Whew! Just stepped out of another meeting with a prospect. I was pitching the world of predictive analytics. The same old question pops up -- "But we do not have data". I am now tired of answering this query everytime people talk of analytics. You may not have demog data ... but you definitely have transaction data. And that is enough to generate a good enough predictive model. Agreed we may not be 100% (pssst: in statistics you never are 100%), we may not even be 95% accurate. But we can atleast be 70%. And that is better than 0%. We can get data updated as we go along business of tomorrow. Maybe in some future post I will highlight how some companies are going about slowly but surely increasing the quality and quantity of customer data.
On the flight to this place, I was scanning one of the business newspaper. I came across a lovely term "Robin Hood Pricing". It implies how we charge a relatively higher premium to serve our good customer and subsidize the net return of our bad customer. This advocates differential pricing.
Today, all service industries (or product industries) charge the same "list" price to all customers. They do not track the cost of delivering the service to the customer. There are two costs involved here. The "Cost of Sales" includes the production, logistics and admin costs incurred for making the sale. The other cost of note is the "Cost of Service" that the customer instigates from the company. A bad customer will keep calling the call center, have complaints and demand more than his share of attention and service. Hence, the cost to serve such a customer will be high. On the other hand, a good customer will not disturb the company too much and will often be understanding towards receiving service from the company.
But in today's world, we charge both the types of customers the same "list" price. Thus, we make the good customer pay a premium of our total cost to serve him whereas the bad customer gets a relatively lesser price compared to the total cost to serve him.
That my dear friends is "Robin Hood Pricing".
Wednesday, July 09, 2008
Monday, July 07, 2008
Mr. Marketer, Please do your homework.
Yesterday I received a call from the local branch of my bank where my account is registered. The lady on the other end of the phone stated that due to my good business :) with the bank they wanted to upgrade me to a Classic customer. She went into various benefits that this upgrade entitled me to.
She wanted to know if I am okay with the upgrade. Now who wants to refuse free stuff. I agreed to the upgrade.
She wanted to verify my contact and details. She read out my address and asked me it is still current and valid. I gave my affirmation. Next, she asked me if the mobile number registered is valid. {now, hello, you called on the number and here I am talking to you... is that not valid number... script writers ... baah}.
She asked me if I was married. Which I said I happily was. She wanted to know how many children I have. I replied I have a 5 year old kid.
Next she asked me the name of my wife and kid. Now, this pissed me off. I am supposed to be upgraded to a premium customer. I have a joint account with my wife at this bank. In the CAF, I have clearly stated that the relation with the joint holder is "wife". I also have a childrens benefit insurance policy in favour of my daughter. The CAF for this obviously have my daughter's name on it. I told the lady that she should have checked my records before calling me. She started justifying that as part of the upgrade she needed more information about me. I repeated that she should have checked my records. I told her to do her homework before calling me.
Quite often marketers just pull out names and phone numbers and generate a standard script for the call center to call. How many times have you been called by your bank or some service provider and asked for information that they should have already have had with them. It is time that marketers do their homework before making that contact to the customer.
She wanted to know if I am okay with the upgrade. Now who wants to refuse free stuff. I agreed to the upgrade.
She wanted to verify my contact and details. She read out my address and asked me it is still current and valid. I gave my affirmation. Next, she asked me if the mobile number registered is valid. {now, hello, you called on the number and here I am talking to you... is that not valid number... script writers ... baah}.
She asked me if I was married. Which I said I happily was. She wanted to know how many children I have. I replied I have a 5 year old kid.
Next she asked me the name of my wife and kid. Now, this pissed me off. I am supposed to be upgraded to a premium customer. I have a joint account with my wife at this bank. In the CAF, I have clearly stated that the relation with the joint holder is "wife". I also have a childrens benefit insurance policy in favour of my daughter. The CAF for this obviously have my daughter's name on it. I told the lady that she should have checked my records before calling me. She started justifying that as part of the upgrade she needed more information about me. I repeated that she should have checked my records. I told her to do her homework before calling me.
Quite often marketers just pull out names and phone numbers and generate a standard script for the call center to call. How many times have you been called by your bank or some service provider and asked for information that they should have already have had with them. It is time that marketers do their homework before making that contact to the customer.
Thursday, June 05, 2008
Competitiveness in Analytics
A lot of discussion, publishing, blogging have happened on the fact that performing customer analytics provides competitive advantages to the organization. However, there has been no specific definition on how this happens. As a result often discussion on analytics revolves around subjective impression of the so called competitiveness. This gives it a elusive nature.
Let me attempt via this post to address how competitiveness can be achieved. Lets say we are doing a cross sell analysis on the customer base. The first analytical step will be to segment the customer (assuming segments are not defined). This will end in identification and definition of the segment. Thus, for a segment called "IT professionals" the definition would be:
Age group: 18-25, 25-35
Income scale: 5 - 7
Product holding: 3 - 5
The next step will be to perform product association or event sequence analysis to understand the typical basket of products or services that this segment consumes. Once this is done, the final step is to score each customer with an "incomplete" basket on the probability of selling additional product to complete the basket. The output will also expose the variables that define the score. Thus we have:
Product last bought: Housing Loan
Location: Metros
and so on.....
Now if I am competitor to this organization, all I need is the information on what variables define high probability of purchase. Thus, in this case, I will go to market to target persons who are typically of profile "IT Consultant" and stays in "Metro" and has recently bought a "housing loan". This list is not impossible to attain. A lot of market research agencies can be deputed to get this list for me. Now, I have a target list which is same as the one that the analytical organization has, after a lot of mining pains, derived for its marketing exercise.
Thus, the information I gleaned from the organization (as defined above) is the competitiveness which I neutralized. This is the competitiveness from analytics.
Let me attempt via this post to address how competitiveness can be achieved. Lets say we are doing a cross sell analysis on the customer base. The first analytical step will be to segment the customer (assuming segments are not defined). This will end in identification and definition of the segment. Thus, for a segment called "IT professionals" the definition would be:
Age group: 18-25, 25-35
Income scale: 5 - 7
Product holding: 3 - 5
The next step will be to perform product association or event sequence analysis to understand the typical basket of products or services that this segment consumes. Once this is done, the final step is to score each customer with an "incomplete" basket on the probability of selling additional product to complete the basket. The output will also expose the variables that define the score. Thus we have:
Product last bought: Housing Loan
Location: Metros
and so on.....
Now if I am competitor to this organization, all I need is the information on what variables define high probability of purchase. Thus, in this case, I will go to market to target persons who are typically of profile "IT Consultant" and stays in "Metro" and has recently bought a "housing loan". This list is not impossible to attain. A lot of market research agencies can be deputed to get this list for me. Now, I have a target list which is same as the one that the analytical organization has, after a lot of mining pains, derived for its marketing exercise.
Thus, the information I gleaned from the organization (as defined above) is the competitiveness which I neutralized. This is the competitiveness from analytics.
Monday, October 22, 2007
Beware of Customer Expectations
Today morning, as part of my job, I visited the technology office of a bank in my work city. This visit reminded me of my relationship with them over 7 years back. Then I was a software project manager in my previous company. As a typical software professional from India, I was required to travel to different geography based on the location of my client.
During this period I was posted to a branch in southern most part of Mumbai. There was only one ATM nearby. This belonged to the bank I had visited in the morning. I called up the call center and expressed my interest in opening a savings account with the bank. The call center agent took down my contact details and stated that a representative from the bank will be contacting me before the end of the day.
True to her work, I got a call from the bank representative in the noon and he landed up at my office around late in the afternoon. I handed over my identification papers and the initial cheque to open the account. When it came to filling up the customer acquisition form, the representative just asked me to sign the form and mentioned that he will fill it from the information available in the identification papers. I was impressed.
He mentioned that the welcome kit will be delivered within 7 working days. Again, true to his word, on day 4 I received my welcome kit containing my cheque book as well as the ATM card. Again, I was impressed.
I had a lovely relationship with the bank while it lasted. I still do not know which branch owned my account. All requests were handled over the phone. Again, I was very impressed. I recommended this bank to everyone I knew.
Then, I was drafted to an onsite project. This meant I was not transacting anymore. But I did maintain my minimum balance as required. After sometime, the bank deactivated my account. I called them and requested that they re-activate my account. They asked me to come to their branch and apply for reactivation of my account. I explained that I was on an onsite project and cannot visit the branch. The agent was cold in her response that I have to come to the branch and they cannot help me otherwise. After a few such followups, I was frustrated and stated that I would like to terminate my relationship. The response I got "for that also you have to visit the branch".
After a couple of months, the bank started deducting a "inactive charge" from my account every month. This led to my balance falling below the required minium. This led to the bank making additional deduction as "non maintenance of minimum balance". In the next 6 months, my entire balance was wiped off.
It was real sad that the bank started at such a high note on customer service and satisfaction. But failed in their process when it was really needed. I blame the acquisition process of the bank which set up such excellent acquisition process that I had very high recommendation of the bank. But now, I tell everyone to beware of the bank.
During this period I was posted to a branch in southern most part of Mumbai. There was only one ATM nearby. This belonged to the bank I had visited in the morning. I called up the call center and expressed my interest in opening a savings account with the bank. The call center agent took down my contact details and stated that a representative from the bank will be contacting me before the end of the day.
True to her work, I got a call from the bank representative in the noon and he landed up at my office around late in the afternoon. I handed over my identification papers and the initial cheque to open the account. When it came to filling up the customer acquisition form, the representative just asked me to sign the form and mentioned that he will fill it from the information available in the identification papers. I was impressed.
He mentioned that the welcome kit will be delivered within 7 working days. Again, true to his word, on day 4 I received my welcome kit containing my cheque book as well as the ATM card. Again, I was impressed.
I had a lovely relationship with the bank while it lasted. I still do not know which branch owned my account. All requests were handled over the phone. Again, I was very impressed. I recommended this bank to everyone I knew.
Then, I was drafted to an onsite project. This meant I was not transacting anymore. But I did maintain my minimum balance as required. After sometime, the bank deactivated my account. I called them and requested that they re-activate my account. They asked me to come to their branch and apply for reactivation of my account. I explained that I was on an onsite project and cannot visit the branch. The agent was cold in her response that I have to come to the branch and they cannot help me otherwise. After a few such followups, I was frustrated and stated that I would like to terminate my relationship. The response I got "for that also you have to visit the branch".
After a couple of months, the bank started deducting a "inactive charge" from my account every month. This led to my balance falling below the required minium. This led to the bank making additional deduction as "non maintenance of minimum balance". In the next 6 months, my entire balance was wiped off.
It was real sad that the bank started at such a high note on customer service and satisfaction. But failed in their process when it was really needed. I blame the acquisition process of the bank which set up such excellent acquisition process that I had very high recommendation of the bank. But now, I tell everyone to beware of the bank.
Monday, October 01, 2007
Data Driven Company
"We are a data driven company"
I bet you have heard the above sentences infinite number of times. The speakers often mean that they have processes instituted for decisions to be taken based on facts and hard data rather than pure intuition.
My job entails selling customer analytics solutions. Analytics is dependent on the richness of data available to be mined. The availability of data is often the toughest challenge. Since most transactions systems were designed for just easing the transactions, they only collect information necessary for completing the transactions. During the time of selecting transaction systems, analytics was nowhere in sight for the evaluation criteria. So it is no surprise that data needed for analytics are not available within a company.
But what often surprises me, or let me say amuses me, is the attempt by the clients to run the "best" analytics on the available data. I was shocked to hear from one senior executive the statement "but all we have is 3 fields on customer data". This executive wanted a solution which will work on the 3 fields and not demand additional data. He claimed that his customer did not give more data.
Now why should a customer part with any more information than is needed? Let me illustrate this by my personal experience with buying automobile insurance in USA and India. India has a standard rate card. So I am not enticed nor am interested in giving any more information than is mandated for the insurance cover. Whereas, in the USA, I know that certain information, like marriage and family will help me get a lower premium. So I am happy to part with that information. I asked the same question to this execution "What has the customer to gain by giving you additional information? Why should he give you additional information?".
The company could have provided additional or special privileges to the customer based on certain information. This would have enabled them to get more information from the customer. The cost of this information could have been justified by the richer analytics that could be run on the customer data.
Just stated that we have limited data is not an excuse. It reflect poor foresight of the company. You cannot let the limited data drive your future activities. You need to enrich your data collection to meet future business needs.
I bet you have heard the above sentences infinite number of times. The speakers often mean that they have processes instituted for decisions to be taken based on facts and hard data rather than pure intuition.
My job entails selling customer analytics solutions. Analytics is dependent on the richness of data available to be mined. The availability of data is often the toughest challenge. Since most transactions systems were designed for just easing the transactions, they only collect information necessary for completing the transactions. During the time of selecting transaction systems, analytics was nowhere in sight for the evaluation criteria. So it is no surprise that data needed for analytics are not available within a company.
But what often surprises me, or let me say amuses me, is the attempt by the clients to run the "best" analytics on the available data. I was shocked to hear from one senior executive the statement "but all we have is 3 fields on customer data". This executive wanted a solution which will work on the 3 fields and not demand additional data. He claimed that his customer did not give more data.
Now why should a customer part with any more information than is needed? Let me illustrate this by my personal experience with buying automobile insurance in USA and India. India has a standard rate card. So I am not enticed nor am interested in giving any more information than is mandated for the insurance cover. Whereas, in the USA, I know that certain information, like marriage and family will help me get a lower premium. So I am happy to part with that information. I asked the same question to this execution "What has the customer to gain by giving you additional information? Why should he give you additional information?".
The company could have provided additional or special privileges to the customer based on certain information. This would have enabled them to get more information from the customer. The cost of this information could have been justified by the richer analytics that could be run on the customer data.
Just stated that we have limited data is not an excuse. It reflect poor foresight of the company. You cannot let the limited data drive your future activities. You need to enrich your data collection to meet future business needs.
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