Download FICO™ Action Segments

FICO™ Action Segments
optimization and strategy design
The overwhelming majority of
leading financial services firms today
rank retention and cross-selling as a
critical objective to success. To help
firms move from product-oriented
“carpet bombing” to customercentric cross-sell and up-sell
marketing, FICO has introduced
FICO™ Action Segments. This new
solution leverages FICO’s unique
segmentation technology to help
firms identify the offers that will
result in the highest business benefit.
T
oday’s high level of market saturation
and competition in financial services has
caused a shift in many institutions’ marketing
strategy: Customer retention and customer
growth programs have become even more
critical than customer acquisition efforts.
As organizations compete for each others’
customers, many institutions realize the value
of strengthening and deepening relationships
with their current customers. Poorly performed
customer marketing—uncoordinated marketing
campaigns that fatigue and annoy customers—
can backfire in today’s volatile environment
and quickly result in customer attrition.
So what’s the best method of effectively marketing to your customers without annoying them?
Certainly, insight into customers’ responsiveness
to specific actions—and insight into the longerterm value impact of these actions—can easily
translate into tactical, and successful, customer
marketing and growth strategies.
Figure 1: Sensitivity of segments to balance transfer
action impacting share-of-wallet
95
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90
SHARE OF WALLET PERCENTAGE
A new solution for
understanding customers’
offer preferences and building
stronger, more valuable
customer relationships
80
Incremental share-of-wallet due to action
Baseline share-of-wallet without action
70
60
50
50
40
37
35
40
30
20
18
20
10
10
15
0
Segment 1
Segment 2
Segment 3
Segment 4
Segment 5
ACTION BASED SEGMENTS
To provide that degree of actionable insight
in marketing, FICO has developed a new
offering—Action Segments.
group most sensitive to? In this way, results of
Action Segments can also be used to shape
new offerings or actions.
»» A groundbreaking
With Action Segments, you can:
segmentation solution
Action Segments identifies your customers’
preferences for your products. Leveraging
FICO’s unique predictive segmentation tools
and action-effect model-ing, this new solution
provides a method of identifying segments of
customers that are similarly “sensitive” to actions.
Action Segments measures “sensitivity” in
terms of a customer’s reaction to potential
actions. The segmentation scheme is driven by
an institution’s desired business metric—such
as response, incremental usage, profit or wallet
share, for example.
An institution can use Action Segments to find
sensitivities to many different types of actions
it might take in marketing. For example, which
customers are most sensitive to promotional
pricing offers? Or, what offer types is a particular
• Increase the efficiency and effectiveness
of your marketing spend
• Target treatments to customers likely to
generate desirable business outcomes
• Leverage existing data and models
• Identify the right time to make an offer
• Look across existing offers to find the
best one for a segment
• Innovate new product offers to meet
customers’ needs
»» Putting Action Segments
to work: Examples
Some institutions conduct product-oriented
marketing campaigns (matching customers to
a given offer) and some are customer-centric
(identifying the best offer for a given customer).
www.fico.com Make every decision countTM
shows that a low rate and a new line-ofcredit program would have the most impact
on wallet share for this segment. Based on
this insight from the Action Segments, an
institution could pursue a few offer options.
For example, it could offer a lower rate on a
credit card, or a new line of credit, or it may
combine the two into one offering—a new
line of credit with a low rate.
Figure 2: Sensitivity to varying actions/offers
on one segment (Segment 3)
100
Incremental share-of-wallet due to action
SHARE OF WALLET PERCENTAGE
90
Baseline share-of-wallet without action
80
70
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30
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16
10
»» A complement to other
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customer marketing
technology
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0
Low Rate
New LOC
Line Increase
Balance Transfer
Rewards
SENSITIVITY TO ACTIONS—SEGMENT 3
Some use both of these approaches or are in
transition from one to the other. FICO™ Action
Segments provides a great deal of flexibility in
developing customer marketing campaigns—
the following example shows their use in
both of these approaches, illustrated in Figures
1 and 2.
In this example, the actions are balance transfer, a
new line of credit, a rewards upgrade or a lower
rate. Actions are evaluated in terms of how they
will impact the business metric of wallet share.
Five Action Segments were developed.
of wallet is measured here as the percent of
total balances with the institution compared
to total balances with all institutions with data
at the bureau).
The Action Segments analysis in Figure 1
shows that Segment 4 is most responsive to
the Balance Transfer offer in terms of having
the largest percentage impact on wallet share,
followed by Segment 2. However, to ensure this
incremental wallet share would translate into
significant business benefit, we would want to
look into the different profiles of the segments,
such as the dollar balances in each segment.
Figure 1 shows the sensitivities (reactions) to a
Balance Transfer offer (action) across five Action
Segments. The reaction of each segment is
measured by the incremental share of wallet
that will be realized by taking the action (share
Figure 2 analyzes one segment’s (Segment
3) preferences for products in terms of a
comparison of their incremental wallet share
from each offer. The Action Segments analysis
For more information US toll-free
+1 888 342 6336
International
+44 (0) 207 940 8718
Financial services marketers can complement
their use of other segmentation and modeling
technology with Action Segments, because
it provides insights that the others don’t.
Traditional segmentation tools—such as
clustering—describe customers’ profiles.
Action Segments adds tactical insights, creating
segments directed by actions relative to value
realized. They help answer the question: “What
incremental business impact will we realize for
taking this action?”
For more information on FICO™
Action Segments, contact FICO at
1-888-342-6336 or send email to
[email protected].
email
[email protected]
web
www.fico.com
Fair Isaac, FICO and “Make every decision count” are trademarks or registered trademarks of Fair Isaac Corporation in the United States and in other countries. Other product and company names herein may be trademarks of
their respective owners. © 2007-2009 Fair Isaac Corporation. All rights reserved.
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