identifying high value customers
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Identifying high value customersTRANSCRIPT
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Identifying and profiling High Value
Business Customer to develop
targeted proposition to further
increase ARPU and profitability
Stefano de’ Rossi - Paola Mandoloni
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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 forhigh value business customer
Choosing divers to set business customers’ value
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Drivers shaping the market
Customers are our most valuable asset
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ARPU
Average costper minute
Trafficdistribution
Averageusage
Customers are our most valuable asset
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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
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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 ofcustomer to attracting and retaining the most profitable ones, goes through a systematic customer interaction and insight strategy
• increasing loyalty
• enhancing value
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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
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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
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CRM approach
A “Customer Centric” approach
Identifyyour
customer
Differentiateyour
customer
Interact withyour customer
Customizesome aspect
Source: Peppers & Rogers121 Field Book
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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 forhigh value business customer
Choosing divers to set business customers’ value
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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 deepKnowledge of our
customer
Different CRM Strategies for
different Customer
Supporting ourchannels, sales & post-sales, with a unique “vision” of
the customer
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Dimension & Valuesegmentation
S O H O P M I
P L A T IN U M
P R IV IL E G E
PE
RS
ON
AL
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
PE
RS
ON
AL
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
PE
RS
ON
AL
S T A N D A R D Line
e m
edie
Evoluti -VAS Aziendali
Tradizionali Ricchi
Internazionali
VAS Personali
IntercomAOM
Fissi Reperibili
Tradizionali Accorti
ARPU/customer Penetrazione
M arg inali A m bascia tori
S fide Diam anti
Pot
enzi
ale
Sotto la m edia Sopra la m edia
Sot
to la
med
iaS
opra
la m
edia
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
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Segmenting by dimension & value …
1 Customers are grouped by DIMENSION and then by VALUE (value segmentation)
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People use mobile services mainly forbusiness porpouse
People who buy may not be the one whouse
People who use may not be the one whopays for mobile services (vas warning)
Different dimension…different issues
Strong competitive pressure
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Margin or Revenue ?
Both Margin and Revenue curveshave the samecustomer concentration
Furthermore, revenue has beenverified to be more stable than marginwhich is highlyaffected by costcomponents
understanding the value drivers
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such differentiation allows tailoring the organization behaviour to each customer based on that customer’s individual needs.
Ave
rage
lines
avg4,3
avg 303€
Alfa users -Business VAS
Rich & Traditional
International
Personal VAS
OLOTraditional & 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.
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Three main drivers of “potential” have been developed: number of lines, Voiceusage 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
IntercomAOM
Fissi Reperibili
Tradizionali Accorti
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Marginal Ambassador
Challenge Diamonds
CUSTOMER RANKING
Potential value
Actu
alV
alu
e
+-
+-
Different Customers…different strategies….
• ARPU monitoring
• Churn monitoring
• Consolidate ARPU
• Reduce Churn
• Increase ARPU
• Consolidate Churn
• Increase ARPU
• Prevent & MinimizeCHURN
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…& level of service
differentiating caring services & levels according to customer value
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Setting the “benchmark” Customer
Benchmark Customersdon’t seem to be much“bigger” than non-benchmark but show off because of theirhigh annualexpenditure level and the avg number of lines
Benchmark Customersdon’t seem to be much“bigger” than non-benchmark but show off because of theirhigh annualexpenditure 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
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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
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…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
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Outbound calls
Inbound calls
Web/e-mail
Point of Sale
SMS-MMS
Mailing
….different campaign channel
Interact withyour customer
“Make Every Customer Interaction a Great One “
SalesForce
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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 forhigh value business customer
Choosing divers to set business customers’ value
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Understand customers’ needs
StatisticalKnowledge
Market researches
Feed-Back from the Front
End
Customer Profiling
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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
UserInterface
Customer Profiling Application
Segmentation Clustering
Cluster 1
Cluster 2
Cluster 3
Data Mining
Reporting
0,3 0,6 0,8 1,2 2,23,9
6,4
11,7
20,5
30,3
42,2
51,1
9 0 9 1 9 2 9 3 9 4 9 5 9 6 9 7 9 8 9 9 0 0 0 1
Customer Profiling in TIM
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KPI IndicatorsOffers 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
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Bus
ines
s K
now
ledg
e
Dat
a U
nder
stan
ding
Dat
a P
repa
ratio
n
Descriptive& Clusteranalysis
CustomerValue
ModellingSeg
men
tatio
n
CustomerQuality
Bus
ines
s
Und
erst
andi
ng
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
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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
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Complex utilisation of Customer Data
Integrationof
models
Customer X
Target Client
Customer X
Target Client
Optimal offer
Customer X
Target ClientOptimal offer
Optimal channel
Customer X
Target Client
Optimal offer
Optimal channel
Optimal time
Customer targeting
Customer profiling
Channeloptimization
Contact optimization
…………………
…………………
……………………………………
…………………
………………
………..……..…………………
………………………………
…………………
Right offer To the right people With the right communication channel At the right time
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Customer Contact Sequence
AcquisitionAcquisition
TimeTime
Valu
eV
alu
e
•Selectiveacquisitionpolicy
•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
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Prepare Program Campaign
Target group ChannelOffer
Offer C
Not-respondersCall 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
Behaviourcharacteristics
• Cost• Effectiveness• Behaviour
• Propensity to accept• Alternative channel• Time period
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ex-ante ex-postSeasonal effect
ARPU (euro/customer)
+-+ 8%
+ %20
+ %12
Con
trol C
luste
r
T-1 T0 T1
EX-ANTE EX-POST
LOCK INCAMPAIGN
Targ
et
Clu
ste
r
Methodology
Monitoring: Ex Ante vs Ex Post analysis
Outgoing Voice (min.)
Vas Usage
Note: all data are just for examples
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ProPro--activeactive
ReactiveReactive
Lock – In plan
Pre-Exit Call
Exit Call
@
Results and Feedback analysis
Lista Clienti
Targetsetting
Potential ofreference
Lista Clienti
Outboundcall
Direct appointment
Complaintsor request for churn
Lock incampaign
Outbound calls
Direct appointment
request for churn
Outbound calls
Retention: churn management
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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
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In search for loyalty ?….Get a dog