Using customer segmentation and insights to create loyalty - Efma Conference Barcelona 2010

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  • 1. Using
customer
segmenta/on
and
insights
to
create
loyalty
Barcelona,
26
November
2010
Roxana
Hidan

Deputy
Director
‐
Product
Management
Directorate
OTP
BANK
ROMANIA

Loyalty: customer retention and communication Avem încredere
  • 2. Agenda
 •  Introduc/on
 •  The
Importance
of
Knowing
Your
Customers
 •  Using
Segmenta/on
for
Understanding
Your
Customers
 •  OTP
Bank
Romania’s
Experience
 •  Lessons
Learned
Loyalty: customer retention and communication Avem încredere
  • 3. Introduc/on
 OTP
Group
 Branches
 





























1507
 Employees
 








30,047
 Number
of
clients






~12.2mn
 Profit
a[er
tax1





84.7
HUF
bn
Loyalty: customer retention and communication Avem încredere 3
  • 4. The
Importance
of
Knowing
Your
Customers
in
general…
•  to
 preserve
 the
 most
 valuable
 asset
of
the
Bank
 Customer retention•  to
 provide
 products
 and
 services 
 which
 effec/vely
 sa/sfy
 customers
needs
 Customer Customer Customer•  to
understand
how
and
when
you
 satisfaction profitability loyalty are
 crea/ng
 value
 for
 your
 customers
•  to
 iden/fy
 and
 focus
 on
 those
 Customer customers
 which
 offers
 the
 best
 acquisition opportuni/es
 for
 profitable 
 growth
Loyalty: customer retention and communication Avem încredere
  • 5. ….and
the
SMEs’
in
par/cular
 •  Small
 businesses
 are
 different
 in
 •  The
 tradi/onal
 approach
 of 
 many
ways:
 compe/ng
 on
 price
 or
 product 
 alone
 is
 a
 losing
 proposi/on. 
 –  Industry
 Instead
 you
 should
 look
 for
 a
 –  Needs
 sustainable,
 differen/ated
 value 
 –  Capabili/es
 proposi/on.

 –  Trust
 –  Business
strategies
Value
proposi0on
=
“Why
should
I
do
business
with
you
and
not
somebody
else?”
 Loyalty: customer retention and communication Avem încredere
  • 6. Segmentation is essential…. •  for
 understanding
 where
 you
 stand
 and
obtain
more
informa/on
about 
 the
customers
 •  for
 determining
 customer 
 distribu/on
 and
 porbolio
 sensi/vi/es



 •  for
realizing
that
it
is
not
possible
to
 serve
everybody
and
that
you
need 
 a
 different
 approach
 for
 each 
 segment
 (loyalty,
 reten/on, 
 standardiza/on,
up
or
out
etc.)

Loyalty: customer retention and communication Avem încredere
  • 7. .
.
.
and
begins
with
an
understanding
of
your
data
resources
 A
 deeper
 understanding
 of
 small 
 business
 customers
 can
 be
 achieved 
 through
 the
 iden/fica/on
 of
 homogenous
groups
of
customers
within 
 the
small
business
segment
based
on
the
 following
types
of
criteria:

   
 Demographic:
 Non‐financial
 and
 financial
characteris/cs
   
 Behavioral:
 Product
 usage
 and
 purchasing
paferns
  AFtudinal:
Preferences
and
needs
  Value‐based:
Customer
value
to
Bank
Loyalty: customer retention and communication Avem încredere
  • 8. Our
experience
in
segmenta/on
is
an
example…
 Customer distributrion •  “Green”
 ‐
 the
 most
 profitable
 clients. 
 This
 segment
 generates
 more
 than 
 80%
of
the
revenues;
 Green 9% 23% •  “Poten/al
 green”
 –
 registering
 a
 good
 Potential Green cross‐selling
ra/o
these
clients
are
the 
 main
providers
of
liabili/es
within
SME 
 40% Orange segment;
 28% Red •  “Orange”
 –
 the
 larger
 SME
 segment 
 registering
 a
 sporadically
 product 
 usage
 and
 an
 income
 contribu/on 
 which
 is
 not
 covering
 the
 opera/onal 
 costs;
 •  “Red”
‐
the
inac/ve
clients
Loyalty: customer retention and communication Avem încredere
  • 9. …and
we
looked
for
addi/onal
insights
to
befer
understand
our
customers’
needs
 I
 ‐
 
 “Friendly
 approach/
 kind
 personnel”
 R‐

“Very
well
trained
personnel”
 S
 ‐
 “Electronic
 and
 on‐line
 services”
 F
‐
“Short
wai/ng
/me”
 J
 ‐
 
 “Professional
 (financial)
 counseling”
 D
–
“Loyalty
program”
Loyalty: customer retention and communication Avem încredere
  • 10. Designing
a
customer
loyalty
program
The
 Golden
 rule:
 keeping
 old
 customers
 is
 always
 less
 expensive
 than
 geong
 new
ones
The
 risks:
 any
 loyalty
 scheme
 might
 generate
 an
 immediate
 decrease
 in
 net 
 revenues
if
it
is
not
thought
through

The
general
principles
of
the
approach:
o  Simple:
 easy
 to
 implement,
 easy
 to
 be
 explained
 to
 sales
 force,
 easy
 to
 explain
to
customers,
easy
to
be
understood
by
the
customers.

o  Timely:
if
the
/me
to
receive
the
reward
is
too
long
the
risk
is
that
the
client 
 will
lose
mo/va/on.
o  Win/Win:
link
the
customer’s
value
with
the
value
to
the
customerLoyalty: customer retention and communication Avem încredere
  • 11. Key
steps
to
build
the
scheme
o  Compute
 the
 average
 expense
 paid
 by
 o  Make
simula/ons
to
es/mate
the
number 
 customers
 for
 each
 of
 the
 product 
 of
 new
 customers
 to
 be
 enrolled
 or
 to
 included
in
the
scheme
 migrate
 from
 “dormant”
 to
 ac/ve 
 accounts
 to
 compensate
 the
 decrease
 in 
o  Compute
 the
 points
 awarded
 for
 each 
 profitability

 product
 based
 strictly
 on
 the
 difference
 among
average
expense
 o  Design,
implement
and
pilot
the
workflow
o  Decide
 upon
 the
 amount
 of
 generic 
 o  Construct
 the
 marke/ng
 campaign
 and
 discount
 to
 be
 offered
 and
 compute
 the
 strategy
 (branding,
 message,
 channels 
 value
of
each
point
 etc.)

o  Decide
 the
 mul/pliers
 to
 be
 used
 in
 the
 o  Internal
 launch
 of
 the
 system
 presen/ng
 first
launch
of
the
program
 its
features
and
work
flow
o  Design
 and
 test
 the
 automated
 tool
 to
 o  Launch
 the
 reward
 system
 and
 make
 it 
 incorporate
 the
 algorithm
 of
 awarding 
 available
to
customers
 points
Loyalty: customer retention and communication •  a Avem încredere
  • 12. Key success factors • 
Maximizing
reten/on
of
the
most
profitable
 Define
your
goal
 customers
 • 
Maximizing
the
profit
per
customer
 • 
Understand
where
you
stand
 Segment
database
 • 
“One
size
fits
all”
is
not
the
way
 Understand
customers
 •  What
are
the
sources
of
sa/sfac/on/dissa/sfac/on?
 mo/va/onal
triggers
 Gain
addi/onal
insights
 •  Quan/ta/ve
AND
Qualita/ve
research
 Establish
behavior
 •  Understand
product
usage
and
place
safeguards
not
to
 paferns
 lose
revenues
 •  Increase
 the
 probability
 that
 your
 customers
 will
 do
 Build
the
bofom
line
 more
 business
 with
 you
 and
 that
 when
 they
 call
 for
 a
 product
or
service,
it
is
ours
they
choose.

Loyalty: customer retention and communication Avem încredere
  • 13. Thank
you
for
your
aJen0on! 
Contact
details:
Roxana
Hidan
Deputy
Director
‐
Product
Management
Directorate
OTP
BANK
ROMANIA

Email:
roxana.hidan@otpbank.ro
Loyalty: customer retention and communication Avem încredere
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