An Integrated CRM System

1
An Integrated CRM System

• presented by
• Dr Kin-nam Lau
• Associate Professor
• Department of Marketing
• The Chinese University of Hong Kong
• on
• 19 September,2001

2
Content

• 1. A Review
• 2. Understanding the Customers
• 3. Roadmap of an Integrated CRM System
• 4. Macro Analysis ( Segmentation )
• 5. Micro Analysis ( Individual Marketing Plan )

3
A Review
4
A CRM Process
Data Capturing
Data Retrieval
Data Cleansing
Data Mining
Data Application
Sales Execution and Automation
5
Integrated Database
6
Fundamental Marketing Questions

• 1. Does the customer need the product?
• Needs driven by life stage
• Needs driven by occupation
• Needs driven by behavior
• 2. Can the customer afford the product?
• Affordability depends on Income
• 3. Will the customer buy the product from us?
• Final purchase decision depends on
• product and price offered
• Competition

7

• Understanding the customer

8
Understanding the customer

• Dimensions

1. Life stage 2. Income 3. Occupation

• Knowledge Management

• Marketing Book

9
Marketing Book (LifestageSingle)
1. Number of customers
100,000
2. Occupation/Industry Distribution
Blue Collar
Professional
White Collar
Middle Management
Senior Management
15
30
10
35
10
3. Income
High (20)
Medium (50)
Low (30)
4. Tenure Distribution
3 yrs or more (50)
Less than 1 yrs (40)
1-3 yrs (10)
5. Past Profitability
High (5)
Medium (30)
Low (65)
6. Product Ownership
7. Channel
8. Remarks
Bundle card with loans
10
Marketing Book (incomemedium)
1. Number of customers
500,000
2. Occupation/Industry Distribution
Blue Collar
Professional
White Collar
Middle Management
Senior Management
20
25
5
40
10
3. Life stage
Single (30)
Married with children (20)
Married without child (50)
4. Tenure Distribution
3 yrs or more (40)
Less than 1 yr (30)
1-3 yrs (30)
5. Past Profitability
High (20)
Medium (60)
Low (20)
6. Product Ownership
7. Channel
8. Remarks
Cross sell insurance products
11
Marketing Book (occupationTeacher)
1. Number of customers
100,000
2. Life stage
Single (20)
Married with children (40)
Married without child (40)
3. Income
High (10)
Medium (60)
Low (30)
4. Tenure Distribution
3 yrs or more (50)
Less than 1 yr (40)
1-3 yrs (10)
5. Past Profitability
High (20)
Medium (70)
Low (10)
6. Product Ownership
7. Channel
8. Remarks
Bundle UT with deposit
12

• Road Map for an integrated CRM System

13
CRM challenges
Deliver the right product, faster than the
competitors, to the right customer with the right
price at the right time and the right channel.
Requirements 1. Information (Customer data) 2.
Technology 3. Creative marketing ideas and
aggressive sales team 4. Management commitment to
excellence
14
Road Map for an integrated CRM System
Segmentation Classification Schemes
Loyal Customers
Customer Segments Customer Class Customer
Potential Value
All customers
Macro Analysis
Micro Analysis
Individual Inference Engine
feedback
Sales Execution Automation
15
CRM Roadmap
Macro Analysis
16
Segmentation Flow Chart
loyal Customers
Income, occupation, life-stage
Apply classification schemes to all customers
100 customer segments
17
Definition of loyal customer

• Have Payroll account
• Have Credit Card
• Have either Loan/Deposit account
• At least 10 banking transactions in the last 2
  months
• At least one year tenure

18
Classifications

• Income
• 1) lt 10k
• 2) 10k lt15k
• 3) 15k lt20k
• 4) 20k lt25k
• 5) 25k lt30k
• 6) 30k lt50k
• 7) 50k lt70k
• 8) 70k lt100k
• 9) 100k lt150k
• 10) ? 150k

Lifestage 1) Student 2) Single 3) Young Couple
without child 4) Married with eldest child lt
6yrs 5) Married with eldest child lt 18yrs 6)
Married with youngest child gt 18yrs 7) Retired
Job 1) Teacher 2) Doctor 3) Civil Services 4)
Financial Specialists 5) IT Specialists 6)
Sales 7) Self-Employed . . . 100) Housewife
Maximum number of combinations 10 ? 100 ? 7
7,000
19
Segmentation Process to reduce representative
individuals
Past Profitability
Counts
Lifestage
Job
Income
Representative Individuals
Low
Medium
High
single
2
18
80
2120
teacher
High
C1
Segment 1
5
17
78
8401
married
doctor
High
C2
11
28
61
8304
married
Medium
C3
Civil servant
Segment 2
10
31
59
17025
married
Medium
C4
manager
13
24
63
12520
single
IT
Medium
C5
Medium
C6








92
7
1
1520
married
drivers
Low
C6999
91
8
1
2130
retired
Low
C7000
housewife
20
Segmentation Process
Segment 1
Segment 2
21
Opportunity Exploration for Each Segment
Marketer Judgement
Historical Information
Best 2 Products in the future
Customer Potential Value PVFV
Top 2 Current Products
Profile (Assignment Rules)
Members
Segment
2
1
2
1
UT
IN
13.1K
IB
D
Married, Professional, High Income
C1, C2,
1
20K
11K
40
50 100K








L
2.3K
C
D
Housewife Low Income
C528, C6782, C5848
100
20K
55 1K
85 2K

• Assign 5 million customers to 100 segments
  according to profile in column 2.
• Standard Basket Current Product Future
  Product
• Customer Potential Value Current Value Future
  Value
• Note D-Deposit, C-Card, L-Loan, IN-Insurance,
  U-UT, IB-Internet Banking
• Margin 10 of all product

22
Segmentation Results
Segmentation Rules derived from loyal customers
Apply the rules to all customers
Problem It is difficult to design marketing
strategy for each segment ( or micro segment)
23
Customer Class (Macro Segments)
We merge 100 segments into 10 customer classes
24
Relationship Score
Rating on relationship with (1-10) other banks
Rating on past profitability (110)
weighted average rating
Rating on no. of products (110)
Rating on tenure (110)
Relationship Score
Note 1best 10worst
(Good)
(Bad)
25
Customer Measurements and Classification

• Each customer is measured by
• Potential Score (customer class)
• Relationship Score

Relationship Score
Customer Class 1 2 3 4 5 6 7 8 9 10
26
Strategic Focus
27
CRM Roadmap
Micro Analysis
28
Strategy Design (cross-selling)

• Design actionable marketing strategies for each
  customer class

Cross-selling strategies a. Product upgrade
rules b. Product bundle rules c. Event driven
rules d. Exclusion rules e. Pricing f. Product
prioritization rule g. Timing and channel
decisions
1
2
3
4
5
6
7
8
9
10
Customer Class
29
Cross-selling Strategy for Customer Class 3
A1. Product Class Upgrade Rules
Deposit
Card
Loan
Insurance
UT
A2. Product Upgrade Rules
1. Deposit Products
(saving, saving builder)
(Medium Term Fixed Deposit)
2. Loan
(personal loan, installment loan)
(OD facility)
3. Insurance
(Travel, accidental)
(Life term)
(Life saving)
4. UT
(By installment)
(Lump sum)
5. Card
(Classic)
(Gold)
(Platinum)
30
Cross-selling Strategy for customer class 3
Product Bundle Rules
1. Deposit
UT
2. Deposit
Insurance
3. Mortgage
Home Insurance
31
Cross-selling Strategy for customer class 3
Event Triggered Rules
1. Large fund inflow
Lump sum UT
2. Change in address
Selling a property
Lump sum UT
3. Increase in income
Installment UT
4. Newly wedded
Gold card marriage loan
5. Intention to buy 1st hand property (HKID
published in newspaper)
Home Insurance
32
Cross-selling Strategy for Customer Class 3
Exclusion Rules
1. If Deposit, then NO Loans.
2. If Loans, then NO Deposit.
33
Cross Selling Strategy for Customer Class 3
Pricing Rules
34
Cross Selling Strategy for Customer Class 3
Product Prioritization Rule
1. If good relationship, then
prioritize product by margin.
2. If bad relationship, then
prioritize product by successful selling
probability (inversely related to product
margin).
35
Application
Mr Issac Wong
Background Information
Income
Job
Life stage
Education
Social class
30K
Database Marketer
Single, Aged 25
College
B
Customer Classification
Segment
Customer class
Relationship score
Major bank
25
3
2
Super Bank
Customer Behavior
Bargain hunting
Risk attitude
Yes
Risk neutral
Channel Analysis
Branch
Phone
Internet Banking
?
?
Responses to past campaign
?
Solo mail
Phone
?
?
Insert
?
Branch
?
Product Prioritization Principle
By margin
36
Individual Inference Engine
37
Strategy Design (Retention)
Retention Strategy 1. Qualification for
retention 2. Product retention rules 3. Customer
retention rules
1
2
3
4
5
6
7
8
9
10
Customer Class
38
Retention Strategy (customer class 3)
39
Application
Mr. Eric Yip
Background
Customer Classification
Customer Behavior
Channel
Branch
Phone
?
Internet Banking
?
40
Inference Engine
Mortgage
Credit Card
Current Basket
Mortgage terms enquiry
Inactive for one month
Attrition signals
0.2
0.9
Attrition probability
0.5
0.7
Threshold attrition probability to trigger
retention action
/
20 discount on air ticket
Recommended retention action
/
Channel
Phone
Timing
/
Immediate
41
Strategy Design (acquisition and utilization)
Acquisition/utilization 1. Qualification 2.
Family bundle rules 3. Product bundle rules
I II III IV V VI VII VIII IX X
42
Qualification for Acquisition / utilization
lt 0.05
Limit
lt 0.1
Limit
43
Acquisition and Utilization for Customer class 3
Family Bundle Rules
1. IF total deposits from all family
members (sharing same residential phone) gt 0.5
million THEN Deposit rate S 1
2. IF Total credit card spending from all
family members gt 10K per month THEN 999 round
trip tickets to Olympics in Year 2000
3. IF Total OD facilities from all family
members gt 1 million THEN Lending rate P
44
Acquisition and Utilization for Customer Class 3
Product bundle Rules
1. High rate on deposit, if card spending gt 10K
per month
2. Monthly discount on insurance saving plan, if
card spending gt 10K per month
45

• Integrated CRM
• A Dream or a Future Practice

46
Building blocks of an integrated CRM
Check Individual Product Holdings and Determine
Individual Action Plan for 1. Cross-selling 2.
Retention 3. Acquisition / Utilization
Internal and External Data Capturing
Marketing Campaign Planning
Competition
Inference on Individuals Demographics,
socio-economics
Lifestage,
Income, Occupation
Identify Product Needs for Today and Future in
Each Segment
100 Segments of similar past profitability and
needs (Micro Segments)
Individual Customer Measures 1. Potential
Score 2. Relationship Score
10 Customer Classes (Macro Segments)
Develop Macro Marketing Strategies for Each
Customer Class
47
Integrated CRM Dream or Future Practice

• 1. Feasibility
• availability of data and technology
• creativity of marketers and aggressiveness of
  sales force
• management commitment to excellence
• 2. Performance and Precision
• quality of data
• quality of modeling
• 3. Urgency
• competition

48
The End

• Thank You