Identifying profitable customer segments

Client: Financial services

Insight gained into customer behaviour at contract-end enables targeted communications to encourage renewals and the development of propositions to attract profitable new customers

Aim

To identify and understand the most profitable types of customer and their renewal behaviour

Process

Customer segmentation analysis to understand sub-groups of customers, their behaviour, characteristics and profitability

Results

Tailored communication strategies to increase renewal rates and new propositions targeted at profitable segments

Our client wanted to understand their customers’ behaviour at the end of a financial service contract and gain insight into the best strategies to encourage renewal and increase profitability. Which types of customer were most likely to renew at the end of a contract and which showed no loyalty to the brand? Could a change in communication strategy improve renewal rates? Could a change in acquisition strategy increase overall profitability?

A customer segmentation was developed by Bulletin to understand the types of customer using the service by mining existing behavioural and attribute data. Their differing needs, motivations and choices were analysed to gain insight into the customer groups and new measures were designed to assess varying levels of profitability.

Subgroups of customers were identified with significantly different characteristics and behaviour. For example, one subgroup of customers, while initially appearing high value, showed little loyalty to the brand and were quick to leave again, only showing interest in finding the cheapest deal possible. While they could be easy to recruit initially with highly discounted offers, they were unlikely to become long-term, high value customers. Another subgroup, while not generating the highest monthly income, demonstrated an affinity to the brand and could turn into long-term, profitable customers if encouraged to stay.

The results of this analysis enabled changes to be made to communications, and a tailored strategy was implemented to focus on encouraging renewals within the high potential subgroups. Additionally, new propositions were developed to appeal specifically to the most profitable groups of customers in order to encourage higher numbers of new customers of these types.

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