differentiating your business through your customer experience rcrq

7/29/2019 Differentiating Your Business Through Your Customer Experience Rcrq

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COPYRIGHT 2009. ALL RIGHTS PROTECTED AND RESERVED. 1

make

animpact!

Strategy. Execution. Results.

Differentiating Your Business ThroughYour Customer Experience

February, 2011


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Contents

Our Approach

Peppers & Rogers Group


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Most of the banks are using value based segmentation; re-newing and detailing theirsegmentation schema in line with their business objectives will help them realize untappedpotential

Our Approach

Current Value

How can we differentiate customersaccording to their current value and

that values relative comparison?

Extended Value

How we can measure customerlifetime value and prioritize customers

based not only on their current valuebut also on untapped potential?

Behavior

How we can retain and grow ourcustomers by utilizing their preferences

in products, services and channels?

Needs

How we can examine customermotivations and needs to spot

opportunities in both current andpotential customer base?

Detailing existing segmentation with extended value and need dimensions as well asenriching behavior segmentation will help banks understand drivers of economicimprovements in priority customer groups and formulate effective strategies that createreal value.


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Using segmentation results to fine tune commercial approach with betterinformed decisions will help banks balance long and short term goals

Our Approach

Cost of growth in thefirst year

Revenue generatedfrom growth in the first

year

Metrics

Cost of growth inlifetime

Revenue generatedfrom growth in lifetime

End of Year Targets

Customer Equity Uplift

Micro Segment 4

Micro Segment 3

Micro Segment 2

Micro Segment 1

Customers

Micro Segment 5

Developing effective strategies across a range of marketing disciplines requires broadinsights into customer value, potential value, behaviors and needs.

Grow

Retain

Acquire

Strategies

Promotion

Channel

Price

Value Offerings

Product

Sales & Service Model

Sales & Service

Sales & ServiceProcesses

Customer ExperienceDesign

KPIs & SLAs

Mid / Long-term Plans

Segment Development

Quick Wins

SEGMENTS ENABLERS GOALS


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Extended Value SegmentationExtended value segmentation provides the bank with insight on untappedcustomer potential by calculating customer lifetime value

Life Time

NetPresentValue

- Acquisit ion Cost

+ First ProductSales Revenue

Today

+

Current Value

Value so far Expected revenue from now on

+ Expected Cross-Sales

+ Expected Up-Sales- Churn Risk

Future Expectations

+ Expected Growth (Trend)

? Sociodemographics(Age, Income etc.)

Extended Value with CLV CLV involves thecalculation of currentand potential value:

Current DataCurrent ValueValue Generated in

different product &service groups Sociodemographic

information

ProjectionsCross and Up-Sell

Potential is projected

with analyticalmodels.

Overall Churn Risk isestimated by usinghistorical data.

This approach will help the bank differentiate and prioritize growable customer segments as well asdevelop strategies and fine-tune sales& service model to realize untapped customer potential.


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Extended Value SegmentationStrategies and actions are differentiated for each segment by comparingextended value against current customer value

Most ValuableCustomers

GrowableLimitedOpportunity

ActualValue

Potential Value

Migrators

Most GrowableCustomers

Customers with high current value and comparatively lowpotential value: Retention and cost managementstrategies are often practiced

Most Valuable

Customers who have comparatively lower current valueand high strategic value: Growth strategies are oftenpracticed

Most Growable & Growable

Customers who have comparatively low current andpotential value: Further exploration to determine

likelihood of migration to growable segment is oftenpracticed.

Migrators

Customers who have very low current and potentialvalue: Cost management strategies are often practiced.

Limited Opportunity


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Behavior SegmentationCurrent customer clusters based on product and profit related metrics areenriched with additional behavioral dimensions

Deposit and Investment

Salary Payment OwnershipInvestment Account OwnershipInvestment HistoryDeposit Balance Stability

Loan Usage

Loan VolumeLoan OwnershipLoan Term PreferenceLoan Payment Habits

Transactions

Transaction FrequencyTransaction Currency

Transaction VolumeTransaction Periodicality

Branch Behavior

Branch Transaction RatioBranch Usage DistributionBranch Usage Timing PreferenceBranch Usage Location Preference

ADC Behavior

Transition from Branch to ADCATM Transaction VolumeOnline Banking Usage VolumeContact Center Usage Volume

Campaing/Promotion Behavior

Promotion Usage NumberCampaign Response Rate

Favorite PromotionAverage Promotion Response Time

Trend

Value Trend (Increase / Decrease / Stable)Trend in specific product groupsActivity levelRecency & Frequency

Others

Customer Value per product & servicegroup

Risk (delinquency , payment behavior)Tenure



Behavior SegmentationCustomer data available in the bank systems is utilized to identify behaviorsegments

123456

Customer Data

123456

Behavior Dimensions

I

II

III

IVV

Behavior Based Segments

Data SourcesFeature

Selection

Data

Preparation Feature

Transformation

Data

Mining

ClusterIdentification

Field 1

Field 2

Field 3

Field 4

Field 5

Value

Usage

Services

Channels

Demographics

Group1

Group2

Group3

Group4

Group5

Extraction and selection of data

fields

Preparation of meaningful data

fields from extracted data

Identification of segments of

customers to manage



Behavior SegmentationBehavior segments provide answers on how to retain and grow customervalue by utilizing their preferences

Stars

High networth andprofitablecustomers

0.3% 2.0 %

Very highproductownership

Product Owners

4.2 % 3.3 %

Risk Takers

Complexinvestmentneeds andcapital

5.0 % 1.2 %

Loss

Inactivity inthe last 3months

3.2% 7.3%

Conservative

Lateadopters,risk averse

5.2% 3.1%

Techies

Quickadoptionand techseekers

6.0% 2.0%

Rising Stars

Increase innet worthand productusage

2.0% 11.6%

Most Valuable

Mass Affluent

Loss

Inactivity inthe last 3months

14.7% 1.3%

Behavior dimensions include all the interaction criteria of the customer with the bank from

product preferences to channel usage preferences. Thus behavior segments provide the

customer groups which possess a clear preference among some product/service/channel

combinations.



Needs SegmentationCommon and differentiating customer needs which are the basis for needssegment are identified

Survey results are utilized to determine which common needs the bank customers share and which

differentiating needs exist within the bank customer base.

Uncovered differentiating needs are used to define bank needs segments while common and shared needs

help the bankunderstand customers common expectations from the bank.

Individual Customers

Shared Needs 3 Shared Needs 4

Shared Needs 2

Shared Needs 1

NeedsSegment B

NeedsSegment A

NeedsSegment

C

NeedsSegment D

NeedsSegment E

Common Needs

Differentiating

Needs II

Differentiating

Needs I

Differentiating

Needs III

Differentiating

Needs IV

Differentiating

Needs V

TargetedValue

Propositions

Segment BasedValue

Propositions

1to1 ValuePropositions

Mass ValuePropositions



Understanding Customer NeedsDetailed customer surveys are used to understand customer needs, preferences, behavioralcharacteristics and sociodemographic parameters

Customer SurveysCustomer surveys which holds the basis for Needs Segmentation are designed to collect externaldata from both customers and non-customers.

Please state the importance of following statements interms of their priority in your personal banking needs

Importance

1 2 3 4 5

Receiv ing support and guidance on my personalinvestments

Having 24/7 access to daily financial news and marketinformation

Finding funds to finance my education

Increasing my assets fast, taking high level of risks

Securing my assets against inflation and financial risks

Value Offering Needs

Please state the importance of following statements interms of their priority in your personal banking servicepreferences

Importance

1 2 3 4 5

Speed of services across channels

Having my branch close to my work or home

Look and feel of my branch

Accuracy in serv ices and transactions

Privacy for my wealth and self

Experience Needs Sociodemographics

Please answer the following questions

Gender

Age

Income

Marital Status

Education Level

Occupation

Please answer the following questions regardingyour relationship with the banks you are workingwith

Response

Yes No

I work only with the bank

I work both with the bank and other banks

I prefer the bank for the following products /services

Loans

Insvetment Products

BehavioralCharacteristics



Needs SegmentationNeeds segmentation focuses on identifying the unmet needs/expectationsby using data mining techniques on market research data

Cluster

Ide

ntification

Factor

Ide

ntification

Q

uantitative

Research

Hypothesis

Development

Q

ualitative

Research

HypothesizedNeed 1

HypothesizedNeed 2

HypothesizedNeed 3

HypothesizedNeed 4

HypothesizedNeed 5

IdentifiedNeed Type

A

IdentifiedNeed Type

B

IdentifiedNeed Type

C

IdentifiedNeed Type

D

IdentifiedNeed Type

E

NeedsSegmen

t I

NeedsSegmen

t II

NeedsSegmen

t III

NeedsSegmen

t IV

NeedsSegmen

t V

Hypothesized customer needs and

profiles are identified through

qualitative research internally andexternally.

The hypotheses are either verified or

revised based on quantitative evidence

through customer surveys.

The proven needs are

used to differentiate

customers and segmentthem.

Some customers might

need

A

B

Some customers do

need group of customers

do need

I

II

III

IVV123456

??????

Profilingneed

segmentwith

customerinfo.

Number ofProducts

Tenure

PreferredChannels

PaymentAmount

Demo-graphic

Information

Customers are assigned to

the suitable need based

segments according totheir profiles

... customer is in ...needs segment



Example: Customers Needs Segments

Needs SegmentationNeeds segments, which are the basis for packaging of banks financialsolutions, are defined and used as another tier in micro segmentation

Market Research Needs Segmentation

Seeks extra income from

investments

Prefers shorter term

commitments and likes to control

Gives importance to having

extra information regarding

investment options

Access, convenience and

simplicity is important

Prioritizes the maintenance of

close contact with the bank

Functionalist

Gives special attention to

planning the future

Needs continuous guidance and

information

Needs funds for unexpected

events and for retirement and

future

Saves mostly for tomorrow

Keeping track of banking

activities involving income and

expenses is highly important

Guidance Seeker

Corresponds to young adults

who start their own

independent lives

Represents a phase of moresophisticated needs from the

bank compared to dependent

youngsters

Youngsters

Needs to access funds for

current

investments/expenditures and

necessities

Seeks guidance on loans,

financing options and future

financing

Simplicity and flexibility is

important

Working Out / In Need

Familys short and long-term

needs are the priority

Needs extra funds and money

for immediate needs

Gives importance to savings and

future security

For The Family

Individual Customers

Sh ared Needs 3 Shared Needs 4

Shared Needs 2

Shared Needs 1

NeedsSegment B

NeedsSegment A

NeedsSegment

C

NeedsSegment D

NeedsSegment E

Common Needs

DifferentiatingNeeds II

DifferentiatingNeeds I

DifferentiatingNeeds III

DifferentiatingNeeds IV

DifferentiatingNeeds V



Mass

Segment IntegrationBlending needs, behavior and extended value dimensions in microsegmentation provides the bank with more actionable segments

1 Segment integration focuses on business attractiveness

2 Manageable number of customer segments is created by integrating segments

3Provides capability to design specific treatments for specific types of customers

NEEDS

BEHAVIOR VALUE & EXTENDEDVALUE

Star

Potential

Rising Stars

Growable

Limited

Conservative

Risk Takers

Product Owners

Techies

Credit Card Holders

Functionals

GuidanceSeeker

Youngsters

Working Out

For TheFamily

Keep Walking



Revisiting Commercial ApproachMicro Segmentation results are used to revisit and update the banks currentcommercial approach

MicroSegmentation

Customer Insight viaMarket Research

Private

Prestige

Affinity

Mass

Corporate

M. Corporate

ME

SME

Segmentation Pillars of Usage

SegmentStrategies&ValueOfferings

Segment strategies are defined based on detailedsegment profiles and help banks prioritize customersbased on business objectives

Value Offering design revises marketing mixcustomization for each customer segment.

SegmentDevelopmentPlan

Segment Development Plan aims to create a long-term action plan moving segment-level marketingbeyond one-off programs. Segment developmentplans created for a number of selected segmentshelp the bank reach long-term company goals byutilizing detailed segment profiles.

Sales & ServiceModelDifferentiation

Sales & Service Model Differentiation includesimprovements in sales and service processes, salesand service models, customer experience design,KPIs and SLAs across segments.



Segment Strategies & Value OfferingsAs part of value offering design the bank is able to create sustainable value throughproduct bundling as well as create a better and more convenient experience to customers

SegmentStrategy &Value Offering

Segment Based StrategiesProduct Bundles


Sales andService ModelDifferentiation

Our data driven approach uses behavioral information in a customer segmentto predict needs of other individuals within that segment

Banking

Modules

Day to

DayBankingLoan

DailyCash

Needs

Basic

Savings

BasicProducts

Current Account

Debit Card

Internet banking access

AdditionalProducts

Multiplecurrent

accounts Savings

accounts

Credit cards

Overdraft

facility

Stand-by-service

POS

Insurance

Credit cards

Cash loan

Non-cashloan

Overdraftfacility

Flexible loan

Cheque

Savingsaccounts

InvestmentFunds



Segment Development PlanTo realize the development plans, segment based activity ideas aregenerated based on various segment insight




Segment Based Activities

Reporting and Revision

1 2 3 4

5

ActivityDesign

Analysisand

PlanningExecution Monitoring

Campaign Design: In line with banks marketing strategy and the needs of its existing andpotential customers, activity ideas are developed, campaign goals and general propertiesare defined

Planning and Selection of Target Groups: To attain maximum return on activities, targetcustomer group selection criteria and activity execution steps are detailed

Execution: Activities are executed to the right customers, at the right time through the rightchannels

Monitoring of Activity Return: The results of the executed activities are tracked andintegrated with existing customer information to enable activity result measurements

Reporting and Revision: Results are reported to business units in an organized andsystematic manner and these are used to enhance future campaign effectiveness

1

2

3

4

5



Segment Development PlanSelected number of activity ideas are put into practice both to make thebank gain the competency and to generate revenue




Segment Based Activities

Borrowers

Entrepreneur

Developing

Cross sell Cheque book & Overdraft Deposit Account

Cross sell Automatic Bill Payment

Cross sell Business Loan

ChannelMigration

Internet Account

Cross sell POS & POS Credit

Cross sell Insurance

Upsell Increase of Business Card Limit

Cross sell Business Card

Cross sell Salary Payment

Cross sell Investment Fund

Cross sell Business Card Activation

Micro Segments



Sales & Service Model DifferentiationFine-tunings on sales & service model components such as processes, KPIsand SLAs are identified according to customer segments




Segment Based Sales and Service Model Differentiation

Segment profiles incorporating needs and behaviors help identifysegment-based improvement opportunities in sales & service model whilecustomer lifetime value will help justify the required investments.

Service Processes

Credit into Loan

account, Issuereceipt

Credit into Loanaccount, Issue

receipt

Instruction from

customer to paycash/cheques into

credit card account.

Instruction from

customer to pay

cash/cheques into


Account DebitedAccount Debited

CashCash

ChequesCheques Cheques valid?Cheques valid?

yes

no

Refer to customerRefer to customerCheques pass

clearing?

Cheques pass

clearing?

no

yes

Cash counted and credited

Update account, Issue receipt.



Initial

Contact

EndEndNewpayment

organised

Newpayment

organised

yes

no

End

Encourage change in payment

method towards direct debit

1 Service Models2

Sales Processes Sales Models4

Credit into Loan

account, Issue

receipt

Credit into Loan

account, Issue

receipt

Instruction from

customer to pay

cash/cheques into


Instruction from

customer to paycash/cheques into


Account DebitedAccount Debited

CashCash

ChequesCheques Cheques valid?Cheques valid?

yes

no

Refer to customerRefer to customerCheques pass

clearing?

Cheques pass

clearing?

no

yes





InitialContact

EndEndNewpayment

organised

Newpayment

organised

yes

no

End

Encourage change in payment

method towards direct debit

3

KPIs & SLAs Customer Experience DesignPrinciples

65

PerceptionProcessProduct

Usage LoyaltyActivationEvaluationAwareness

Attrition





Attrition Attrition AttritionAttrition


What are the highest impact initiatives t o move customers towards loyalty?

Marketing Level DashboardC-Level Dashboard

Asset Managers

Transactors

...

2%3%5%Attrition Rate

1.51.231.2

200102150

Customer Lifecycle Performance

New Customer Acquisition

Cross-Sales Ratio

4.0003.5003.000Average Balance per Customer

4.04.04.1Mutuality & Alignment Index

4.02.22.1Commitment Index

4.03.23.1Trust Index

Relationship Performance

1.000250500Average Credit per Customer

1.5001.2501.000Average Revenue per Customer

25%25%25%Customer Profitability

Financial Performance

TargetCurrentLastIndicator

2%3%5%Attrition Rate

1.51.231.2

200102150

Customer Lifecycle Performance

New Customer Acquisition

Cross-Sales Ratio

4.0003.5003.000Average Balance per Customer

4.04.04.1Mutuality & Alignment Index

4.02.22.1Commitment Index

4.03.23.1Trust Index

Relationship Performance

1.000250500Average Credit per Customer

1.5001.2501.000Average Revenue per Customer

25%25%25%Customer Profitability

Financial Performance

TargetCurrentLastIndicator



Sales & Service Model Differentiation

Segment profiles as well as deep insight gained through market researchconstitute a basis for segment based customizations

Mid ValueMass Affluent Mass Market Affluent HNWHigh Value Large Corp

Commercial Banking Private BankingCorporate

Banking

Commercial BranchesRetail Branches Private Banking CentersCorporateCenters

Classic Branches

Phone / Appointment / Client branch visit /Visit to client

Q-MateAppointment / Private

Bank visit / Visit to client

Business Line

Service Model

Primary SalesChannels

Tools

SMEAccount

Managers

Mass Aff.RMs

Meeter Greeters /Customer Representatives

AffluentAccount

Managers

HNWAccount

Managers

Comm.Account

Managers

CorporateAccount

Managers

Call Center Agents (Cross-Sell)

Tellers (referrals only)

Primary Sales

Roles

ATM

Call Center

Internet

Tellers Customer Service Officers

Affluent and HNW Internet

Call CenterAffluent and HNW Call

Center

ServiceChannels

Central OperationsService

Processing

Retail Banking

Specific type of branches fortechnology users No teller, nooperations, limited #of RMs for

sales activities

Specific type of RMsfor customers

showing low actualbut high potential

value

Specific type of CCagents (virtual RMs)for time savvy high

value customers

Specific type of customerrepresentatives for loan user to

close follow up of loan process anddirection to investment products at

the end

Specific type of private bankingcenters and RMs for risk avers

and/or risk taker customers

Rightsizing of customerrepresentative

headcounts regardingactual and potential

value



Contents

Our Approach



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Who we are

World leading management consultancy

Global Consultancy Thought Leader Strong Regional Presence

Headquartered in the U.S.With offices on the five

continents

150 consultants deployedon projects across the

region

Foundersrecognizedamong the worlds top

20 business thinkers

150


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What we do

The Peppers & Rogers Group Value Chain for the Financial ServicesIndustry.

Customersegmentation

Lifetime value

Potential Valuenextbest product offering

Churn Model

RSX

Customer Behavior

Prediction Credit Card

Segmentation

Payroll Segmentation

Best PracticeResearch &Benchmarking

Market entry insight

Data Strategy

Corporate strategy

Human resources

Customer centricity

Portfolio strategy

Private Banking ValueProposition

Affluent ValueProposition

SME Banking ValueProposition

Product SpecificBusiness Models

(mortgage, credit

card)

Sub-prime BankingBusiness Model

OperationalExcellence

Cost Optimization

CustomerExperience

Management

TechnologySelection

Corp. FinanceSupport

Organization Design& Restructuring

PerformanceManagement & KPIs

Cultural ChangeManagement

Project ManagementOffice

Initiatives Piloting

CommunicationPlanning and

Coordination

Sales & Service Model

Customer Service

Campaign Mgmt.

PRODUCT

Product BundlingDesign & Execution

Product Enhancement

Pricing

DISTRIBUTION

Target Setting

Network strategy

Distribution ModelDesign / Execution

Multichannel Strategyand Design

Sales force Mgmt

Staff rightisizingSales

& Service

INSIGHT STRATEGYPRODUCT &DISTRIBUTION

CAPABILITIESDEVELOPMENT

DEPLOYMENT


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Telco PublicSector

RealEstate

Travel &Transport

Retail &Distribution

Sample References

Since its inception, Peppers & Rogers Group has made an impact on someof the worlds and regions leading organizations

FinancialServices

Nike.com

Ministry ofCulture, Youth

and

CommunityDevelopment

Turkish Prime Ministry

State PlanningOrganization
http://www.stc.com.sa/cws/http://www.difc.ae/index.htmlhttp://www.aramex.com/default.aspxhttp://www.orange.com/default.asp?UID=&UAT=http://www.hsbc.com/;jsessionid=PYM0PIEUAV0TNQFIYNLCGWQhttp://www.citibank.com/domain/redirect/logo/citi.htm?BVE=http://web.da-us.citibank.com&BVP=/cgi-bin/citifi/scripts/&M=S&US&_u=visitorhttp://store.nordstrom.com/Default.asp?origin=tab-logo


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Industry References

In the Financial Services Industry, PRGs clients include the following:
http://www.cardmemberservices.com/ccp/index.jsp?pg_name=ccpmapp/cms/home/page/cardmemberservices_homehttp://www.wachovia.com/http://www.lloydstsb.com/homepage.asphttp://www.hsbc.com/;jsessionid=PYM0PIEUAV0TNQFIYNLCGWQhttp://www.citibank.com/domain/redirect/logo/citi.htm?BVE=http://web.da-us.citibank.com&BVP=/cgi-bin/citifi/scripts/&M=S&US&_u=visitor


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For a copy of Customer Strategist, please go to

www.peppersandrogersgroup.com

For a copy of the Customer Experience Report, please send me an email at

[email protected] or just drop your business card

Thank You!
http://www.peppersandrogersgroup.com/mailto:[email protected]:[email protected]://www.peppersandrogersgroup.com/


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Peppers and Rogers Group Americas

Norwalk - ConnecticutUnited States of America

Voice +1 (203) 123 4121

Fax +1 (203) 123 4122

Peppers and Rogers Group EMEA


Dreve du Prieur 19 PriorijdreefBruxelles 1160 BrusselPhone: + 32 ( 2 ) 661 21 11

Fax: + 32 ( 2 ) 661 21 50

COPYRIGHT 2009. ALL RIGHTS PROTECTED AND RESERVED.

The information contained in this document, much of which is confidential to

Peppers and Rogers Group, is for the sole use of the intended recipients. No part

of this document may be reproduced in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written

permission of Peppers and Rogers Group..

150

Global thoughtleadership with strong

regional presence

Peppers and Rogers Group MEA

Al Thuraya Tower1503Dubai Media City

P.O. Box 502264

DubaiUnited Arab Emirates

Voice +971 (4) 391 1353Fax +971 (4) 390 4698

Peppers and Rogers Group Turkey

Buyukdere Cad. Ozsezen Is Merkezi

No:122 C Blok Kat:8 Esentepe,

Turkey

phone +90 212.272.3780

fax +90 212.272.3790

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