Identifying high value customers
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1. The document discusses identifying and profiling high value business customers in order to develop targeted promotions to increase average revenue per user (ARPU) and profitability. 2. It examines how to assess customer relationship management (CRM) systems used to collect customer data and determine customer value through segmentation and clustering. 3. Examples are provided of tailored promotions that were developed for high value business customers based on their needs and behaviors.
Identifying high value customers
- 1. Identifying and profiling High Value Business Customer to develop targeted proposition to further increase ARPU and profitability Stefano de’ Rossi - Paola Mandoloni
- 2. Agenda: Shifting the definition: it’s all about Customer Assessing the key CRM systems used to collect and process Customer data to determine Customer value Examining examples of tailored promotions developed for high value business customer Choosing divers to set business customers’ value
- 3. Drivers shaping the market Customers are our most valuable asset
- 4. ARPU Average cost per minute Traffic distribution Average usage Customers are our most valuable asset
- 5. Shifting the definition: it’s all about Customer Marketing is the process of planning and executing conception, pricing, promotion and distribution of goods, ideas and services to create exchanges that satisfy individual and organizational goals Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Source: American Marketing Association
- 6. Today Italian mobile market is approaching saturation. The consequence is a radical shift in operators customer strategy. The purely quantitative growth of the past years must be replaced by the focused acquisition of profitable customers and the push to maximize profits from existing customer Addressing the loyalty challenge Accomplishing this strategic shift away from the sheer number of customer to attracting and retaining the most profitable ones, goes through a systematic customer interaction and insight strategy • increasing loyalty • enhancing value
- 7. The importance of increasing loyalty Increased loyalty of existing customers creates: • Reduced dependence on “low price” as a marketing strategy • Decreased costs incurred acquiring new business customers • Increased efficiency created by familiarity with customer needs • Increased margins, higher profits and a greater market share
- 8. Loyalty is a behaviour, not an intention When profitability and loyalty are considered at the same time it becomes clear that different customers need to be treated in different ways • increase loyalty • enhance value Addressing the loyalty challenge
- 9. CRM approach A “Customer Centric” approach Identify your customer Differentiate your customer Interact with your customer Customize some aspect Source: Peppers & Rogers 121 Field Book
- 10. Agenda: Shifting the definition: it’s all about Customer Assessing the key CRM systems used to collect and process Customer data to determine Customer value Examining examples of tailored promotions developed for high value business customer Choosing divers to set business customers’ value
- 11. Identify your customers The fundamental goal of market segmentation is to identify groups, segments or clusters of customers that, from a marketing perspective, are meaningfully different from each other. The purpose of such segmentation is to create targeted messages that will trigger the desired response of these customer (either actual or potential) in a more efficient and consistent way Developing a deep Knowledge of our customer Different CRM Strategies for different Customer Supporting our channels, sales & post-sales, with a unique “vision” of the customer
- 12. Dimension & Value segmentation S O H O P M I P L A T IN U M P R IV IL E G E PERSONAL S T A N D A R D S O H O P M I P L A T IN U M P R IV IL E G E PERSONAL S T A N D A R D S O H O P M I P L A T IN U M P R IV IL E G E PERSONAL S T A N D A R D Lineemedie Evoluti -VAS Aziendali Tradizionali Ricchi Internazionali VAS Personali Intercom AOM Fissi Reperibili Tradizionali Accorti ARPU/customer Penetrazione Marginali Ambasciatori Sfide Diam anti Potenziale Sotto la m edia Sopra la m edia SottolamediaSopralamedia Potential growth • High Level caring service for High Value Customer • Building more profitable customer experience • Different retention policies • Tailored offering • Developing specific loyalty policies and campaign for specific segment Behaviour analysis • Improving revenue opportunities with specific 121 marketing actions (cross selling and up selling) Strategic CRM framework 1 2 3
- 13. Segmenting by dimension & value … 1 Customers are grouped by DIMENSION and then by VALUE (value segmentation)
- 14. People use mobile services mainly for business porpouse People who buy may not be the one who use People who use may not be the one who pays for mobile services (vas warning) Different dimension…different issues Strong competitive pressure
- 15. Margin or Revenue ? Both Margin and Revenue curves have the same customer concentration Furthermore, revenue has been verified to be more stable than margin which is highly affected by cost components understanding the value drivers
- 16. such differentiation allows tailoring the organization behaviour to each customer based on that customer’s individual needs. Averagelines avg 4,3 avg 303€ Alfa users -Business VAS Rich & Traditional International Personal VAS OLO Traditional & Safe Fixed users Intercom ARPU …. & behaviour 2 ….. than by behaviour (traffic and vas clustering) in order to identify different clusters that reflects different customer needs.
- 17. Three main drivers of “potential” have been developed: number of lines, Voice usage and Vas usage 3 …. & potential capabilities • Identification of the main variables linked to the key driver whose potential will be evaluated (activity field, revenues, number of employees) • Identification of groups of customers with the same characteristics in terms of behaviours, activity field, revenues, number of employees. • Selection of the “Benchmark Customers” (best 15%) • Evaluation of the coefficients that link the variables to the key driver (numeric evaluation) • Extending the coefficients to all other customer behaving the same group as of “benchmark” CLIENTI BENCHMARK ALTRI CLIENTI Stima delle linee potenziali Regressione logaritmica log(driver b)log(linee) = ααααιιιι ββββιιιι γγγγ* log (driver a)+ * + i * log(driver n)κκκκ + Evoluti -VAS Aziendali Tradizionali Ricchi Internazionali VAS Personali Intercom AOM Fissi Reperibili Tradizionali Accorti
- 18. Marginal Ambassador Challenge Diamonds CUSTOMER RANKING Potential value ActualValue +- +- Different Customers…different strategies…. • ARPU monitoring • Churn monitoring • Consolidate ARPU • Reduce Churn • Increase ARPU • Consolidate Churn • Increase ARPU • Prevent & Minimize CHURN
- 19. …& level of service differentiating caring services & levels according to customer value
- 20. Setting the “benchmark” Customer Benchmark Customers don’t seem to be much “bigger” than non- benchmark but show off because of their high annual expenditure level and the avg number of lines Benchmark Customers don’t seem to be much “bigger” than non- benchmark but show off because of their high annual expenditure level and the avg number of lines Source: Busacca & Associati 7,3 3,9 0,5 0,3 592 € 310 € Basic KPI Avg lines/customer: Avg lines/employee: Avg expense/ customer: Dimensional KPI Avg number of empl.: Avg Revenues: Avg number of locations: Benchmark Customer Non benchmark Customer 14 13 1,75 € mln 2,18 € mln 2 2
- 21. Benchmark Customer vs non benchmark: example Name: Activity Field: Employess: Revenues: Locations: Number of Lines: Lines/Employees: Lines/Revenue: Lines/Locations: Edilizia Frappoli Construction 15 1 mln € 1 5 0,3 5 E-6 5 MEI Sas Transport 20 1,7 mln € 2 9 0,4 5,2 E-6 4,5 EDIL Srl Construction 15 0,7 mln € 1 7 0,5 1 E-5 7 Source: Busacca & Associati Non benchmark Customer Non benchmark Customer Benchmark Customer
- 22. …integrated multichannel approach Every interaction with a customer should take place in the context of all previous interactions with that customer. One goal of every interaction with a customer should be to acquire additional information about that customer that can help you make decisions or implement new strategies. Making every customer interaction a chance to strenghten loyalty and maximizing arpu
- 23. Outbound calls Inbound calls Web/e-mail Point of Sale SMS-MMS Mailing ….different campaign channel Interact with your customer “Make Every Customer Interaction a Great One “ Sales Force
- 24. Agenda: Shifting the definition: it’s all about Customer Assessing the key CRM systems used to collect and process Customer data to determine Customer value Examining examples of tailored promotions developed for high value business customer Choosing divers to set business customers’ value
- 25. Understand customers’ needs Statistical Knowledge Market researches Feed-Back from the Front End Customer Profiling
- 26. Customer Profiling Systems Information system Index Calculation 0 2 0 4 0 6 0 8 0 1 0 0 Est Ove st N or d Datawarehouse DWH User Interface Customer Profiling Application Segmentation Clustering Cluster 1 Cluster 2 Cluster 3 Data Mining Reporting 0,3 0,6 0,8 1,2 2,2 3,9 6,4 11,7 20,5 30,3 42,2 51,1 90 9 1 92 9 3 94 9 5 96 9 7 98 9 9 00 0 1 Customer Profiling in TIM
- 27. KPI Indicators Offers performances monitoring and trends Target for the New Voice offering Analysis One to One CRM Strategy: Loyalty and Retention Customer Profiling is a tool for… Churn prediction (Lock In) Achieving segmentation & Cluster modelling
- 28. Business Knowledge Data Understanding Data Preparation Descriptive & Cluster analysis Customer Value Modelling Segmentation Customer Quality Business Understanding Setting up the knowledge TIM success is built on Customer knowledge To understand and forecast their NEEDS To achieve a SEGMENTATION To differentiate SERVICE & OFFERING
- 29. VAS • PC Card • Byte Blackberry • MMS (Trad-Interatt) • WAP navigation • Unitim-Intranet • SMS DEMOGRAPHICSTRAFFIC Understanding the value drivers Customers are different … one size doesn’t fit all Segmentation to identify like-minded customers: based on behaviour first, then demographics • Call statistics • International • Other Mobile operator • Roaming • Intercom • Incoming/Outgoing • Mobile/Fixes • Employees • # of lines • Corporate Revenues • Location • Industry • Billing information • Credit history
- 30. Complex utilisation of Customer Data Integration of models Customer X Target Client Customer X Target Client Optimal offer Customer X Target Client Optimal offer Optimal channel Customer X Target Client Optimal offer Optimal channel Optimal time Customer targeting Customer profiling Channel optimization Contact optimization ………………… ………………… ………………… ………………… ………………… ……………… ………..…….. ………………… ………………… …………… ………………… Right offer To the right people With the right communication channel At the right time
- 31. Customer Contact Sequence AcquisitionAcquisition TimeTime ValueValue •Selective acquisition policy •Welcome •actions •one2one campaigns •tailored offers •cross-selling •up-selling •loyalty program Loyalty &Loyalty & DevelopmentDevelopment LockLock in &in & RetentionRetention •Value Based renewal activities •Needs & value based retention •“risk index based” •lock in program
- 32. Prepare Program Campaign Target group ChannelOffer Offer C Not-responders Call A Specific group of Customer High Value Low Value Control group Offer A Offer B Offer D Control group Responders Not-responders Responders Not-responders Responders Not-responders Responders Call B Mail C Mail D Mail A Mail B Calll C Call D DESIGN CRITERIA • Cluster Value • Churn Risk Behaviour characteristics • Cost • Effectiveness • Behaviour • Propensity to accept • Alternative channel • Time period
- 33. ex-ante ex-postSeasonal effect ARPU (euro/customer) +- + 8% + %20 + %12 ControlCluster T-1 T0 T1 EX-ANTE EX-POST LOCK IN CAMPAIGN TargetCluster Methodology Monitoring: Ex Ante vs Ex Post analysis Outgoing Voice (min.) Vas Usage Note: all data are just for examples
- 34. ProPro--activeactive ReactiveReactive Lock – In plan Pre-Exit Call Exit Call @ Results and Feedback analysis Lista Clienti Target setting Potential of reference Lista Clienti Outbound call Direct appointment Complaints or request for churn Lock in campaign Outbound calls Direct appointment request for churn Outbound calls Retention: churn management
- 35. Customers at risk Retention offer to keep profitable customers Potential of reference Monitoring Lines with considerable monthly expenditure for several months in succession Warning Indicators: Differentiated offerings based on customer risk profile • Expenditure level • Outgoing traffic reduction with steady incoming traffic • MNP request • Customer Satisfaction level Dynamic management • effectiveness measurement of implemented actions • dynamic analysis of customers at risk • monthly update of customers database Retention: Lock-in plan Customers that generate the highest value are constantly kept under observation and their behaviour is analyzed in depth to intercept any possible signal of risk
- 36. In search for loyalty ?…. Get a dog