Promotion Individual Assignment
As the product manager, I suggest employing data mining techniques as a crucial part of our Customer Relationship Management (CRM) strategy. This will allow us to gain a deeper understanding of our clients who use our various third party products, including mutual funds, insurance products, and bonds. By doing so, we aim to enhance our profitability as we earn commissions from selling products from other companies.
Even though the fee amounts may be small, they play an important role in diversifying revenue streams and increasing non-interest income, thereby improving profits. However, the market is highly competitive as banks and other financial institutions are increasingly offering these Non-Fund Income products. Therefore, it is essential to incorporate customer relationship management strategy and data mining tactics.
CRM strategy has been successful among larger companies in financial services in the USA and Europe. For instance, AXA Seguros e Inversiones, a member of The AXA Group, generated revenues of over €1.8 billion and had two million customers. AXA aimed to gain better insights into its customers to provide personalized offers and implement loyalty campaigns.
AXA utilized data mining technology to construct a predictive model that anticipates policy cancellations. This enabled them to generate customer profiles and predictive models using customer data. These models have proven beneficial in enhancing AXA’s management of campaigns, call centers, sales-force automation, and other operational areas. By implementing this model across various offices for both existing and cancelled policies, they achieved a significant reduction of up to 9% in auto insurance policy cancellations. It is imperative that we employ the same approach for our NFI products.
By analyzing the data of clients who have made purchases in the past two years, our bank can gain a deeper understanding of our customer base. This allows us to better identify and attract new customers. Utilizing data mining techniques, we can analyze financial and demographic information to uncover valuable insights including identifying preferred products for different customer segments, understanding the characteristics of each customer cluster, and pinpointing the most profitable clients. Armed with this knowledge, salespeople can accurately target potential customers promptly.
Moreover, our bank provides various transactional channels such as branches, ebanking, telebanking, and direct sales. Through data mining, we can determine which customer segments are unique to or prefer a specific channel. This enables us to allocate specialized sales forces accordingly.
Additionally, the strategic analysis of data empowers marketing department personnel to utilize this customer-centric information to create and implement customized communication strategies. While an extensive advertising campaign may generate attention from the public, it does not necessarily reach our intended audience. Financial products, by their nature, require customers to invest time in understanding and comparing alternatives. Advertising campaigns, constrained by budget, time, space, and media limitations, lack the ability to convincingly persuade individuals.
Previous surveys show that individuals often seek advice from professional acquaintances, family members, or conduct online research when considering financing options. Therefore, it is important to implement relationship marketing management strategies to retain customers and generate word-of-mouth (WOM) recommendations. To maintain and cultivate relationships with previous customers, the database can offer valuable insights into their specific needs and expectations. People have diverse objectives when seeking financing, including ensuring a prosperous future for their children, enhancing their quality of life, achieving financial success, or protecting funds from inflation.
In order to maintain long-term customer relationships, it is vital to comprehend and meet their needs. However, aggressive clients who desire quick and high returns highlight the fact that simply offering long-term investment products will not suffice. To show dedication to the relationship, one must understand customer expectations and consistently provide satisfaction and delight. Ultimately, this commitment builds trust and promotes enduring relationships.
This insight into customers can enhance our bank’s cross-selling performance. The salesperson has the ability to propose various products to the customer that will fulfill their needs effectively. This can also benefit the loan department and the private banking department. Furthermore, the product designing department can collaborate with product suppliers to develop suitable product packages from third parties. Additionally, by studying the customers’ patterns of life cycle, career development, and even children’s growth, we can anticipate their future requirements.
By offering financing advice and products at the appropriate times, we can outperform our competitors and demonstrate our commitment to customer satisfaction. Additionally, employing data mining technology allows our staff to address event-based marketing concerns. For example, if a customer calls their account manager to inquire about the current yield rate of a fund product, this could signal that they are considering alternative options and may be inclined to switch banks. This straightforward event can prompt the manager to present a tailored offer aimed at retaining these customers.
The intelligent technology can also notify account managers about the birthday or important anniversary date of important customers. This allows them to send personal greetings and make the customers feel cherished and satisfied. These practices of customer relationship management not only help retain customers but also yield two benefits: lower marketing costs and enhanced customer understanding. These benefits cannot be attained through a mere advertising campaign, which is highly costly and takes years to recover from. In contrast, improving customer retention reduces our bank’s expenses as fewer dollars are needed to replace lost customers.
Over time, as customer tenure lengthens, our understanding of customer requirements and expectations improves. Customers also come to understand the services we can provide for them. This leads to the development of trust, reducing risk and uncertainty. As a result, customers are more willing to invest their savings and assets in our banks. Additionally, our deepened customer intimacy allows us to benefit from increased cross-selling yields. As previously mentioned, maintaining a good relationship with retained customers also generates positive word-of-mouth effects.
A loyal and content customer is more likely to express positive word-of-mouth (WOM) and impact other individuals. WOM carries greater weight than advertising because people trust their loved ones who have actual buying experience. This signifies that effectively managing relationship marketing to retain customers is more lucrative than advertising: a mere 5% rise in customer retention corresponds to a minimum of 25% increase in the net present value of customers, according to estimates. In summary, customer retention directly boosts customer lifetime value.
In summary, this database and selection method is superior and more valuable than an advertising campaign aimed at boosting the value of our third-party product.
References
- Francis Buttle (2009).
- Customer relationship management : concepts and technologies(2nd Edition). Amsterdam, London. Butterworth-Heinemann.
- Fitzsimmons, J. A. , Fitzsimmons, M. J. (2008).
- Service Management: Operations, Strategy, Information Technology (6th Edition). New York: McGraw-Hill
- V. Kumar, Werner J. Reinartz. Kumar, V. Hoboken, N. J. (2006): Customer relationship management : a data based approach. Wiley
