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DATA MINING IN
THE FINANCIAL SERVICES INDUSTRY
PRESENTATION TO KNOWLEDGE DISCOVERY CENTRE
(15 FEBRUARY 2001)
Steven Parker
Head CRM
Consumer Banking
Standard Chartered
1
STANDARD CHARTERED
• World’s leading emerging markets bank - Asia, SubContinent, Africa, the Middle East and Latin America
• 740+ offices (55 countries); US$90bn in assets
• Key business lines:
– Consumer Banking - deposits, mutual funds,
mortgages, credit cards, personal loans
– Commercial Banking - cash management, trade
finance, treasury, custody services
• Long-term commitment to Hong Kong e.g. note issuer,
#1 consumer credit card etc.
2
KNOWLEDGE - WHY?
THE NEW IMPERATIVE
Identify Opportunity and Key Success Factors
GOAL
Focus on a Precise Proposition
Business Plan
Build World-Class Talent
METHOD
Amass Actionable Information
Gather Purpose-Appropriate
Infrastructure
Database
+
Deliver Best-of-Breed Solutions
Business Plan
Earn Customer Loyalty
RESULT
I would like
to buy ...
Earn Superior Returns
Source: Corporate Executive Board
3
KNOWLEDGE - WHY?
Revenue
Years of
Relationship
1
2
3
4
5
6
7
8
9
10
Cost
• It is the customers usage of the product over time which has the potential to
create profit
• And our ability to cross-sell & up-sell other products which are also used
profitably
4
KNOWLEDGE - HOW?
Retention
Customer
Relationship
Management
New Customer
Management
Acquisition
Re-pricing
0
Acquisition
Model
6-12
Customer Segmentation
time
(months)
Retention Model
5
KNOWLEDGE - HOW?
KNOWLEDGE OF
CUSTOMERS
• Purchase Behaviour
• Service Needs
TAILORED
PROGRAMMES AND
COMMUNICATION
• Demographics
• Product Usage
• Relationship
• Price Sensitivity etc.
TAILORED CUSTOMER
SERVICE
• Customer Retention
+
• Cross-sell/Utilisation
+
• Pricing Optimisation
+
• Customer De-marketing
+
• Product Re-design
+
• Channel Management
+
___________________________
= HIGHER PROFIT
6
KNOWLEDGE - HOW?
Learning
Test & Learn Cycle –
Definitive Results
Proprietary
Knowledge =
Competitive
Advantage
Today - some learning based on assumptions about “what worked”
Time
7
DATA MINING INTO PRACTICE
Data Warehouse
Customer Profitability/
Segmentation
Campaign Management
Contact Management
8
DATA MINING INTO PRACTICE
Taiwan
DW
India
DW
Hong Kong
DW
Campaign
Contact
Thailand
DW
Philippines
DW
Malaysia
DW
Campaign
Contact
Singapore
DW
Campaign
Contact
Brunei
DW
Indonesia
DW
9
CHALLENGES
• Changing the culture - data-driven, product to
customer, volume to value
• Shortage of skills - analytical, technical,
marketing
• Immature market e.g. vendor networks, public
data, lists etc.
10
SUCCESSES
• Building on “early wins”
• Learn from developed markets - faster cycle time
• No public data = proprietary data even more
valuable
• Ability to combine emerging markets channels
with information capabilities
11
EXAMPLE: RETENTION
Attrition Cycle
10.0%
9.0%
8.0%
Predict Attrition
7.0%
Win-Back
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
Length Of Relationship
Data
Warehouse
Customer
Profitability
Campaign
Management
Contact
Management
12
EXAMPLE: RETENTION
No
Pre-Attrition
No
Yes
Post Attrition
Yes
No
Retained
Yes
Attrition Gating
Yes
High Profit
Post Post Attrition
No
High Profit
No
Low Potential
Attritors
Low Potential
13
EXAMPLE: MIGRATION
Customer Segmentation
7.6%
8
9.9%
10.0%
1
14.2%
2
9.7%
17.1%
6
15.6%
3
4
Data
Warehouse
7
Customer
Profitability
11.4%
5
Campaign
Management
Contact
Management
14
EXAMPLE: MIGRATION
Retain / Grow
Maintain
Segment
Focus
Migration
and
Relationship
Packages
Strategic
Importance
Channel
Usage
Mix
8
7
6
5
4
3
2
1
Mass Market
1
2 (3 5 6)
Mid Market
Affluent
Up-sell
Re-Package
Profitability/Balance Sheet/Potential
Branch
Self- service
Branch
Selfservice
15
EXAMPLE: CROSS-SELL
Depth of relationship
(no. of products held)
Intensity of relationship (no. of transactions)
Data
Warehouse
Customer
Profitability
Campaign
Management
16
EXAMPLE: CROSS-SELL
Business Value Centre
Customer Segments
Wealth
Secured
Un-Secured
Segment 1
BUILD CUSTOMER VALUE
Segment 2
BUILD CUSTOMER VALUE
Segment 3
BUILD CUSTOMER VALUE
Segment 4
BUILD CUSTOMER VALUE
Segment 5
BUILD CUSTOMER VALUE
Segment 6
BUILD CUSTOMER VALUE
Segment 7
BUILD CUSTOMER VALUE
BFS
17
EXAMPLE: CROSS-SELL
Established Loyals
Developing Loyals I
Share of customers
3%
Share of customers
Share of profits
8%
Share of profits
9%
44%
• Multiple account holding is common
• Highest asset balance across segments
• Long relationship time
• 25% of segment has high bank assets
• High transaction activities
• Liabilities low
• High phone banking usage
Developing Loyals II
Borrowing Potentials
Share of customers
12%
Share of customers
10%
Share of profits
13%
Share of profits
12%
• Highest level of multiple deposit account holding
• All hold credit cards
• Average account balance very high
• Most have loans in small amounts
• Mean age is 45
• Deposit balance low
18
EXAMPLE: CROSS-SELL
New Savers
Share of customers
Share of profits
12%
3%
• Dominated by single deposit account holders
• Short relationship time
• Open accounts in response to promotions
Low Value Savers
Share of customers
Share of profits
Low Activity Savers
10%
0%
Share of customers
Share of profits
•z
•z
15%
2%
• Single deposit account holders – mainly saving
accounts
• Mostly customers with one deposit account
• Longest relationship time with SCB
• Highest proportion of static balance
• Mean age is 50
• Over-represented by females
• Dormant customers over-represented
19
•z
TARGET BENEFIT - QUICK WINS
RETENTION
High
MIGRATION
Medium/high
CROSS-SELL
Medium/low
20
FACING THE CHALLENGES
• Building competencies
• Integrating value concepts into all points of
customer contact
• Re-engineering processes in marketing, sales and
service
• Continuing technology investment
21