Financial services companies are facing increased pressures to retain their existing customers and protect their business against the assault from aggressive competitors. In addition, customers are looking for more value for their money and expect better customer service from their financial institutions. Customer retention, customer acquisition, cost containment and speed to market has become major preoccupations for financial services companies.

The Challenge:

A major American financial services company with both credit card and insurance businesses was facing a similar challenge. The credit card business was growing rapidly through acquisition and the company wanted to increase its customer base through an aggressive direct mail targeting program without exposing the portfolio to unacceptable delinquency rate and bad debt. According to the Vice President, Affinity, “We do not have the necessary intelligence built into our customer targeting program to meet our risk management requirements. And more important, we do not have in place the analytic tools and data base infrastructure that allow us to dynamically analyze our portfolio and adjust our marketing strategies very quickly. There are too many systems and we need to consolidate our various data sources”. On the insurance side the challenge for managers was how to develop an effective cross-sell program by targeting the credit card base of the company. As the Vice President, Insurance Marketing indicated, “We would like to develop a good segmentation of the credit card portfolio and obtain the optimum response rate while keeping our direct mailing cost at a minimum”.

The Solution:

Six Sigma process was used to identify the key customer requirements and metrics were developed to measure the key drivers of the business in Marketing and Insurance. Once the team started to work it did not take too long for results to be put in place very quickly.
 

	A data mart was built to allow both Marketing and Risk to view and access the same information, with drill down capability for multi-dimensional analysis.
	Predictive models were developed to automatically score and identify customers who should be targeted for credit card offers while minimizing the impact of new acquisitions on portfolio delinquency.
	The combination of the data mart and the predictive analytics offered the solutions that the organization needed to sustain a profitable growth in a very competitive environment.

The Benefits:
 

As the Vice President, Affinity indicated, “We have the ability now to go to market several types a day instead of waiting for days for data to be consolidated from multiple systems. By reducing the cycle time we can better monitor our portfolio both from the customer acquisition point of view as well as from the risk management perspective. There is greater communication and feedback between Marketing, Risk and Operations. What we have now is true collaborative analytics. We are acquiring better customers with lower delinquency profile”.

Improvements on the insurance side did not take too long to materialize. “We have increased our capability to do champion/challenger tests and test new insurance product offers with excellent response rates”, stated the Vice President of Insurance. She went to add, “We have dramatically reduced our mailing costs. Our cross-sell models can identify seventy percent of responders by targeting only thirty percent of the customer base. Our overall response and conversion rates have increased dramatically. Our ability to have a better understanding of the customer base combined with the increased cost savings is allowing us to expand our cross-sell programs into newly acquired portfolios. We are now able to work in a collaborative manner with the credit card division to offer a variety of new products and services. In addition, we have strengthened our ability to retain our customers”.