ROLE OF CUSTOMER ANALYTICS IN PRESENT

SITUATION

Customer analytics refers to the processes and technologies that give

organizations the customer insight necessary to deliver offers that are
anticipated, relevant and timely.

As the backbone for all marketing activities, customer analytics

comprises techniques such as predictive modeling, data visualization,
information management and segmentation.

The importance of customer analytics

Customer analytics is becoming critical. To understand why, consider

this: Customers are more empowered and connected than ever. And
becoming more so. Customers have access to information anywhere,
any time – where to shop, what to buy, how much to pay, etc. That
makes it increasingly important to obtain customer insight to
understand how they will behave when interacting with your
organization, so you can respond accordingly. The deeper your
understanding of customers' buying habits and lifestyle preferences,
the more accurate your predictions of future buying behaviors will be
– and the more successful you will be at delivering relevant offers that
attract rather than alienate customers.

Key customer analytics in use today

1. Customer satisfaction analysis: Customers who are happy will
come back again for more purchases. This type of analysis determines
whether the customers’ needs are being met – in short, it determines
whether they are satisfied or dissatisfied with what the company
offers.

2. Customer lifetime value analytics: This is the process of

analyzing the entire relationship with a customer in order to determine
his or her value to the business. It determines how long a customer
stays a customer, their likelihood of making purchases during that
period and their entire value in that timeframe. The main goal is to
focus marketing strategies to the best customers in order to increase
the customer-business relationship.

3. Sales channel analytics: Sales channel analytics analyses all

the different ways a product can be distributed to the market and
determines the most effective channel for better resource
management. Customers may be exposed to a different sales channel
so it is crucial to determine whether customers prefer to purchase
physically or online.

4. Customer segmentation analytics: All customers are not

equal. This process identifies sub-groups within the customer base
and splits them into segments depending on their purchasing power.
This allows the company to customize its marketing and
communication efforts.
 Customer analytics is the process companies use to capture and
analyze customer data to make better decisions. Customer analytics
often comes in the form of a software that furnishes companies with
insights into their users’ behaviors. These insights power businesses’
sales, marketing, and product development efforts and studies show
that companies that use customer analytics are more profitable.

Why do companies use customer analytics?

Customer analytics helps businesses break big problems into

manageable answers. When companies need to look at how their
customers behave, either as individuals or as overall, customer
analytics decodes their actions so that they’re easier to understand.
This helps companies make better decisions on pricing, promotion,
and management. Better decisions are great for business. According
to McKinsey, “Companies that use customer analytics
comprehensively report outstripping their competition in terms of
profit almost twice as often as companies that do not.” A
good consumer analytics platform can help your team increase:

 Mobile adoption

 Customer retention

 User engagement

 In-app purchases
Today, companies are more reliant upon analytics than ever before
because it helps them keep pace with consumers who are increasingly
sophisticated. According to an IBM study, 85 percent of customers
now expect a seamless experience and desire faster responses, count
on optichannel support, and have less attention to spare. Analytics
help companies measure and improve their products to cater to
modern customers.

How do customer analytics work?

Customer analytics gives companies full visibility into how customers

use their products. Analytics is particularly useful for companies
with technology offerings because they can collect step-by-step data
on how customers, users, or subscribers flow through their sites or
apps. At a macro-level, this exposes major trends such as how users
discover their product, which features they like best, where they find
 value, and what causes them to leave. At a micro-level, customer
analytics allows companies to understand who their users are as
individuals. They can segment users by demographics, interests, and
behaviors and view their unique journeys. This knowledge helps
businesses better cater to each customer persona. Elavon, for example,
is a mobile payment app that found its users were complaining they
couldn’t download the app. Using Mixpanel’s customer analytics
software they were able to instantly identify all users trying to
download the app on incompatible OS systems, reach out, and suggest
a fix. Another Mixpanel customer, STARZ PLAY, was able to
segment their customers by behavior to detect fraud and reduce it by a
factor of 1,000. Which teams have a need for customer analytics?

 Marketing can create segments and look-alike audiences.

 Sales can scores leads, prospects, and users.

 Product can measure features, usage, and customer journeys.

What questions can customer analytics answer?

Customer analytics platforms can answer questions on anything that

can be measured or tracked. That said, the answers they provide are
only as good as the questions asked of them. Open-ended, subjective,
or relative questions like, “Is our product the best?” are difficult to
clearly answer. Good questions are concrete, easily proved or
disproved, and tie back to core business objectives like acquisition,
revenue, retention, and engagement. Examples of common
customer analytics questions:
 Acquisition
Which channels drive the most new customers?
What is the most common customer journey from awareness to
advocacy?

 Revenue
What are our most profitable revenue channels?
Which users are the most profitable?

 Retention
Where do we lose customers and why?
What behaviors are correlated with high retention rates?

 Engagement
What features resonate with which customers?
What is the optimal experience for users?

CUSTOMER ANALYTICS

Customer analytics is a process by which data from customer

behavior is used to help make key business decisions via market
segmentation and predictive analytics. This information is used by
businesses for direct marketing, site selection, and customer
relationship management. Marketing provides services in order to
satisfy customers. With that in mind, the productive system is
considered from its beginning at the production level, to the end of the
cycle at the consumer. Customer analytics plays an important role in
the prediction of customer behaviour. Customer analytics refers to the
processes and technologies that give organizations the customer
insight necessary to deliver offers that are anticipated, relevant and
timely.

USES

• Retail Although until recently over 90% of retailers had limited

visibility on their customers with increasing investments in loyalty
programs, customer tracking solutions and market research, this
industry started increasing use of customer analytics in decisions
ranging from product, promotion, price and distribution
management.The most obvious use of customer analytics in retail
today is the development of personalized communications and offers
and/or different marketing programs by segment. Additional reasons
set forth by Bain & Co. include: prioritizing product development
efforts, designing distribution strategies and determining product
pricing. Demographic, lifestyle, preference, loyalty data, behavior,
shopper value and predictive behavior data points are key to the
success of customer analytics.[citation needed]

• Retail Management Companies can use data about customers to

restructure retail management. This restructuring using data often
occurs in dynamic scheduling and worker evaluations. Through
dynamic scheduling, companies optimize staffing through predictive
scheduling software based on predictive customer traffic. Worker
schedules can be adjusted in response to updated forecasts at short
notice. Customer analytics allows retail companies to evaluate
workers by comparing daily sales to daily traffic in a store. The use of
customer analytics data affecting the management of retail workers in
a phenomenon known as refractive surveillance. The model of
refractive surveillance describes how the collection of information on
one group can affect and allow for the control of an entirely different
group.

• Criticisms of Use As retail technologies become more data driven,

use of customer analytics use has raised criticisms specifically in how
they affect the retail worker. Data driven staffing algorithms can lead
to irregular working schedules because they can change on short
notice to adapt to predicted traffic. Data driven assessment of sales
can also be misleading as daily traffic counters do not accurately
distinguish between customers and staff and cannot accurately
account for workers’ breaks.

• Finance Banks, insurance companies and pension funds make use

of customer analytics in understanding customer lifetime value,
identifying below-zero customers which are estimated to be around
30% of customer base, increasing cross-sales, managing customer
attrition as well as migrating customers to lower cost channels in a
targeted manner.
 • Community Municipalities utilize customer analytics in an effort to
lure retailers to their cities. Using psychographic variables,
communities can be segmented based on attributes like personality,
values, interests, and lifestyle. Using this information, communities
can approach retailers that match their community’s profile.

• Customer relationship management Analytical Customer

Relationship Management, commonly abbreviated as CRM, enables
measurement of and prediction from customer data to provide a 360°
view of the client.

Factors That Ensure You Reap Optimal Benefits From Customer

Analytics
McKinsey & Company maintains that every company should
strengthen three aspects to harness the potential of customer analytics
fully. They are:
1. Do Not Get Stuck Up On Mediocrity. Aim For Excellence.
Over 85% businesses state that only when they start using customer
analytics (IT and predictive analytics) extensively that they begin to
see an impressive and notable boost in value contribution from
customer analytics, as compared to 20% and 30% of companies where
the utilization of customer analytics is relatively low and moderate
respectively. These figures establish the fact that businesses can only
reap the benefit of customer analytics when their operations achieve a
level of excellence.
 Thus, it is essential for an organization’s managerial wing to
understand what customer analytics tools they need to invest in to
bridge the gap between their current customer analytics infrastructure
and state-of-the-art customer analytics frameworks that are being used
by the magnates in the industry.

2. Encourage Fact-Driven Decision Making

Although IT and predictive analytics are pivotal to customer
analytics, these alone aren’t enough to pull customer analytics to the
optimum level. The key to success lies in taking a holistic approach to
customer analytics. The guidance of a leader who stresses on fact-
based decision making is also crucial to customer analytics. Insights
offered by customer analytics can only be translated into real and
actionable decisions by an organizational framework having a logical
and rational culture at its core. For instance, instead of focusing on the
speed at which the insights are being put into action, you should first
focus on the smooth integration of all the tenets required for customer
analytics including IT, analytics, and the organizational framework.

3. Encourage The Involvement Of Senior Management In

Customer Analytics
According to McKinsey & Company’s report, businesses where the
senior management isn’t involved with customer analytics of the
organization display as low as 28% value contribution through
customer analytics. Contrary to this,  almost 69% of the companies
where the senior management is actively involved in customer
analytics report of having attained great value from customer
analytics.
Given the fact that all the vital decisions concerning a company’s
sales and marketing strategies, product/service improvement
strategies, campaigns, and so on, are taken by the top management
wing, it is only wise to get them involved in reviewing the customers’
side of things. This way they’ll be able to understand better what the
customers are looking for and make decisions accordingly.

CUSTOMER ANALYTICS CAN HELP YOU IMPROVE YOUR

BUSINESS IN THE FOLLOWING AREAS:

1. Marketing Efficiency Focusing on the individual customer takes

your marketing analysis beyond just knowing your spend and the
eyeballs you received in return. Knowing which marketing channels
bring the highest value customers in terms of order size, retention rate
and profitability allows you to either cut marketing costs or expand
your reach more efficiently.

2. Customer Retention Customer acquisition is expensive, so it's

important to understand what causes customers to leave. Customer
analysis can help you identify common denominators among lost
customers and give you an early warning that existing customers may
be in danger of leaving if you don't take corrective action.
3. Increased Sales Understanding customer purchasing decisions is
the key to increasing sales. Use customer analysis to identify factors
that have both a positive and negative impact on sales. This could
include shipping times, how customer service interactions are
handled, whether you have a minimum order or bundled discount, or
the customer's location or income.

4. Improved Profit Margins Not all customers are equal. Some

customers are more profitable than others, and some may even cost
you money. Factors that affect customer profitability include order
size, cost of handling the order, time spent servicing the account and
returns. EXAMPLE Customer Insight and Analytics in action of
Deloitte Co.

• A national retailer that sells fashion apparel through its catalogs,

web sites, and retail stores wanted to improve the ROI on its web-
search advertising spend. We helped this client analyze three million
customer orders to identify the search keywords that drove the most
sales. The insights were surprising: the client’s organic search terms
delivered a stronger ROI than their paid search terms. As a result, the
client decreased their paid online search spend by more than a million
dollars without decreasing topline sales.

• An insurance company was struggling to meet its sales and customer

retention goals. They needed a clear profile of their customer base to
more accurately target advertising and promotions to attract new
clients and to expand relationships with existing customers. We used
customer data-matching algorithms and cluster analysis to analyze
approximately 150,000 policies and 300,000 customers. This analysis
provided the insight needed to better understand and segment the
company’s customers, including identifying customers with high
potential value.

• A national healthcare provider wanted to improve customer service

levels by anticipating and mitigating negative customer experiences.
We designed, developed, and implemented a tested, rules-based
solution to help them predict – and preempt – customer complaints.
This solution allowed customer service representatives to proactively
reach out to customers who were identified as likely to have a
negative experience, which reduced customer dissatisfaction and
strengthened loyalty.

COMPILING BIG AND SMALL DATA

Customer analytics is often associated with big data. Big data refers to
extremely large datasets, often containing millions or billions of
customer transactions or records. These large datasets are analyzed
with sophisticated software to reveal patterns, trends, and
associations. Big data allows you to detect very subtle trends and
patterns that may have a large impact on revenue. But customer
analytics is also about small data. While not as trendy as big data,
small data refers to finding insights with datasets that often contain
less than 30 customers. With small data, you’re limited to seeing
larger patterns in attitudes. While the field of customer analytics is
still being defined and varies across organizations and industries, it
usually involves some combination of the following:

✓ Past behavior: Customer analytics is about using data from the past
to predict future behavior. This is both a definition and a warning.
What customers did in the past is no guarantee of what they will do in
the future. If a certain type of customer purchased one type of product
in the past, he is probably more likely to do so again in the future;
however, there’s no guarantee.

✓ Predictive modeling: Software programs are able to detect patterns

in behavior, even subtle ones that are difficult for humans to detect
with intuition or just inspecting data. For example, software can
determine quickly that a certain segment of customers, such as
higherincome mothers, are more likely to purchase certain products
and aren’t sensitive to changes in price. A model is a description of a
customer interaction, process, or behavior that can be used to predict
future outcomes. For example, the sales price of a house can be
estimated by its total square footage. In general, bigger houses sell for
more than smaller homes in the same neighborhood. This book
focuses on the methods and metrics that help answer business
questions and set the groundwork for predicting. There is a special
branch of customer analytics that deals exclusively with making
predictions with software. See the appendix for a primer on getting
started with prediction.
✓ What-if scenarios: Customer analytics allows you to test “what-if”
scenarios by looking at past customer data and estimating how future
data may change based on manipulating things like product features,
prices, messaging, or some combination of those elements.

✓ Customer experience: While customer analytics often involves the

hard numbers of transactional data, sales, and profitability, it also
involves understanding the customer’s experience with a product or
service. Measuring the customer experience involves collecting
metrics for the entire journey a customer has with a brand or
organization — including awareness, purchasing, and long-term
usage. This involves collecting a mix of metrics about behaviors and
attitudes. Customer analytics includes the metrics for the customer
experience. It’s as much about how the customer uses a product as it
is about what goes into the product.

How Customer Analytics is Transforming Customer Service

How is data or customer analytics transforming customer service?

Here are some of the leading pointers:

 Providing a personalized experience

Be it through a smartphone app or website, today’s online customers

have come to expect a personalized experience from business. A 2017
Forbes report highlights that 85% of digital marketers have reported
marketing success (in terms of higher engagement, conversions, and
business revenue) using personalization. In the digital marketplace,
over 50% of the customers have switched from companies due to a
poor customer experience.

Data or business insights are transforming the way in which

customers interact with business brands. According to McKinsey &
Company, personalization can boost company sales by 10% and
returns on marketing investments by 8x. Additionally, 63% of travel
companies are using data analytics to personalize their website
content.

A prime example of personalization is from customer messaging

company, Intercom, that enables real-time personalized custom bot
messages for individual customers.

 Anticipating customer needs and expectations

Predictive analytics can enable businesses anticipate customer needs

and expectations thus improving customer service and optimizing
targeted campaigns, among other benefits. Using predictive analytics,
business enterprises can leverage the potential of artificial intelligence
and machine learning to interpret customer-centric data and find
solutions.

For instance, in a call centre business, predictive analytics can

improve crucial KPIs such as the average wait time (for calling
customers), call completion time, and measuring customer
satisfaction.

AI-powered predictive analytics is transforming the way brands

interact with their customers. An instance of this trend is the adoption
of AI-powered algorithms by American carrier company, Sprint, that
can identify customers (at high risk of churn) and has drastically
reduced the churn rate by predicting and proactively offering what
customers want from the business. Similarly, popular motorcycle
company, Harley Davidson has successfully used predictive analytics
tools to identify potential customers that are most likely to make a
high value purchase.

 Boosting product launches

While introducing new products is critical for any successful

businesses, it’s also important for product companies to have a great
marketing strategy and plan for the product launch. Data-driven
marketing messages that can inspire curiosity and anticipation in the
market are crucial for increasing brand awareness and sales. For
example, the market launch of the Spectacles sunglasses by
Snapchat through the use of vending machines in areas with high foot
traffic.

Even for online product launches, the online customer’s purchase path
can be charted through the proper landing page and checkout page.
An example of this is the online launch of the “Peanut Butter Fudge”
ice-cream by Ben & Jerry’s. 

Similarly, the online sales and marketing platform, Drift deployed

“conversational marketing” to boost their own growth and disrupt the
industry. 

Analysing customer touch points

According to industry stats, 73% of customers use multiple channels

or touch points before making a purchase. Typically, customer touch
points include business websites, call centres, social media platforms,
and in-store client interactions. Business brands can use data analytics
to integrate all these touch points and provide a unified and consistent
experience to their customers.

Data analytics tools that can derive insights from multiple customer
touch points can be effective in building brand perception and
improving customer satisfaction. An effective example of using
customer touch points is by Apple through the use of in-store product
demos and online product descriptions.

Text analytics tools can be useful in capturing customer data from

support calls and chats, which in turn, can be used by any customer
analytics tool. 

 Resolving customer issues

Whether it is through chatbots or intelligent call routing, customer
analytics can help in identifying and resolving customer issues and
complaints, thus leading to higher levels of customer satisfaction.

As a classic example, customer service chatbots are equipped to

handle most of customer queries or transfer their calls to human
agents, when required. Additionally, automated bots can listen and
analyse agent calls and suggest answers to specific customer queries 

Through social listening, business can also leverage on natural

language processing (or NLP) to respond appropriately to customers
or assign them to the right service agent. Other means of elevating
customer satisfaction is through the use of voice biometrics for
authenticating customers. 

ROLE OF ANALYTICS IN RETAIL SECTOR

Here are the 5 main areas to use predictive analytics in retail:

1. Personalization for customers

Understanding customer behavior and combining it with consumer
demography is the first step in the deployment of predictive analytics.
Retailers can use it to give targeted and highly customized offers for
specific shoppers.

In the past, before data analytics became mainstream, the option of

targeted offers was non-existent, or was only for large swathes of
customers having one or two common characteristics. But with the
emergence of online shopping, and then data analytics, it is now
possible to track behavior across channels, i.e. monitor a shopper who
researches in the digital store and then goes ahead and purchases the
item in the physical store.

Such insights coupled with predictive analytics now give merchants

the option to make highly personalized offers to customers at a very
granular level. For example, retailers can personalize the in-store
experience by giving offers to incentivize frequent buying to drive
more purchases, thereby achieving higher sales across all channels.

As a matter of fact, predictive analytics can be used to upsell or even

cross-sell. Eg: Based on his previous buying history, it was
established that John Doe has a fondness for buying X brand of
chocolates at the start of every month. Using predictive analytics, a
retailer can now offer John 1 pack of chocolate free on the purchase
of 2, in the middle of the month, even.

2. Inventory and supply chain management

One area which is often neglected is the back office operations.
Poorly maintained inventory is every retailer’s nightmare. Supply
chains need to be optimized in order to increase operational
efficiency. Predictive analytics helps answer questions such as what
to store, when to store, and what and when to discard. Stocking up on
slow moving products or running out of popular ones are both
problems. Such insights optimize performance and reduce costs.
Thus, predictive analytics removes this uncertainty or any purchase
simply based on a hunch.
 

3. Customer segmentation & customer journey

A customer’s journey is a map that tracks the buyer’s experience. It
starts with the point of first contact with the seller, and the finish line
is represented by the purchase order. The journey traces the process of
engagement.

Contrary to popular belief, customer mapping does not end with the
client placing an order. It’s also about long-term relationship, trying
to map the behavior of a customer after he has received his product.
The customer is at the center of every B2C and B2B company, and a
map of the customer’s journey gives managers a ringside view of how
customers or leads have moved through the sales funnel.

Data-driven insights can help retailers understand each customer’s

profile and history across channels. Activities at every step in the
customer’s journey can be monitored to understand your high-value
customers and their behavior, their best possible way to reach them,
and so on.

Predictive analytics helps with not only targeting customer but also

their segmentation. Using affinity analysis, a retailer can cluster the
customer base based on common attributes. With response modeling,
merchants can examine past marketing stimulus and the response
generated in order to predict whether a certain approach in the future
will get positive response. Churn analysis, on the other hand, tells you
the percentage of customers lost over time, as well as the potential
revenue lost because of it.
Predictive analytics helps businesses predict a customer’s lifetime
value (CLV). Retailers would like to know how to predict the value of
a customer over the course of his/her interactions with their business
in the future. A CLV is the discounted value of future profits
generated by a buyer. It is arrived at using analytics to check out the
past behavior to determine the most profitable customers over time,
among other factors.
4. Customer behavior or behavioral analytics
People-tracking technology has now made it easy for retailers to find
ways of analyzing in-store or online shopping behavior, and assess the
impact of merchandising efforts.

Data can be collected from a host of consumer interaction points –

mobile, social media, e-commerce sites, credit card swipes
(transaction), etc. Which means a retailer today has access to diverse
(and complex) data about his customers.

Using this and even data points captured from earlier marketing and
advertising campaigns, retailers can now build predictive models to
link past behavior and demographics. The aim of such models is to
score every customer according to the likelihood of them buying
certain products.

This entire data-based process also gives retailers invaluable insights

into recognizing their high value customers, establishing the CLV, a
customer’s motives behind a purchase, the buying patterns, the
preferred channels, and so on. Not only throwing up personalized
offers, retailers armed with such knowledge can also retain new
customers to a very high degree of probability and then drive loyalty
programs to stop them from going over to the competition.
A loyal client who seems to be disengaging from your brand is
something that needs not only to be monitored but requires swift
corrective action. Using predictive analytics, retailers can gauge those
customers that are drifting, and those that have the potential to be a
long-term user.

5. Campaign management
Predictive analytics can be used to draw up marketing strategies to
execute future marketing campaigns. The more you know about your
customers, the more targeted your messaging can be.

Data-based decisioning reduces assumption-based ones, those that are

based on instincts or guesswork.  It can be used to understand where
to focus ad spend based on the CLV. Predictive analytics can identify
the channels and the times that require an increase in your marketing
spend and resources.

To conclude, using data analytics no longer remains the sole purview

of the retail biggies such as Amazon. Thanks to the technology
getting cheaper and more mainstream, predictive analytics can now be
used even by medium and small retailers to be ahead of the
competition.
 ROLE OF CUSTOMER ANALYTICS IN BANKING
 It is noted that financial marketers need to extract more value from internal and external data sources,
guiding product development, customer communication, innovation and growth. According to Celent, the
use of advanced analytics in banking is correlated to the size of organization even though the cost of
processing data is no longer as much of a barrier as even five years ago.

The following are the primary reasons why banks need to step up their customer analytics game:

 The New Normal: The banking industry is expected to remain revenue challenged for the foreseeable
future as a result of low interest rates, moderate fee revenue, onerous regulation and a less than robust economy.
As a result, it will be more important than ever for banks and credit unions to focus on all possible strategies to
reduce costs and increase revenues. Some of these strategies, enabled by customer analytics include:

 Improved targeting of customer segments

 Moving from a product focus to a customer focus
 Better management (and measurement) of sales leads across channels
 Inclusion of custom customer incentives/rewards to influence behavior
 The Imperative for Customer Centricity: With customer delivery and communication channels
expanding, and more customers interacting with their financial provider using online and mobile channels,
always-on, real-time sales and service become imperative. Analytics can respond to the migration to digital
channels by:
 Improving branch efficiency and effectiveness
 Integrating sales and service tools within a new digital environment
 Helping to drive high value, high touch traffic back to branches
 Technology Advancement: Customer analytic applications are no longer the sole domain of highly
skilled specialists. Today’s solutions can be accessed and used by marketers and other business users to answer
complex inquiries. Improvements include:
 Collapsing of product silos and ability to process increased data sources
 Increased number of specialized vendor solutions and expanded talent
 Cloud-based solutions

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Customer Analytic Applications

As the Celent study makes clear, there is no shortage of analytic applications for banks and credit unions.
While some are more general in nature, some are highly specific outsourced solutions, supporting a buy
vs. build decision. Obviously, with a focus on containing costs, the ability to utilize outsourced solutions is
good news.

“Key retail banking priorities – specifically, using self-service channels to drive branch foot traffic,
improving branch channel efficiency and effectiveness, and learning how to sell and service through
digital channels – all require customer analytics,” says Meara from Celent. “The good news is that there
has never been such a variety of specialized customer analytics solutions.”

According to the Celent report, there are six key well-established business drivers for predictive analytics
in financial services. Each of these are important as a bank or credit union builds an analytic strategy for
the future.

Customer Insight
Of special interest to most financial marketers is the ability to gain a better insight on current customers.
While demographics and current product ownership are at the foundation of customer insight, behavioral
and attitudinal insights are gaining in importance as channel selection and product use become more
differentiated. Sentiment analysis and social media analysis are two additional examples.

Another predictive analytic model is the FICO score. Scoring models such as FICO analyze consumers’
credit history, loan or credit applications, and other data to assess whether the consumer will make their
payments on time in the future.

Business Strategy

The foundation of traditional banking business intelligence (BI), customer analytics are often used for
product and channel development as well as economic forecasting, business improvements, risk analysis,
and financial modeling.

Customer Experience Management

According to the Celent study, the key to using customer analytics for customer experience management
(CEM) is about delivering personalized, contextual interactions that will assist customers with their daily
financial needs. In addition, if done correctly, customer analytics in the context of CEM enables the real-
time delivery of product or service offerings at the right time. It can also allow for highly sophisticated
relationship pricing never before available.

Risk Management

One of the more common uses of ‘big data’ today is in the area of risk and fraud management. Data
mining today has expanded well beyond internal purchase and balance insights to include transaction
patterns and even social media interactions that can provide a leading indicator to potential losses or fraud.

This type of integration of structured and unstructured data can also be leveraged for traditional risk
management uses such as for pricing decisions.

Channel Execution

BI tools have helped banks understand channel effectiveness for some time. More recently, analytics
capabilities have boosted the usefulness of these tools. Capabilities include providing comprehensive
views of channel performance based on both customer behavior and transaction mix. Solutions help banks
understand channel profitability and customer satisfaction and tailor retail operating models to improve
retail delivery.

As more banks and credit unions work harder at migrating customers to digital channels, analysis of
engagement and shifts in channel use become important indicators of satisfaction and re-pricing
opportunities.

Marketing

Another traditional use of customer analytics is the ability to increase the effectiveness and efficiency of
sales and marketing in financial services. The ability to derive the likelihood of purchase based on
available information about individual customers has ushered in a seismic shift in marketing from product
centricity to customer centricity.

Rather than offering products and services based on what the financial institution would like to sell
(campaigns), banks and credit unions are now able to make unique, timely, and relevant offers based on
available customer insight. Doing this form of analysis across multiple channels allows financial marketers
to significantly improve the efficiency of marketing spending and the close rate of sales leads.

For each of the applications shown above, the power is not just in the analytics themselves, but in the
ability to do so in real time. With more challenges than ever in banking, analytics is at the center of it all.

Implementing a Successful Data Analytics Process

The Celent research emphasizes that while there are a growing array of use cases for data analytics, the
process is definitely not a ‘one and done’ proposition. The move from a product/campaign based approach
to a customer centric approach is huge and involves many moving parts.

Successful implementations always involve a series of steps and a test and learn process as shown below,
with a different amount of time and effort applied to each step based on the specific objectives of the
project being undertaken.