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In cooperation with our GTIN* and CIC*, Accenture Management Consulting conducted a customer base segmentation for a European mobile operator
Credential
Business Challenge
Results Delivered
The Customer Base Segmentation project is part of an initiative resulting from a former CRM capability assessment which Accenture performed at a European mobile operator. The key finding of the analysis was that the segmentation approaches across the different subsidiaries were inconsistent and not standardized, which led to the fact that no segment based customer strategy nor dedicated customer segment accountability was in place and that no CRM related decisions could be taken by proposition owners or business line managers. Therefore, with the Customer Base Segmentation project Accenture developed a standardized strategic customer base segmentation that can be applied across all subsidiaries in Europe to gain strategic insights that help to increase up- and cross-sell potential and to reduce customer churn, by delivering a consistent multi-dimensional segmentation framework with clearly defined customer attributes about value and behavior.
Customer base segmentation for one country affiliate and derivation of strategic segments. Consistent multi-dimensional segmentation framework with clearly defined customer attributes on value and behavior. Migration of segments to client DWH (data ware house) and corresponding documentation. Gap analysis for another client subsidiary. Management summary with strategic recommendations on future segment development. Roadmap on implementation across all European subsidiaries.
Accenture developed a standardized segmentation of the customer base: a consistent, multidimensional segmentation framework with clearly defined customer value and behavior attributes. Working with Accenture's CIC in Milan and a GTIN team in India, this project used a field-tested approach which enabled fast implementation of this segmentation framework and accelerated time to market.
*GTIN = Accenture Global Talent and Innovation Network; CIC = Accenture Customer Insight Center
Mobile operators generate most of their revenues with just a small part of their existing customers and leave a big growth potential on the table
Effect of Leveraging unused Potential in existing Customer Base
As-Is Situation
4bn
Optimized Situation Based on an analysis of leading European mobile operators this can be improved to 70/50 - i.e. 70% of the customers generate 50% of the revenues The increase could generate over USD 100m of additional revenue p.a. for a medium sized telecom company (4-5 million subscribers) This leaves a big growth potential on the table
70% of the customers generate only 30% of the mobile operators revenues High percentage of non-profitable prepaid customers Low penetration of modern online and data services e.g. internet, e-mail, etc.
3bn
NEW: 70% OF CUSTOMERS GENERATE 50% OF REVENUES
2bn
1bn
*m
5m
Applying a multi-dimensional customer analysis provides marketers with sound and actionable insights to target customers more effectively
Shift to an Actionable Multi-Dimensional Customer Analysis
CLV Calculation
Two-Dimensional Analysis
Multi-Dimensional Analysis
Total CLV
=
Total CLV
Needs
Historic
+
Demography
Cross-Sell
+
Behaviour
Referral Value
Behavior
Value
The customer lifetime value calculation provides one dimension of the multi-dimensional customer analysis.
The two-dimensional analysis adds an additional layer to the customer base analysis by considering the customer behavior
The multi-dimensional analysis leverages factbased insights into value, behavior, profitability, status and needs of the customer base.
Based on a comprehensive customer profitability analysis targeted strategic actions can be defined to leverage the customer potential
High Level Customer Analytics Approach
Customer Profitability Analysis Strategic Actions
1
Customer Analytical Record (CAR)
2
Customer Analytics for Profit
3
Customer Profiling
4
Customer Strategies
5
Campaigns
Client data is captured in CAR according to specific data dimensions (values, behavior, demographics, needs)
Based on the CAR the customer value is calculated. Subsequently a multidimensional segmentation is created based on customer value and behavior
Based on the segmentation customer profiles are defined taking into account specific customer needs
Based on the customer profiles segment strategies are derived and specific campaigns are defined
Campaign
Needs
Product
Demography
Behaviour Value
Service
Price
To enable a profound customer analysis the necessary customer data is stored in the customer analytic record (CAR) based on best practice data dimensions
Customer Analytical Record Split into three Data Dimensions
Customer Customer
Identification Individual Demographics 1 Customer Analytical Record
Behavior Product
Services Price Plan
Value Interaction
Number of contacts Time since last contact
Demographics
Person Home
Usage
Service Usage Service Volume
Value
Customer value Satisfaction Customer revenue Customer cost Customer value scores Top Ups
Geography Status
Customer scores Account details
Address sector
Micro Market
Contract
Handset
Usage pattern
Payment history
Contact history
Campaign history
Community
Price development
Mobility
Calling Circles
Loyalty programs
Identify unique customers to remove duplicates and aggregate customer base Understand account structure and status changes in customer base
Provide demographic background information for customers Understand customer profiles throughout industries
Identify impact of contract & price plan on customer involvement Quantify impact of handset on usage per service Understand handset needs per segment
Understand segment specific usage pattern and customer needs Identify payment issues per segment Understand roaming pattern of customers Quantify impact of calling circles
Identify preferred interaction channels & topics per segment Understand customer contacts as a driver of customer behavior Identify value of loyalty program
Treat customers based on their value Identify cost & revenue drivers Manage low & negative value customers
The variables categorized as value and behavior are used for the segmentation whereas the customer dimension supports the profiling
CAR variables used for Value and Behavior Segmentation
Customer Customer
Identification Individual Demographics 2 Analytics for Profit
Behavior Product
Services Price Plan
Value Interaction
Number of contacts Time since last contact
Demographics
Person Home
Usage
Service Usage Service Volume
Value
Customer value Satisfaction Customer revenue Customer cost Customer value scores Top Ups
Geography Status
Customer scores Account details
Address sector
Micro Market
Contract
Handset
Usage pattern
Payment history
Contact history
Campaign history
Community
Price development
Mobility
Calling Circles
Loyalty programs
Run clustering
Profile segmentation
Select the variable that are used as input variables for the segmentation The CAR is designed along the main categories for value and behavior variables used for segmentation purposes Sometimes individual vars are excluded, to improve the formation of a meaningful segmentation
Cluster targets are determined to guide the formation of a segmentation Cluster targets are chosen according to the main purpose of the segmentation (e.g. value related targets for value segmentation)
Run clustering for all chosen target functions and a group of possible number of segments (e.g. 4 to 10) All clusters are created in batch mode and the main statistical measures are taken and documented Modifications to the target and exclusion of additional vars can be done during this phase
Deeper statistical analysis selects a short list of the most promising segmentations Business reviews are executed on this short list to determine the best result Business reviews can lead to additional modifications to the target and vars list, that in turn requires to run additional clustering
After the selection of the best segmentation this will be profiled with the available data in the CAR Profile focus is usually on the segmentation vars (determining vars) and the customer demographics (descriptive vars) Profiles are stored in Excel and aggregated in PPT format
Usually several variations of the target functions are appended to the CAR to explore the best result
Best segmentation
Segment profiles
High Value Postpaid customers with balanced use of services (ARPU $ 194 / avg. $ 104) - Highest value customers with tenure slightly above average (49 months/ avg. 46 months) - Highest MRC ($ 72) but also very high additional outbound revenue ($ 60) - Slightly younger customers as the average (61% between 18 and 39 / in average only 56%)
High Potential Postpaid customers with comparably high inbound revenue (ARPU $ 98 / avg. $ 104) - Medium value customers with tenure below average (41 months / avg. 46 months) - Lowest Outbound Revenue Quota (15% / avg. 20%) and High Inbound Revenue Quota (29% / avg. 25%) - Youngest customer group (36 years / avg. 38 years)
Medium to Low Value Postpaid customers with comparably low MRC (ARPU $ 60 / avg. $ 104) - Low end price plans, MRC is below average ($ 36 / avg. $ 48) - Customers are spread across all age groups
Purely low Value Postpaid customers with strong focus on Outbound Voice Revenue (ARPU $ 32 / avg. $ 104) - Lowest MRC of all groups ($ 20 / avg. $ 48) - The oldest customer group (30% are above 50 years; in avg. only 19% above 50)
The behavior of postpaid customers distinguishes seven segments by airtime use and contact frequency
Overview of identified Behavior Segments - Postpaid
10
12%
Contact frequency
5
3% 19% 5%
14% 9% 21%
0 0 400 Airtime BS1: Different SIM Cards Users Very convenient & loyal (53 m tenure / avg. 46 m), well off, older age - Mainly calls, lowest data /entertainment/mobility usage w high percentage of calls from abroad - Very low CS contacts, but high acceptance to inbound offers (61%/avg. 41%)
-
800
1.200
BS3: Advanced Services Users Slightly older, mainly male - Very high data usage (463MB/avg. 43MB), very little calls - Often use high end handsets, some laptops - Medium contacts to CS often for equipment
-
BS7: Good Basic Services Users Younger, mainly female Strong Text focus, with little calls and data - Medium CS contacts and not very susceptible to inbound offers
-
BS4: Only when on the road Cheap and many nonmatching price plans (82% vs.. avg. 77%) - 77% of customers overuse their allowance - Low CS contacts, but with high acceptance rate to inbound offers (50% vs.. avg. 41%)
-
BS6: Call Always all Friends Voice focused off-peak callers - 2nd highest number of calls to CS, but not very susceptible to offers - Mainly acquired by independent partners - Tenure above avg. (48 m vs.. avg. 41 m)
Their Products
Preferred price plans are flexible (61%) and fixed (13%) 42% of customers have changed their price plan during their lifetime (avg. 37%) Highest representation of free time (10% / avg. 6%) and everyone Off-Peak (3% / avg. 2%) across segments, which are Off-Peak focused contracts
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Two main data dimensions value and behavior already enable a multi-dimensional and profound customer analysis and segmentation
Strategic Segments in Value-Behavior Matrix for Postpaid Customers
2 Analytics for Profit
High
High Value
Talk-a-lot
Value Analytics
High Potential
Value Generators
mobile communicator and power user Handset as status symbol Shops for latest technology and entertainment
Medium Value
Low Value
Regular Users
Use different SIM Cards
Happy Customers
engaged with higher value with friends and family Likes all mobile channels and services
Connects
Low
Technology Lovers
High
low engagement but high value Has a big network and likes to talk Shops for convenience, not for price
Behavior Analytics
In a first step customer value and behavior are analyzed and clustered separately In the second step the customer segments are clustered based on both dimensions to define the above value-behavior matrix
engagement and low value needs basic calling services Shops for simplicity and price
Only
3
Basic Strategy
Customer Profiling
High Value
High Potential
Medium Value
Treatment Ideas
Target Different SIM Cards Users with basic price plans and promote additional services like home zone, and simple handsets Target Call Always all Friends with entertainment cross-sell offers Explore higher value customers with offers for boosters and contract renewal with simple handsets using low cost channels (e.g. text)
Low Value
Low
Description
The Regular Users segment consists of low to medium value customers paired with the behavior of Different SIM Cards Users and Only when on the road as well as Call Always all Friends Regular Users are clustered due to their convenience orientation combined with their relatively low overall usage They like to stay connected with their family and friends when on the go They usually dont use email or internet on the phone and they dont text very often Their low usage also suggest a certain level of price sensitivity
Customer Service
Use standard IVR* routing to keep low cost service Drive customers towards self-service in the internet, e.g. by announcement in IVR, but keep it simple
Products
Simple price plans with basic services Boosters (e.g. holiday or seasonal) for affordable usage flexibility Convenient and simple handsets with low subsidy
*IVR = Interactive Voice Response Copyright 2010 Accenture All Rights Reserved. 13
3
Basic Strategy
Customer Profiling
High Value
Talk-a-lot
High Potential
Medium Value
Treatment Ideas
Offer discounts for calls to own or other mobile network for High Value users on a special occasion (e.g. reaching a certain airtime) Offer free text messages for on time payment Target young users (Call Always all Friends) with entertainment and new communication service cross-sell offers with low cost marketing (e.g. email/text campaigns) Link new communication device trials and communication package trials (e.g. booster) to Inbound calls to raise commitment
Low Value
Low
Technology Lovers
High
Description
Talk-a-lots are also convenience oriented, but have a significant higher talk time than Regular Users and belong to the higher value customer segments Talk-a-lots are much more intense users of the basic mobile services than the Regular Users as they like to talk a lot with their social network However they have only little knowledge of innovative technologies and mobile services They also do not use the mobile internet or email very often yet but have already basic experience in using these services
Customer Service
Faster routing and simple and friendly communication in the CS center No high tech talk, but intentional education on simple email / internet usage Offer self service (e.g. internet), but do not push
Products
Flexible price plans with a lower commitment Easy to use handsets but capable of basic internet services Advanced convenience services e.g. battery replacement, phone book transfer
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Customer segmentation drives increased marketing & sales effectiveness resulting in higher revenues and lower costs
Achievable Benefits
Insights from Segmentation
Identification of most valuable customers (past & future)
Achievable Benefits 1)
Higher performance of marketing activities
Campaign costs reduced by 25-35% (e.g. fewer mailings achieve same marketing lift)
Increased direct marketing acquisition rate of up to 400% Customer contacts increased by 200-450% Campaign cycle times reduced by 50-70% Increased volume & revenue per customer Increased cross- and upselling rate Consistent customer experience across all channels Reduced customer churn by 10-15%
Identification of cross-selling potentials Optimized service levels per segments (e.g. high service levels for most valuable customers)
Consistent service levels across all channels Coordinated and focused resource allocation
Targeted pricing strategy per segment
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As less as 12 weeks can be sufficient to analyze the customer base, define segment specific strategies and get new campaigns up and running
High Level Timeline
Segmentation & Data Design Segmentation Objectives CAR Design Data Management Infrastructure Set-up Data extraction Build CAR
Cluster Analysis & Segmentation Profile Definition Definition of Strategic Segments Definition of Strategy per Segment Marketing Customer Service Products
Customer Profiling
Customer Strategies Definition of Treatment Ideas Quick Win Campaigns Planning of Long Term Campaigns
Campaigns
Execution of Campaigns
weeks 0 4 6 7 12
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A good customer segmentation integrates several dimensions, leaves creative freedom for the marketer and is achievable within weeks
Conclusion and Take-Aways
1.
2.
Leave creative freedom for marketers and integrate them as early and often as possible
3.
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Accenture is a global management consulting, technology services and outsourcing company, active in all major industries and geographies
Accenture Company Profile Facts and Figures Industry and Functional Expertise
Communication & High Tech Financial Services Post & Public Services Products Resources
Accenture is the worlds largest consulting, technology and services firm and partner of High Performance Companies Revenue Clients Employees Listed Offices Alliances US$21.58 billion in FY09 96 of the Fortune 100 and > 75% of the Fortune 500 >177.000 worldwide, 4.000 in Austria, Switzerland & Germany since July 2001 at the NYSE 200 in 52 countries, 6 in Austria, Switzerland & Germany with more than 150 companies
Management Consulting
Outsourcing
18
Accentures innovation and implementation leadership in the CRM domain has been recognized by external appraisals for consecutive years
Accenture CRM Expertise and Market Positioning CRM Market-Leader
According to Gartner, Inc., Leaders are vendors that are performing well today, have a clear vision of market direction and are actively building competencies to sustain their leadership position in the market.
Source: Gartner Magic Quadrant for EMEA CRM Service Provider, 2009
Source: CRM Magazine, 2003, 2004, 2005, 2006, 2007, 2008, 2009
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Thomas Ruck
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