An Opportunity Lost

India has been pretty gung ho about the Unique IDentification (UID) project. While the machinery has been churning out UID cards in thousands, there has been a whole series of debate on the use of UID numbers. One of the usage has been in the subsidy management process by the Government. See the article in Mint on the Finance Minister launching pilot of this scheme.

As per this scheme, a consumer of a government subsidised item such as cooking gas cylinder will have to pay the full market rate for the cylinder. The purchase activity will be passed on to the government agency who will then credit the subsidy amount to the bank account of the consumer. This bank account will be picked up from the bank account linked to the UID number.

India has a large number of items subsidised by the Government for its retail citizens. The public distribution system covers grocery items. Fertilizers are subsidised for farmers. Cooking gas cylinders are subsidised for retail/home consumption. When all consumers of these subsidised items are counted, the numbers will run into maybe 70% or more of the Indian population. The government is expected to pay the subsidy amount to the bank account of these consumers.

Each of these consumers will need to have a bank account declared attached to the UID number. Knowing how critical this bank account will eventually become, the chances of consumers changing the bank account will be minimal. Also, considering the cumbersome process of government agencies, consumers will be deterred form changing this account.

So now we are seeing a potential of a consumer sticking with a bank account for longer time since his subsidy amount is being credited to it. A excellent case in increasing the stickiness of the consumer.

Unfortunately, I dont see any bank realizing the potential of this. Banks cannot play a role in the UID registration process since the agencies are already appointed. But Banks can definitely facilitate the UID registration process. They could source the forms, provide address proofs (attested bank statements) and also get appointment tokens for the individuals. The catch --- the bank account registered on the UID number will be one that is opened in the same bank. For every customer who takes up this offer, the bank wins a highly persistent customer with a high life time with the bank.

Lets see which of the banks latch on to this idea. Till then, I wait for my appointment date for UID registration.

If you enjoy reading my posts, do click on the right to become a follower of the blog.

CRM Bloopers...

This post is on a lighter note. The software industry and the manufacturing industry are proud of their Quality Assurance processes. But it looks like CRM processes lag behind on this front.


Today I renewed my vehicle insurance policy. This is my first renewal and I have had a year of no claim on the policy. So I enjoyed a "no claim bonus" on the renewal premium. After completing the payment of the renewal premium, I was presented with the usual "thank you" message from the insurer, Bajaj Allianz. While reading the message I was very amused by the following sentence:

"As a loyal customer you are covered Additionally for Accidental Medical Expenses Cover/Drive Assure protect and 24x7 spot assistance for sum insured of Rs. 0."

So for renewing the policy, I am termed as a "loyal" customer. Well, I am okay with that. I get additional services. Well, I am okay with that. For a sum insured of Rs.0. WHAT? Is that a benefit I should be happy about? I can make two guesses:

1. Either it is a typo error. In which case, I will wait for the detailed policy wordings document.

OR

2. The formula used for calculating the benefit resulted in a value of ZERO.

Typical, case of borderline defect as they say in the software industry. A case for Quality Assurance.


On similar lines, a couple of months back, I was withdrawing some money at the ATM. After the transaction, I was presented with the following screen.

Note the options given. It was like holding a gun to my head and stating that I have to take the offer. There was no exit option or refusal option. The first time it happened, I was perplexed on what to do especially since my debit card was still in the ATM machine. I did not want the bank to call me since my CA had already addressed all tax issues. While my mind was booting up to process this situation, the screen went away and the transaction terminated normally with my transaction slip and card being returned to me. The next time, I got this message, I knew I had to just wait for few seconds and eventually the message would go away. DEJA VU... I say.



If you enjoy my posts, click on the right to follow these posts. Also, looking forward to your comments and similar experiences.

Integrating online and offline worlds

A few years ago I had written a post of my experience with a general insurance company. (Same Company ...Same Customer). This post highlighted how the company was giving different customer experiences across different channels. 

I have noticed a recent trend among my colleagues and myself included. Even when one purchases a product at the store outlet, one often visits online retailers to check options, comparisons and prices. In most cases, this online research also includes the web site of the outlet from where the product is eventually purchased. 

I have been working out on how the two worlds can be integrated for a retailer. The toughest format to integrate is the super market. These are stores with a high RFM value. I had a passing mention of this in my post on customer captivity (Aim for captivity .. not loyalty).  The relevant excerpt from this post is pasted below:

"Grocery purchases are often a chore rather than fun activity. A grocery retailer could allow a customer to define her basket of regular purchase. Then have an SMS facility wherein the customer sends in her request for a particular basket and have it delivered to her home. What a convenience that would be? Would this customer want to go over the pain of defining her baskets with another retailer... highly unlikely."

While the thought started with an idea, overtime I have fleshed out the model of integration between online and offline formats. The key aspect of this integration is unified customer experience across the channels. There should be a scenario wherein the customer feels that certain activity can only be done on the online or the offline format. I will attempt to highlight key aspects of the same in the post. 

• The customer gets registered over the net or at the store. The mobile number is used as the identifier of the customer.
• The customer can create shopping list over the net and store it. She can also give it unique and meaningful names..such as weekend, monthly, household, etc. 
• The customer can also create a shopping list by SMSing the receipt number to a predefined number. The backend system would retrieve the purchase basket of the receipt number and store the basked as a shopping list against the customer account. The customer can copy or modify the list as per requirement. Also, the feature to specify brands or leave it open for each item is available to the customer. 
• When the customer needs to shop for specific items, say household items on a monthly basis, the customer will need to send an SMS to the predefined number with the shopping list name or number. The customer can also order for the shopping basket over the net. Based on the delivery preferences, the basket is then delivered to the customer. 
• Over time, the purchase pattern can be identified for each customer. Using analytics, one can predict the likely basket and the time of purchase. As this time nears, the retailer can prompt the customer for upcoming need. This could also be a reminder call for the customer who probably just needs to confirm the basket and have it delivered to her. 
• In order to increase the basket, the retailer can used market basket analysis to recommended additional products to be added to the basket. Also, personalized offers could be presented to  the customer. 
• The customer can also order a shopping list over the web and opt to have it ready for pickup at a particular outlet. While at the outlet, maybe she wanted additional items which she wants to inspect before purchase. This also gives opportunity for impulse purchase while she is at the store. The customer saves time picking up items of regular purchase in her basket. 
• On lines of fast food joints, the above basket could also be in a drive-in lane where the customer can pick it up at the take-away counter and pay for it without leaving her vehicle.
• The retailer could also offer products on trial to entice purchase. This is corollary to the product association analysis that determines the next best product. In this case we look at products that are least likely to be bought by the customer but one that if enticed the product has best chance to be bought. For example, the profile of the customer shows that she has a school going youngster in her household. Our basket analysis shows the "school" related products that the customer has bought. The disassociation analysis also shows the products that the customer has not bought and is least likely to buy. A conditional modelling can show the product amongst this second set that has the best chance of being bought if the customer is enticed with the product. Such a product can be given to the customer on a trial basis to be returned within, say, 15 days if the customer does not want it. The customer can opt to purchase it and be billed in the next purchase basket.  
• Additional service, such as toileteries and personal effects can be made available in different cities to be delivered to the customer when she is travelling. 

If any retailer wants to run a pilot on this, kindly contact me at michaeldsilva@gmail.com. Together we can define an appropriate process for blurring that online / offline demarcation and provide a unified and enhanced customer experience.

Segmentation .... now or later?

Very frequently while building analytical models, I have had clients state "Let's start with customer segmentation." I have to spend a considerable time convincing the clients that segmentation is not mandatory as the first step of modelling. Unfortunately, a majority of the statisticians start with segmentation. They claim that the population need to be clustered into homogeneous segment. Every business user also is convinced that his customer base is a group of homogeneous clusters.

This thinking is very flawed for two reasons:

1. Segmentation is a relative activity. That is, one needs to do "statistical" segmentation towards some goal... whether it is to understand customer value or default or cross sell. Segmentation as a stand alone activity does not provide much value. This is the reason I always dissuade my customers from doing just a "segmentation" exercise. (see my post on "statistical segmentation" titled perspectives of segmentation).
2. Grouping customers into clusters induces biasness into the model building process. Let me elaborate further on this.

The primary reason in clustering is that the customer base consists of groups of individuals who behave in similar pattern. This also leads to the corollary that customers belonging to different clusters behave differently.

My econometrics professor in college had a wonderful way of explaining statistical concepts from real life scenarios or philosophies. He had stated that the basic premise of law is "a person is innocent unless proven guilty." He had told us to keep this premise in mind when defining the hyphothesis for model building. Going by this, we start with the assumption that the customer population is homogeneous unless proven otherwise. This proof can only come with model building.

By performing segmentation upfront, we are making an assumption that the customer population is not homogeneous. With this presumption we are inducing a biasness in the model building process.

From an effort perspective, I have a cost accountant view on this. A segmentation exercise typically leads to definition of 5 to 10 segments. The next step will be to build separate models for each of the 5 (or 10) segments. This multiplies the efforts required. And all because of an unproven assumption that different segments behave differently from one another.

An effective approach will be to first assume that the customer base is homogeneous. Then build a single model for the target variable. The next step is to find variance within the test population. The variance can be either on the decile dimension or we could look at the significant variable to idenfity the value that has the highest variance. This will then indicate a likely set of customers who behave differently than the rest of the population and hence provide the variance in the test population.

At one client where we adotped this approach, we found that the "product holding" was showing the highest variance. Evaluating the values, a particular product was found to be exhibiting the high variance. As a next step, we split the population into two segments -- one segment holding this product and the second for the rest of the population. Two separate models were built, one each for the two segments, and the scores were merged (after normalization). Since the population creating variance in the original model was now separated, the rest of the population was comparatively more homogeneous. The model for the variant population was custom for that population and hence a better fit. Thus, the combined scoring was more accurate than the first single model. This accuracy met the acceptable threshold of the client and we deployed the score in the business operations.

The entire exercise involved - 3 models and one filter based population split. Compare this with the "traditional" approach of one segmentation (leading to 5 to 10 segments) and one model for each segment (approximately 5 to 10 segments). We completed the exercise in 4 days against what would have taken us more than 10 days the traditional way.  

Downgrading an Upgraded Customer

A long time back I had written a post titled "The Power of Gold" which referenced to a customer being upgraded to Gold status basis his business with the bank. Within this post, I had promised to write one on downgrading the customer and its challenges. Many times companies make elaborate plans on segregating customers across value and promoting them to the higher levels. But very often, they forget to manage the downgrade of the customer when he does not meet the qualifying criteria.

A good case in point is Jet Airways. All airlines having frequent flyer program have graded memberships. Depending on the flights taken or mileage clocked a customer is upgraded to the next level. Then there are detailed rules on maintaining the tier level as well as on getting upgraded to a higher tier. Jet Airways has an additional feature whereby they track a customers flights with the airline. If they notice a increasing trend of using Jet flights then they upgrade the customer without waiting for the completion of the eligible number of flights. While this ensures a frequent flyer to get upgraded faster, Jet is also efficient to downgrade the flyer if his usage drops.

This was my personal experience. Due to some reason, for two months I had taken exclusively Jet Airways flights. Though my pattern of travel had not changed but since all the fligts where on Jet Airways, the airlines noticed a increasing pattern of patronage. Accordingly, they upgraded me to the Silver tier and explained the quick upgrade. As fate would have it, the next two months happened to be Kingfisher and Air India flights. Jet Airways probably saw this as a reducing trend of usage. After a couple of months, I got a letter from Jet Airways. The letter first reminded me that I was upgraded due to my increasing usage of Jet Airways inspite of me not having met the qualifying criteria of the upgraded tier and then went on to inform me that since I had not kept up with the usage patter, I was downgraded to the lower tier.

While I understood the logic and process followed by Jet Airways in this process. This incident did leave a bad taste for me. The next few months whenever the travel department presented an option between Jet and any other airlines, I always chose the non-Jet option. Normally, I would not have bothered and would have let the travel department select the best option within the time of travel.

Since then I have discussing with various experts on how to handle the downgrades of the customer in such programs. Till date I did not get any satisfactory reply.

Last week I was discussing with an HR consultant on employee promotions. He explained how he decides on employee growth. An employee who has outgrown his existing role is typically a candidate for promotion. However, he does not promote this person. The employee is encouraged to take up additional role or function. For the next 6 to 9 months, the employee is evaluated on his management of the increased responsibilities. When he shows good performance on the increased responsibilities, only then he is promoted to the next role. If he fails at the new responsibility, then the employee is offered a different set of roles or responsibilities. The promotion only happens when the employee is successful in the new role. The HR consultant explained that this process is beneficial to both - employer and the employee. The employer gets employees growing up the hierarchy who can manage the new roles and the employee grows into roles that are manageable by them. In other cases, since a employee is normally not demoted (since that causes problems with morale), quite often the employee's performance suffers and often he leaves the employer.

After my discussion with this consultant, I was trying to find how this approach can be applied to customer relationship (see my earlier post on Let HRD solve Marketing Issues). And I realized the solution was right here and very obvious. I could immediately draw up the analogy. Coming to my experience with Jet Airways. The airlines should have communicated that due to my increased patronage, the airlines is providing me a gift of facilities that are normally available the higher tier for a period of 2 months. After the end of two months, they should have reminded me of the additional service I enjoyed and enticed me to meet the qualifying criteria to continue to enjoy the additional services. If my usage has remained constant, the airlines could have extended the additional facilities for another two months, and so on till I met the qualification criteria for the next tier. If my usage had dropped, that was it, I enjoyed two good months of additional services. If my usage remained the same or increased, eventually I would qualify for the next tier and be upgraded as a normal course of action. There was no negative or demotivating message of being demoted to the lower tier.

Every company which has differentiated customer relationship based on tiers or grading can use this approach. Contact me on michaeldsilva@gmail.com and we can review your customer grading scheme and draw up similar strategies for customer upgrades and demotion.