Models Acquisition Modeling

Campaigning
Campaign Testing using Control groups Next Best Activity
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Predictive Technologies in Data Mining


Logistic Regression Models
Predict likelihood of purchase Statistical knowledge needed very effective for linear correlations Predict likelihood of purchase More complex (black box) but sometimes more accurate Predict likelihood of purchase No theory assumptions needed very descriptive regarding results Find segments mostly based on product mix and transactions One of the most important tools for unsupervised segmentation Groups of products typically held together Very popular as Market Basket Analysis the simplest way to X selling Actions and events which indicate the next purchase Very popular for Web Mining taking into account the time order
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Neural Networks

Rule/tree induction Models

Clustering Models

Association Detection

Sequence Detection

Behavioural Segmentation (mobile telephony)

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Association Analysis (fixed telephony)

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Data Mining Effectiveness

Data mining significantly improves targeting and ROI of direct campaigns Data mining models can catch 5 to 6 times more churners than randomness Models accuracy is always dependent on data
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The Cumulative Gains Chart

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% ResponseModel NoModel 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
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x-axis gives the population percentile y-axis gives % of captured responses customers with top 10% of the scores account for 30% of responders

Classification Trees

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Customers

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Look Inside your Customers

Putting them All Together Deployment

Next Best Activity Components

The main NBA components Credit ability and behavior (Credit Scoring) Current and expected customer Value (Customer Profitability and Value based segmentation) Customer segments based on behavioral, demographical, surve y and financial attributes (Customer Segmentation) Probability of customers accepting cross/up/deep selling activities (Supervised propensity Modeling) Probability of customers voluntary churn in the future (Churn Prediction)
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Next Best Activity in Action

Retentionofhighvalue customersisalwaysa firstprioritytask

Customerdevelopment shouldbeappliedtolow riskcustomers

Operational CRM Campaign Management Analytical CRM

DWH & Data Marts

Surveys & Feedback

Understanding of Customer Lifecycle and Migration Streams

Segment-Management integrated Multi-Channel Management

Product/Channel Affinity & Churn Risk Scores

Inbound Offering Branches - MicroMRK

Inbound Offerings Services to Sale Direct Marketing Outbound E-Mail Direct Marketing Outbound Mail

The CRM House

Direct Marketing Outbound Call

Contact Strategy

to 1

Instruments 1

Analytical Foundation

Tactical Segmentation and Clustering

Advance Analytical Techniques

Profile based Offering Internet

Customer value and Customer profitability

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Segment based Advertising

Sources used for this presentation

The main source of this presentation is the book: Data Mining Techniques in CRM: Inside Segmentation

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