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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 95 100 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 70 60 50 30 20 16 10 »» A complement to other 40 37 35 40 30 56 50 customer marketing technology 15 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. 2382PS 06/09 PDF