Sustaining Profitable Customer Relationships Using Data-Driven Marketing in Financial Services 1
Executive Summary Gone are the days when people chose their banks based on location. Today, customers rely on new technologies and channels to conduct transactions from anywhere in the world. Competition is only a click away. Loyalties can change in a matter of minutes. In this age of consumer empowerment, convenience, and choice, it is more important than ever for organizations to gain a deeper understanding of customers interests and behaviors if they wish to sustain lasting and profitable relationships. This paper explains how customer relationships can be threatened by lack of insight into their behaviors and preferences and how organizations can use data analytics and customer-centric marketing to improve these relationships and drive business. Identifying Marketing Problems Financial institutions participate in tens of millions of customer interactions every day across a variety of channels, including Web sites, mobile apps, social media, smart ATMs, kiosks, branch offices, call centers, and email. These interactions result in a vast store of information that must be constantly integrated and analyzed to enable relevant and customized real-time responses. Every conversation and interaction provides insight into customer behavior and preferences. If you do not use all of this information to understand and engage with customers, your competitors will. For example, when a customer is ready to make an investment, the window of opportunity for meaningful engagement may be a few seconds at most, because the competition is only a click away. The pace of acceleration for customer expectations is increasing faster than the pace of innovation from most institutions. Marc DeCastro, IDC Financial Insights According to Forrester Research, 88 percent of people who do online banking use two or more channels to interact with their banks each year. 1 Can you tell when a customer is on the verge of leaving for another institution? Can you identify the right moment to offer a new service? Are current marketing efforts enticing your most profitable customers or driving them away? Most institutions today use best attempt marketing techniques to answer these questions and that is a dangerous strategy in today s data-rich, digitally connected world. While some organizations are starting to explore these new sources of customer information, most are deterred by the complexities of acquiring, integrating, enriching, storing, and analyzing the data. Without accurate and timely insight into the complete customer relationship across the physical and digital environments, marketing teams suffer from the following problems: ~ ~ Incomplete view of customer behavior: Do you understand the reasons behind customer churn? Could you improve the customer experience if you had a holistic view of all customer actions across all channels and parts of your business? Do you have the insight to provide meaningful personalization? ~ ~ Inefficient marketing and inaccurate marketing attribution: Do you use simple last click attribution for your marketing campaigns? Do you understand the golden path to purchase for key offerings? Do you know which marketing channels offer the best return on investment (ROI)? Without the ability to measure attribution across all channels, campaigns, offers, and interactions, organizations are allocating millions of dollars in marketing budgets based on assumptions. ~ ~ Product-focused marketing: Marketing teams often track performance across individual products and campaigns, rather than taking into account the overall customer experience. You may send dozens of offers each month for different products, when only a small handful of them may be of interest to certain 2
customers. By shifting to customer-centric marketing, institutions can improve marketing efficiency and engage customers with meaningful dialogue instead of overwhelming them with irrelevant offers. Analyzing Customer Data Data-driven marketing is the process of using the rich customer data at your disposal to create the relevant offers for the right customers at the right time, based on their behaviors and interactions. To achieve this objective, you must aggregate and analyze all the data available to you, including customer preferences, transaction history, purchases, social networks, geodemographics, and cross-channel interactions to better understand their needs and interests. Figure 1 shows customer trends in multi-channel banking based on recent Forrester Research survey results. % who purchased or applied for a product/ service By phone By mail On the Internet using a cell phone or tablet computer (e.g., Apple ipad)* On the Internet using a desktop, laptop, or netbook computer In person (a ) 2% 2% % of buyers in each channel who researched online (2012) 56% 58% 19% 29% 32% 16% 17% 12% 8% 32% 37% 40% 36% 2010 2011 15% 5% 37% 40% 2012 In person (at a branch On the Internet using a desktop, laptop, or netbook computer On the Internet using a cell phone or tablet computer (e.g., Apple ipad) By phone Base: US online adults who applied for t in the channel listed above in the past 12 months By mail Base: US online adults who applied f t/account except for mutual fund/etf account; small business checking account; small business credit card; small business loan/line of credit; and 401(k), 403(b), or other employer-sponsored ts in the past 12 months (percentages may not total 100 because of rounding) *In 2010 this response option was not available to survey respondents Figure 1: Multi-channel uses by customers in the industry. 3
By integrating and analyzing all of your sources of customer data, you can extract new insight that dramatically improves overall marketing performance: ~ ~ Discover hidden patterns lying deep within billions of customer interactions, gaining predictive insights into customer attrition or marketing attribution. ~ ~ Increase the number of products per customer by understanding their current interests and needs and responding with personalized, relevant, and timely offers. ~ ~ Improve net revenue by optimizing marketing efforts based on varying levels of value to your organization. ~ ~ Provide a seamless, synchronized, personalized experience for customers across all banking channels, around the clock, creating a one bank experience that improves retention and long-term growth. ~ ~ Improve the efficiency and effectiveness of marketing campaigns by matching them to customer preferences at the exact moment of decision making. Taking Six Steps Toward Customer-centric Marketing Customers should perceive your organization as a single entity, no matter how they interact with it, and datadriven marketing is the key to achieving this one bank impression. Companies that are finding success with data-driven marketing use and recommend the following general strategies: 1. Gain a real-time understanding of customer behaviors across multiple channels. As you analyze customer behavior, access all sources of customer data in the physical and digital worlds, such as the following: ~ ~ Online banking interactions ~ ~ Customer conversations at branch locations ~ ~ ATM and kiosk interactions ~ ~ Customer service contacts call center support and email ~ ~ Mobile banking application usage ~ ~ Social media conversations and social networks How Much Could You Increase Customer Profitability? Financial organizations using data-driven marketing to analyze customer behavior have achieved the following measurable results, according to Teradata customer case studies: ~ ~ 50 percent increase in customer response rates, with an estimated ROI of up to 1,400 percent ~ ~ Increase from four and a half products per customer to more than six ~ ~ 3 percent to 5 percent reduction in customer churn What measurable business results could datadriven marketing bring to your organization? By combining data from all of these sources, you can identify events and paths that trigger significant business events, then micro-segment your customer base on newly discovered insights. You can then determine the most effective channels and offers for reaching customers on a similar path. For example, a customer with someone in their social network who has recently closed a checking account and made a large transfer to another bank may soon follow suit. Knowing this, you could intervene and lower or eliminate that risk. 2. Include customer context and value in all of your marketing decisions. If you focus on selling products rather than serving customers needs, you can overwhelm them with offers that could destroy a relationship you are trying to build. Consider the context and make only the appropriate offers that will sustain the relationship. In a product-focused marketing environment, every product group might want to make offers to your highnet-worth customers. In a customer-centric marketing organization, you will carefully manage which offers you make because the relationship is more important than the performance of any single product. 4
3. Optimize customer offers with true personalization. With a holistic, cross-channel view of the customer, you can hyper-segment your audience and make personalized offers. Understanding the behavior patterns that indicate dissatisfaction or interest in competitors may give you the insight to promote unique customized offers. For example, a bank might use multi-channel interaction data to discover that customers who used a savings calculator widget on its Web site were significantly more likely to open a wealth management account, CD, or other savings product. This information could then be used to drive event-based marketing offers to those customers. 4. Test and retest to identify customer needs. Your customer data plays a key role in developing new and innovative product offerings that differentiate your organization s. With real-time and comprehensive visibility into customer behavior, you can refine product offers and iteratively analyze the results. 5. Find sources of customer churn. Any reduction in customer churn can have a significant impact on your bottom line. A careful analysis of customer behavior patterns may hold the key to finding common triggers. For example, discovery analysis of data might show that customers who have been researching CD rates on a bank rate comparison Web site and have a CD about to expire are likely to move their money elsewhere. If the customer value is high, you can proactively present a more competitive offer, such as a higher-interest CD or investment product when they are at the decision point retaining those who were otherwise likely to move their money to a competitor. 6. Look beyond marketing to reuse data for bigger returns. An up-to-date, comprehensive view of the customer is invaluable for detecting fraud, measuring risk, and improving service. By building a comprehensive analytics platform to support data-driven marketing, you can share this robust analytics environment with your fraud prevention team, minimizing loss while gaining operational efficiencies across your organization. Implementing a Data-Driven Marketing Strategy The technologies and analytic platforms are available today for implementing data-driven marketing for your organization. As you put your strategy in place, make sure it supports the following essential requirements: ~ ~ Diverse data sources and types: You need to analyze customer activity across online and offline sources. Doing this requires combining structured data (from customer and banking databases) with multistructured data (Web logs, social media posts, and email). ~ ~ High volumes and frequencies: Create a system to store, capture, and analyze all customer interaction data generated across all channels, including social media. ~ ~ Real-time changes in customer behavior: To make timely offers or identify customer behavior patterns that predict churn, you need up-to-the-minute data. ~ ~ Iterative analysis: You will need the right analytics tools to efficiently run iterative analysis as new data comes in and as you fine-tune and test your new strategies and product offerings. ~ ~ Access to insight: To get the maximum value from your data, provide analysts easy access to the insight with the right tools and analytics applications. ~ ~ Scalability: Data sources and the business environment will continue to evolve over time, and you need to be prepared. No single technology can address all aspects of this kind of data-intensive analysis. Instead, you will need a comprehensive solution such as the Teradata Unified Data Architecture (see Figure 2) that includes the following key components: ~ ~ Data staging: First, you need a way to load, refine, and store all of the multistructured data in a cost-effective and efficient manner. This data may include email, Web log files, call center notes, in-person dialogues, social media conversations, mobile device information, and location data. Financial organizations can use the data-staging platform to cost-effectively integrate and store years of data for future use as market trends emerge. 5
Figure 2: The Teradata Unified Data Architecture ~ ~ Data discovery: Use data discovery analytics to unlock insights from big data. The discovery platform finds hidden patterns and detects customer attrition, the golden path to purchase, social networks, and customer sentiments on your brand, products, and. The data discovery platform supports the iterative analytics necessary to create, refine, and maintain personalized, event-based rules for customers. ~ ~ Data warehouse: An integrated data warehouse gives you a single source of consolidated and shared data to manage the business and deliver strategic and operational analytics to the extended organization. The data warehouse enriches data from the data discovery platform with information such as payment and product usage, customer preference, customer lifetime value, profitability, and credit risk. By uncovering hidden patterns and paths in data, analysts can refine customer treatment in a way that supports ongoing, meaningful conversations and relevant offers. 6
Conclusion Data-driven marketing unleashes the business value that is otherwise hidden in mountains of cross-channel customer data. Using this insight, you can discover new patterns of customer behavior, innovate and test new offerings, and create a consistent one bank approach to the customer relationship: ~ ~ Improve ROI by understanding which channels are most effective for which customers and by offering relevant and timely messages using behavior-based customer segmentation. ~ ~ Improve profitability by increasing the number of products per customer and retaining your most profitable customers. ~ ~ Reduce customer churn by identifying and proactively reducing attrition of your most profitable customers and by improving the overall customer relationship and experience. ~ ~ Know when members of a customer s social network are switching banks. ~ ~ Keep a history of customer tweets about your brand so you can respond in ways that show you truly know your customers. ~ ~ Use marketing data for customer-related functions such as fraud, risk, and customer service. To learn more about data-driven marketing and how Teradata solutions can help you improve customer relationships and drive business, visit www.teradata.com/ industry-expertise/-/. About the Author Ray Wilson is a program director at Teradata with more than 25 years of business consulting and data warehousing experience in the industry. He is responsible for defining Teradata banking industry strategy, marketing, go-to-market solutions, and sales support. endnotes 1. The State of North American Digital and Multichannel Banking 2013, Forrester Research, April 2013. 10000 Innovation, Drive Dayton, OH 45342 teradata.com The Best Decision Possible and Unified Data Architecture are trademarks and Teradata and the Teradata logo are registered trademarks of Teradata Corporation and/or its affiliates in the U.S. and worldwide. Teradata continually improves products as new technologies and components become available. Teradata, therefore, reserves the right to change specifications without prior notice. All features, functions, and operations described herein may not be marketed in all parts of the world. Consult your Teradata representative or Teradata.com for more information. 7 Copyright 2013 by Teradata Corporation All Rights Reserved. Produced in USA. EB-7537 > 0613