Data Fusion, Data Mining, and Decision Support System:

Bank Marketing in the 21st Century

Prof. Chan Chi Fai, Department of Marketing

Prof. Lai Siu King, Department of Decision Science and Economics
Prof. Lau Kin Nam, Department of Marketing
Prof. Leung Kwong Sak, Department of Computer Science and Engineering
Prof. Leung Pui Lam, Department of Statistics
Prof. Leung Yee, Department of Geography

The Chinese University of Hong Kong

11 June 2001
 The Introduction
by Prof. Chan Chi Fai

The Chinese University

of Hong Kong
 Introduction:
• CUHK research project supported by :
• 0.7M Strategic Research Fund, CUHK
• 3.5M Innovation and Technology Fund
from Industry Department of SAR
• Hong Kong’s first prominent academic/business cooperation on
design and implementation of Customer Relationship
Management system for financial institutions
• A major Bank in Hong Kong participated as industry partner to
provide data for pilot system implementation since Jan 99

The Chinese University of Hong Kong Page I1

 The Study
by Prof. Lau Kin Nam

The Chinese University of Hong Kong

 Contents:
• Bank Marketing Objectives
• Marketing Technology in the Information Era
• CRM fundamentals
• Major types of Selling
• CRM Roadmaps
– Phase 1 : Data Capturing
– Phase 2 : Data Cleansing
– Phase 3 : Data Mining Applications
• CRM System
• Future CRM Directions

The Chinese University of Hong Kong Page S1

 Bank Marketing Objectives

• New customer acquisition

• Cross-selling / up-selling
• Increase utilization
• Customer retention
• Win-back

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 Marketing Technology in Information
Era
Technology Description

Data Farming Design data capturing sytem

Data Warehouse Enhance data retrieval

Convert data into meaningful
Data Cleansing and Fusion
information
Recover hidden knowledge from
Data Mining
the database
Apply data mining results to
Database Marketing
improve sales/efficiency
Sales Automation e.g. Siebel

The Chinese University of Hong Kong Page S3

 CRM Fundamentals

• Customer Focus
• Speed
• Technology
– Selling by Information
– Selling by Relationship
– Selling by Automation

The Chinese University of Hong Kong Page S4

 Major Types of Selling
Active Selling
• Event Triggered Selling
– Mortgage, Personal Loan
• Product Based Selling
– Campaign Management
Passive Selling
• Customer Based Selling
– By Branch
– By Phone
– By Internet
The Chinese University of Hong Kong Page S5
Phase 1:
Internal Data
Capturing Process
CRM Roadmap
Autopay
Employers

Salary

Purchases Purchases
Bank’s Retail Merchants
Internet Mall Customers

Browsing Demographics, Card data

data banking transaction

Bank’s
Raw Database

Phase 2
The Chinese University of Hong Kong Page S6
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In-house data
A. Types:
– Product Usage Data
– Demographics
– Socio-economics
– Transactional Data
• Credit Card
• EPS B. Problems:
• PPS • Outdated
• Autopay/payroll
• MPF • Incomplete
– Channel Data • Isolated

The Chinese University of Hong Kong Page S7

Phase 2: Phase 1
Data Cleansing
Standardization of
data and format

Identification of
household relationship

Various classification schemes to

convert data to useful information

Enriched fusion External

update Database databases

Customer Survey
Solving missing Analytical and
Validation value problems statistical models

Phase 3
Page S8
 Example:

• Address standardization:
Unformatted: 4/F., K.K. Leung Bldg., ShaTin, N.T.
Formatted: Room no.
Floor
Building
Street
District

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Example:

• Name standardization:
Unformatted: Andrew C.F. Chan

Formatted:
Last Name First Name Christian Name

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Example: BACK

• Mr. Chan Tai Man • Miss Lee Mei Lai

Sex :M Sex :F
Age : 32 Age : 28
Tel. : 26096000 Tel. : 26096000
Address : 25, 5/F., CRM Address : 25, 5/F., CRM
building, Sha Tin, building, Sha Tin,
NT. NT.

Couple
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Example:

• Job Classification
• Address Classification
• Life-stage Classification
• Credit Card Merchant Classification
• SME Classification

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Example:

• Census
• Property transaction database
• CRE (Central Registration Establishment)
• TDC (Trade Development Council)

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Survey:
• Contact information
– Phone, Business address, Email, Website
• Updated demographics
– Marital Status, Number of dependants, Spouse’s information
• Socio-economics
– Job, Income, Property ownership, Car ownership
• Product Interests
– UT Yes No
– Insurance Yes No
– Deposit Yes No

The Chinese University of Hong Kong Page S14

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Enrichment Examples:

Signal Enrichment variables:

ATM withdrawal from
Gambling
race-course
ISP payment from credit
Internet user
card
School payment Age and number of kids

Change of address Buy/sell property

The Chinese University of Hong Kong Page S15

 Example:

Age : 30 Age : 29
MS : Married MS : Married
Edu level : College Edu level : College
Industry : Banking Industry : Banking
Address : 3A, Blk. 5, Address : 6B, Blk. 2,
Island Harborview Island Harborview
Income : $35,000 Income(?) : $35,000 ± 2000
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Integrated Database
Category Variables
Contact Information e.g. Address, phone (Business/home), E-mail, website

Demographics e.g. Age, sex, marital status, Life stage

Socio-economics e.g. Income, job, education, property ownership,

car ownership, social class
Household e.g. Household Income, Numbers/Age of dependants,
Information Spouse information
Relationship e.g. Overall tenure, product tenure, past profitability,
Variables No. of product
Product Ownership/ e.g. RFM (card), Deposit, Loan, UT, Insurance
Usage
Channel e.g. Branch, ATM, Phone, Internet

Behavioral variables e.g. Gambling, Travel, Degree of Luxury, Life-style,

Risk attitude
Page S17
 Next part
Phase 3: Phase 2
Data Mining
OLAP
(query)
Marketing Integrated Database Customer
New
campaigns and Attrition
ready for mining product
customers
Analysis
Prediction analysis
model segmentation

Customer based selling

1. Cross selling opportunity
2. Channel
3. CLV and ROI SWOT 1.Acquisition Attrition
on each
criterion pattern
customer
segment 2.Increase and
Extract and product utilization signals
Cross
internal Customer selling
and retention by
external branch,
signals phone,
internet Targeting,
positions,
pricing,
Event
driven bundling
selling

Strategic
Cross Selling Plan Marketing Plan
Page S18
 Segmentations:
1. By occupation
2. Prizm scheme =
Lifestage ✕ Address class
Married
Single Married Retired
with kids

Public

Private

Luxury
housing

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Segmentations:

3. by shareholders variables
Profitability
Low Medium High

New

Tenure 1–3

3+

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 Name : Liu Wai Chuen
Age : 24
Current Sex : Male Future
Basket Edu : College Basket

Credit Card Mortgage

Deposit UT

Current and Future Value

Past Value

Page S21
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Future Value
Low High

High Retention /
Let go/stay Loyalty Program

Past Value
Aggressive
Low De-marketing selling

The Chinese University of Hong Kong Page S22

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Campaign Management: BACK

Potential Customers in the Database

Selected Selected
Past Campaign Results
Adopters Non-Adopters

Page S23
 CRM System:
Data Capturing

Data Retrieval

Data Analysis

Data Application

Sales Execution
and Automation
The Chinese University of Hong Kong Page S24
 A Comparison:
Before CRM: After CRM:

Selling a good product by Selling a good product by

• Advertising • Information
• Personal Selling • Relationship
• Automation

Product Based Selling Customer Based Selling

The Chinese University of Hong Kong Page S25

Future CRM Direction ——
1. Customer Driven Organization

Customer

Segment 1 Segment 2 Segment 3

Customer manager

Value Equity Retention Brand Equity

Officer Officer Officer
(Price, (Loyalty (Brand
Convenience, Program, Awareness)
Quality) Building
Relationship)

Modified from: Driving Customer Equity, (Rust Zeithaml Lemon), 2001 Page S26
 Future CRM Direction ——
2. Product and Service Diversification

Banking
Products

The Chinese University of Hong Kong Page S27

 End of Presentation

*There would be a Q & A session after the coffee break.

The Chinese University of Hong Kong Page S28

 Coffee Break
Venue : 1/F Foyer
Time : 10:45 a.m.– 11:15 a.m.

The Chinese University of Hong Kong