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Gruppo UniCredito Italiano
Giorgio Redemagni
Marketing Information Systems Manager
Paris, 2002 June 11-13
Increasing Retail Banking Profitabilitythrough CRM:
the UniCredito Italiano Case History
Gruppo UniCredito Italiano
UNICREDITO ITALIANO GROUP OVERVIEWUNICREDITO ITALIANO GROUP OVERVIEW
In Italy In Italy (2001):(2001):• 1st in Operating Income and
Market Capitalization• 2nd in Interest Margin and Income
from Banking Activities• 7 Banks• Full Retail & Corporate Banking services• 6,5 millions retail customers• 2,924 branches
In Europe In Europe (2001):(2001):• 3rd in pre-tax RoE (28.9%)• 5th in Cost to Income Ratio (55.2%)
UniCredito ItalianoHolding
BancaCRT
CreditoItaliano
Investment Banking
ItalianBanks
Wholesale Banking
Foreign Banks
ClarimaXelion
ROLO Banca
CariveronaBanca
CassaMarca
CRTrieste
UBM
TradingLab
Bank PEKAO
BulBank
Pol’nobanka
SplitskaBanka
CARITRO
Asset Mgmt.
PIONEER
RETAIL BANKING
UniCredito ItalianoCRM
Gruppo UniCredito Italiano
• Business Objectives
• CRM Organization and Processes
• CRM Information System
• Project Roadmap and Methodology
• Achieved Results
AGENDAAGENDA
Gruppo UniCredito Italiano
• Business Objectives
• CRM Organization and Processes
• CRM Information System
• Project Roadmap and Methodology
• Achieved Results
AGENDAAGENDA
Gruppo UniCredito Italiano
CUSTOMER RELATIONSHIP MANAGEMENT: A DEFINITION
Customer Relationship Management (CRM) is a business strategy aimed at
• Increasing customer profitability over time
• Maximizing customer satisfaction
through a mix of
• Business Processes
• Organization Steps
• People’s Skills
• Enabling Technologies
Source: Gartner Group
CRM
TECHNOLOGYTECHNOLOGY
PROCESSESPROCESSES
ORGANIZATIONORGANIZATION
SKILLSSKILLS
Gruppo UniCredito Italiano
CRM PROJECT MISSION AND OBJECTIVES
MissionTo deploy a CRM System supporting UniCredito’s CRM Business Strategy in Retail Banking for Italian Banks
Business Benefits
! Increased Profitability
! Improved Cross-selling
! Decreased Attrition Rate
! Increased Propensity-to-buy
Objectives! To improve effectiveness of marketing campaignsthrough better targeting
! To retain most profitable customers
! To increase customers’ wallet share
! To improve customer satisfaction by offering" The right product " At the right time" Through the right channel
! To provide a customer-centric view throughout theorganization
Gruppo UniCredito Italiano
• Business Objectives
• CRM Organization and Processes
• CRM Information System
• Project Roadmap and Methodology
• Achieved Results
AGENDAAGENDA
Gruppo UniCredito Italiano
ORGANIZATION SUPPORTING CRM STRATEGY
Hence:
! dedicated CRM Business Unit
managing the whole strategy
! specific functions of the Business
Unit managing each phase of the
CRM process
CRM - Marketing Information Systems
CRM - Planning CRM – Data Analysis CRM - MktgCommunication
DATA MININGAND
TARGETINGCAMPAIGN
MANAGEMENT COMMUNICATIONCAMPAIGN
PLANNING
Gruppo UniCredito Italiano
CRM PROCESS: CUSTOMER PROFILINGCRM PROCESS: CUSTOMER PROFILING
Fidelization• Attrition Scoring• Loyalty Programme
High Profitability
HighAttrition
Customer Segmentation• Attrition Scoring• Wallet Share Estimation
Up-sellingCross-selling
• Multi-banking Scoring • Propensity-to-buy Scoring
HighLoyalty
Find Best Prospects(Top Customers- like)
Prediction
Low Profitability
! For each customer define predictive indicators and KPIs to track over time
! Identify clusters of customers, having relevant business features, to consistently address
$++
$--
Retention• Loyalty Programme• Lifetime Value Estimation
Gruppo UniCredito Italiano
CRM PROCESS: CAMPAIGN MANAGEMENTCRM PROCESS: CAMPAIGN MANAGEMENT
Bank
ASSESSMENTCAMPAIGNEXECUTION
SEGMENTATION &PLANNING
CAMPAIGNDEFINITION
• Target endorsement• Planning endorsement
Target Selection
• Branches• Account Managers
• Evaluation of Results
• Learning from experience
Define contents:• Macro-target• Budget• Timing • Media mix
• Verify consistency• Analysis and
segmentation• Targeting• Campaign Planning
• Sharing of • Results • Businessevaluation
• Direct Mail• Call Center• Internet• Ads•...
CRM BusinessUnit
! Bank defines contents, demands consultancy and decides! CRM Business Unit designs and plans marketing operations as well as defines
related analytics, and eventually measures results
Gruppo UniCredito Italiano
• Business Objectives
• CRM Organization and Processes
• CRM Information System
• Project Roadmap and Methodology
• Achieved Results
AGENDAAGENDA
Gruppo UniCredito Italiano
THE MARKETING PROCESS: CLOSING THE LOOP
• Where are we now ?• What strategy ?
• What have we achieved ?• Measurement
• Why are we here ? • Planning / Targeting
• Marketing Operations
• CampaignExecution
Source: Gartner Group
AnalyzeExecute
Plan
TrackOperational CRM• Marketing Automation
Analytical CRM• Business Intelligence
• Data Mining
CustomerIntelligence
Gruppo UniCredito Italiano
CRM FRAMEWORKCRM FRAMEWORK
CUSTOMER DATA WAREHOUSE
MAR
KET
ING
AU
TOM
ATIO
N
DAT
A M
ININ
G
QU
ERY
& R
EPO
RTI
NG
CUSTOMERRELATIONSHIP MANAGEMENT
OLA
P
Gruppo UniCredito Italiano
CUSTOMER DATA WAREHOUSE
## FactsFacts
• Product Ownership• Statement Balance• Transaction Amt.• Profitability• Contacts (I/O)
## DimensionsDimensions
• Customer• Household• Product Type• Channel• Geography• Bank Organization• Campaign
# Overview• Heart of CRM System• Pre-defined Data Model for Retail Banking• “Light” Personalization • Data History: 24 on-line Monthly Snapshots
# Size• Current Size: 750+ GB
• Final Estimated Size: 3 TB
# Monthly Records• Customer Personal Data: 6 millions• Checking Account Transactions: 13 millions• Profitability : 14 millions
• Total: 95 millions
Gruppo UniCredito Italiano
BUSINESS INTELLIGENCE
OLAP, OLAP, QueryQuery & & ReportingReporting
! OLAP Analyisis:• Drill down• Roll up• Slice & dice
! Query & Reporting through Web browser
! 11 OLAP Cubes, 30 business users
! Support Marketing Product &Segment Managers in betterbusiness understanding andcampaign macro-targeting
WHAT’S HOT:" Cross-selling Cubes
AnalyzeExecute
Plan
Track
Gruppo UniCredito Italiano
DATA MINING
SASSAS Enterprise MinerEnterprise Miner
! Brain of CRM System, turns data into valuableinformation supporting business decisions
! Predictive Analysis and Market Basket Analysis through statistical modeling
! Scoring of Customers based on their propensity-to-buy
WHAT’S HOT:
" Attrition Analysis supporting Customer Retention Programme
" Customer Lifetime Value Analysis
" Multi-banking Customer Analysis
AnalyzeExecute
Plan
Track
Gruppo UniCredito Italiano
MARKETING AUTOMATION
CampaignCampaign ManagerManager
! Support definition & mana-gement of multi-stage multi-channel marketing campaigns
! Definition of customer segmentsand profiles
! Connect Target Information (Customer names & addresses) to multiple Touchpoint
! Execute Response Analysis and compute ROI for each campaign
WHAT’S HOT:" Event - triggered Campaign
Management" Life Cycle Campaign
Management
AnalyzeExecute
Plan
Track
Gruppo UniCredito Italiano
Data Warehousing
LOGICAL SYSTEM ARCHITECTURELegacySystems
Customer Data
DepositAccounts
BrokerageAccouns
OperationalDataStore
CRM Applications
Loans
Transactions
Profitability
CustomerData
Warehouse
CRM Hardware Infrastructure
Oracle Enterprise Server 8i
Relationship Manager
Call Center
Direct Mail
Web
Multi-channelInformationDelivery Sys.
Channels
Contacts
Cards
OLAP Query & Reporting
OLAP Cubes
Track
Analyze
Plan
Execute
CampaignManagement
DataMining
SAS Enterprise Miner
Customer Relationship Management System
ETL
SAS Warehouse Administrator• EXTRACT• TRANSFORM• AGGREGATE• CLEANSE• BUILD HISTORY• LOAD
Gruppo UniCredito ItalianoCustomer Relationship Management System
CRM ApplicationsData WarehousingLegacySystems
CustomerData
Warehouse
Track
Analyze
Plan
Execute
Operational DataStore
DataMining
OLAP Query & Reporting
ETL
RelationshipManager
Call Center
Direct Mail
Web
Channels
100 Mb/s LAN Ethernet
155 Mb/sATM
IBM MVSMAINFRAME
Web Browser
Campaign Manager
SAS Enterprise Miner
SAS WarehouseAdministrator
DATABASESERVER
Sun E5500
DATA MININGAPPLICATION
SERVER
HP N4000
OLAPAPPLICATION
SERVER
HP NTLxr8000
PHYSICAL SYSTEM ARCHITECTURE
Gruppo UniCredito Italiano
THE ROLE OF SASTHE ROLE OF SASData Warehousing CRM ApplicationsLegacy Systems
Account Manager
Customer Data
DepositAccounts
BrokerageAccouns
OperationalDataStore
Loans
Transactions
Profitability
CustomerData
Warehouse
CRM Hardware Infrastructure
Oracle Enterprise Server 8i
Web
Multi-channelTargetDelivery
Channels
Contacts
Cards
OLAP Query & Reporting
OLAP Cubes
Track
AnalyzePlan
Execute
Campaign Manager
DataMining
SAS Enterprise Miner
ETL
SAS Warehouse Administrator• EXTRACT• TRANSFORM• AGGREGATE• CLEANSE• BUILD HISTORY• LOAD
Call Center
Direct Mail
• SAS Warehouse Administrator as ETL Tool• Operational consulting activities for ODS Data Feed
• RME (Rapid Modeling Environment), application writtenin SAS, as flattening and scoring tool for Enterprise Miner’s I/O
• SAS Enterprise Miner as Data Mining application
Gruppo UniCredito Italiano
CASE STUDY – SMALL BUSINESS PACKAGE CAMPAIGN CHAID
Number of Accounts
Conversions from a traditional checking account to a small business package account
< 1,5 >= 1,5
Overdraft Profit Margin
Number of Monthly Transactions
< 51,32 EUR >= 51,32 EUR
Number of Monthly Transactions Average Monthly Balance
< 4,5 >= 4,5
< 5854,84 EUR >= 5854,84 EUR< 6,5 >= 6,5< 7,83 >= 7,83
COLOR KEY
Below Avg. Avg. Above
Avg.
Sample Average = 12,2 %
32 %
23,6 %
37,8 %
41,7 %
27,6 %
Gruppo UniCredito Italiano
• Business Objectives
• CRM Organization and Processes
• CRM Information System
• Project Roadmap and Methodology
• Achieved Results
AGENDAAGENDA
Gruppo UniCredito Italiano
PROJECT ROADMAP PROJECT ROADMAP Pr
ofita
bilit
y
Customer Satisfaction
Start date: July 1999
UniCredito in 2000
Phase 1: Proof-of-Concept
• Development in 6 months
• One bank• Subset of Data• Data Mining +
Campaign Manager• Early & tangible
Business benefits
UniCredito in 2001
Phase 2: Full CRM System• One bank • Data enhancement• + Business Intelligence• Complete Infrastructure:
" Process Automation" Test Environment" Full System Mgmt.
UniCredito in 2002
Phase 3: Enterprise-level deployment• Integration of other
banks • + Web Channel• Channel Integration
Gruppo UniCredito Italiano
THE “APPLICATION ICEBERG”A risky trend in CRM is to mainly consider technology and front-end systems, disregarding the underlying components ...
Behaviour
Processes
! Data Model consistent with business objectives
! Proper Data Sourcing! Good Data Quality
! CRM Processes Definition
! Change Management! No “shotgun approach”! Consistent Organization
Applications
Data
Gruppo UniCredito Italiano
CHOOSING A PRAGMATIC PROJECT SCOPE
versusversus
We need to manage the integration ofapplications, data, processes andbehaviour to achieve real business benefits !!
Data
Applications
Old approach:
• Broad Project Scope (“doeverything”)
• Emphasis just on link between applications and data
Applications
Data
Processes
Behaviour
New approach:
• More restricted Project Scope
• Emphasis on:
• Fast delivery
• Match of applications, data,
processes and behaviour
Gruppo UniCredito Italiano
GROWING BY ITERATIONS
Increased Scope in each iteration:• One Business Objective• New Subject Areas• New User Requirements
Project Scope
SecondIteration
FirstIteration
Pilot
Analysis
Design
Implementation
Test
Roll-Out
Review
Gruppo UniCredito Italiano
CRITICAL SUCCESS FACTORSCRITICAL SUCCESS FACTORS
! ORGANIZATION• Sponsorship from Top Management• Dedicated CRM Business Unit
! PROCESS• Quick Wins: rapid prototyping able to produce immediate and tangible
business benefits • Clear definition of business objectives to be achieved and related
metrics to track CRM results
! TECHNOLOGY• Approach: ‘Buy’ versus ‘Make’• Choice of Best-of-breed applications, having standard integration with
Data Warehouse Metadata • Data Quality / ETL Process (“garbage in, garbage out”)
! PEOPLE• Marketing and I.T. skills in the same business unit• On-going education of internal customers on CRM
Gruppo UniCredito Italiano
• Business Objectives
• CRM Organization and Processes
• CRM Information System
• Project Roadmap and Methodology
• Achieved Results
AGENDAAGENDA
Gruppo UniCredito Italiano
KPIsKPIs TO MEASURE CRM SUCCESSTO MEASURE CRM SUCCESS
Key Performance Indicator
Redemption LiftCampaign ROI
Retention Rate
Customer Net Present Value (NPV)Customer Lifetime Value (LTV)
Customer Satisfaction Index (CSI)
“If you can’t measure it, you can’t manage it”(John F. Welch, Chairmain and CEO, General Electric, 1981 – 2001 )
Objective
To improve effectiveness of marketing campaigns
To retain most profitable customers
To increase customers’ wallet share
To improve customer satisfaction
Gruppo UniCredito Italiano
REDEMPTION LIFT 1999 REDEMPTION LIFT 1999 -- 20012001
! Campaign Redemption increase from no CRM to Pilot CRM: 126 %
! Campaign Redemption increase from Pilot CRM to Full CRM: 90 %
! Total Redemption increase from no CRM to Full CRM: 329 %
Redemption Lift Index
1,00
2,26
4,29
0,00
1,00
2,00
3,00
4,00
5,00
1999 - No CRM 2000 - Pilot CRM 2001 - CompleteCRM
Year
Lift
Inde
x
+ 126 %
+ 90 %
Gruppo UniCredito Italiano
ROI ON 2001 MARKETING CAMPAIGNSROI ON 2001 MARKETING CAMPAIGNS
Campaign Year (2001)
• Overall Return On Campaigns (ROI): 375 %
• Return due to better targeting (CRM ROI): 75 % (*)
• Profit Increase due to CRM: X (millions Euros)
Life TimeA product sold in one year brings profits, due to its usage and yearly fee, also in
the following years (until product life time) => CAMPAIGN LIFETIME VALUE
• Return due to better targeting: 540 %
• Profit Increase due to CRM: 7 X
(*) CRM ROI = CRM Net Margin / Total Costs
CRM Net Margin comes from a redemption increase due to better targeting made with Data Mining methodologies, as opposed to pseudo-casual Control Group data selection
Gruppo UniCredito Italiano
CONCLUSIONSCONCLUSIONS
! CRM is a business strategy, and an effective implementation needs to be consistently managed through four layers:
" organization
" processes
" people’s skills
" technology
CRM
TECHNOLOGY
PROCESSES
ORGANIZATION
SKILLS
2nd
1st
Pilot
Analysis
DesignImplementation
Test
Roll-OutReview
! Fast delivery of an incremental business-driven project
! Focus on most profitable customer segments
Gruppo UniCredito Italiano
THE ESSENCE OF CUSTOMER RELATIONSHIP MANAGEMENT
“Don’t count the people you reach,
reach the people who count”�������������������������������������������������������
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Gruppo UniCredito Italiano
Thank you !“Building a technological infrastructure may seem simply tricky.As a matter of fact, it is awfully more complex”
(IBM)
Giorgio Redemagni+39-02-8862.3056redemagnig@gruppocredit.it
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